---

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 1934

or

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

For the fiscal year ended: May 31, 2008

or

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

or

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

Commission file number: 001-31995

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

Canada(Jurisdiction of incorporation
or organization)

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

Dr. Albert D. Friesen, Tel: (204) 487-7412, Fax: (204)
488-98234 - 1200 Waverley Street, Winnipeg, Manitoba, Canada R3T
0P4(Name, Telephone, E-mail and/or Facsimile number and
Address of Company Contact Person)

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

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

Common Shares, without par value(Title
of Class)

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

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

At May 31, 2008 the registrant had 130,307,552 common shares
  issued and outstanding

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

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2

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes  [   ]     No [X]

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

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

Large Accelerated Filer [  
]         Accelerated Filer
[X]       Non-Accelerated Filer [  
]

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

|US GAAP [   ] | International Financial
      Reporting        | Other [X]
|------------- | ---------------------------------------------- | ---------
|              | Standards as issued by the
      International |          
|              | Accounting Standards Board
      [   ]         |          

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

Item 17 [X]    Item 18 [   ]

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes  [   ]     No [X]

As of May 31, 2008, the rate for Canadian dollars was US $1.0070
for Cdn $1.00.

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3

TABLE OF CONTENTS

|**GLOSSARY**                                                             | 5                                                      
|------------------------------------------------------------------------ | -------------------------------------------------------
|**FORWARD LOOKING STATEMENTS**                                           | 6                                                      
|**PART I**                                                               | 6                                                      
|**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;

CABGmeans coronary artery bypass graft;

"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 Practices;

"GMP" means Good Manufacturing Practices;

"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. This Annual Report contains forward-looking
statements and information which may not be based on historical fact, which may
be identified by the words believes, may, plan, will, estimate,
continue, anticipates, intends, expects, and similar expressions and the
negative of such expressions. Such forward looking statements include, without
limitation, statements regarding:

- our intention to further advance our commercial operation and increase
  AGGRASTAT® product revenue;
- our intention to raise capital through equity or debt financings,
  collaborative or other arrangements with third parties or through other
  sources of financing;
- our ongoing corporate restructuring plan;
- our intention to discover and develop new pharmaceuticals;
- our intention to license the sale and distribution of any products we may
  commercialize to larger, international pharmaceutical companies;
- our plan to move forward with a clinical development program for MC-1 in
  chronic indications;
- our intention to build a pipeline of pre-clinical products over the next
  several years, including our drug product candidates currently at the
  discovery and preclinical stages of development;
- our evaluation of other drug candidates for potential license with the
  objective of further broadening our product and patent portfolio; and
- our licensing and research collaboration discussions, from time to time,
  with larger pharmaceutical firms and other biotechnology firms relating to the
  potential development and commercialization of our product candidates.

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

- the ability to meet its debt obligations;
- dependence on collaborative partners;
- sufficient working capital to meet current obligations;
- our ability to continue as a going concern;

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7

- the competitive landscape in the markets which we compete, pricing and/or
  Medicare/Medicaid positioning for AGGRASTAT®;
- the availability of capital on acceptable terms to pursue the
  commercialization of AGGRASTAT® and to carry on research and development
  programs related to MC-1 or other products;
- unanticipated interruptions in our manufacturing operations;
- significant changes in foreign exchange rate;
- the impact of new discoveries and scientific information that affect the
  competitive positioning of AGGRASTAT® and/or its competitors;
- the impact of competitive products and pricing;
- the compliance with all long-term debt covenants and obligations;
- the expense and outcome of certain legal and regulatory proceedings and
  expense thereto;
- the nature of the market for MC-1 in the treatment of chronic
  cardiovascular and metabolic indications;
- the regulatory approval process leading to commercialization;
- fluctuations in operating results, and other risks as detailed from time to
  time in our filings with the SEC and the Canadian Securities Administrators;
- our ability to anticipate and manage the risks associated with the
  foregoing, contractual disagreements with third parties;
- the unpredictability of protection provided by our patents;
- the results of continuing safety and efficacy studies by industry and
  government agencies;
- the regulatory environment and decisions by regulatory bodies impacting our
  products, fees relating or our and the feasibility of additional clinical
  trials;
- the companys stage of development;
- lack of product revenues;
- the companys limited marketing experience
- additional capital requirements;
- risks associated with the completion of clinical trials and obtaining
  regulatory approval to market the Companys products;
- the ability to protect its intellectual property and
- additional risks and uncertainties relating to the Company and its business
  can be found in the Risk Factors section of this Annual Report.

These factors should be considered carefully and readers are
cautioned not to place undue reliance on such forward-looking statements and
information. The Company disclaims any obligation to update any

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8

such factors or to publicly announce the result of any
revisions to any of the forward-looking statements and information contained
herein to reflect future results, events or developments, except as otherwise
required by applicable law.

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,
2008 and 2007 and for the fiscal years ended May 31, 2008, 2007 and 2006 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, 2006,
2005 and 2004 and for the fiscal years ended May 31, 2005 and 2004 was extracted
from the audited financial statements of the Corporation not included in this
annual report. Reference is made to Note 14 of the consolidated financial
statements of the Corporation included herein for a discussion of the material
measurement differences 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 and the issuance of debt. The Corporations ability to
continue operations is dependent on the ability of the Corporation to obtain
additional financing. See Item 3 - Key Information - D. Risk Factors.

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9

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

Balance Sheet Data
    
    May 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(as at period end)
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Current Assets
    
    14,402,736
    
    
    35,827,187
    
    
    35,841,573
    
    
    8,658,888
    
    
    21,342,820Capital Assets
    
    132,887
    
    
    196,521
    
    
    50,663
    
    
    81,002
    
    
    66,202Intangible Assets
    
    8,353,610
    
    
    23,412,131
    
    
    2,921,841
    
    
    1,332,969
    
    
    976,690Other Assets
    
    11,916,000
    
    
    349,963
    
    
    -
    
    
    -
    
    
    -Total Assets
    
    34,805,233
    
    
    59,785,802
    
    
    38,814,077
    
    
    10,072,859
    
    
    22,385,712Total Liabilities
    
    41,361,393
    
    
    25,479,333
    
    
    1,644,339
    
    
    2,732,754
    
    
    817,575Net Assets /
    
    (6,556,160
    )
    
    34,306,469
    
    
    37,169,738
    
    
    7,340,105
    
    
    21,568,137(deficiency)Capital Stock,
    
    128,677,313
    
    
    112,137,421
    
    
    83,297,304
    
    
    40,860,597
    
    
    40,222,719warrants andContributed SurplusDeficit
    
    (135,233,473
    )
    
    (77,830,952
    )
    
    (46,127,566
    )
    
    (33,520,492
    )
    
    (18,654,582
    )Statement ofOperations(for the fiscal yearended on)Product Sales
    
    2,247,129
    
    
    5,944,730
    
    
    -
    
    
    -
    
    
    -Interest and Other
    
    1,149,574
    
    
    1,590,801
    
    
    299,737
    
    
    394,784
    
    
    445,461IncomeLoss from ContinuingOperations
    
    (57,402,521
    )
    
    (31,703,386
    )
    
    (12,607,074
    )
    
    (14,865,910
    )
    
    (5,989,086
    )Net Loss for the
    
    (57,402,521
    )
    
    (31,703,386
    )
    
    (12,607,074
    )
    
    (14,865,910
    )
    
    (5,989,086
    )PeriodBasic and Diluted
    
    (0.46
    )
    
    (0.30
    )
    
    (0.17
    )
    
    (0.22
    )
    
    (0.11
    )Loss per ShareWeighted-AverageNumber ofCommon Shares
    
    125,476,086
    
    
    104,879,404
    
    
    75,144,764
    
    
    66,717,715
    
    
    55,738,716Outstanding


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10

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

Balance Sheet Data
    
    May 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,
    
    
    May 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(as at Period end)
    
    $
    
    
    $
    
    
    $
    
    
    $
    
    
    $Current Assets
    
    14,402,736
    
    
    35,827,187
    
    
    35,841,573
    
    
    8,658,888
    
    
    21,342,820Capital Assets
    
    132,887
    
    
    196,521
    
    
    50,663
    
    
    60,859
    
    
    41,472Intangible Assets
    
    5,510,661
    
    
    20,078,862
    
    
    -
    
    
    -
    
    
    -Other Assets
    
    14,470,081
    
    
    349,963
    
    
    -
    
    
    -
    
    
    -Total Assets
    
    34,516,365
    
    
    56,452,533
    
    
    35,892,236
    
    
    8,719,747
    
    
    21,384,292Total Liabilities
    
    43,915,123
    
    
    25,479,333
    
    
    1,644,339
    
    
    2,732,754
    
    
    817,575Net Assets /
    
    (9,398,758
    )
    
    30,973,200
    
    
    34,247,897
    
    
    5,986,993
    
    
    20,566,717(deficiency)Capital Stock,
    
    144,921,967
    
    
    128,382,255
    
    
    99,542,135
    
    
    57,105,431
    
    
    56,459,161warrants andContributed SurplusDeficit
    
    (154,320,725
    )
    
    (97,409,055
    )
    
    (65,294,238
    )
    
    (51,118,438
    )
    
    (35,892,444
    )Statement ofOperationsProduct Sales
    
    2,247,129
    
    
    5,944,730
    
    
    -
    
    
    -
    
    
    -Interest and Other
    
    1,149,574
    
    
    1,590,801
    
    
    299,737
    
    
    394,784
    
    
    445,461IncomeLoss from ContinuingOperations
    
    (56,911,670
    )
    
    (32,114,817
    )
    
    (14,175,800
    )
    
    (15,225,994
    )
    
    (6,222,185
    )Net Loss for the
    
    (56,911,670
    )
    
    (32,114,817
    )
    
    (14,175,800
    )
    
    (15,225,994
    )
    
    (6,222,185
    )PeriodBasic and Diluted
    
    (0.45
    )
    
    (0.31
    )
    
    (0.19
    )
    
    (0.23
    )
    
    (0.11
    )Loss per ShareWeighted-AverageNumber ofCommon Shares
    
    125,476,086
    
    
    104,879,404
    
    
    75,144,764
    
    
    66,717,715
    
    
    55,738,716Outstanding


Comparability of Data

The selected financial data for the fiscal years ended May 31,
2008, 2007, 2006, 2005 and 2004 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.

---

11

May 31, 2008
    May 31, 2007
    May 31, 2006
    May 31, 2005
    May 31, 2004Period End
    1.0070
    0.9349
    0.9079
    0.7967
    0.7335Average
    0.9857
    0.8798
    0.8588
    0.7978
    0.7453


August
    July
    June
    May
    April
    March
    February2008
    2008
    2008
    2008
    2008
    2008
    2008(Aug 1- 21)High for Period(1)
    .9394
    0.9782
    0.9755
    1.0179
    1.0002
    1.0241
    1.0298Low for Period(1)
    .9332
    0.9733
    0.9690
    0.9761
    0.9682
    0.9713
    0.9805


Notes: (1) Figures are extracted from daily
exchange rates

As of August 21, 2008, the exchange rate to convert one
Canadian dollar into the U.S. dollar was .9579.

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.

Going concern risk

The Company recorded a loss of $57,403,000 and negative cash
flows from operations of $41,865,000 in the year ended May 31, 2008 and the
Company reported an accumulated deficit of $135,233,000 as at May 31, 2008. In
March 2008, the Company announced a significant corporate restructuring stemming
from the unfavourable results of the Phase 3 MEND-CABG II trial. This
restructuring included a significant reduction in numbers of staff and in
resources allocated to certain programs. Based on the Companys operating plan,
its existing working capital is not sufficient to meet the cash requirements to
fund the Companys currently planned operating expenses, capital requirements,
working capital requirements, long-term debt obligations and commitments beyond
the end of the 2009 fiscal year without additional sources of cash and/or
deferral, reduction or elimination of significant planned expenditures. The
Companys plan to address the expected shortfall of working capital is to secure
additional funding within the next six months and to increase operating revenue
and reduce operating expenses. There is no certainty that the Company will be
able to obtain any sources of financing on acceptable terms, or at all, or that
it will increase product revenue or reduce operating expenses to the extent
necessary.

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12

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 actions
taken or planned, some of which are described above, which management believes
will mitigate the adverse conditions and events which raise doubt about the
validity of the going concern assumption used in preparing these financial
statements. There is no certainty that these and other strategies will be
sufficient to permit the Company to continue as a going concern.

The Corporation has engaged in a restructuring program
designed to reduce costs and conserve capital which may not be successful.

Following MC-1s failure to achieve its endpoint as announced
in February 2008, the Corporation engaged in a restructuring effort which led to
the downsizing of 50 staff and consultants in order to reduce expenses and
conserve capital. The restructuring may negatively impact the ability of the
Corporation to retain qualified management, staff and consultants which may
further limit the Corporations ability to continue its commercial operations as
well as its ongoing research and development activities.

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. The Corporation incurred net losses of $57,402,521 for the
year ended May 31, 2008, $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, and $5,989,086 for the year ended May 31, 2004.

The Corporation anticipates that its losses will continue for
the foreseeable future. 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;                              
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

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 the Corporation insolvent.

In September 2007, the Company entered into a debt financing
agreement with Birmingham Associates Ltd. (Birmingham), an affiliate of Elliott
Associates, L.P. (Elliott) for a US$25 million up-front cash

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13

payment. Under the terms of the agreement, Birmingham will
receive a payment based on a percentage of AGGRASTAT® net sales. Birmingham is
entitled to a return of 20 percent on the first US$15 million in AGGRASTAT®
revenues, 17.5 percent on the next US$10 million, 15 percent on the next $5
million and 5 percent thereafter, subject to an escalating minimum annual
return, until May 31, 2020. The minimum annual returns start at US$2.5 million
in 2008 and escalate to US$6.9 million in 2017, with minimum payments over the
life of the agreement aggregating US$49.7 million.

In August 2006, the Corporation entered into a term loan
financing facility with a syndicate of lenders, led by Merrill Lynch Business
Financial Services Inc. (Merrill) (formerly Merrill Lynch Capital Canada Inc.),
Silicon Valley Bank and Oxford Finance Corporation (the Credit Facility). As
at May 31, 2008, the balance outstanding on the Credit Facility is US$12
million. 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 both 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 and
- the occurrence of any fact, event or circumstance that could reasonably be
  expected to result in a material adverse effect.

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. Pursuant to an
amendment to the Credit Facility agreement made as of September 17, 2007, the
cash amount of US$12 million was deposited in a cash collateral reserve held by
Merrill and to be applied against the Corporations obligations under the Credit
Facility.

The Corporations substantial debt could impair its
financial condition. The Corporation is highly leveraged and has substantial
debt service obligations which it may not be able to meet in the ordinary course
of business.

As of May 31, 2008, the Corporation had approximately US$36.2
million of future principal repayments on its long-term debt. 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;

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14

- 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;
- 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.

There is no guarantee that the Corporation will be able to meet
its obligations under these facilities.

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

The Corporation currently relies on trade credit as well as
cash from term debt and equity issues to provide the necessary short-term
financing to conduct the Corporations research and development activities as
well as its commercial operations. Should suppliers and other creditors decline
to extend short-term credit to the Corporation in the future, it may have a
material adverse effect on the Companys business prospects, financial results
and financial condition.

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 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. 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

---

15

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

The 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 not have
key person insurance in effect in the event of a loss of any management,
scientific or other key personnel. The loss of the services of one or more of
the Companys current executive officers or key personnel or the inability to
continue to attract qualified personnel could have a material adverse effect on
the Companys business prospects, financial results and financial condition.

The 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.

---

16

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. 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s financing agreement with Birmingham
Associates includes certain restrictive covenants on the corporations commercial
and developmental products including intellectual property. The ability for the
company to execute on portions of its business plan may be contingent on having
collaborative relationships with Birmingham. The failure to establish or
maintain this successful collaborative arrangement may negatively impact the
Corporation.

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 is currently dependent on a single
manufacturer of its sole commercial product, AGGRASTAT and on a single supplier
of raw material used in the manufacture of AGGRASTAT.

The Corporation is reliant on a single supplier of the raw
material for AGGRASTAT and a single third party manufacturer of the final
product AGGRASTAT. If the supply of raw material or the manufacturing agreement
for AGGRASTAT is terminated or interrupted and the Corporation was unable to
obtain a replacement supplier or manufacturer, it could have a material adverse
effect on the Companys business prospects, financial results and financial
condition.

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 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 payers 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

---

17

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.

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

The Corporation has no experience in large-scale manufacturing
and has no experience in marketing or selling its products except for limited
experience marketing AGGRASTAT®. The Corporation may never be able to
successfully manufacture and market certain of 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, and possible to 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 its future prospects. Failure of or delay by a third party in the marketing
or selling of the Corporations products or failure of the Corporation to
successfully market and sell such 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 39 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

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18

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 products
or processes infringes 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.

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19

Except with respect to AGGRASTAT®,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
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.

The Corporation manufacturers Aggrastat in commercial
quantities. In addition 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

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20

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 is exposed to foreign exchange movements
since the majority of its debt financing and its commercial sales operations are
denominated in U.S. currency.

At May 31, 2008, the Corporation had US$36.2 million in debt
offset by US$19.5 million in cash and cash equivalents. As well, the majority of
the Corporations sales revenues and a substantial portion of its selling,
general and administrative expenses are denominated in U.S. dollars. The Company
does not utilize derivatives, such as foreign currency forward contracts and
futures contracts, to manage its exposure to currency risk and as a result a
change in the value of the Canadian dollar against the U.S. dollar could have a
negative impact on the Companys business prospects, financial results and
financial condition.

The Corporation is exposed to changes in underlying interest
rates on the portion of its debt financed based on floating interest rates.

The Company is exposed to interest rate risk on a portion of
its debt financing and there are no financial contracts in place to offset this
risk. An increase in underlying interest rates could have a negative impact on
the Companys financial results and financial condition.

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

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.

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, 2008, the Corporation had 130,307,552, common
shares issued and outstanding. A further 4,614,383 common shares are issuable
upon exercise of outstanding stock options and another 16,065,381 common shares
are issuable upon exercise of share purchase warrants, all of which may be
exercised in

---

21

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 10% of the outstanding 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, 2008, the Corporations common shares closed at a
price of CDN$0.07 on the TSX and US$0.06 on the AMEX. For the period from June
1, 2007 to May 31, 2008, the high and low trading prices of the Corporations
common shares on the TSX were CDN$1.70 and CDN$0.06, respectively, with a total
trading volume of 114,926,000 shares. For the period from June 1, 2007 to May
31, 2008, the high and low trading prices of the Corporations common shares on
the AMEX were US$1.65 and US$0.05, respectively, with a total trading volume of
61,259,600.

Daily trading volume on the TSX of the Corporations common
shares for the period from June 1, 2007 to May 31, 2008 has fluctuated, with a
high of 25,845,200 shares and a low of 5,500shares, averaging
approximately 457,873 shares. Daily trading volume on the AMEX in the
Corporations common shares for the period from June 1, 2007 to May 31, 2008 has
fluctuated with a high of 10,301,400 and a low of 4,700, averaging approximately
243,094. 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;
- 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

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22

- 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. On June 18, 2008, the Corporation
announced its intention to file a Form 25 with the Securities and Exchange
Commission in order to voluntarily delist its common shares from the Amex. The
Corporations shares ceased trading on the Amex effective July 3, 2008.

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 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 does not expect to pay such dividends
in the foreseeable future as all available funds will be invested to finance the
growth of its business. The Corporation will need to achieve profitability prior
to any dividends being declared, which may never happen.

If the Corporations is classified as a passive foreign
investment company for United States income tax purposes, it could have
significant and adverse tax consequences to United States holders of its common
shares.

The Corporation does not believe that it was a passive foreign
investment company for the taxable year ended May 31, 2008, and does not expect
that it will be a passive foreign investment company (PFIC) for the taxable
year ending May 31, 2009. (See more detailed discussion in Item 10 E  Taxation)
However, there can be no assurance that the IRS will not challenge the
determination made by the Corporation concerning its passive foreign investment
company status or that the Corporation will not be a passive foreign
investment company for the current taxable year or any subsequent taxable year.
Accordingly, although the Corporation expects that it may be a QFC for the
taxable year ending May 31, 2009, there can be no assurances that the IRS will
not challenge the determination made by the Corporation concerning its QFC
status, that the Corporation will be a QFC for the taxable year ending May 31,
2009 or any subsequent taxable year, or that the Corporation will be able to
certify that it is a QFC in accordance with the certification procedures issued
by the Treasury and the IRS.

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

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23

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.

Risks associated with Material weaknesses within the
Companys financial reporting and review process

In connection with its review of the Companys internal control
over financial Reporting, KPMG, the Companys external auditors, identified a
martial weakness with the Companys financial reporting and review process,
involving the preparation and review of the reconciliation form Canadian GAAP to
United States GAAP. Based on such determination, the Companys management
concluded that the Companys internal control over financial reporting was not
effective. The company either plans to ensure adequate personnel are available
with the necessary training and expertise or reliance on a external third party
to provided this control, any failure to remediate the material weakness, to
implement the required new or improved control, or difficulties encountered in
the implementation, could cause the Company to fail to meet its reporting
obligations on a timely basis ore result in material misstatements in the annual
or interim financial statements. Inadequate internal control over financial
reporting could also cause investor to lose confidence in the Companys reported
financial information, which could cause the Companys stock price to
decline

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, Phone (204) 487-7412 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.

In September 2007, the Corporation monetized a percentage of
its current and potential future commercial revenues by entering into a debt
financing agreement with Birmingham Associates Ltd. (Birmingham), an affiliate
of Elliott Associates, L.P. (Elliott) for proceeds of US$25 million. (See Item 5
B  Liquidity and Capital Resources)

In February 2008, the Company announced that its pivotal Phase
III MEND-CABG II clinical trials with MC-1 did not meet the primary endpoint and
as a result was not sufficient to support the filings. As a result of the study
results, the Company announced a restructuring plan that resulted in the
organization its head count by approximately 50 employees and full-time
consultants. The restructuring and downsizing in March 2008 did conserve capital
for ongoing operations. The Company continues to look for areas were it can
reduce overhead and further conserve capital and will continue to do so into the
2009 fiscal year. The company is also exploring various alternatives for further
strengthening its financial position and will provide additional guidance as
appropriate. The Companys near term focus will be on

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24

its commercial asset AGGRASTAT®, the development of MC-1 for
chronic cardiovascular and metabolic disease, and exploring further cost savings
measures. The Companys ability to continue in operation for the foreseeable
future and be able to realize its assets and discharge its liabilities and
commitments in the normal course of business is dependent on the ability of the
Company to execute on these plans and secure additional sources of financing.
(See Item 3 D  Risk factors)

B. Business Overview

Plan of Operation

The Corporation is a pharmaceutical company focused on the
discovery, development and commercialization of therapeutics for various
large-markets, and in particular for unmet cardiovascular and cerebral vascular
needs.

In fiscal 2008, the Company was focused on two major
objectives; first and foremost on the 3000 patient Phase III trial of MC-1 for
protection of ischemic reperfusion injury during Coronary Artery By-pass Graft
surgery (CABG), entitled MEND-CABG II and secondly on increasing the sales of
AGGRASTAT®. In February 2008 the Company announced that the pivotal Phase III
trial, MEND-CABG II, did not meet the primary end point and therefore would not
file an application for regulatory approval of the use of MC-1, for this
indication. It further announced that the MC-1 development for the acute
indication of CABG, ACS and Stroke would be put on hold and the primary focus
would shift to growing the AGGRASTAT® sales through its Commercial
business and that the Companys Research and Development activity would
focus on exploring other clinical applications of MC-1.

As a result of the above, the Company announced a restructuring
plan that resulted in the organization reducing its head count by approximately
50 employees and full-time consultants. The restructuring and downsizing in
March enabled the Company to significantly conserve capital for ongoing
operations. The Company continues to look for areas were it can reduce overhead
and further conserve capital and will continue to do so into the 2009 fiscal
year. The company is also exploring various alternatives for further
strengthening its financial position and will provide additional guidance as
appropriate. The Companys near term focus will be on its commercial asset
AGGRASTAT®, the development of MC-1 for chronic cardiovascular and metabolic
disease, and exploring further cost savings measures. The Companys ability to
continue in operation for the foreseeable future and to realize its assets and
discharge its liabilities and commitments in the normal course of business is
dependent on the ability of the Company to execute on these plans and secure
additional sources of financing.

Commercial:

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, 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. The acquisition of
AGGRASTAT® initiated the commercial (sales and marketing) part of the business
forming a base for revenue, the acquisition of other drugs that fit the
commercial team and the potential to launch and market internally developed
drugs.

Net product revenue from the sale of AGGRASTAT® for fiscal 2008
declined over the net product revenue for fiscal 2007. Many factors contributed
to this including, but not limited to, the lingering effects in the market of
previous sales efforts, or the lack thereof, the challenge of reversing a long
term decline in sales, and the diversion of the commercial groups effort by
activities associated with the development and planned launch of MC-1 for CABG.
It also took time for Medicure to change its initial sales execution strategy
from a third party contract sales force to an internal sales force managed
directly in house. Management believes the company has made significant strides
in developing AGGRASTAT®s place in the market and believes benefits will be
seen in fiscal 2009. The Company

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25

also notes the successful quarter over quarter growth in
revenues in each of the last three quarters of fiscal 2008.

Research and Development:

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                                     
|----------------- | ---------------------------------------------- | ---------------------------------------------------------
|MC-1              | Coronary Artery Bypass Graft
      Surgery     | Phase III  complete did not
      meet primary end point
|MC-1              | Acute Coronary Syndrome                        | Phase II complete  on hold *                            
|MC-1              | Stroke                                         | Phase I complete  on hold                               
|MC-1              | Chronic use to lower metabolic parameters      | Phase II studies - planning                              
|MC-1              | Chronic use for neurological
      indications | Phase II studies - planning                              
|MC-4232           | Diabetes/Hypertension                          | Phase II complete on hold                               
|MC-4262           | Metabolic Syndrome/Hypertension                | Phase I complete  on hold                               

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

The Companys research and development program is currently
focused on the clinical development of the Companys lead clinical product,
MC-1, for new indications and the discovery and development of other drug
candidates. MC-1 is a naturally occurring small molecule that in both
preclinical and clinical studies has shown potential for treating various forms
of cardiovascular disease.

MC-1, the Corporations lead product, was 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. The Phase III pivotal study of
3,023 patients in support of registration filings with major regulatory
agencies, MEND-CABG II, did not meet its primary end points. Therefore, it will
not be sufficient to support the filings and as a result of limited resources
the program was put on hold.

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. Because of limited financial resources, the
studies to further to evaluate their commercial potential have been put on hold.
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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26

It is the Corporations intention to actively search for a
partnership with a large pharmaceutical company. Such a partnership may provide
funding for Phase II and 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.

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

Potential Products in Development Stage

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) as well as several
other non-cardiovascular indications. MC-1 has been shown to be a
cardioprotective drug in both preclinical and clinical studies which suggest the
potential for treating various forms of CV diseases and stroke.

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 that suggested that MC-1 was safe and the potential 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.

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

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. In the first half of fiscal 2007, the Corporation initiated a
follow on Phase III study, MEND-CABG II to form the basis of registration
applications to the major market regulatory agencies.

The Company conducted the Phase III MEND-CABG II trial at over
120 cardiac centres throughout North America and Europe. It was managed by Duke
Clinical Research Institute (DCRI) and Montreal

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27

Heart Institute and enrolled 3,023 patients. Enrolment was
completed in October 2007 and results were announced on February
23rd, 2008. The Phase III, MEND-CABG II trial did not meet its
primary end point and therefore is not sufficient for registration filings for
market approval. Because of lack of resources, the Company has put the further
development of MC-1 for acute cardiovascular indications on hold.

Preclinical and clinical studies have shown that MC-1 has the
potential to provide other clinical benefits to provide cardiovascular and
non-cardiovascular indications.

With respect to other cardiovascular indications, MC-1 has been
shown to have the potential to improve various metabolic parameters. The Company
has been pursuing these potential opportunities with a plan to develop fixed
dose combination pills with drugs already in use for improving aspects of
metabolic parameters.

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 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 is planning further clinical
studies as a result of these positive results.

The Company is also considering other combination products,
such as MC-4262, a drug combining MC-1 and an Angiotensin Receptor Blocker
(ARB). The patented new product, could be developed for use in the treatment of
hypertension in patients whose condition is complicated with metabolic syndrome
resulting in increased cardiovascular risk. A third combination product is
MC-4252, a drug combining MC-1 and a lipid lowering statin, The patented new
product could be developed for use in the treatment of patients with elevated
lipids and other complicating metabolic syndromes.

The Company is also considering the use of MC-1 as monotherapy
for the various metabolic syndrome indications. MC-1 has been shown to have
potential to lower blood pressure, reduce HbA1c, lower LDL, lower triglycerides
and CRP. With sufficient resources, the Company is considering follow-up
clinical studies to support and strengthen previous data for these applications.
With additional supportive data, MC-1 could have the potential for adjunctive
therapy to drugs already in use for these indications.

The Company is also considering the use of MC-1 as monotherapy
for non-cardiovascular chronic applications in neuroprotection.

While MC-1 for chronic 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

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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 has 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 further
clinical testing for a few chronic applications including cardiovascular and
neurologic applications with the intention of attracting partnerships for
further commercializing.

The Corporation has various compounds currently in early stage
research and development.

The Corporation has developed a novel series of small molecule
dual acting anticoagulant/antiplatelet compounds which may be useful in treating
venous and arterial thrombosis. These novel compounds are patented and
based on a vitamin B6(pyridoxine) scaffold. A number of these
compounds are active at nanomolar concentrations and selectively inhibit
thrombin. In addition these compounds also inhibit platelet aggregation. These
compounds are relatively simple to synthesize and can easily be chemically
modified to obtain the desired ratio of anticoagulant/antiplatelet activity.

The dual acting anticoagulant/antiplatelet molecules have shown
definite activity in venous and arterial models of thrombosis. Preclinical
studies show these compounds to have lesser bleeding tendencies as compared to
currently used agents such as heparin. These compounds do not give rise to HIT
antibodies, and a few analogs inhibit HIT-induced platelet aggregation. The HERG
studies demonstrate a favourable safety profile in the CanAm compounds. Acute
toxicity studies in rats also demonstrate a favourable safety profile.

The company seeks to establish a licensing arrangement or
R&D collaboration to advance these compounds to the clinic.

As at May 31, 2007, the Corporation had 39 issued United States
patents (see Item 5  Operating and Financial Review and Prospects  C. Research
and Development, Patents and Licenses, Etc. below).

Competitors Current Products

The only commercial product the corporation currently has is
sold in the United States of America.

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.).

_________________________________________________1American Heart Association,Heart Disease and Stroke Statistics - 2007
Update.

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29

Despite the development of various effective products,
pharmaceutical companies carefully monitor developments in the field and
continually attempt to bring in new major products. 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 larger financial and other resources than the Corporation does, including
those related to research and development, manufacturing, and sales and
marketing. The Corporation also faces competition in recruiting scientific
personnel from colleges, universities, agencies, and research organizations who
seek patent protection and licensing agreements for the technologies they
develop.

Competitive Strategy and Position

The Corporation is primarily focusing on:

1. Growing AGGRASTAT® sales in the
United States. The present market for the class of drug GP IIb/IIIa, of
which AGGRASTAT® is one of three in the USA market, is over $500 million per
year. At present AGGRASTAT® has 1% to 2% of this market. AGGRASTAT® is
recommended by the AHA and ACC Guidelines as one of the three GP IIb/IIIa drugs
to be used for the treatment of ACS. AGGRASTAT® has been shown, in several
clinical trials, to reduce mortality and morbidity post ACS by as much as 40%.

2. The development of MC-1 for
chronic cardiovascular and other indications, such as neurological needs.
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).

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.

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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, 2008, American Cardio Therapeutics Inc. was
involved in no material transactions.

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



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,
Canada.

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, 2008 and there are no unresolved comments as of
the date of the filing of this Annual Report with the Commission.

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31

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, 2008, May 31, 2007 and May 31, 2006
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 14 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 14 to the audited consolidated financial statements for the year ended
May 31, 2008. 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, stock-based compensation and accounting for warrants.

Revenue recognitionThe Company recognizes product
revenue when substantially all of the risks and rewards of ownership have
transferred to the customer and collection is reasonably assured. Revenue is
recognized upon product delivery 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.

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.

Research and development costsAll 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 expensesClinical 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 enrolment,
services provided, contractual terms, and prior experience with similar
contracts.

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32

Intangible assetsCosts 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 yearsPatents
    5-20 yearsTrademark
    10 yearsCustomer 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 TaxesThe 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 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 compensationThe 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

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33

compensation expense calculation. The Corporation recorded
stock compensation expense in fiscal 2008 of $563,272 (2007 - $1,025,310; 2006 -
$745,570).

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.

As discussed in Note 1 of the consolidated financial statements
of the Corporation, the financial statements do not reflect adjustments that
would be necessary if the going concern assumption were not appropriate. If the
going concern basis was not appropriate for these financial statements then
adjustments would be necessary in the carrying value of assets and liabilities,
the reported revenues and expenses, and the balance sheet classifications used.
Based on the Companys operating plan, its existing working capital is not
sufficient to meet the cash requirements to fund the Companys currently planned
operating expenses, capital requirements, working capital requirements,
long-term debt obligations and commitments beyond the 2009 fiscal year without
additional sources of cash and/or deferral, reduction or elimination of
significant planned expenditures. The Companys plan to address the expected
shortfall of working capital is to secure additional funding within the next six
months and to increase operating revenue and reduce operating expenses. There is
no certainty that the Company will be able to obtain any sources of financing on
acceptable terms, or at all, or that it will increase product revenue or reduce
operating expenses to the extent necessary.

Year Ended May 31, 2008 Compared to the Year Ended May 31,
2007

Net product sales for fiscal 2008 were $2,247,000, compared to
$5,945,000 in fiscal 2007. Net product sales reflect reduction of gross sales at
the time of initial sales recognition for estimated wholesaler chargebacks,
returns and discounts. 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. Net product sales are lower for the year
ended May 31, 2008 as compared to fiscal 2007 for several reasons including a
decline in purchases by hospitals, impacted in part by the reconfiguring of the
Companys commercial operations during the first quarter of fiscal 2008 which
resulted in a transition from a contracted third-party direct sales force to a
directly managed in-house sales force.

Cost of goods sold for fiscal 2008 were $606,000, compared to
$388,000 in fiscal 2007. 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. The calculation of royalties
due was based on a sliding scale dependent on reaching certain net sales
milestones. In January 2008, Merck & Co., agreed to terminate any future
royalty payments on net sales of AGGRASTAT® as a result of its decision to
divest its non-US commercial rights to AGGRASTAT®. The increase in cost of goods
sold was due to a write-down of obsolete inventory of $ 428,822 which was offset
by lower product sales during the year.

Selling, general, and administrative expenditures for fiscal
2008 were $12,073,000, compared to $11,048,000 in fiscal 2007. Selling, general,
and administrative expenditures related to AGGRASTAT® were $6,782,000 in fiscal
2008, compared to $6,716,000 in fiscal 2007, despite the fact that expenses in
2007 only relate to the nine-month period following the acquisition of
AGGRASTAT® in August 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 2008 increased to $5,291,000 from $4,332,000 in fiscal
2007 mainly

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34

due to costs associated with the structuring of the financing
agreements entered into during the year and the activities resulting from the
Companys restructuring efforts along with increases in some regulatory and
capital tax costs.

Research and development expenditures for fiscal 2008 were
$28,660,000, compared to $23,336,000 in fiscal 2007, which is an increase of
$5,324,000. Research and development expenditures were higher as compared to
fiscal 2007 due to the advancement and completion of the Phase 3 MEND-CABG II
study during fiscal 2008.

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 completed enrolment of the 3,000
patients in September 2007 for the MEND-CABG II trial. Over 130 cardiac centres
throughout North America and Europe participated in the study, which is managed
by Duke Clinical Research Institute (DCRI) and Montreal Heart Institute. In
February 2008, the Company announced that the study did not meet the primary
endpoint. The key findings from the study were presented at the American College
of Cardiology 57th Annual Scientific Session in April 2008. Based on the
results, the Company does not plan on submitting an application for MC-1
marketing approval to the U.S. Food and Drug Administration for the CABG
indication.

MEND-CABG II study costs incurred during the fiscal year
related to regulatory activity, patient costs, monitoring costs, laboratory
tests, manufacturing costs and administration costs. For the year ended May 31,
2008, total expenditures for the MC-1 CABG program were $26,262,000 as compared
to $20,258,000 in fiscal 2007.

The MATCHED Study: The Phase 2 study evaluated MC-1
alone and in combination with an ACE inhibitor 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-1 on important primary and
secondary blood pressure and metabolic endpoints.

MATCHED study costs incurred during the current year related to
data analysis and planning for future clinical development. For the year ended
May 31, 2008, total expenditures for the MC-4232 program were $29,000 as
compared to $113,000 in fiscal 2007.

During the year ended May 31, 2008, the Company determined that
conditions had arisen which triggered the need to review certain of the
Companys long lived assets for impairment. In particular, during the quarter
ending February 29, 2008, the Company announced that the results from the Phase
3 MEND-CABG II clinical trial did not meet its primary endpoint. Based on the
results, the Company does not plan on submitting an application for MC-1
marketing approval to the U.S. Food and Drug Administration for the CABG
indication. The Company has decided to discontinue at this time the development
of MC-1 as a monotherapy for acute indications such as CABG and announced a
corporate restructuring in March 2008. These factors, along with a lower than
originally projected AGGRASTAT® product market share has triggered the need to
review the Companys intangible assets for impairment under CICA Handbook
Section 3063 (Section 3063).

Section 3063, Impairment of Long-Lived Assets, requires
that a long-lived asset is tested for recoverability whenever events or changes
in circumstances indicate that its carrying amount may not be recoverable. An
impairment loss is recognized as the difference between fair value and carrying
amount when the carrying amount of a long-lived asset is not recoverable and
exceeds its fair value. As a result of unfavourable results of the MEND-CABG II
Study and the resulting changes to the Companys commercial plans as well as the
continued decline in AGGRASTAT® product revenues, the Company has determined
that the carrying value of patents, trademark, technology license, and customer
list exceed their fair value based on discounted future cash flows and market
prices for similar assets. Accordingly, the Company recorded a write-down of
$884,000 relating to MC-1 and $12,173,000 relating to Aggrastat during the year.

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35

Amortization for the year ended May 31, 2008 was $2,653,000,
consistent with $2,289,000 in fiscal 2007. The majority of amortization expense
in both periods relates the amortization of AGGRASTAT® intangibles.

Interest and other income for the year ended May 31, 2008 was
$1,150,000, compared to $1,591,000 in fiscal 2007. The decrease in interest and
other income in fiscal 2008 is the result of lower cash and cash equivalents
balance and lower interest rates as compared to the prior fiscal year.

Interest expense for fiscal 2008 was $3,831,000, compared to
$1,958,000 in fiscal 2007. The increase in interest expense in the year ended
May 31, 2008 as compared to fiscal 2007 is primarily due to interest on the
US$25 million in long-term debt that the Company secured in the second quarter
of fiscal 2008.

The foreign exchange gain for the year ended May 31, 2008 was
$79,000, compared to a $392,000 loss in fiscal 2007. The foreign exchange gain
in fiscal 2008 is due to a decrease in the strength of the U.S. dollar relative
to the Canadian dollar in the period. While the functional currency of the
Company is the Canadian dollar, the Company is holding U.S. dollars to finance
the U.S. dollar denominated clinical trial costs incurred as a result of the
MEND-CABG II study, AGGRASTAT® expenses incurred in the U.S. and U.S.
denominated long-term debt. 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.

For the year ended May 31, 2007, the Corporation recorded a
consolidated net loss of $57,403,000 or $0.46 per share compared to a
consolidated net loss of $31,703,000 or $0.30 per share for the year ended May
31, 2007. As discussed above, the consolidated net loss resulted mainly from the
reduction in net product sales of AGGRASTAT, increased costs of the Companys
clinical development programs, primarily being the Phase 3 MEND-CABG II study,
the write-down of MC-1 CABG and AGGRASTAT® intangible assets, rising selling,
general and administrative expenses due to costsassociated with the
structuring of the financing agreements entered into during the year and the
activities resulting from the Companys restructuring efforts along with
increases in some regulatory and capital tax costs and increased net interest
costs.

The weighted average number of common shares outstanding used
to calculate basic and diluted loss per share increased to 125,476,086 for the
year ended May 31, 2008 from 104,879,404 for the year ended May 31, 2007.

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.

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. 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.

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36

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 enrolment 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 conducted the MEND-CABG II trial at
over 120 cardiac centres throughout North America and Europe and was managed by
Duke Clinical Research Institute (DCRI) and Montreal Heart Institute and
enrolled up to 3,000 patients. The Company announced results in the second half
of fiscal 2008.

Costs incurred during fiscal 2007 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 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.

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37

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.

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 issue of
warrants and exercise of stock options, and interest income on excess funds
held.

Cash used in operating activities for fiscal 2008 increased
$16.7 million to $41.9 million compared to $25.2 million for fiscal 2007 as a
result of a $3.7 million reduction in sales, and increase in general and
administrative expenses of $1.0 million, an increase in research and development
expenses of $5.3 million, increased net financing costs of $2.3 million and a
$4.0 million decline in cash provided by working capital compared to the prior
year.

Cash provided by financing activities in fiscal 2008 was
$22,586,000, compared to $45,021,000 in fiscal 2007. The cash inflow during the
current period resulted from two financings in September 2007. First, the
Company entered into a debt financing agreement with Birmingham Associates Ltd.
(Birmingham), an affiliate of Elliott Associates, L.P. for proceeds of US$25
million. Under the terms of the agreement, Birmingham will receive a return
based on a percentage of AGGRASTAT® net sales. Birmingham is entitled to a
return of 20 percent on the first US$15 million in AGGRASTAT® revenues, 17.5
percent on the next US$10 million, 15 percent on the next $5 million and 5
percent thereafter, subject to an escalating minimum annual return, until May
31, 2020. The minimum annual returns start at US$2.5 million in 2008 and
escalate to US$6.9 million in 2017, with minimum payments over the life of the
agreement aggregating US$49.7 million. The annual minimum payments have been
reflected in the effective interest rate calculation of the debt. Second, the
Company closed a private placement with investors raising gross proceeds of
US$16 Million. Under the terms of the securities purchase agreements, the
Company issued approximately 13.9 million common shares together with warrants
to purchase approximately 4.37 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 have an exercise price of US$1.50 each. These
inflows were offset by $11,916,000 that was placed under restriction during the
period as collateral for the Merrill Lynch Business Financial Services Inc.
(formerly Merrill Lynch Capital Canada Inc.) term loan facility.

Cash used in investing activities in fiscal 2008 was $587,000,
compared to $22,925,000 in fiscal 2007. The large decrease in cash used in
investing activities in fiscal 2008 from fiscal 2007 reflects the Companys
acquisition of AGGRASTAT® in the first quarter of fiscal 2007.

As at May 31, 2008, the Corporation had cash and cash
equivalents totalling $11,905,000 as well as $11,916,000 of restricted cash to
secure the Merrill Credit Facility, as compared to $31,770,000 of cash and cash
equivalents as of May 31, 2007. These funds are committed to short-term
investments and as a

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38

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, 2008 was 130,307,552 as compared to 116,314,509 at May 31, 2007.

At May 31, 2008, the Corporation had net working capital of
$5,242,262, compared to net working capital of $21,129,422 at May 31, 2007.
During the period ended May 31, 2008, a total of 80,000 stock options were
exercised for proceeds of $60,000. 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 May 31, 2007, a total of 345,000 stock
options were exercised for proceeds of $286,500.

The Corporation had long-term debt at May 31, 2008 of US$12
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. The Corporation will not be required to make
any principal repayments on the term loan before the expiration of the term loan
on February 1, 2010, except that Merrill, at its option, can require the Company
to immediately repay US$2.0 million after September 17, 2008.. The Company has
deposited US$12 million in a cash collateral account to be held by Merrill, for
the benefit of Merrill and the lenders.

The Corporation also had long-term debt at May 31, 2008 of
US$24.2 million recorded in on its financial statements relating to the
Birmingham debt described in more detail above. The Company has imputed an
effective interest rate of 13.3% .

As at May 31, 2008 the Corporation had US$19.5 million in cash,
cash equivalents and restricted cash to finance the U.S. denominated long-term
debt as well U.S. denominated selling, general and administrative expenses and
research and development costs. The Corporation currently has no derivatives,
such as foreign currency forward contracts and futures contracts, hedging the
balance of the U.S. denominated debt.

In March 2008, the Company announced a significant corporate
restructuring stemming from the unfavourable results of the Phase 3 MEND-CABG II
trial. This restructuring included the significant reduction in numbers of staff
and in resources allocated to certain programs. Based on the Companys operating
plan, its existing working capital is not sufficient to meet the cash
requirements to fund the Companys currently planned operating expenses, capital
requirements, working capital requirements, long-term debt obligations and
commitments beyond the end of the 2009 fiscal year without additional sources of
cash and/or deferral, reduction or elimination of significant planned
expenditures. The Companys plan to address the expected shortfall of working
capital is to secure additional funding within the next six months and to
increase operating revenue and reduce operating expenses. There is no certainty
that the Company will be able to obtain any sources of financing on acceptable
terms, or at all, or that it will increase product revenue or reduce operating
expenses to the extent necessary.

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 may not be able to continue as a going concern. There is significant
doubt about the appropriateness of the use of the going concern assumption
because the company has experienced operating losses and cash outflows from
operations since incorporation.

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

Research and Development

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39

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 Companys research and development program is currently
focused on the clinical development of the Companys lead clinical product,
MC-1, and the discovery and development of other drug candidates. MC-1 is a
naturally occurring small molecule that in both preclinical and clinical studies
has shown potential for treating various forms of cardiovascular disease.

In February 2008, the Company announced that its pivotal Phase
3 MEND-CABG II clinical trial with MC-1 did not meet the primary endpoint and as
a result were not sufficient to support the filings. This program has been put
on hold due to the companys limited resources at this time. At such time as the
Companys resources warrant a further review of this program the Company will do
so and then make a determination as to what if any further investigation is
warranted. The key findings from the study were presented at the American
College of Cardiology 57th Annual Scientific Session in April 2008. The trial
was designed to evaluate the effect of Medicures lead product MC-1, versus
placebo, on the incidence of cardiovascular death or nonfatal myocardial
infarction up to and including 30 days following coronary artery bypass graft
(CABG) surgery. Based on the results, the Company does not plan, in the
foreseeable future, on submitting an application for MC-1 marketing approval to
the U.S. Food and Drug Administration for the CABG indication. However, the
information and findings from the program could possibly assist and speed up the
investigation of alternative applications of MC -1.

As outlined in Item 17, company-sponsored research and
development expenditures for fiscal 2008 were $28,660,250 (2007 - $23,335,752;
2006 - $10,219,205).

Patents and Licenses

The Corporation has been issued 39 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 31 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 39 patents issued
to the Corporation are as follows:

Patent Numbe
    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-


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40

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 Analogues6,586,414
    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 Treatment7,375,112
    May 20, 2008
    Compounds and Methods for Reducing Triglyceride Levels


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

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41

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
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 46 pending regular and provisional United States
patent applications, including 44 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

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42

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 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 Clinical Development
Research Institute (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

Factors which contributed to the decline in AGGRASTAT® sales in
2008 included, but were not limited to, the lingering effects in the market of
sales efforts, or lack thereof, prior to the Companys acquisition of AGGRASTAT®
in August 2006, the dilution of the commercial groups energy by activities
associated with the development and planned launch of MC-1 for CABG, which have
since been suspended, and the impact of restructuring in 2008 of the
Corporations sales execution strategy from a third party contract sales force
to an internal sales force managed directly in-house. Management believes the
Company has made significant strides in developing AGGRASTAT®s place in the
market and believes the benefits will be demonstrated in fiscal 2009 as
indicated by the successful quarter over quarter growth in revenues in each of
the last three quarters of fiscal 2008.

The Corporation is not aware of any other 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.

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43

E. Off-balance Sheet Arrangements

As of May 31, 2008 the company does not have any off-balance
sheet arrangements, other than those disclosed below.

F. Contractual Obligations

The following tables set forth the Corporations contractual
obligations as of May 31, 2008:

Contractual
        Obligations Payment Due By Period(in thousands of CDN$)
      Total
      2009
      2010
      2011
      2012
      2013
      ThereafterLong-term debt obligations2
      $36,741
      $1,986
      $9,930
      -
      $825
      $1,724
      $22,276Purchase Agreement Commitments3
      2,233
      1,600
      633
      -
      -
      -
      -Total
      $38,974
      $3,586
      $10,563
      -
      $825
      $1,724
      $22,276


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, 2008, the Company has no further commitments related to clinical
research agreements with CROs.

In addition, the Company has committed to fund a further
$26,255,000 in research and development activities under two development
agreements with 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

______________________________________________2
In September 2007, the Company entered into a debt financing agreement with
Birmingham Associates Ltd. (Birmingham), an affiliate of Elliott Associates,
L.P. (Elliott) for a US$25 million up-front cash payment. Under the terms of the
agreement, Birmingham will receive a payment based on a percentage of AGGRASTAT®
net sales. Birmingham is entitled to a return of 20 percent on the first US$15
million in AGGRASTAT® revenues, 17.5 percent on the next US$10 million, 15
percent on the next $5 million and 5 percent thereafter, subject to an
escalating minimum annual return, until May 31, 2020. The minimum annual returns
start at US$2.5 million in 2008 and escalate to US$6.9 million in 2017. The
total minimum payments over the life of the agreement aggregate US$49.7 million.

Birmingham 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 Birmingham
will receive is tiered and declines as certain revenue levels are achieved. Upon
conversion to MC-1, Birmingham is entitled to a return of 10 percent on the
first US$35 million in MC-1 revenues, 5 percent on the next US$40 million in
MC-1 revenues and 3 percent thereafter. Birmingham shall also receive a minimum
annual return of US$2.6 Million on MC-1 net sales, if approved until May 31,
2020. Birmingham will receive payments based on MC-1 revenues until December 31,
2024, unless a novel patent is obtained for MC-1, which could extend the period
of payments.

During the 30 day period following the date on which the U.S.
Food and Drug Administration shall have first approved MC-1 for sale to the
public, the Company may elect to terminate AGGRASTAT® or MC-1 Debt Payment
rights with the payment, prior to the end of such 30 day period of US$70 Million
to Birmingham. In addition, upon the approval of MC-1 for a second indication,
the Company may once again elect to terminate AGGRASTAT® or MC-1 Debt Payment
rights with the payment, prior to the end of such 30 day period of US$120
Million to Birmingham.

3 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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44

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 were payable to Merck & Co., Inc., based on net
sales of AGGRASTAT® beginning in January 2007. In January 2008, Merck & Co.,
agreed to terminate any future royalty payments on net sales of AGGRASTAT® as a
result of its decision to divest its non-US commercial rights to AGGRASTAT®.

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. Date of birth is May 19, 1947

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.
Date of birth is August24, 1933.

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45

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. Date of birth is January 25,
1940.

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 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. Date of
birth is February 11, 1956.

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. Date of
birth February 7, 1957.

David Banks, J.D. Toronto, Ontario, Canada  Director

Mr. Banks is presently a Principal of Carlyle Banks &
Company Inc, a Toronto-based investment banking firm. Mr. Banks has nearly 20
years of experience at The Chase Manhattan Bank (now known as JPMorgan Chase), a
leading global financial services firm, where he held various roles including
Senior Vice President. Additionally, Mr. Banks has served as AT&T Capital
Corporations Chief Executive Officer. AT&T Capital was the fifth largest
leasing company in the world, operating in 26 countries. Prior to his current
role at Carlyle Banks & Company, Mr. Banks held the position of Vice
Chairman of Lawrence & Company Inc., a Toronto-based global asset management
firm with interests and investments in various sectors in Canada and throughout
the world. Date of birth is January 25, 1943.

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

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46

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. Date of birth is May 7, 1971.

Dwayne Henley, CA  Chief Financial Officer

Mr. Henley joined Medicure in June 2008 from a private
investment and management company where he held the position of Vice President
of Finance. Prior to that Mr. Henley's was Vice-President Finance at Big Freight
Systems Inc., a privately owned transportation company operating throughout
North America. Other notable experience includes Assante Corporation where he
held the position of Corporate Controller and Biovail Laboratories Inc. where he
held the position of Manager, Finance and Administration. Date of birth is
November 20, 1964

Mr. Henley replaced Derek G. Reimer, CA as Chief Financial
Officer and Secretary in June 2008 after Mr. Reimer resigned from the
corporation.

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).

Dawson Reimer - Vice-President, Operations: Mr. Reimer
holds the responsibility of commercial operations and managing the internal
operations as well as certain other functional areas. (See Directors and Senior
Management under this item)

Dwayne Henley, CA - Chief Financial Officer and
Secretary: Mr. Henley is responsible for the Corporations financial
management and accounting practices (see Directors and Senior Management under
this item).

Bonnie Zell, Senior Advisor, Sales

Ms. Zell, who provides her services through a consulting
agreement with the Corporation, is responsible for sales execution by Medicures
hospital based sales team. She has over 30 years of experience in the
pharmaceutical and biotech industry where she recently held the position as Vice
President of Sales for Millennium Pharmaceuticals, Inc. Prior to Millennium, Ms.
Zell was Vice President of Sales for COR Therapeutics, Inc., which was acquired
by Millennium. Ms. Zell was instrumental in the launch and growth of
INTEGRILIN®, the market leading GP IIb/IIIa inhibitor.

Hogan Mullally, Investor Relations

Mr. Mullally, who provides services through a consulting
agreement with the Corporation, leads Medicures investor relations activities
and also contributes extensively to Business Development initiatives of the
corporation. Until May 2008, Mr. Mullally served as full time employee of the
Corporation, most recently in the capacity of Director of Business Development
and Investor Relations.

Dr. George Thomas - Director of Pharmacology

Dr. George R. Thomas received his Master in Pharmacy degree
(1996) and PhD (2002) from the Birla Institute of Technology and Sciences,
Pilani, India. He received his post-doctoral training at the Faculty of
Medicine, University of Toronto. He has over 13 years of experience in new drug
discovery particularly in the areas of cardiovascular and metabolic disorders.
Dr. Thomas held senior executive positions at Torrent Pharmaceuticals Research
Centre, where he was responsible for setting up and

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47

managing several pharmacological, pharmacokinetic and
toxicological studies. He has presented at research competitions, conferences
and published in peer reviewed journals.

Scientific Advisory Board

The Corporation has established a Scientific Advisory Board to
ensure continued and proper review of research activities and work plans.
Although due to changes in the Companys R&D activities there are at present
no formal meetings planned, the Board has been kept in place and continues to
provide input to the Corporation. 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. 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.

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

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48

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, 2008, 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,
October 1, 2006, and October 1, 2007. For the year ended May 31, 2008, the
Corporation paid A.D. Friesen Enterprises Ltd., $307,531 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.

Dawson Reimer serves the Corporation as Vice President,
Operations and received a salary of $120,417 payable in equal semi-monthly
instalments in fiscal 2008.

Derek G. Reimer serves the Corporation as Chief Financial
Officer and Secretary and received a salary of of $148,333 payable in equal
semi-monthly installments in fiscal 2008.

During the year ended May 31, 2008, the Corporation paid
directors a total of Nil (Year ended May 31, 2007: Nil; Year ended May 31, 2006:
Nil; Year ended May 31, 2005: Nil; Year ended May 31, 2004: 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.

C. Board Practices

The Board of Directors presently consists of six directors who
were elected at the Corporations annual general meeting of the shareholders
held on October 2, 2007. 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. 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 has served as a director of the
Corporation since June 2006. David Banks was appointed as a director of the
Corporation on December 3, 2007.

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 five independent directors: Kishore Kapoor (Chair), Dr. Arnold Naimark,
Gerald McDole, Peter Quick, and David Banks. 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

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49

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 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.

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50

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.

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.

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51

INDEPENDENT AUDITOR

Nominations

Nominates 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;
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

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52

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.

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;

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53

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.

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

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54

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, Kishore Kapoor, and David Banks, 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 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 29 employees,
of which 7 employees are dedicated to the Corporations research and development
activities.

E. Share Ownership

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55

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) | 7,216,699(1) | 5.54%              
|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  | David Banks                    | 969,565      | 0.74%              
|Common shares  | Derek G. Reimer                | 124,500      | 0.10%              
|Common shares  | Dawson Reimer                  | 199,735      | 0.15%              

|1) | Dr. Albert Friesen holds 432,500 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, 2008. 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
    50,000 35,000 110,000
    $1.10 $1.65 $0.98
    August 12, 2008 December 6, 2015
      December 11, 2017Gerald P. McDole
    100,000 75,000 10,000
    $1.63 $1.65 $0.98
    January 16, 2009 December 6, 2015
      December 11, 2017Peter Quick
    100,000 50,000 10,000
    $1.65 $1.54 $0.98
    December 6, 2015 January 16, 2017
      December 11, 2017Kishore Kapoor
    100,000 50,000
    $1.83 $0.94
    August 18, 2016 October 18, 2017David Banks
    100,000
    $0.98
    December 11, 2017Derek G. Reimer
    30,000 45,000 190,000
    $1.63 $1.65 $1.63
    January 5, 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, 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

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56

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 10% 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, 2008, 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 76,489,537 (58.7%) 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) | 7,216,699(1) | 5.54%              
|               | Winnipeg, Manitoba             |              |                    
|Common shares  | Dr. Lars Hoie                  | 20,018,230   | 15.36%             
|               | London, England                |              |                    



|Notes: |                                                                                                                                                                                                                                                                                                                                          
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)    | Amount of shares as of May 31, 2008.                                                                                                                                                                                                                                                                                                     
|(2)    | Dr. Albert Friesen holds 432,500 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 24, 2008, there were 7,351 shareholders of record
worldwide. As of this date there were 1,716 shareholders of record in the United
States holding a total of 29,803,667 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, 2008, 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 8,520,499 (or 6.54% of
common shares).

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57

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.

The major shareholders do not have any special voting rights.

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
instalments. 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. On October 1, 2007, a consulting contract was
entered into with A.D. Friesen Enterprises Ltd. for an annual salary of
$275,000. The consulting contract expires on December 31, 2008. 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,
2008, the Corporation paid a total of $272,250 to A.D. Friesen Enterprises Ltd.
During the year ended May 31, 2007, the Corporation paid a total of $289,333 to
A.D. Friesen Enterprises Ltd. For the year ended May 31, 2006, the Corporation
paid a total of $191,667 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 2008, $32,004 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 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.

C. Interests of Experts and Counsel

Not applicable

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements or Other Financial Information

Financial Statements

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58

Included in Item 17 hereto are the consolidated financial
statements of the Corporation for the years ended May 31, 2008, 2007 and 2006.
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.

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. On June 18, 2008, the Corporation
announced its intention to file a Form 25 with the Securities and Exchange
Commission in order to voluntarily delist its common shares from the Amex. The
Corporations shares ceased trading on the Amex effective July 3, 2008. The
historical trading data for the common shares of the Corporation on the
above-mentioned exchanges is set out below.

TSX
    TSX
    Amex (1)
    Amex (1)Fiscal Period/Year Ended
    High ($)
    Low ($)
    High
    Low($US)
    ($US)May 31, 2008
    1.70
    0.06
    1.64
    0.05May 31, 2007
    1.88
    1.10
    1.70
    0.91May 31, 2006
    2.37
    0.83
    2.07
    0.66May 31, 2005
    1.87
    0.65
    1.37
    0.57May 31, 2004
    2.85
    0.73
    2.14
    1.10


Fiscal Quarter EndedMay 31, 2008
    0.12
    0.06
    0.12
    0.05February 29, 2008
    1.05
    0.10
    1.11
    0.08November 30, 2007
    1.32
    0.70
    1.23
    0.70August 31, 2007
    1.70
    1.12
    1.64
    1.05May 31, 2007
    1.55
    1.13
    1.37
    0.97February 28, 2007
    1.64
    1.10
    1.43
    0.91November 30, 2006
    1.88
    1.37
    1.70
    1.21August 31, 2006
    1.88
    1.27
    1.70
    1.20


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59

MonthJuly 2008
    0.04
    0.03
    (2)
    (2)June 2008
    0.06
    0.04
    0.09
    0.03May 2008
    0.09
    0.06
    0.08
    0.06April 2008
    0.12
    0.07
    0.12
    0.06March 2008
    0.10
    0.06
    0.11
    0.05February 2008
    1.02
    0.10
    1.04
    0.08


|Note: |                                                                                             
|----- | --------------------------------------------------------------------------------------------
|(1)   | The Corporation commenced trading on the American Stock
      Exchange on February 17, 2004.
|(2)   | The Corporation ceased trading on the American Stock
      Exchange on July 3, 2008.        

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. On June 18, 2008, the Corporation announced its intention to
file a Form 25 with the Securities and Exchange Commission in order to
voluntarily delist its common shares from the Amex. The Corporations shares
ceased trading on the Amex effective July 3, 2008.

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.

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.

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60

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

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.

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61

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.

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

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62

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. The Corporation does have a shareholder rights plan as outlined in
Item 3.D  Risk Factors.

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

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63

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, 2006
      between A.D. Friesen Enterprises Ltd. and the Corporation.
| | -- | ------------------------------------------------------------------------------------------------------------------------
| | b) | Amended Stock Option Plan approved October 2,
  2007.                                                                   
| | c) | Amendment to Employment Agreement dated October 1, 2007
      between A.D. Friesen Enterprises Ltd. and the Corporation.
| | d) | Debt financing agreement between Birmingham Associates
      Ltd. and the Corporation dated September 17, 2007.         
| | e) | Employment Agreement with Dwayne Henley dated June 10,
      2008                                                       

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 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.

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64

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 the anticipated material U.S.
federal income tax consequences to a U.S. Holder (as defined below) arising from
and relating to the acquisition, ownership, and disposition of common shares of
(Common Shares).

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

Scope of this Summary

Authorities

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

U.S. Holders

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65

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

Non-U.S. Holders

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

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

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

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

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

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

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

Distributions on Common Shares

General Taxation of Distributions

A U.S. Holder that receives a distribution, including a
constructive distribution, with respect to the Common Shares will be required to
include the amount of such distribution in gross income as a dividend (without
reduction for any Canadian income tax withheld from such distribution) to the
extent of the current or accumulated earnings and profits of the 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 more detailed discussion at 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 Corporation is a qualified
foreign corporation (as defined below), (b) the U.S. Holder receiving such
dividend is an individual, estate, or trust, and (c) such dividend is paid on
Common Shares that have been held by such U.S. Holder for at least 61 days
during the 121-day period beginning 60 days before the ex-dividend date. The
Corporation generally will be a qualified foreign corporation under Section
1(h)(11) of the Code (a QFC) if (a) the Corporation is eligible for the
benefits of the Canada-U.S. Tax Convention, or (b) the Common Shares are readily
tradable on an established securities market in the U.S. However, even if the
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.

As discussed below, the Corporation does not believe that it
was a passive foreign investment company for the taxable year ended May 31,
2008, and does not expect that it will be a passive foreign investment company
for the taxable year ending May 31, 2009. (See more detailed discussion at
Additional Rules that May Apply to U.S. Holders below). However, there can be
no assurance that the IRS will not challenge the determination made by the
Corporation concerning its passive foreign investment company status or that
the Corporation will not be a passive foreign investment company for the
current taxable year or any subsequent taxable year. Accordingly, although the
Corporation expects that it may be a QFC for the taxable year ending May 31,
2009, there can be no assurances that the IRS will not challenge the
determination made by the Corporation concerning its QFC status, that the
Corporation will be a QFC for the taxable year ending May 31, 2009 or any
subsequent taxable year, or that the Corporation will be able to certify that it
is a QFC in accordance with the certification procedures issued by the Treasury
and the IRS.

If the 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
financial advisor, legal counsel, or accountant regarding the dividend rules.

Distributions Paid in Foreign
Currency

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

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loss on the subsequent sale or other taxable disposition of
such foreign currency (including an exchange for U.S. dollars).

Dividends Received Deduction

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

Disposition of Common Shares

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

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

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

Foreign Tax Credit

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

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

Information Reporting; Backup Withholding Tax

Payments made within the U.S., or by a U.S. payor or U.S.
middleman, of dividends on, or proceeds arising from the sale or other taxable
disposition of, Common Shares generally will be subject to

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

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 U.S. Holders 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 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) 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.

In addition, if the Corporation is a PFIC and owns shares of
another foreign corporation that also is a PFIC, under certain indirect
ownership rules, a disposition of the shares of such other foreign corporation
or a distribution received from such other foreign corporation generally will be
treated as an indirect disposition by a U.S. Holder or an indirect distribution
received by a U.S. Holder, subject to the rules of Section 1291 of the Code
discussed below. To the extent that gain recognized on the actual disposition by
a U.S. Holder of Common shares or income recognized by a U.S. Holder on an
actual distribution received on Common Shares was previously subject to U.S.
federal income tax under these indirect ownership rules, such amount generally
should not be subject to U.S. federal income tax.

If the 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.

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Under Section 1291 of the Code, any gain recognized on the sale
or other taxable disposition of Common Shares, and any excess distribution (as
defined in Section 1291(b) of the Code) paid on the Common Shares, must be
ratably allocated to each day in a Non-Electing U.S. Holders holding period for
the Common Shares. The amount of any such gain or excess distribution allocated
to prior years of such Non-Electing U.S. Holders holding period for the Common
Shares generally will be subject to U.S. federal income tax at the highest tax
applicable to ordinary income in each such prior year. A Non-Electing U.S.
Holder will be required to pay interest on the resulting tax liability for each
such prior year, calculated as if such tax liability had been due in each such
prior year.

A U.S. Holder that makes a QEF Election generally will not be
subject to the rules of Section 1291 of the Code discussed above. However, a
U.S. Holder that makes a QEF Election generally will be subject to U.S. federal
income tax on such U.S. Holders pro rata share of (a) the net capital gain of
the 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. 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.

A U.S. Holder that makes a Mark-to-Market Election generally
will not be subject to the rules of Section 1291 of the Code discussed above. A
U.S. Holder may make a Mark-to-Market Election only if the Common Shares are
marketable stock (as defined in Section 1296(e) of the Code). A U.S. Holder
that makes a Mark-to-Market Election will include in gross income, for each
taxable year in which the 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 tax basis in such Common Shares. A
U.S. Holder that makes a Mark-to-Market Election will, subject to certain
limitations, be allowed a deduction in an amount equal to the excess, if any, of
(a) such U.S. Holders adjusted tax basis in the Common Shares over (b) the fair
market value of such Common Shares as of the close of such taxable year.

The Corporation does not believe that it was a PFIC for the
taxable year ended May 31, 2008, and, based on current operations and financial
projections, does not expect that it will be a PFIC for the taxable year ending
May 31, 2009. The determination of whether the Corporation was, or will be, a
PFIC for a taxable year depends, in part, on the application of complex U.S.
federal income tax rules, which are subject to differing interpretations. In
addition, whether the Corporation will be a PFIC for the taxable year ending May
31, 2009 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 Annual Report.
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 was not, or will not be, a PFIC for any taxable year.

The PFIC rules are complex, and each U.S. Holder should consult
its own financial advisor, legal counsel, or accountant regarding the PFIC rules
and how the PFIC rules may affect the U.S. federal income tax consequences of
the acquisition, ownership, and disposition of Common Shares.

Canadian Federal Income Tax Considerations for United States
Residents

The following, as of the date hereof, is a summary of the
principal Canadian federal income tax considerations generally applicable to the
holding and disposition of Common Shares by a holder, (a) who for the purposes
of the Income Tax Act (Canada) (the Tax Act) at all relevant times, is not
resident, or deemed to be resident in Canada, deals at arms length and is not
affiliated with the Corporation for the purpose of the Tax Act, holds the Common
Shares as capital property and does not use or hold, and is not deemed to use or
hold, the Common Shares in the course of carrying on, or otherwise in connection
with, a business in Canada, and (b) who, for the purposes of the Canada -
United States Income Tax Convention(the Convention) at all relevant
times, is a resident of the United States, has never been a resident of Canada,
has not held or used (and does not hold or use) Common Shares in connection with
a permanent establishment or fixed base in Canada, and who otherwise qualifies
for the

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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 United States 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 the voting stock of the
Corporation 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, unless
the shares 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 designated
stock exchange (which currently includes the TSX 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 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.

Canadian Federal Income Tax Consequences

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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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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, 2008, the
outstanding principal amount of this debt is US$12 million. As this debt bears
interest at monthly LIBOR plus 6.5 percent per annum, the Corporation is exposed
to interest rate risk. A 1% change in the underlying LIBOR for fiscal 2008,
would have impacted the loss for the year by 0.2% .

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 2008, it is estimated that
approximately 53% 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 or on U.S. dollar denominated debt. A 10%
change in foreign exchange rates for fiscal 2008 would have impacted loss for
the year by 5%.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND
DELINQUENCIES

Not applicable

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

Not applicable

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide
reasonable assurance that information that is required to be disclosed in
prescribed filings and reports that are filed with the Canadian securities
regulatory authorities is recorded, processed, summarized and reported on a
timely basis, and is accumulated and communicated to management, including the
Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) as
appropriate to allow timely decisions regarding required disclosure.

The CEO and CFO have evaluated the Companys disclosure
controls and procedures as of May 31, 2008 and have concluded that such controls
and procedures were not effective to provide reasonable assurance that material
information relating to the Company was reported as required because we
identified a material weakness in our internal control over financial reporting
as described below.

Managements Annual Report on 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, 2008, 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 is not effective as a result of a material weakness
described below.

A material weakness is a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the annual financial
statements will not be prevented or detected on a timely basis. In connection
with managements assessment of the internal control over financial reporting
referred to above, management has identified the following material weakness in
the Company internal control over financial reporting as of May 31, 2008:

The Company did not maintain sufficient
personnel with an appropriate level of technical accounting knowledge,
experience, and training in the application of United States GAAP. Specifically,
there are insufficient personnel to allow for the independent preparation and
review of the reconciliation from Canadian GAAP to United States GAAP as
disclosed in Note 14 to the financial statements. This control deficiency
resulted in adjustments to the disclosure in the financial statements prior to
their issuance. This control deficiency results in a reasonable possibility that
a material misstatement of the financial statements will not be prevented or
detected on a timely basis.

---

74

Attestation Report of the Registered Public Accounting Firm

KPMG LLP, an independent registered public accounting firm, has
audited the consolidated financial statements included in this Annual Report on
Form 20-F and, as part of their audit, has issued their report, included herein,
on the effectiveness of our internal control over financial reporting . See
Exhibit 15.1

Changes in Internal Control over Financial Reporting and
Planned Remediation Activities

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.

Management has begun to address the material weaknesses
discussed above. A determination as to requirements necessary to address this
weakness is currently underway which includes considering either obtaining
external third party assistance or ensuring adequate personnel are available
with the necessary training and expertise.

Subsequent to May 31, 2008, the Chief Financial Officer
resigned and was replaced.

ITEM 16. RESERVED

Not applicable

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

As of May 31, 2008, 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.

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
    
    2008
    
    
    2007$
    187,285
    
    $
    55,600


---

75

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

(b) Audit-related fees
    
    2008
    
    
    2007$
    26,285
    
    $
    124,850


Audit-related fees consist of fees billed for services
associated with the issuance of securities filings and prospectuses.

(c) Tax fees - No compensation was paid to KPMG for tax
compliance, tax advice and tax planning in fiscal 2008 or 2007.

(d) All other fees
    
    2008
    
    
    2007$
    -
    
    $
    3,825


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

(e) Audit Committees Pre-approval Policies

All KPMG services and fees are approved by the Audit Committee.

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

Not applicable

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

Not applicable

---

76

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 14 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.                 

---

77











Consolidated Financial Statements of

MEDICURE INC.

Years ended May 31, 2008, 2007 and
2006

---

78





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of Medicure Inc.

We have audited the accompanying consolidated balance sheets of
Medicure Inc. ("the Company") and subsidiaries as of May 31, 2008 and 2007 and
the related consolidated statements of operations and comprehensive loss,
shareholders equity (deficiency) and cash flows for each of the years in the
three-year period ended May 31, 2008. 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 opinion.

In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of the
Company and subsidiaries as of May 31, 2008 and 2007 and the results of their
operations and their cash flows for each of the years in the three-year period
ended May 31, 2008 in conformity with Canadian generally accepted accounting
principles.

Canadian generally accepted accounting principles vary in
certain significant respects from US generally accepted accounting principles.
Information relating to the nature and effect of such differences is presented
in Note 14 to the consolidated financial statements.

The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in note 1 to the consolidated financial statements, the Company has
experienced operating losses and cash outflows from operations since
incorporation that raise significant doubt about its ability to continue as a
going concern. Managements plans in regard to these matters are also described
in note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

On June 1, 2007, the Company adopted retrospectively, without
restatement, the new recommendations of CICA Handbook Section 1530,
Comprehensive Income, Section 3855, Financial Instruments - Recognition and
Measurement, Section 3861, Financial Instruments - Disclosure and Presentation
and Section 3251, Equity. The effect of those changes is discussed in Note 2(q)
to the consolidated financial statements.

---

79





We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the Company's
internal control over financial reporting as of May 31, 2008, based on the
criteria established in Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our
report dated August 26, 2008 expressed an adverse opinion on the effectiveness
of the Companys internal control over financial reporting.

Signed KPMG LLP

Chartered Accountants

Winnipeg, Canada August 26, 2008

---

80

MEDICURE INC.Consolidated
Balance Sheets (Expressed in Canadian dollars)

May 31, 2008 and 2007

|                                                        |   | 2008         |   |   | 2007        |  
|------------------------------------------------------- | - | ------------ | - | - | ----------- | -
|                                                        |   |              |   |   |             |  
|Assets                                                  |   |              |   |   |             |  
|                                                        |   |              |   |   |             |  
|Current assets:                                         |   |              |   |   |             |  
|Cash and cash equivalents                               | $ | 11,904,930   |   | $ | 31,770,320  |  
|Accounts
      receivable (note 4)                      |   | 884,343      |   |   | 2,048,260   |  
|Inventories (note 5)                                    |   | 316,359      |   |   | 640,004     |  
|Research
      advance (note 11)                        |   | 200,000      |   |   | 200,000     |  
|Prepaid expenses                                        |   | 1,097,104    |   |   | 1,168,603   |  
|                                                        |   | 14,402,736   |   |   | 35,827,187  |  
|                                                        |   |              |   |   |             |  
|Property and equipment (note 6)                         |   | 132,887      |   |   | 196,521     |  
|                                                        |   |              |   |   |             |  
|Restricted cash (note 3)                                |   | 11,916,000   |   |   |            |  
|                                                        |   |              |   |   |             |  
|Intangible assets (note 7)                              |   | 8,353,610    |   |   | 23,412,131  |  
|                                                        |   |              |   |   |             |  
|Deferred debt issue expenses (note 8)                   |   |             |   |   | 349,963     |  
|                                                        |   |              |   |   |             |  
|                                                        | $ | 34,805,233   |   | $ | 59,785,802  |  
|                                                        |   |              |   |   |             |  
|Liabilities and Shareholders' Equity
      (Deficiency) |   |              |   |   |             |  
|                                                        |   |              |   |   |             |  
|Current liabilities:                                    |   |              |   |   |             |  
|Accounts payable and
      accrued liabilities          | $ | 7,174,474    |   | $ | 8,536,869   |  
|Current portion of
      long-term debt (note 8)        |   | 1,986,000    |   |   | 6,160,896   |  
|                                                        |   | 9,160,474    |   |   | 14,697,765  |  
|                                                        |   |              |   |   |             |  
|Long-term debt (note 8)                                 |   | 32,200,919   |   |   | 10,781,568  |  
|                                                        |   |              |   |   |             |  
|Shareholders equity (deficiency):                      |   |              |   |   |             |  
|Capital
      stock (note 9)                            |   | 116,014,623  |   |   | 109,102,397 |  
|Warrants                                                |   | 9,094,635    |   |   |            |  
|Contributed surplus                                     |   | 3,568,055    |   |   | 3,035,024   |  
|Deficit                                                 |   | (135,233,473 | ) |   | (77,830,952 | )
|                                                        |   | (6,556,160   | ) |   | 34,306,469  |  
|                                                        |   |              |   |   |             |  
|Nature of operations - going concern (note
      1)     |   |              |   |   |             |  
|Commitments and
      contingencies (note 11)           |   |              |   |   |             |  
|                                                        |   |              |   |   |             |  
|                                                        | $ | 34,805,233   |   | $ | 59,785,802  |  

See accompanying notes to consolidated financial statements.

On behalf of the Board:

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

---

81

MEDICURE INC.Consolidated
Statements of Operations and Comprehensive Loss (Expressed in Canadian
dollars)

Years ended May 31, 2008, 2007 and 2006

|                                                 |   | 2008        |   |   | 2007        |   |   | 2006        |  
|------------------------------------------------ | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                 |   |             |   |   |             |   |   |             |  
|Revenue:                                         |   |             |   |   |             |   |   |             |  
|Product
      sales, net                         | $ | 2,247,129   |   | $ | 5,944,730   |   | $ |            |  
|                                                 |   |             |   |   |             |   |   |             |  
|Expenses:                                        |   |             |   |   |             |   |   |             |  
|Cost of goods sold,
      excluding amortization |   | 605,623     |   |   | 387,803     |   |   |            |  
|Selling,
      general and administrative        |   | 12,072,596  |   |   | 11,047,769  |   |   | 2,858,443   |  
|Research and development
      (note 11)         |   | 28,660,250  |   |   | 23,335,752  |   |   | 10,219,025  |  
|Investment tax credits                           |   |            |   |   | (171,927    | ) |   | (478,473    | )
|Impairment of intangible
      assets (note 7)   |   | 13,056,697  |   |   |            |   |   |            |  
|Amortization                                     |   | 2,652,566   |   |   | 2,288,745   |   |   | 107,379     |  
|                                                 |   | 57,047,732  |   |   | 36,888,142  |   |   | 12,706,374  |  
|                                                 |   |             |   |   |             |   |   |             |  
|Loss before the undernoted                       |   | (54,800,603 | ) |   | (30,943,412 | ) |   | (12,706,374 | )
|                                                 |   |             |   |   |             |   |   |             |  
|Other expenses (income):                         |   |             |   |   |             |   |   |             |  
|Interest
      and other                         |   | (1,149,574  | ) |   | (1,590,801  | ) |   | (299,737    | )
|Interest expense                                 |   | 3,830,838   |   |   | 1,958,380   |   |   |            |  
|Foreign exchange loss
      (gain), net          |   | (79,346     | ) |   | 392,395     |   |   | 200,437     |  
|                                                 |   | 2,601,918   |   |   | 759,974     |   |   | (99,300     | )
|                                                 |   |             |   |   |             |   |   |             |  
|Loss and
      comprehensive loss for the year   | $ | (57,402,521 | ) | $ | (31,703,386 | ) | $ | (12,607,074 | )
|                                                 |   |             |   |   |             |   |   |             |  
|Basic and diluted loss per share                 | $ | (0.46       | ) | $ | (0.30       | ) | $ | (0.17       | )
|                                                 |   |             |   |   |             |   |   |             |  
|Weighted average number of common shares used in |   |             |   |   |             |   |   |             |  
|computing basic and diluted
      loss per share |   | 125,476,086 |   |   | 104,879,404 |   |   | 75,144,764  |  

See accompanying notes to consolidated financial statements.

---

82

MEDICURE INC.Consolidated
Statements of Shareholders Equity (Deficiency) (Expressed in Canadian
dollars)

Years ended May 31, 2008, 2007 and 2006

|                                                            |   | 2008         |   |   | 2007        |   |   | 2006        |  
|----------------------------------------------------------- | - | ------------ | - | - | ----------- | - | - | ----------- | -
|                                                            |   |              |   |   |             |   |   |             |  
|Capital stock:                                              |   |              |   |   |             |   |   |             |  
|Balance, beginning of
      year                            | $ | 109,102,397  |   | $ | 81,226,634  |   | $ | 39,864,296  |  
|Adoption
      of financial instrument standards            |   |              |   |   |             |   |   |             |  
|(note 2(q))                                                 |   | (6,425,336   | ) |   |            |   |   |            |  
|Exercise
      of options for cash                          |   | 90,241       |   |   | 347,456     |   |   | 405,482     |  
|Private placement for
      cash on August 19, 2005, net    |   |              |   |   |             |   |   |             |  
|of share issue costs of $545,544                            |   |             |   |   |            |   |   | 4,139,406   |  
|Public offering for cash
      on January 4, 2006, net of   |   |              |   |   |             |   |   |             |  
|share issue costs of $1,154,850                             |   |             |   |   |            |   |   | 10,857,650  |  
|Private placement for
      cash on May 9, 2006, net of     |   |              |   |   |             |   |   |             |  
|share issue costs of $2,373,792                             |   |             |   |   |            |   |   | 25,959,800  |  
|Private placement on
      October 5, 2007, net of          |   |              |   |   |             |   |   |             |  
|issue costs of $714,445                                     |   | 13,247,321   |   |   |            |   |   |            |  
|Private placements on
      December 22 and                 |   |              |   |   |             |   |   |             |  
|December
      28, 2006, net of issue costs of $2,366,056  |   |              |   |   | 27,528,307  |   |   |            |  
|Balance, end of year                                        |   | 116,014,623  |   |   | 109,102,397 |   |   | 81,226,634  |  
|                                                            |   |              |   |   |             |   |   |             |  
|Warrants:                                                   |   |              |   |   |             |   |   |             |  
|Balance,
      beginning of year                            |   |             |   |   |            |   |   |            |  
|Adoption of financial
      instrument standards            |   |              |   |   |             |   |   |             |  
|(note 2(q))                                                 |   | 6,425,336    |   |   |            |   |   |            |  
|Warrants granted with
      long-term debt (note 8)         |   | 809,344      |   |   |            |   |   |            |  
|Private
      placement on October 5, 2007, net of          |   |              |   |   |             |   |   |             |  
|issue costs of $104,795                                     |   | 1,859,955    |   |   |            |   |   |            |  
|Balance,
      end of year                                  |   | 9,094,635    |   |   |            |   |   |            |  
|                                                            |   |              |   |   |             |   |   |             |  
|Contributed surplus:                                        |   |              |   |   |             |   |   |             |  
|Balance, beginning of
      year                            |   | 3,035,024    |   |   | 2,070,670   |   |   | 996,301     |  
|Placement
      agents warrants granted                    |   |             |   |   |            |   |   | 42,758      |  
|Stock-based compensation                                    |   | 563,272      |   |   | 1,025,310   |   |   | 1,184,800   |  
|Options exercised -
      transferred to capital stock      |   | (30,241      | ) |   | (60,956     | ) |   | (153,189    | )
|Balance, end of year                                        |   | 3,568,055    |   |   | 3,035,024   |   |   | 2,070,670   |  
|                                                            |   |              |   |   |             |   |   |             |  
|Deficit:                                                    |   |              |   |   |             |   |   |             |  
|Balance,
      beginning of year                            |   | (77,830,952  | ) |   | (46,127,566 | ) |   | (33,520,492 | )
|Loss and comprehensive loss for the year                    |   | (57,402,521  | ) |   | (31,703,386 | ) |   | (12,607,074 | )
|Balance, end of year                                        |   | (135,233,473 | ) |   | (77,830,952 | ) |   | (46,127,566 | )
|                                                            |   |              |   |   |             |   |   |             |  
|Shareholders equity (deficiency)                           | $ | (6,556,160   | ) | $ | 34,306,469  |   | $ | 37,169,738  |  

See accompanying notes to consolidated financial statements.

---

83

MEDICURE INC.Consolidated
Statements of Cash Flows (Expressed in Canadian dollars)

Years ended May 31, 2008, 2007 and 2006

|                                                   |   | 2008        |   |   | 2007        |   |   | 2006        |  
|-------------------------------------------------- | - | ----------- | - | - | ----------- | - | - | ----------- | -
|                                                   |   |             |   |   |             |   |   |             |  
|Cash provided by (used in):                        |   |             |   |   |             |   |   |             |  
|                                                   |   |             |   |   |             |   |   |             |  
|Operating activities:                              |   |             |   |   |             |   |   |             |  
|Loss for the year                                  | $ | (57,402,521 | ) | $ | (31,703,386 | ) | $ | (12,607,074 | )
|Adjustments for:                                   |   |             |   |   |             |   |   |             |  
|Amortization of property and equipment             |   | 78,222      |   |   | 41,187      |   |   | 32,797      |  
|Amortization of intangible assets                  |   | 2,574,344   |   |   | 2,247,558   |   |   | 74,582      |  
|Amortization of deferred debt issue                |   |             |   |   |             |   |   |             |  
|expenses                                           |   | 327,484     |   |   | 211,096     |   |   |            |  
|Write-off of property and equipment                |   |            |   |   |            |   |   | 17,212      |  
|Stock-based compensation                           |   | 563,272     |   |   | 1,025,310   |   |   | 745,570     |  
|Write-off of inventory                             |   | 428,822     |   |   |            |   |   |            |  
|Impairment of intangible assets                    |   | 13,056,697  |   |   |            |   |   |            |  
|Unrealized foreign exchange gain                   |   |             |   |   |             |   |   |             |  
|on long-term debt                                  |   | (1,258,804  | ) |   | (825,221    | ) |   |            |  
|Change in the following:                           |   |             |   |   |             |   |   |             |  
|Accounts receivable                                |   | 1,163,917   |   |   | (1,589,836  | ) |   | 11,342      |  
|Inventories                                        |   | (105,177    | ) |   | (640,004    | ) |   |            |  
|Prepaid expenses                                   |   | 71,499      |   |   | (905,887    | ) |   | 135,488     |  
|Accounts payable
      and accrued liabilities     |   | (1,362,395  | ) |   | 6,892,530   |   |   | (1,088,415  | )
|                                                   |   | (41,864,640 | ) |   | (25,246,653 | ) |   | (12,678,498 | )
|                                                   |   |             |   |   |             |   |   |             |  
|Investing activities:                              |   |             |   |   |             |   |   |             |  
|Acquisition of property
      and equipment        |   | (14,588     | ) |   | (187,045    | ) |   | (19,671     | )
|Acquisition of
      intangible assets             |   | (572,520    | ) |   | (22,737,848 | ) |   | (1,224,223  | )
|                                                   |   | (587,108    | ) |   | (22,924,893 | ) |   | (1,243,894  | )
|                                                   |   |             |   |   |             |   |   |             |  
|Financing activities:                              |   |             |   |   |             |   |   |             |  
|Issuance
      of common shares and warrants,      |   |             |   |   |             |   |   |             |  
|net of share issue costs                           |   | 15,167,276  |   |   | 27,814,807  |   |   | 41,251,907  |  
|Proceeds
      from issuance of long-term debt     |   |             |   |   |             |   |   |             |  
|and warrants                                       |   | 25,022,600  |   |   | 17,767,685  |   |   |            |  
|Repayments of long-term debt                       |   | (3,959,616  | ) |   |            |   |   |            |  
|Debt issue expenses                                |   | (1,727,902  | ) |   | (561,059    | ) |   |            |  
|Cash placed under
      restriction                |   | (11,916,000 | ) |   |            |   |   |            |  
|                                                   |   | 22,586,358  |   |   | 45,021,433  |   |   | 41,251,907  |  
|                                                   |   |             |   |   |             |   |   |             |  
|Increase (decrease) in cash and cash equivalents   |   | (19,865,390 | ) |   | (3,150,113  | ) |   | 27,329,515  |  
|                                                   |   |             |   |   |             |   |   |             |  
|Cash and cash
      equivalents, beginning of year |   | 31,770,320  |   |   | 34,920,433  |   |   | 7,590,918   |  
|                                                   |   |             |   |   |             |   |   |             |  
|Cash and cash
      equivalents, end of year       | $ | 11,904,930  |   | $ | 31,770,320  |   | $ | 34,920,433  |  
|                                                   |   |             |   |   |             |   |   |             |  
|Supplementary information:                         |   |             |   |   |             |   |   |             |  
|Cash
      transactions:                           |   |             |   |   |             |   |   |             |  
|Interest paid                                      | $ | 2,353,130   |   | $ | 1,574,209   |   | $ |            |  
|Interest received                                  |   | 1,023,347   |   |   | 1,596,616   |   |   | 207,718     |  
|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.

---

84

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|1. | Nature of operations - going concern:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | Medicure Inc. (the Company) is a biopharmaceutical
      company focused on the discovery and development of therapeutics for
      various large-market, unmet cardiovascular needs. The Company has the U.S.
      rights to the commercial product, AGGRASTAT® Injection (tirofiban
      hydrochloride) in the United States and its territories (Puerto Rico, U.S.
      Virgin Islands, and Guam). AGGRASTAT®, a glycoprotein GP IIb/IIIa receptor
      antagonist, is used for the treatment of acute coronary syndrome (ACS)
      including unstable angina, which is characterized by chest pain when one
      is at rest, and non- Q-wave myocardial infarction.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Companys research and development program is
      currently focused on the clinical development of the Companys lead
      clinical product, MC-1, and the discovery and development of other drug
      candidates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | These consolidated financial statements have been
      prepared on a going concern basis in accordance with Canadian generally
      accepted accounting principles. The going concern basis of presentation
      assumes that the Company will continue in operation for the foreseeable
      future and be able to realize its assets and discharge its liabilities and
      commitments in the normal course of business. There is significant doubt
      about the appropriateness of the use of the going concern assumption
      because the company has experienced operating losses and cash outflows
      from operations since incorporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Company has experienced a loss of $57,402,521 and
      negative cash flows from operations of $41,864,640 in the year ended May
      31, 2008, and the Company has accumulated a deficit of $135,233,473 as at
      May 31, 2008. In March 2008, the Company announced a significant corporate
      restructuring stemming from the unfavorable results of the Phase 3
      MEND-CABG II trial. This restructuring included the significant reduction
      in numbers of staff and in resources allocated to certain programs. Based
      on the Companys operating plan, its existing working capital is not
      sufficient to meet the cash requirements to fund the Companys currently
      planned operating expenses, capital requirements, working capital
      requirements, long-term debt and commitments beyond the end of the 2009
      fiscal year without additional sources of cash and/or deferral, reduction
      or elimination of significant planned expenditures. The Companys plan to
      address the expected shortfall of working capital is to secure additional
      funding within the next six months and to increase operating revenue and
      reduce operating expenses. There is no certainty that the Company will be
      able to obtain any sources of financing on acceptable terms, or at all, or
      that it will increase product revenue or reduce operating expenses to the
      extent necessary.

---

85

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|1. | Nature of operations - going concern
      (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | 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 actions taken or planned, some of which are described
      above, which management believes will mitigate the adverse conditions and
      events which raise doubt about the validity of the going concern
      assumption used in preparing these financial statements. There is no
      certainty that these and other strategies will be sufficient to permit the
      Company to continue as a going concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | The financial statements do not reflect adjustments that
      would be necessary if the going concern assumption were not appropriate.
      If the going concern basis was not appropriate for these financial
      statements, then adjustments would be necessary in the carrying value of
      assets and liabilities, the reported revenues and expenses, and the
      balance sheet classifications used.                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|2. | Significant accounting policies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

---

86

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|2. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------
|   |                                               
|   | (c)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (d)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (e)                                           
|   |                                               
|   |                                               

Asset
    Basis
    Annual RateComputer equipment
    Straight-line
    25%Furniture, fixtures and equipment
    Diminishing balance
    20% to 25%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 yearsTrademark
    10 yearsTechnology license
    8 yearsCustomer list
    10 years


---

87

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|2. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------
|   |                                               
|   | (g)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (h)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (i)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (j)                                           
|   |                                               
|   |                                               

---

88

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|2. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------
|   |                                               
|   | (k)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (l)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (m)                                           
|   |                                               
|   |                                               

---

89

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|2. | Significant accounting policies
  (continued):
|-- | ----------------------------------------------
|   |                                               
|   | (n)                                           
|   |                                               
|   |                                               
|   |                                               
|   | (o)                                           
|   |                                               
|   |                                               
|   |                                               
|   |                                               
|   |                                               
|   | (p)                                           
|   |                                               
|   |                                               

---

90

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

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

---

91

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

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

| |     | These new standards are to be applied without restatement
      of prior periods. Upon initial adoption, all adjustments to the carrying
      value of financial assets and financial liabilities shall be recognized as
      an adjustment to the opening balance of deficit or accumulated in other
      comprehensive income, depending on the classification of existing assets
      and liabilities. The above classifications had no material impact on the
      Companys financial statements at the time of adoption.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Transaction costs that are directly attributable to the
      acquisition or issuance of financial assets or liabilities not classified
      as held-for-trading are accounted for as part of the respective asset or
      liabilitys carrying value at inception and amortized over the expected
      life of the financial instrument using the effective interest
    method.                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Upon adoption of these new standards, the Company
      reallocated $6,425,336 for warrants issued in prior fiscal years from
      common shares based on their fair values under the Black- Scholes
      model.                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | Section 3865 establishes standards for when and how hedge
      accounting can be applied as well as disclosure requirements. The Company
      does not currently have a hedging program in place, so the adoption of
      this section did not have an impact on the Companys financial
      statements.                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (r) | Recent accounting pronouncements issued but not yet
      adopted:                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | The following accounting standards were issued recently
      by the CICA. The Company is currently evaluating the impact of these new
      standards on its consolidated financial statements:                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

---

92

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

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

| | (iii) | Section 3031, Inventories(Section 3031),
      supersedes existing guidance on inventories in Section 3030,
      Inventories.This standard introduces significant changes to the
      measurement and disclosure of inventories, including the requirement to
      measure inventories at the lower of cost and net realizable value, the
      allocation of fixed production overheads based on normal capacity, and the
      reversal of previous write-downs to net realizable value when there is a
      subsequent increase in the value of inventories. Inventory policies,
      carrying amounts, amounts recognized as an expense, write-downs and the
      reversals of write-downs are required to be disclosed. This standard is
      effective for the Company for interim and annual financial statements
      beginning on June 1, 2008.                       
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (iv)  | Section 1400, General Standards of Financial Statement
      Presentation(Section 1400) was amended to change the guidance related
      to managements responsibility to assess the ability of the entity to
      continue as a going concern. When preparing financial statements,
      management is required to make an assessment of an entitys ability to
      continue as a going concern and should take into account all available
      information about the future, which is at least, but is not limited to, 12
      months from the balance sheet date. Disclosure is required of material
      uncertainties related to events or conditions that may cast significant
      doubt upon the entitys ability to continue as a going concern. These
      amendments are effective for the Company for interim and annual periods
      beginning on June 1, 2008.
| |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (v)   | Section 3064, Goodwill and Intangible Assets,
      amends the standards for recognition, measurement, presentation and
      disclosure of intangible assets for profit-oriented enterprises. These
      standards are effective for annual and interim financial statements
      relating to fiscal years beginning on or after October 1, 2008. Standards
      concerning goodwill are unchanged from previous
  standards.                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|3. | Restricted cash:                                                                                                                                                                                                                                                                                                                           
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                            
|   | As at May 31, 2008, the Company has $11,916,000
      (US$12,000,000) (May 31, 2007 - nil) in restricted cash, which is cash on
      deposit to secure the Merrill Lynch Financial Services Inc. (formerly
      Merrill Lynch Capital Canada Inc.) term loan facility (note 8). The term
      loan facility matures on February 1, 2010.

---

93

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|4. | Accounts receivable:
|-- | --------------------

| |                           |   | 2008    |  |   | 2007      | 
| | ------------------------- | - | ------- |  | - | --------- | 
| |                           |   |         |  |   |           | 
| | Trade accounts receivable | $ | 327,249 |  | $ | 1,164,386 | 
| | SR&ED taxes receivable    |   |        |  |   | 408,927   | 
| | Interest receivable       |   | 310,348 |  |   | 184,121   | 
| | Other                     |   | 246,746 |  |   | 290,826   | 
| |                           |   |         |  |   |           | 
| |                           | $ | 884,343 |  | $ | 2,048,260 | 

|   | As at May 31, 2008, the trade accounts receivable
      consists of amounts owing from three customers which represent
      approximately 100 percent (May 31, 2007 - 98 percent) of trade accounts
      receivable.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                       
|5. | Inventories:                                                                                                                                                                                                          

| |                                       |   | 2008    |  |   | 2007    | 
| | ------------------------------------- | - | ------- |  | - | ------- | 
| | Raw materials and packaging materials | $ | 92,985  |  | $ | 366,796 | 
| | Finished goods                        |   | 223,374 |  |   | 273,208 | 
| |                                       | $ | 316,359 |  | $ | 640,004 | 

|6. | Property and
equipment:
|-- | -----------------------

| |                                   |   |         |  |   | Accumulated  |  |   | Net book | 
| | --------------------------------- | - | ------- |  | - | ------------ |  | - | -------- | 
| | May 31, 2008                      |   | Cost    |  |   | amortization |  |   | value    | 
| |                                   |   |         |  |   |              |  |   |          | 
| | Computer equipment                | $ | 151,565 |  | $ | 137,827      |  | $ | 13,738   | 
| | Furniture, fixtures and equipment |   | 184,896 |  |   | 65,747       |  |   | 119,149  | 
| | Leasehold improvements            |   | 20,671  |  |   | 20,671       |  |   |         | 
| |                                   |   |         |  |   |              |  |   |          | 
| |                                   | $ | 357,132 |  | $ | 224,245      |  | $ | 132,887  | 

| |                                   |   |         |  |   | 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  | 

---

94

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|7. | Intangible assets:
|-- | ------------------

| |               |   | Cost,
      net of |  |   | Accumulated  |  |   | Net book  | 
| | ------------- | - | ------------------ |  | - | ------------ |  | - | --------- | 
| | May 31, 2008  |   | impairment         |  |   | amortization |  |   | value     | 
| |               |   |                    |  |   |              |  |   |           | 
| | Patents       | $ | 11,263,893         |  | $ | 4,021,700    |  | $ | 7,242,193 | 
| | Trademark     |   | 1,534,440          |  |   | 589,736      |  |   | 944,704   | 
| | Customer list |   | 270,784            |  |   | 104,071      |  |   | 166,713   | 
| |               |   |                    |  |   |              |  |   |           | 
| |               | $ | 13,069,117         |  | $ | 4,715,507    |  | $ | 8,353,610 | 

| |                    |   |            |  |   | 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 | 

As described in note 8, certain
intangible assets are pledged as security against long-term debt. During the
year ended May 31, 2008, the Company determined that conditions had arisen which
triggered the need to review certain of the Companys long-lived assets for
impairment. In particular, during the quarter ending February 29, 2008, the
Company announced that the results from the Phase 3 MEND-CABG II clinical trial
did not meet its primary endpoint. Based on the results, the Company does not
plan on submitting an application for MC-1 marketing approval to the U.S. Food
and Drug Administration for the CABG indication. The Company decided to
discontinue the development of MC-1 as a monotherapy for acute indications such
as CABG and announced a corporate restructuring in March 2008. These factors,
along with a lower than originally projected AGGRASTAT® product market share has
triggered the need to review the Companys intangible assets for impairment
under CICA Handbook Section 3063 (Section 3063).

Section 3063, Impairment of
Long-Lived Assets, requires that a long-lived asset is tested for
recoverability whenever events or changes in circumstances indicate that its
carrying amount may not be recoverable. An impairment loss is recognized as the
difference between fair value and carrying amount when the carrying amount of a
long-lived asset is not recoverable and exceeds its fair value. The Company has
determined that the carrying value of patents, trademark, technology license,
and customer list exceed their fair value based on discounted future cash flows
and market prices for similar assets. Accordingly, the Company recorded an
impairment write-down of $883,784 relating to MC-1 and $12,172,913 relating to
AGGRASTAT® in the third quarter of fiscal 2008.

---

95

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|8. | Long-term debt:
|-- | ---------------

| |                                                                 |   | 2008       |   |   | 2007       |  
| | --------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                                 |   |            |   |   |            |  
| | Birmingham long-term debt (a)                                   | $ | 22,460,084 |   | $ |           |  
| | Merrill Lynch Business Financial Services Inc. (formerly        |   |            |   |   |            |  
| | Merrill Lynch Capital Canada Inc.) term loan
      facility (b) |   | 11,726,835 |   |   | 16,942,464 |  
| |                                                                 |   | 34,186,919 |   |   | 16,942,464 |  
| |                                                                 |   |            |   |   |            |  
| | Current portion of
      long-term debt (b)(iv)                 |   | (1,986,000 | ) |   | (6,160,896 | )
| |                                                                 |   |            |   |   |            |  
| |                                                                 | $ | 32,200,919 |   | $ | 10,781,568 |  

Principal repayments to maturity by
fiscal year are as follows:

| |                                                             |   |            |  
| | ----------------------------------------------------------- | - | ---------- | -
| | 2009                                                        | $ | 1,986,000  |  
| | 2010                                                        |   | 9,930,000  |  
| | 2011                                                        |   |           |  
| | 2012                                                        |   | 824,878    |  
| | 2013                                                        |   | 1,723,675  |  
| | Thereafter                                                  |   | 22,276,447 |  
| |                                                             |   | 36,741,000 |  
| |                                                             |   |            |  
| | Less deferred debt issue expenses (net of
      accumulated |   |            |  
| | amortization of $538,580)                                   |   | (2,554,081 | )
| |                                                             |   |            |  
| |                                                             | $ | 34,186,919 |  

| | (a) | In September 2007, the Company entered into a debt
      financing agreement with Birmingham Associates Ltd. (Birmingham), an
      affiliate of Elliott Associates, L.P. (Elliott) for proceeds of US$25
      million. Under the terms of the agreement, Birmingham will receive a
      payment based on a percentage of AGGRASTAT® net sales. Birmingham is
      entitled to a return of 20 percent on the first US$15 million in
      AGGRASTAT® revenues, 17.5 percent on the next US$10 million, 15 percent on
      the next US$5 million and 5 percent thereafter, subject to an escalating
      minimum annual return, until May 31, 2020. The minimum annual returns
      start at US$2.5 million in 2008 and escalate to US$6.9 million in 2017.
      The total minimum payments over the life of the agreement aggregate
      US$49.7 million. The annual minimum payments have been reflected in the
      effective interest rate calculation of the
debt.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

96

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|8. | Long-term debt
(continued):
|-- | ---------------------------

As disclosed in note 9(d), the Company
issued 1,000,000 warrants associated with the debt financing agreement. The
warrants were valued at $809,344 based on the fair value of the options at the
date of issue using the Black-Scholes option pricing model. The warrants have
been recorded in shareholders equity. The Company recorded a long-term debt
liability of $24,213,256, representing the residual value of the proceeds
received under the debt agreement. The Company also incurred debt issuance costs
of $1,727,902, which it has recorded as a discount on the debt. The Company has
imputed an effective interest rate of 13.3 percent.

Birmingham has the option to convert
its rights based on AGGRASTAT® to MC-1 within six months after MC-1s
commercialization, if achieved. Upon conversion to MC-1, Birmingham is entitled
to a return of 10 percent on the first US$35 million in MC-1 revenues, 5 percent
on the next US$40 million in MC-1 revenues and 3 percent thereafter, subject to
a minimum annual return of US$2.6 million until May 31, 2020. Birmingham would
receive payments based on MC-1 revenues until December 31, 2024, unless a novel
patent is obtained for MC-1, which could extend the period of payments.

Birminghams participation rights are
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-1 products), 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, as
well as shares in Medicure Pharma Inc. and Medicure International Inc.

During the 30 day period following the
date on which the U.S. Food and Drug Administration shall have first approved
MC-1 for sale to the public, the Company may elect to terminate AGGRASTAT® or
MC-1 Debt Payment rights with the payment, prior to the end of such 30 day
period, of US$70 million to Birmingham.

In addition, upon the approval of MC-1
for a second indication, the Company may once again elect to terminate
AGGRASTAT® or MC-1 debt payment rights with the payment, prior to the end of
such 30 day period, of US$120 million to Birmingham. The termination options
represent an embedded derivative as defined in CICA Handbook Section 3855 -
Financial Instruments - Recognition and Measurement. As of May 31, 2008,
the estimated fair value of the termination options is nil.

---

97

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|8. | Long-term debt (continued):
|-- | ---------------------------
|   |                            
|   | (b)                        
|   |                            
|   |                            
|   |                            
|   |                            
|   |                            
|   |                            
|   |                            
|   |                            
|   |                            
|9. | Capital stock:             
|   |                            
|   | (a)                        
|   |                            
|   |                            

---

98

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|9. | Capital stock
(continued):
|-- | --------------------------

| | (b) | Shares issued and outstanding are as
  follows:
| | --- | -----------------------------------------------

| |                                                               |  | Number of shares |  |   | $           |  
| | ------------------------------------------------------------- |  | ---------------- |  | - | ----------- | -
| |                                                               |  |                  |  |   |             |  
| | Common shares:                                                |  |                  |  |   |             |  
| |                                                               |  |                  |  |   |             |  
| | 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 |  
| |                                                               |  |                  |  |   |             |  
| | Private placement for cash on October 5,
      2007,          |  |                  |  |   |             |  
| | net of share issue costs of $714,445                          |  | 13,913,043       |  |   | 13,247,321  |  
| | Exercise of options for cash                                  |  | 80,000           |  |   | 90,241      |  
| | Adoption of
      financial instruments standards (note 2(q)) |  |                 |  |   | (6,425,336  | )
| |                                                               |  |                  |  |   |             |  
| | Balance, May 31,
      2008                                   |  | 130,307,552      |  | $ | 116,014,623 |  

---

99

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|9. | Capital stock (continued):
|-- | --------------------------
|   |                           
|   | (c)                       
|   |                           
|   |                           
|   |                           
|   |                           

| |                       |  |            |   |   | 2008           |  |  |           |   |   | 2007           | 
| | --------------------- |  | ---------- | - | - | -------------- |  |  | --------- | - | - | -------------- | 
| |                       |  |            |   |   | Weighted       |  |  |           |   |   | Weighted       | 
| |                       |  | Number of  |   |   | average        |  |  | Number of |   |   | average        | 
| |                       |  | Options    |   |   | exercise price |  |  | Options   |   |   | exercise price | 
| |                       |  |            |   |   |                |  |  |           |   |   |                | 
| | Balance, beginning of |  |            |   |   |                |  |  |           |   |   |                | 
| | year                  |  | 4,235,528  |   | $ | 1.52           |  |  | 3,300,028 |   | $ | 1.41           | 
| | Granted               |  | 4,435,649  |   |   | 0.46           |  |  | 1,355,500 |   |   | 1.65           | 
| | Exercised             |  | (80,000    | ) |   | 0.75           |  |  | (345,000  | ) |   | 0.83           | 
| | Cancelled or expired  |  | (1,873,494 | ) |   | 1.31           |  |  | (75,000   | ) |   | 1.37           | 
| |                       |  |            |   |   |                |  |  |           |   |   |                | 
| | Balance, end of year  |  | 6,717,683  |   | $ | 0.87           |  |  | 4,235,528 |   | $ | 1.52           | 
| |                       |  |            |   |   |                |  |  |           |   |   |                | 
| | Options exercisable,  |  |            |   |   |                |  |  |           |   |   |                | 
| | end
      of year     |  | 2,138,028  |   |   |                |  |  | 2,318,028 |   |   |                | 

| |                                             |   | 2008 |  |   | 2007 |  |   | 2006 | 
| | ------------------------------------------- | - | ---- |  | - | ---- |  | - | ---- | 
| |                                             |   |      |  |   |      |  |   |      | 
| | Weighted average fair value per unit        |   |      |  |   |      |  |   |      | 
| | of options granted during the
      year at |   |      |  |   |      |  |   |      | 
| | market value on grant date                  | $ | 0.28 |  | $ | 1.07 |  | $ | 1.27 | 
| | Weighted average fair value per unit        |   |      |  |   |      |  |   |      | 
| | of options granted during the year at       |   |      |  |   |      |  |   |      | 
| | above market value on grant
      date      |   |     |  |   |     |  |   | 0.34 | 
| |                                             |   |      |  |   |      |  |   |      | 

---

100

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|9. | Capital stock (continued):                                         
|-- | -------------------------------------------------------------------
|   |                                                                    
|   | Options outstanding at May 31, 2008 consist of the
      following:

Range of
    
    Weighted
      average
    Options
      outstandingexercise
    Number
    remaining
    weighted average
    Numberprices
    outstanding
    contractual life
    exercise price
    exercisable$ 0.09 - 1.95
    6,467,683
    8.3 years
    $ 0.82
    1,888,0281.99 - 2.48
    250,000
    2.0
      years
    2.28
    250,0006,717,683
    
    $
      0.87
    2,138,028


The compensation expense related to
stock options granted under the stock option plan during fiscal 2008 aggregated
$563,272 (2007 - $1,025,310). 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:

| |                         | 2008      | 2007     
| | ----------------------- | --------- | ---------
| |                         |           |          
| | Expected option life    | 6.8 years | 6.5 years
| | Risk-free interest rate | 3.99%     | 4.10%    
| | Dividend yield          |          |         
| | Expected volatility     | 63.19%    | 66.96%   
| |                         |           |          

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.

---

101

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|9. | Capital stock
(continued):
|-- | --------------------------

| | (d) | Warrants:
| | --- | ---------

Exercise
      
    Granted
      
    GrantedIssue
    Original
    price
    May 31,
    (Exercised)
    May 31,
      (Exercised)
    May 31,(Expiry date)
    granted
    per
      share
    2006
    (Cancelled)*
    2007
      (Cancelled)*
    2008104,110 units(August 19, 2008)
    104,110
    $ 1.18
    104,110
    
    104,110
    
    104,1102,602,750 units(August 19, 2010)
    2,602,750
    1.18
    2,602,750
    
    2,602,750
    
    2,602,7504,000,000 units(May 9, 2011)
    4,000,000
    US 2.10
    4,000,000
    
    4,000,000
    
    4,000,0003,984,608 units(December 22, 2011)
    3,984,608
    US 1.70
    
    3,984,608
    3,984,608
    
    3,984,6081,000,000 units(December 31, 2016)
    1,000,000
    US 1.26
    
    
    
    1,000,000
    1,000,0004,373,913 units(October 5, 2012)
    4,373,913
    US 1.50
    
    
    
    4,373,913
    4,373,913


| |     | The warrants, with the exception of the warrants expiring
      on December 31, 2016, were issued together with common shares either under
      prospectus offerings or private placements with the net proceeds allocated
      to common shares and warrants based on their relative fair values using
      the Black-Scholes model. The warrants expiring on December 31, 2016 were
      issued with the debt financing agreement in September 2007, as disclosed
      in note 8(a).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | The warrants expiring on May 9, 2011, December 22, 2011,
      October 5, 2012, and December 31, 2016 may be exercised, upon certain
      conditions being met, on a cashless basis based on a formula described in
      the warrant agreements.                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (e) | 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.                                      

---

102

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|10. | Income taxes:                                                                                  
|--- | -----------------------------------------------------------------------------------------------
|    |                                                                                                
|    | Significant components of the Companys future tax assets
      and liabilities are as follows:

| |                                                    |   | 2008       |   |   | 2007       |  
| | -------------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                    |   |            |   |   |            |  
| | Future tax assets:                                 |   |            |   |   |            |  
| | Research and development
      expenses deductible |   |            |   |   |            |  
| | in future periods for income tax purposes          | $ | 2,136,000  |   | $ | 3,373,000  |  
| | Share issue costs                                  |   | 1,065,000  |   |   | 1,440,000  |  
| | Operating
      losses carried forward             |   | 5,429,000  |   |   | 2,419,000  |  
| | Other                                              |   | 712,000    |   |   | 222,000    |  
| |                                                    |   | 9,342,000  |   |   | 7,454,000  |  
| |                                                    |   |            |   |   |            |  
| | Less valuation allowance                           |   | (9,342,000 | ) |   | (7,454,000 | )
| |                                                    |   |            |   |   |            |  
| |                                                    | $ |           |   | $ |           |  

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

| |                                              |   | 2008        |   |   | 2007       |   |   | 2006       |  
| | -------------------------------------------- | - | ----------- | - | - | ---------- | - | - | ---------- | -
| |                                              |   |             |   |   |            |   |   |            |  
| | Loss for the year:                           |   |             |   |   |            |   |   |            |  
| | Canadian                                     | $ | 5,111,984   |   | $ | 4,575,446  |   | $ | 2,951,941  |  
| | Foreign                                      |   | 52,290,537  |   |   | 27,127,940 |   |   | 9,655,133  |  
| |                                              |   |             |   |   |            |   |   |            |  
| |                                              | $ | 57,402,521  |   | $ | 31,703,386 |   | $ | 12,607,074 |  
| |                                              |   |             |   |   |            |   |   |            |  
| | Canadian federal and provincial income taxes |   |             |   |   |            |   |   |            |  
| | recovery at 27% (2007- 32.5%;                |   |             |   |   |            |   |   |            |  
| | 2006 - 35%)                                  | $ | 15,499,000  |   | $ | 10,304,000 |   | $ | 4,412,000  |  
| | Foreign tax rate differential                |   | (12,914,000 | ) |   | (7,947,000 | ) |   | (3,138,000 | )
| | Permanent differences                        |   | (126,000    | ) |   | (333,000   | ) |   | (265,000   | )
| | Change in statutory rates                    |   | (964,000    | ) |   | (374,000   | ) |   | (46,000    | )
| | Valuation allowance                          |   | (1,888,000  | ) |   | (1,650,000 | ) |   | (1,157,000 | )
| | Other                                        |   | 393,000     |   |   |           |   |   | 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 the Companys wholly-owned
subsidiaries, Medicure International Inc. and Medicure Pharma Inc.

---

103

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|10. | Income taxes (continued):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | At May 31, 2008, the Company has Canadian and foreign
      unutilized operating losses carried forward for income tax purposes of
      $10,876,162 and $97,770,849, respectively. These losses are available to
      be applied against taxable income of future years up to fiscal 2028. The
      Company also has scientific and development investment tax credits of
      $1,983,000 (2007 - $2,618,000) which can be applied against income taxes
      otherwise payable of future years up to fiscal 2028.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|11. | Commitments and contingencies:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                                                            |   | Purchase    | 
| | ---------------------------------------------------------- | - | ----------- | 
| |                                                            |   | agreement   | 
| |                                                            |   | commitments | 
| |                                                            |   |             | 
| | Contractual obligations payment due by
      fiscal period |   |             | 
| | ending May 31:                                             |   |             | 
| |                                                            |   |             | 
| | 2009                                                       | $ | 1,600,000   | 
| | 2010                                                       |   | 633,000     | 
| |                                                            |   |             | 
| |                                                            | $ | 2,233,000   | 

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 $2,233,000 over the term of the agreement, which expires in fiscal 2010.

As disclosed in note 8(a), in
September 2007 the Company entered into a debt financing agreement for a US$25
million upfront cash payment. The minimum annual payments start at US$2.5
million in 2008 and escalate to US$6.9 million in 2017 and continue until May
31, 2020. The cumulative minimum annual payments (from 2008 to 2020) under the
agreement aggregate US$49.7 million.

---

104

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|11. | Commitments and contingencies
  (continued):
|--- | --------------------------------------------

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:

| | (i)  | Contracts with 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, 2008, the Company has no
      outstanding commitments related to clinical research agreements with
      CROs.                                                               
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (ii) | As at May 31, 2008, the Company has committed to fund a
      further $26,255,128 in research and development activities under two
      development agreements with 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, 2008, the Company has provided a research advance
      of $200,000 (2007 - $200,000) to one of these organizations, 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 is obligated to pay 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

---

105

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|11. | Commitments and contingencies
  (continued):
|--- | --------------------------------------------

Royalties were payable to Merck &
Co., Inc., based on net sales of AGGRASTAT® in the United States and its
territories beginning in January 2007. The calculation of royalties due was
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. In January
2008, Merck & Co., agreed to terminate any future royalty payments on net
sales of AGGRASTAT® as a result of its decision to divest its non-US commercial
rights to AGGRASTAT®.

The above royalty commitments exclude
any obligations to Birmingham pursuant to the debt financing agreement (note 8).

|12. | Related party transactions:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    | During the year ended May 31, 2008, the Company paid
      companies controlled by a director a total of $348,517 (2007 - $358,345;
      2006 - $267,569) 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|13. | 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, 2008.

---

106

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|14. | 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)                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                             

---

107

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|14. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------

The Company recognizes interest and
penalties accrued related to unrecognized tax benefits in income tax expense.
The company had no amounts accrued for the payment of interest and penalties as
of May 31, 2008.

The Company is subject to tax
examinations in all major taxing jurisdictions in which it operates (namely
Canada, the United States and Barbados). The Companys tax years 2004 through
2008 remain open in Canada for regular examination and tax years 2001 through
2008 for transfer pricing purposes. Furthermore, taxation years 2000 through
2008 remain open for examination in other jurisdictions.

In accordance with SFAS 109, the
Company reviews all available positive and negative evidence to evaluate the
recoverability of the deferred tax assets. This includes a review of such
evidence as the carry-forward periods of the significant tax assets, the
Companys history of generating taxable income in its significant tax
jurisdictions (namely Canada, the United States and Barbados), the Companys
cumulative profits or losses in recent years, and the Companys projections of
earnings in its significant jurisdictions. On a jurisdictional basis, the
Company is in a cumulative loss position in all of its significant
jurisdictions. For all jurisdictions, the Company continues to maintain a
valuation allowance against all of its deferred income tax assets.

Under Canadian GAAP, investment tax
credits and other research and development credits are deducted from research
and development expense for items of a current nature, and deducted from
property and equipment for items of a capital nature. Under United States GAAP,
these tax credits would be reclassified as a reduction of income tax expense.

---

108

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|14. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | (b)                                                                          
|    |                                                                              
|    |                                                                              

| |                                       |   | Year
      ended |   |   | Year
      ended |   |   | Year
      ended |  
| | ------------------------------------- | - | ---------------- | - | - | ---------------- | - | - | ---------------- | -
| |                                       |   | May 31,          |   |   | May 31,          |   |   | May 31,          |  
| |                                       |   | 2008             |   |   | 2007             |   |   | 2006             |  
| |                                       |   |                  |   |   |                  |   |   |                  |  
| | Loss for the period, Canadian GAAP    | $ | (57,402,521      | ) | $ | (31,703,386      | ) | $ | (12,607,074      | )
| | Adjustments for the following:        |   |                  |   |   |                  |   |   |                  |  
| | Intangible assets (a)                 |   | (572,520         | ) |   | (618,330         | ) |   | (1,663,453       | )
| | Amortization of intangible assets (a) |   | 179,587          |   |   | 206,899          |   |   | 74,582           |  
| | Scientific equipment                  |   |                  |   |   |                 |   |   | 17,212           |  
| | Amortization of scientific            |   |                  |   |   |                  |   |   |                  |  
| | equipment                             |   |                  |   |   |                 |   |   | 2,933            |  
| | Impairment of intangible assets (a)   |   | 883,784          |   |   |                 |   |   |                 |  
| |                                       |   |                  |   |   |                  |   |   |                  |  
| | Loss for the
      period, U.S. GAAP  | $ | (56,911,670      | ) | $ | (32,114,817      | ) | $ | (14,175,800      | )
| |                                       |   |                  |   |   |                  |   |   |                  |  
| | Basic and diluted loss per share,     |   |                  |   |   |                  |   |   |                  |  
| | U.S. GAAP                             | $ | (0.45            | ) | $ | (0.31            | ) | $ | (0.19            | )
| | Weighted average number of common     |   |                  |   |   |                  |   |   |                  |  
| | shares                                |   | 125,476,086      |   |   | 104,879,404      |   |   | 75,144,764       |  

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,          |  
| |                      |   | 2008             |   |   | 2007             |   |   | 2006             |  
| |                      |   |                  |   |   |                  |   |   |                  |  
| | Operating activities | $ | (42,437,160      | ) | $ | (25,864,983      | ) | $ | (13,902,721      | )
| | Investing activities |   | (14,588          | ) |   | (22,306,563      | ) |   | (19,671          | )
| | Financing activities |   | 22,586,358       |   |   | 45,021,433       |   |   | 41,251,907       |  
| |                      |   |                  |   |   |                  |   |   |                  |  

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

| |                                       |   | 2008         |   |   | 2007        |  
| | ------------------------------------- | - | ------------ | - | - | ----------- | -
| |                                       |   |              |   |   |             |  
| | Deferred debt issue expenses          | $ | 2,554,081    |   | $ |            |  
| | Long-term debt                        |   | 36,741,000   |   |   |            |  
| | Intangible assets                     |   | 5,510,661    |   |   | 20,078,862  |  
| | Capital stock and contributed surplus |   | 144,921,967  |   |   | 128,382,255 |  
| | Deficit                               |   | (154,320,725 | ) |   | (97,409,055 | )
| |                                       |   |              |   |   |             |  

---

109

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|14. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------
|    |                                                                              
|    | (c)                                                                          
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              
|    |                                                                              

---

110

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|14. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------

In November 2007, the Emerging Issues
Task Force issued EITF Issue 07-01, Accounting for Collaborative
Arrangements (EITF 07-01). EITF 07-01 requires collaborators to present the
results of activities for which they act as the principal on a gross basis and
report any payments received from (made to) other collaborators based on other
applicable GAAP or, in the absence of other applicable GAAP, based on analogy to
authoritative accounting literature or a reasonable, rational, and consistently
applied accounting policy election. Further, EITF No. 07-01 clarified that the
determination of whether transactions within a collaborative arrangement are
part of a vendor-customer (or analogous) relationship subject to Issue 01-9,
Accounting for Consideration Given by a Vendor to a Customer. EITF 07-01
is effective for fiscal years beginning after December 15, 2008.

In December 2007, the FASB issued SFAS
No. 141 (Revised 2007), Business Combinations (SFAS 141R). SFAS 141R will
change the accounting for business combinations. Under SFAS 141R, an acquiring
entity will be required to recognize all the assets acquired and liabilities
assumed in a transaction at the acquisition-date fair value with limited
exceptions. SFAS 141R will change the accounting treatment and disclosure for
certain specific items in a business combination. SFAS 141R applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008.

In December 2007, the FASB issued SFAS
No. 160, Non-controlling Interests in Consolidated Financial Statements - An
Amendment of ARB No. 51 (SFAS 160). SFAS 160 establishes new accounting and
reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 is effective for fiscal years
beginning on or after December 15, 2008.

In March 2008, the FASB issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities - An
Amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 revises the
disclosure requirements for derivative instruments and hedging activities. SFAS
161 is effective for financial years beginning on or after November 15,
2008.

In May 2008, the FASB issued SFAS 162,
The Hierarchy of Generally Accepted Accounting Principles(SFAS 162).
SFAS 162 identifies the sources of accounting principles and the framework for
selecting the principles to be used in the preparation of financial statements.
This statement is effective 60 days following the SECs approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning
of Present Fairly in Conformity with Generally Accepted Accounting
Principles.

---

111

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|14. | Reconciliation of generally accepted accounting
      principles (continued):
|--- | -----------------------------------------------------------------------------

In June 2008, the Emerging Issues Task
Force issued EITF Issue No. 07-5, Determining Whether an Instrument (or an
Embedded Feature) is Indexed to an Entitys Own Stock (EITF 07-5).

The instruments affected by this issue
may contain contract terms that call into question whether the instrument or
embedded feature is indexed to the entitys own stock. A derivative instrument
or embedded derivative feature that is deemed indexed to an entitys own stock
may be exempt from the requirements of Statement 133 for derivatives. In
addition, a freestanding instrument that is indexed to a companys own stock
remains eligible for equity classification under Issue 00-19.

The consensus addresses the following
issues:

| | • | How an entity should evaluate whether an instrument (or
      embedded feature) is indexed to its own stock.                                                                                                                                     
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                  
| | • | How the currency in which the strike price of an
      equity-linked financial instrument (or embedded equity-linked feature) is
      denominated affects the determination of whether the instrument is indexed
      to an entitys own stock.
| |   |                                                                                                                                                                                                                                                  
| | • | How an issuer should account for market-based employee
      stock option valuation instruments.                                                                                                                                                 

The consensus is effective for fiscal
years and interim periods beginning after December 15, 2008. The consensus must
be applied to outstanding instruments as of the beginning of the fiscal year in
which the Issue is adopted as a cumulative-effect adjustment to the opening
balance of retained earnings for that fiscal year. Early application is not
permitted.

|15. | 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 39 percent,
      Customer B accounted for 33 percent, Customer C accounted for 25 percent,
      and the remaining four customers accounted for 3 percent of
    revenues.

---

112

|MEDICURE INC.                             
|------------------------------------------
|Notes to Consolidated Financial Statements
|(Expressed in Canadian dollars)           
|                                          
|Years ended May 31, 2008, 2007 and 2006   
|                                          

|15. | Segmented information (continued):                                                        
|--- | ------------------------------------------------------------------------------------------
|    |                                                                                           
|    | Property and equipment and intangible assets are located
      in the following countries:

| |               |   | 2008      |  |   | 2007       | 
| | ------------- | - | --------- |  | - | ---------- | 
| |               |   |           |  |   |            | 
| | Canada        | $ | 205,904   |  | $ | 251,543    | 
| | Barbados      |   | 8,184,642 |  |   | 23,233,236 | 
| | United States |   | 95,951    |  |   | 123,873    | 
| |               |   |           |  |   |            | 

|16. | 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.

---

113

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];                                                                                                                                                                                                                                                                
| | 1.8    | Bylaw No. 2 **                                                                                                                                                                                                                                                             
| |        |                                                                                                                                                                                                                                                                            
| | 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];                                                                                                                                                                                                

---

114

| | 4.8  | Employment Agreement with Moray Merchant
        dated September 22, 2003 [3];                                                                                                                                                                                                                                                       
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                      
| | 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
        [7];                                                                                                                                                                                               
| |      |                                                                                                                                                                                                                                                                                                                                      
| | 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) [7];
| |      |                                                                                                                                                                                                                                                                                                                                      
| | 4.25 | Amendment
        to Employment Agreement dated October 1, 2007 between A.D. Friesen Enterprises
        Ltd. and the Corporation **;                                                                                                                                                                                                

---

115

| | 4.26 | Amended Stock Option Plan approved
        October 2, 2007 as filed on October 9, 2007 Form S-8 #333-146574                                                 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                             
| | 4.27 | Employment
        Agreement with Dwayne Henley June 10, 2008 **                                                                                            
| |      |                                                                                                                                                             
| | 4.28 | Debt financing
        agreement between Birmingham Associates Ltd. and the Corporation dated
        September 17, 2007 **.                                
| |      |                                                                                                                                                             
| | 11.  | Code of Ethics [4].                                                                                                                                         
| |      |                                                                                                                                                             
| | 12.1 | Certification
        of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **.                                                                  
| |      |                                                                                                                                                             
| | 12.2 | Certification
        of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 **.                                                                  
| |      |                                                                                                                                                             
| | 13.1 | Certification
        of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant
        to Section 906 of the Sarbanes-Oxley Act of 2002 **.   
| |      |                                                                                                                                                             
| |      | [1] Herein incorporated
        by reference as previously included in the 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.          
| |      |                                                                                                                                                             
| |      | [7] Herein incorporated
        by reference as previously included in the Corporations Form 20-F
        annual report filed on August 22, 2007.          
| |      |                                                                                                                                                             
| | 15.1 | Report of
        Independent Registered Public Accounting Firm **                                                                                          
| |      |                                                                                                                                                             
| | 23.1 | Consent of
        Independent Registered Pubic Accounting Firm **                                                                                          
| |      |                                                                                                                                                             
| |      | ** Filed Herewith                                                                                                                                           

---

116

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 27 2008

ON BEHALF OF THE CORPORATION, MEDICURE INC.

per:  
  ___________________________________________________Albert
D. Friesen, Ph.D. Chairman, President & CEO

---