Exhibit 99.3



MERUS LABS INTERNATIONAL INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the years ended September 30, 2015
and 2014



The following section of our report sets
forth Management’s Discussion and Analysis of the financial performance and condition of Merus Labs International Inc. (“the
Company” or “Merus”) for the year ended September 30, 2015 compared to the year ended September 30, 2014. The
analysis should be read in conjunction with the accompanying annual audited consolidated financial statements (the “Financial
Statements”) for the years ended September 30, 2015 and 2014 and the related notes thereto.



The date of this MD&A is December
3, 2015.



FORWARD-LOOKING STATEMENTS



This MD&A contains certain statements
or disclosures that may constitute forward-looking information or statements (collectively, “forward-looking information”)
under applicable securities laws. All statements and disclosures, other than those of historical fact, which address activities,
events, outcomes, results or developments that management of the Company, anticipates or expects may or will occur in the future
(in whole or in part) should be considered forward-looking information. In some cases, forward-looking information can be identified
by terms such as “forecast”, “future”, “may”, “will”, “expect”, “anticipate”,
“believe”, “could”, “potential”, “enable”, “plan, “continue”,
“contemplate”, “pro forma” or other comparable terminology. Forward-looking information presented in such
statements or disclosures may, among other things include:



| | · | the
                                         Company’s expectations regarding sales from its existing products, including its
                                         sales forecasts;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s ability to acquire new products;
| | - | ---------------------------------------------------------------------------------------



| | · | the
                                         Company’s expectations regarding it ability to raise capital, including its ability
                                         to secure the financing necessary to enable us to acquire new products;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s expectations regarding sales from products that we acquire or license;
| | - | -----------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s forecasts regarding its operating expenditures, including general and
                                         administrative expenses,
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s expectations regarding the development of its target markets;
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s expectations regarding government regulations of its products and any
                                         new products that we acquire;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s expectations regarding currency exchange rates;
| | - | ------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s expectations regarding income taxes;
| | - | -------------------------------------------------------------------------------------------



| | · | the
                                         Company’s plans, objectives and targets for future revenue growth and operating
                                         performance;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------










| | · | the
                                         Company’s plans and objectives regarding new products that it may acquire; and
| | - | ---------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s forecast business results and anticipated financial performance.
| | - | -----------------------------------------------------------------------------------------------------------------------



The forward-looking information in statements
or disclosures in this MD&A is based (in whole or in part) upon factors which may cause actual results, performance or achievements
of the Company to differ materially from those contemplated (whether expressly or by implication) in the forward-looking information.
Those factors are based on information currently available to the Company, including information obtained from third-party industry
analysts and other third party sources. Actual results or outcomes may differ materially from those predicted by such statements
or disclosures. While the Company does not know what impact any of those differences may have, their business, results of operations,
financial condition and credit stability may be materially adversely affected. Factors that could cause actual results or outcomes
to differ materially from the results expressed or implied by forward-looking information include, among other things:



| | · | the
                                         acceptance of the Company’s products by regulatory and reimbursement agencies in
                                         various territories including Canada and Europe and inclusion on drug benefit formularies,
                                         hospital formularies and acceptance by pharmacies, physicians and patients in the marketplace;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s ability to successfully market and sell its products;
| | - | ------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s ability to increase sales of its existing products;
| | - | ----------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s ability to acquire new products and, upon acquisition, to successfully
                                         market and sell new products that are acquired;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company’s ability to achieve the financing necessary to complete the acquisitions
                                         to new products;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | core
                                         patent protection for Merus’ product portfolio has expired or will expire in the
                                         future, which could result in significant competition from generic products resulting
                                         in a significant reduction in sales;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | delays
                                         or setbacks with respect to governmental approvals, or manufacturing or commercial activities;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         Company's ability to service existing debt;
| | - | ----------------------------------------------------------------------------------------



| | · | the
                                         timing and unpredictability of regulatory actions;
| | - | -----------------------------------------------------------------------------------------------



| | · | the
                                         patient health, legal, and commercial risks associated with patient adverse events or
                                         side effects resulting from the use of the Company’s products;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         ability to source, develop and commercialize new products effectively;
| | - | -------------------------------------------------------------------------------------------------------------------



| | · | unanticipated
                                         cash requirements to support current operations, to expand its business or for capital
                                         expenditures;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         inability to adequately protect its key intellectual property rights;
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | the
                                         inability to make royalty payments as they become due;
| | - | ---------------------------------------------------------------------------------------------------










| | · | the
                                         loss of key management or scientific personnel;
| | - | --------------------------------------------------------------------------------------------



| | · | the
                                         activities of its competitors and specifically the commercialization of innovative or
                                         generic products that compete in the same category as the Company’s products;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | regulatory,
                                         legal or other setbacks with respect to its operations or business;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | market
                                         conditions in the capital markets and the biopharmaceutical industry that make raising
                                         capital or consummating acquisitions difficult, expensive or both;
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | enactment
                                         of new government laws, regulations, court decisions, regulatory interpretations or other
                                         initiatives that are adverse to the Company or its interests;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         risk that the Company is not able to arrange sufficient, cost-effective financing to
                                         repay maturing debt and to fund expenditures, future operational activities and acquisitions,
                                         and other obligations; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the
                                         risks associated with legislative and regulatory developments that may affect costs,
                                         revenues, the speed and degree of competition entering the market, global capital markets
                                         activity and general economic conditions in geographic areas where the Company operates.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Investors should review the full discussions
as to material risks and uncertainties, and factors and assumptions used to develop forward-looking statements, included in the
Company’s annual report on Form 40-F.



Various assumptions or factors are typically
applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions
and factors are based on information currently available to the Company, including information obtained from third-party industry
analysts and other third party sources. In some instances, material assumptions and factors are presented or discussed elsewhere
in this MD&A in connection with the statements or disclosure containing the forward-looking information. You are cautioned
that the following list of material factors and assumptions is not exhaustive. The factors and assumptions include, but are not
limited to:



| | · | no
                                         unforeseen changes in the legislative and operating framework for the business of the
                                         Company;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | a
                                         stable competitive environment; and
| | - | ------------------------------------------------------------------------------



| | · | no
                                         significant event occurring outside the ordinary course of business such as a natural
                                         disaster or other calamity.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company is not obligated to update
or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required
by applicable laws. Because of the risks, uncertainties and assumptions contained herein, security holders should not place undue
reliance on forward-looking statements or disclosures. The foregoing statements expressly qualify any forward-looking information
contained herein.



The Company cautions you that the above
list of risk factors is not exhaustive. Other factors which could cause actual results, performance or achievements of the Company
to differ materially from those contemplated (whether expressly or by implication) in the forward-looking statements or other
forward-looking information are disclosed in the Company’s publicly filed disclosure documents.










All historical financial information is
prepared in accordance with IFRS and is expressed in Canadian dollars.



Corporate
History



The Company was originally formed on December
19, 2011 by the amalgamation of Merus Labs International Inc. (“Old Merus”) and Envoy Capital Group Inc. (“Envoy”)
pursuant to an arrangement agreement dated November 10, 2011 pursuant to the Business Corporations Act(British Columbia).
Envoy was incorporated under the laws of the Province of British Columbia as “Potential Mines Ltd.” in December 1973
and was continued under the laws of the Province of Ontario in December 1997. At Envoy’s annual general meeting held on
March 30, 2007 the shareholders voted to amend Envoy’s articles of incorporation by changing its name to Envoy Capital Group
Inc. In connection with the amalgamation of Envoy and Old Merus, Envoy continued from the jurisdiction of the Province of Ontario
to the Province of British Columbia on December 16, 2011.



Old Merus was incorporated under the laws
of the Province of British Columbia on November 9, 2009 under the name 0865346 B.C. Ltd. On January 22, 2010, Old Merus changed
its name to Merus Labs International Inc. in connection with a plan of arrangement with Range Gold Corp. and Merus Labs Inc. (“Merus
Labs”).



On October 1, 2012, the Company amalgamated
with Merus Labs, a wholly owned subsidiary of the Corporation continuing under the name “Merus Labs International Inc.”



The Company’s head office is located
at Suite 2110, 100 Wellington St. West, P.O. Box 151, Toronto, Ontario M5K 1H1; and its telephone number is 416-593-3725.



The common shares in the capital of the
Company (the “Common Shares”) are publicly traded on the Toronto Stock Exchange (“TSX”) under the symbol
“MSL” and on NASDAQ under the symbol “MSLI”.



CORPORATE STRATEGY



Merus is a specialty pharmaceutical company that acquires prescription
medicines in the following categories:



| | · | On
                                         patent but at maturity stage of product life cycle
| | - | ----------------------------------------------------------------------------------------------



| | · | Branded
                                         generics
| | - | ---------------------------------------------------------



| | · | Under
                                         promoted products
| | - | ----------------------------------------------------------------



| | · | Niche
                                         market pharmaceuticals
| | - | ---------------------------------------------------------------------



| | · | Products
                                         with annual sales below the critical threshold for large pharma
| | - | -----------------------------------------------------------------------------------------------------------------



The Merus corporate growth strategy is
driven by a product acquisition plan which employs an opportunistic approach to source product acquisition candidates. This approach
allows Merus to source pharmaceutical products across broad therapeutic classes which provides access to acquisition targets not
available to other players and creates a diversified strategy. Although Merus has a broad therapeutic focus, opportunities will
be pursued if the application of a dedicated small scale sales force can deliver incremental product sales growth. The geographic
focus is Canada and Europe.










The Merus corporate strategy results in
a diversified product portfolio approach. To manage such a product portfolio, a low cost operating model has been implemented
in which there is a light infrastructure footprint. Merus has partnered with third party contract manufacturing and regulatory
service providers to leverage their expertise but still maintain maximum flexibility for Merus.



Business Model for Acquisition of Diversified
Legacy Products



Merus believes that it has a unique strategy
in seeking to acquire legacy products primarily for the purpose of generating a stream of stable revenues and cash flow. Merus
believes that this strategy will provide it with the flexibility to consider a broad range of acquisition targets from a variety
of therapeutic areas. Therefore, the potential number of product acquisition candidates may be much larger for Merus than for
its competitors. Management believes that its approach to product acquisition and its return objectives provide Merus with a competitive
advantage in acquiring products as Merus can purchase diversified bundles of products from a single vendor. In contrast, Merus’
competitors, such as niche pharmaceutical companies, are more likely to focus on individual product acquisition within the same
therapeutic area. As a result, certain vendors may view Merus as a preferred purchasing candidate.



Predictable Cost Structure



Merus’ plan is to establish a predictable
cost structure by relying on a small employee base and outsourcing more of the operational functions associated with its business,
including warehousing, distribution, customer service, invoicing, collections, regulatory affairs, medical and drug information,
human resources and informational technology. Wherever possible, Merus achieves cost controls by entering into contractual supply
and/or service agreements that dictate fixed or percentage fixed costs with annual adjustments for inflation. In the case of its
manufacturing supply agreements, its cost of goods will be based on a fixed, per unit cost with annual inflationary adjustments.
Management believes the predictability, flexibility and efficiency gained by contracting with established, experienced service
organizations will assist Merus in maintaining its margins and maximizing distributable cash.



Partnership with Leading Service Providers



Related to the above, Merus will enter
into outsourcing relationships with leading providers of pharmaceutical contract services for many of the operational functions
associated with its business and intend to pursue this strategy in the future.



Competitors of Merus



Competitors in the pharmaceutical market
range from large multinational pharmaceutical development corporations to small, single product companies that may limit their
activities to a particular therapeutic area, region or territory. Competition also comes from generic companies, which develop
and commercialize formulations that are identical to marketed brands. Merus expects to compete with a variety of drug companies.
With respect to its acquisition strategy, Merus expects to compete principally with other pharmaceutical companies who seek to
acquire mature pharmaceutical products as part of their growth strategy. These companies, however, typically focus on under-promoted
products in specific therapeutic niches that offer growth potential through synergistic sales and marketing efforts. In addition,
since Merus is not focused on specific therapeutic classes, it will have the ability to purchase diversified products and product
bundles.










OVERVIEW



During the last twelve months ended September 30, 2015 and
up to the date of this MD&A, the Company announced the following:



| | · | July
                                         10, 2015 – Merus Announces Filing of Preliminary Base Shelf Prospectus
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | June
                                         3, 2015 – Merus Provides Update on German Reimbursement Review
| | - | ------------------------------------------------------------------------------------------------------------



| | · | June
                                         1, 2015 – Merus Announces Closing of Over-Allotment Option
| | - | --------------------------------------------------------------------------------------------------------



| | · | May
                                         28, 2015 – Merus Labs to Present at Jefferies 2015 Healthcare Conference in New
                                         York
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | May
                                         26, 2015 – Merus Appoints Frank Rotmann VP & Head of European Operations
| | - | ---------------------------------------------------------------------------------------------------------------------



| | · | May
                                         22, 2015 – Merus Acquires Specialty Product Rights in Multiple Countries
| | - | ---------------------------------------------------------------------------------------------------------------------



| | · | April
                                         30, 2015 – Merus Announces Closing of $60.0 Million Bought Deal Financing
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | March
                                         27, 2015 – Merus Appoints New Director and Provides European Update
| | - | ------------------------------------------------------------------------------------------------------------------



| | · | March
                                         2, 2015 – Merus Announces Settlement of Canadian Patent Litigation
| | - | -----------------------------------------------------------------------------------------------------------------



| | · | February
                                         4, 2015 - Merus Appoints Geoff Morrow as Vice President, Business Development
| | - | -------------------------------------------------------------------------------------------------------------------------------



| | · | December
                                         15, 2014 - Merus Appoints Barry Fishman as Chief Executive Officer
| | - | --------------------------------------------------------------------------------------------------------------------



| | · | November
                                         17, 2014 - Merus Announces Normal Course Issuer Bid
| | - | -----------------------------------------------------------------------------------------------------










OVERALL PERFORMANCE



For
the year ended September 30, 2015, the Company incurred a net loss of $237,879 compared to a net loss of $8,061,698 for the year
ended September 30, 2014. For the year ended September 30, 2015, EBITDA1 was $29,858,745, compared to $13,143,414
for the prior year. Adjusted EBITDA, which adds back (deducts) non-cash share based compensation expense, foreign exchange, derivative
losses and (gains), investment expenses and acquisition costs, was $32,613,913, compared to $13,344,775 for the prior year.
As at September 30, 2015, the Company had an accumulated
deficit of $61,271,614.



Cash provided by operating activities
of the Company was $20,350,329 for the year ended September 30, 2015, compared to cash provided by continuing operations of $12,762,554,
for the year ended September 30, 2014.



Operating risks include but are not limited
to: the Company’s ability to attract and retain key personnel, effectively manage growth, and smoothly integrate newly acquired
pharmaceutical products and businesses; impact of new or existing generic and innovative competing products, regulatory issues
and risk that the Company may not be able to adequately protect the intellectual property surrounding its products, conflicts
of interest among the Company’s directors, officers, promoters and members of management; unanticipated expenses; changes
in business strategy; impact of any negative publicity; general political and economic conditions; and acts of God and other unforeseeable
events, natural or human-caused. Financial risks include but are not limited to the availability of capital to finance the Company’s
activities.



The Company cannot anticipate or prevent
all of the potential risks to its success, nor predict the impact of any such risk. To the extent possible, management implements
strategies aimed at reducing or mitigating risks and uncertainties associated with its business.



1EBITDA – Non-IFRS
Financial Measures



The term EBITDA does not have any standardized
meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. The Company defines EBITDA
as earnings before interest expense, taxes, depreciation and amortization (including impairment charges). Adjusted EBITDA is the
same measure with additional adjustments for non-cash stock based compensation), foreign exchange gains or losses, investment
income or expense, and acquisition costs. The Company believes EBITDA to be an important measurement that allows it to assess
the operating performance of its ongoing business on a consistent basis without the impact of amortization and impairment expenses,
debt service obligations and other non-operating items. The Company excludes amortization and impairment expenses because their
level depends substantially on non-operating factors such as the historical cost of intangible assets. The Company's method for
calculating EBITDA may differ from that used by other issuers and, accordingly, this measure may not be comparable to EBITDA used
by other issuers.










|                                  |  | Three Months Ended September
    30 |            |   | Year Ended September 30 |  
|--------------------------------- |  | ----------------------------------- | ---------- | - | ----------------------- | -
|                                  |  | 2015                                |            |   | 2014                    |  
|                                  |  |                                     |            |   |                         |  
|Net loss for the period           |  | $                                   | 22,512     |   |                         | $
|                                  |  |                                     |            |   |                         |  
|Interest expense                  |  |                                     | 1,237,317  |   |                         |  
|Income tax (recovery) expense     |  |                                     | (1,450,242 | ) |                         |  
|Depreciation                      |  |                                     | 4,067      |   |                         |  
|Amortization                      |  |                                     | 7,331,944  |   |                         |  
|Impairment charges                |  |                                     | -          |   |                         |  
|                                  |  |                                     |            |   |                         |  
|EBITDA                            |  | $                                   | 7,145,598  |   |                         | $
|                                  |  |                                     |            |   |                         |  
|Add/(Deduct):                     |  |                                     |            |   |                         |  
|Non-cash stock based compensation |  |                                     | 475,995    |   |                         |  
|Investment expense                |  |                                     | 2,335      |   |                         |  
|Foreign exchange (gains) losses   |  |                                     | 137,749    |   |                         |  
|Derivative losses (gains)         |  |                                     | 1,548,775  |   |                         |  
|                                  |  |                                     |            |   |                         |  
|Adjusted EBITDA                   |  | $                                   | 9,310,452  |   |                         | $










PRODUCT SUMMARY



The Company currently has products in
the area of urology/women's health, anticoagulants, cholinergic agents, hormone replacement therapies, and anti-infectives.



Urology / Women's Health



Over Active Bladder



Overactive bladder occurs when a large
muscle in the bladder known as the detrusor contracts more often than normal. This causes a person to feel a sudden and sometimes
overwhelming urge to urinate even when the bladder isn’t full. Urgency, incontinence, and urinary frequency can also be
caused by urinary-tract infections, kidney stones, prostate infection or enlargement, or medicine taken to treat other conditions
such as high blood pressure. Though not life-threatening, overactive bladder is inconvenient, can be embarrassing, and can markedly
reduce quality of life.



According to an article published in the
Reviews of Urology by the Department of Urology, New York University School of Medicine, in women, moderate and severe bother
have a prevalence ranging from about 3% to 17%. Severe incontinence has a low prevalence in young women, but rapidly increases
at ages 70 through 80. In men, the prevalence of incontinence is much lower than in women, about 3% to 11% overall, with urge
incontinence accounting for 40% to 80% of all male patients. Incontinence in men also increases with age, but severe incontinence
in 70- to 80-year-old men is about half of that in women.



Decision Resources, an advisory firm for
pharmaceutical and healthcare issues, finds that although more than 50 percent of people with overactive bladder in the world’s
major pharmaceutical markets are undiagnosed, the sizeable prevalent population fuels significant sales for the indication. As
a result, the overactive bladder drug market will increase from approximately $3 billion in 2009 to nearly $4 billion in 2019
in the United States, France, Germany, Italy, Spain, United Kingdom and Japan.



Emselex®/Enablex®



In 2003, Novartis Pharma AG (Novartis)
acquired the Emselex®/Enablex® (darifenacin) product from Pfizer Inc. and the product was approved for sale in Europe
and the United States in 2004. As the global sales of Emselex®/Enablex® were below the critical sales threshold for Novartis,
the company decided to reduce its marketing and sales efforts in the majority of territories where the product was marketed. In
2010, Novartis divested the product rights for the United States to Warner Chilcott Plc. A key patent protecting Emselex®/Enablex®
expires in August 2016, however, the Company also has a Supplementary Protection Certificate ("SPC") which is expected
to provide an additional barrier to generic entrants until October 2019 in most European markets.



In
July 2012, the Company acquired from Novartis, the Canadian and European rights (excluding France, Spain and Italy) to manufacture,
market, and sell the branded prescription medicine product Emselex®/Enablex® (darifenacin) extended release tablets. Darifenacin
is a muscarinic antagonist indicated for the treatment of overactive bladder with symptoms of urge urinary incontinence, urgency
and frequency. The product’s specific mechanism of action is the blocking of the M3 muscarinic receptor, which is primarily
responsible for bladder musclecontractions. As overactive bladder is
a chronic condition, Emselex®/Enablex® is prescribed as a medication to be taken once daily and the extended release tablet
format is produced in 7.5mg and 15mg dosage strengths.










As Merus has acquired the product rights
in a number of European countries in which the product was not being actively marketed, we have entered into promotion and distribution
agreements with local marketing and sales organizations with the goal of incrementally increasing sales in those regions.



Under the terms of the agreements, the
partner companies have been granted exclusive rights to distribute, market, and sell Emselex®/Enablex® in their respective
territories. Other than Switzerland and Canada, the territories covered by these distribution and promotion agreements did not
have any substantial marketing and sales resources devoted to the product in recent years. Merus has entered into these promotion
and distribution agreements with partner companies that have a wealth of knowledge and expertise in their local markets. Emselex®/Enablex®
is a major growth driver for the Company and these collaborations will enable Merus to broaden its reach in countries which were
previously underserved in terms of marketing and sales efforts.



Anticoagulants



Anticoagulants prevent stroke and systemic
embolism in patients with Atrial Fibrillation. Atrial Fibrillation (AF) is the most common cardiac arrhythmia (heart rhythm disorder)
and is associated with palpitations, chest pain, or congestive heart failure. Embolism refers to where a clot exists and breaks
off and flows into the blood stream later clogging an artitery. Antigoagulants treat and prevent deep vein thrombosis (DVT) and
pulmonary embolism (PE) and also prevent venous thromboembolic events (VTE) in patients who have undergone hip or knee replacement
surgery.



| | · | Atrial
                                         Fibrillation: AF affects 1–2% of the population and likely to increase in the next
                                         50 years. Prevalence of AF increases with age, from 0.5% at age 40-50, to 5–15%
                                         at age 80. Over 6 million Europeans suffer arrhythmia with prevalence estimated to double
                                         in the next 50 years
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | VTE:
                                         Approximately 1.1 million venous thromboembolic events occur each year across the EU
                                         encompassing: DVT events - 61% of total and PE events - 39% of total
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



When patients have AF the heart’s
two upper chambers (atria) begin to quiver instead of beating effectively. As a result, blood isn’t pumped completely out
of the atria and begins to pool and clot. The clot later leaves the heart via blood flow to the brain where it can lodge in a
brain artery causing a stroke. It is estimated that 15% of strokes occur with patients with AF.



Global Industry Analysts Inc., one of
the world’s largest market research publishers, projected that the global anticoagulants market will soon surpass $11.2Bn,
driven by an aging global population, rising incidence of cardiovascular diseases, cancers, and acute hip and knee complications,
as well as emergence of innovative therapeutics targeting new and previously targeted clotting factors.



Anticoagulants are a rapidly evolving
market for both legacy and emerging treatment regimes. Dominated by just two therapy classes – vitamin K antagonist and
heparin injectables; the anticoagulants industry has come a long way since the 1990s, when advancements in thrombotic disease
detection and increased physician awareness were major drivers for market growth. Market growth is currently led by the arrival
of novel therapeutics as well as favorable demographic tailwinds. The United States and Europe dominate the global anticoagulants
market, which is expected to grow dramatically as advanced therapeutics present brighter prospects for coagulation as well as
patient management. While novel drugs are likely to impact the market sometime in near future, factors that already influence
market prospects include increasing use of low molecular weight heparins, patient population (Baby Boomers reaching age of retirement),
and additional indications for existing drugs. Future impact of anticoagulants is expected to mainly result from enormous patient
potential. Among these, an aging population at growing risk of venous and arterial problems and patients on long-term anticoagulation
would be the major influencers. Currently, the global anticoagulants market is led by vitamin K antagonist (VKA), unfractionated
heparin and low molecular weight heparins (heparins). The injectable anticoagulants market has maintained a steady pace over the
years with more number of patients receiving anticoagulation with one or more of the injectable therapies. From 2008 to Sept 2013
total European VKA sales have grown from $188MM to $225MM with Warfarin and Acenocoumarol as the only molecules representing annual
growth in each respective year.










Sintrom®



In September 2014, the Company acquired
from Novartis, in certain European countries, the rights to manufacture, market, and sell the branded prescription medicine product
Sintrom® (acenocoumarol). Acenocoumarol is an anticoagulant indicated for the treatment and prevention of thromboembolic diseases.
Sintrom® has been available in Europe for over 50 years and in calendar year 2013 the product had net sales of approximately
US$28 million in the territories acquired.



Sintrom was approved in Europe in the
early 1950’s and its patent expired in 1964. As a result, the product has not only been on the European market for over
five decades but also faced generic competition over the same period. It is important to note that the product is not subject
to intense competition from generics given the legacy nature of the product (effective and well known), its low price and strong
market share. These key competitive features make the product uneconomical for new generic entries.



VKA’s represent a fraction of the
price of NOAC’s. Within the VKA European market, Sintrom is priced in the mid-tier with the generic version of the drug
representing the lowest price at almost half of Sintrom. It is important to note that generic versions of Sintrom are only available
in four European countries; Netherlands, Poland, Romania and Hungary. From a competition perspective, the threat of generics remains
low for several reasons: 1) Sintrom along with other VKA’s are legacy drugs and are priced to compete with generics providing
an economic barrier; 2) Europe is highly fragmented with multiple local registration requirements for generics providing a political
barrier; and 3) Sintrom has an established brand in these market and has increased sales in some countries despite presence of
a generic.



Sintrom’s key competition in the
Vitamin K antagonist (VKA) segment of the anticoagulant business is Warfarin and Marcoumar. Warfarin holds the largest market
share and is sold in several different countries under different brand names. Warfarin is the chemical name for Coumadin and is
manufactured as a generic by several different manufactures including Barr, Sandoz, Merck, Taro, and others. Warfarin is a direct
competitor of Sintrom, but not a generic substitute because although similar, it is not the same molecule. The major difference
between the above noted products is biological half-life (T 1⁄2 or biological half-life is the time required for an organism
to eliminate one-half of a substance which has been introduced into it). The key benefit of Sintrom is because it has a shorter
biological half-life, doctors are able to adjust dosages in the short term and can more readily apply an antidote. Both Warfarin
and Marcoumar have a longer life and thus provide more constant long term plasma levels.



New Oral Anti-Coagulants (NOAC’s)
such as Pradaxa (Boehringer Ingelheim), Xarelto (Bayer) and Eliquis (Apixaban) obtained EMA approval in 2011/2012 with patent
expiry in 2020/2023. These products are the “next generation” of anti-coagulants and have many benefits over legacy
anti-coagulants such as VKA’s and as a result many international guidelines recommend NOAC as the preferred option. However,
VKAs in some countries are still the preferred option due to local guidelines, broad physician experience, and low price (NOAC's
can be up to 50 times more expensive). NOAC’s are superior to VKA’s in terms of safety, efficacy and therapeutic window
and for this reason have received much attention since their introduction. However, these drugs exhibit one key issue –
in emergency bleeds or surgery, physicians are unable to medically administer an antidote unlike VKA’s. Furthermore, given
NOAC’s do not require the same level of monitoring, VKA’s provide physicians with greater oversight over patient progress
prompting emergency avoidance. Lastly, doctors have been using VKA’s for decades and as a result are comfortable with dosing,
monitoring procedures and reversals vs NOAC’s.










Sintrom is sold predominantly through
distributors with whom Merus already has established relationships. Sintrom will be sold by the distributors to wholesalers and
pharmacy networks.



Sintrom will continue to be manufactured
by Novartis and its contract organizations for a period of time in order to allow Merus to transition the product manufacturing
to a contract manufacturer and obtain the related approvals. The transition to a third party manufacturer is expected to provide
additional cost savings. The Company has signed agreements with two contract manufacturers and is currently undergoing the technology
transfer process.



The Company funded the Sintrom® acquisition
with cash on hand (from operations and equity financings), the issuance of preferred shares, and a debt facility provided to Merus
by a syndicate of lenders which also refinanced the Company’s existing debt. Pursuant to the acquisition, Merus in-licensed
the Sintrom® trademark, certain related intellectual property, and acquired other information and materials required to continue
commercializing the brand in the territories acquired.



Cholinergic Agents



Cholinergic agents work by increasing
the secretion of saliva from the salivary glands, which helps to relieve dry mouth. Pilocarpine is considered to be the gold standard,
however there are less effective alternative therapies (non-pilocarpine) that exist.



Salagen



In May 2015, Merus acquired the product
rights to Salagen (pilocarpine hydrochloride) capsules from Novartis AG in 18 European territories. Salagen® is indicated
for xerostomia following radiation therapy, in addition to Sjogren's syndrome. Salagen® had total sales of approximately $7.8
million in 2014. The first marketing authorization was received in 2001 (in EU) and the product has no patent life remaining.



Hormone Replacement Therapies



Hormone replacement therapies (HRT’s)
use estrogen to alleviate menopausal systems or osteoporosis.



Estraderm



In May 2015, Merus acquired the product
rights to Estraderm MX (β-Estradiol) transdermal patches from Novartis AG in six markets, four of which are in Europe. Estraderm®
is indicated to manage certain symptoms of post-menopause and to prevent osteoporosis related to menopause. Estraderm® sales
were approximately $3.6 million in 2014. The first marketing authorization was received in 2001 (in EU) and the product has no
patent life remaining.



Anti-infectives



The global market for anti-infective drugs,
which mainly includes antibacterials, antivirals, antifungals, and vaccines, is projected to exceed $103 billion by the year 2015,
according to a published report. Antibacterials represent the largest segment of the anti-infectives market globally. The competitive
landscape remains highly fragmented, however Merck and GSK are market leaders in the category.










Vancocin



In May 2011, Old Merus acquired Vancocin
(vancomycin hydrochloride) capsules from Iroko International LP. a subsidiary of Iroko Pharmaceuticals, LLC. According to IMS
Canada, Vancocin® 125mg and 250mg capsules had combined total sales of approximately $7.8 million in 2010.



Vancomycin was first isolated by Eli Lilly.
The original indication for vancomycin was for the treatment of penicillin-resistant staphylococcus aureus. One advantage that
was quickly apparent is that staphylococci did not develop significant resistance despite serial passage in culture media containing
vancomycin. The rapid development of penicillin resistance by staphylococci led to the compounds being fast-tracked for approval
by the US Food and Drug Administration (“FDA”). Eli Lilly first marketed vancomycin hydrochloride under the trade
name Vancocin. Vancocin is a powerful antibiotic used to treat a life-threatening disease resulting from the infection of Clostridium
Difficile (“C. Difficile”).



C. Difficile is on the increase with higher
mortality and severity. Due to the nature of the disease, intravenous (systemic) solutions are regarded as ineffective. To be
effective against C. Difficile, drugs must act locally on the flora of the gastro intestinal track. Intravenous solutions by definition
do not act locally.



Clinical Practice Guidelines (Clinical
Practice Guidelines for Clostridium difficile Infection in Adults: 2010 Update by the Society for Healthcare Epidemiology of America
(SHEA) and the Infectious Diseases Society of America (IDSA)) state that oral Vancocin should be used as first line therapy in
severe cases of C. Difficile. The guidelines state that vancomycin is the drug of choice for an initial episode of severe C. Difficile.
The dosage is 125 mg orally four times per day for 10–14 days. Vancomycin administered orally (and per rectum, if ileus
is present) is the regimen of choice for the treatment of severe, complicated C. Difficile.



Changes in the Competitive Landscape



Enablex



In June 2014, Merus
received notification from Apotex Inc. (“Apotex”) that it has filed with Health Canada an Abbreviated New Drug Submission
(“ANDS”) seeking market approval for a generic version of Enablex® (darifenacin hydrobromide tablets) for the
Canadian marketplace. In connection with this filing, we received Notices of Allegation (“NOAs”) from Apotex against
our Enablex® patents listed on the Canadian patent register which expire in August of 2016 and beyond. The NOAs were issued
under the Canada Patented Medicines (Notice of Compliance) Regulations (the “Regulations”). Enablex® is currently
protected in Canada by three issued patents listed on the Canadian patent register. On March 2, 2015, Merus reached an out of
court settlement with Apotex and litigation has ceased.



During 2014, the Company was informed
by the German Federal Joint Committee (G-BA), responsible for directives on drug reimbursement policy, that in Germany there is
a plan to introduce a single reimbursement class for all anticholinergic-based OAB products in the market. This new classification
would effectively set a maximum reimbursable price for public payors. The Committee invited Merus to provide a rationale for Enablex
(Darifenacin) being excluded from the class, which the Company has done. The process of assessing arguments for exclusion from
the class, the determination of a reimbursement price for the class, and that price becoming effective could take up to a year
or more. Most recently the Company attended an oral hearing on June 9, 2015 along with other affected pharmaceutical companies.
The Company has been notified that Darifenacin will not be excluded from the class and thus will be subject to a maximum reimbursement
price. The specifics of class including the maximum reimbursable price has not been determined, however, a final decision is expected
shortly. Management expects the maximum price to be effective sometime during fiscal 2016. Depending on the maximum reimbursable
price, there may be a material adverse effect on sales.










Arbitration Proceeding



The Company has received notice of a request
for arbitration from the original owner of the Company’s former Factive® product. The request for arbitration is based
on the original license agreement entered into by the original owner and Cornerstone Therapeutics, Inc. (now Chiesi USA, Inc.).
The request for arbitration names the Company as a respondent together with Cornerstone and Vansen Pharma, Inc. The request for
arbitration includes the allegation that Cornerstone did not have the legal right to transfer the Factive product to Merus. The
original owner is seeking an award for damages relating to an alleged breach of contract, as well as disgorgement of revenues
and other benefits derived by the Company from sales of Factive. The Company is defending the claim and has denied any liability
to the original owner. The Company and Cornerstone have each asserted claims against the other, seeking indemnity and damages
related to the original owner’s claim.










RESULTS OF OPERATIONS FOR THE YEAR
ENDED SEPTEMBER 30, 2015 AND 2014



For the year ended September 30, 2015,
the Company incurred a net loss of $237,879 ($0.00 per share), compared to a net loss of $8,061,698 ($0.15 per share) for the
prior year. EBITDA for the year ended September 30, 2015 was $29,858,745, compared to EBITDA for the prior year of $13,143,414.
Adjusted EBITDA, which adds back (deducts) non-cash stock based compensation, foreign exchange, derivative losses and (gains),
investment expenses and acquisition costs, was $32,613,913 for the year ended September 30, 2015, compared to $13,344,775 for
the prior year.



Revenues and Gross Margin



|                   |  | Years ended September 30 |           
|------------------ |  | ------------------------ | ----------
|                   |  | 2015                     |           
|Revenue:           |  |                          |           
|Enablex/Emselex    |  | $                        | 27,380,718
|Sintrom            |  |                          | 15,486,207
|Salagen            |  |                          | 2,141,556 
|Vancocin           |  |                          | 3,272,165 
|Estraderm          |  |                          | 677,779   
|Total Revenue      |  |                          | 48,958,425
|Cost of Goods Sold |  |                          | 7,535,124 
|Gross Margin       |  | $                        | 41,423,301



Revenues were $48,958,425 for the year
ended September 30, 2015 compared to revenues of $26,151,440 for the year ended September 30, 2014. Revenues in the prior year
were attributable to sales of Vancocin, Enablex, and Sintrom. Revenues during the year ended September 30, 2015 also include sales
of Salagen and Estraderm. Salagen and Estraderm sales were only recorded from May 22, 2015, the date of acquisition, to September
30, 2015.



Gross margin for the year ended September
30, 2015 was $41,423,301 (85%) compared to gross margin of $21,657,671 (83%) for the year ended September 30, 2014. The higher
margin as a percentage of revenue in the current period is primarily a result of recording Sintrom, Salagen, and Estraderm sales
on a net basis (as discussed below) and an increase in the average selling price in Germany for Enablex resulting from the expiration
of a legacy marketing agreement in December 2014.



Revenues from Sintrom during the year
ended September 30, 2015 were $15,486,207, compared to $1,007,443 for the year ended September 30, 2014. The increase is entirely
related to twelve months of operations in the current year versus less than one month of operation in the prior year (Sintrom
was acquired September 8, 2014).



During the current year, the Company recorded
the majority of Sintrom revenues in the statements of operations entirely on a net basis, whereby revenues were recorded net of
cost of goods and selling expenses, subject to a transition arrangement whereby Novartis continues to provide certain sales and
distribution functions while the parties work through the process of transferring the necessary marketing authorizations. As a
result of this arrangement the Company is considered to be acting as an agent rather than principal and revenues are recorded
on a net basis. Had the Company recorded Sintrom on a gross basis, revenues and cost of goods would have been higher by $16,188,726.










During September 2015, the presentation
of revenues from Sintrom in Spain switched from a net basis to a gross basis as a result of the marketing authorization and commercial
operations in Spain being transferred from Novartis to Merus. As a result, the revenues and cost of goods related to any sales
conducted directly by Merus were recorded separately on a gross basis as if Merus were acting as the principal. In addition to
switching to a gross basis in Spain, the Company also acquired and transferred to its partner the local inventory. These sales
resulted in a higher than normal level of revenues in September as Merus’ distributor in Spain built up inventory.



Revenues from Salagen during the year
ended September 30, 2015 were $2,141,556. Similar to Sintrom, during the current period, the Company recorded Salagen revenues
in the statements of operations entirely on a net basis, whereby revenues were recorded net of cost of goods and selling expenses.
Had the Company recorded Salagen on a gross basis, revenues and cost of goods would have been higher by $511,296.



Revenues from Estraderm during the year
ended September 30, 2015 were $677,779. Similar to Sintrom, during the current period, the Company recorded Estraderm revenues
in the statements of operations entirely on a net basis, whereby revenues were recorded net of cost of goods and selling expenses.
Had the Company recorded Estraderm on a gross basis, revenues and cost of goods would have been higher by $474,378.



Revenues attributable to Enablex for the
year ended September 30, 2015 were $27,380,718, compared to $20,699,996 for the year ended September 30, 2014. Revenues for Enablex
were higher in the current year compared to the prior year due primarily to an increase in the average selling price in Germany
for Enablex resulting from the expiration of a legacy marketing agreement in December 2014 and an increase in sales volumes in
the UK. Until the end of December 2014, the Company was bound to a legacy marketing and distribution agreement in Germany. Upon
its expiration at the beginning of the fiscal second quarter, the Company began to benefit from gaining a larger portion of revenue
in the territory.



Revenues attributable to Vancocin were
$3,272,165 for the year ended September 30, 2015, compared to $4,444,081 for the year ended September 30, 2014. The decrease in
revenue from this product in the current fiscal year primarily due to the entry of a second generic Vancomycin which began to
impact the market during the third quarter of fiscal 2014.



Sales and Marketing Expense



The Company incurred sales and marketing
expenses of $926,758 for the year ended September 30, 2015, compared to $2,933,340 for the year ended September 30, 2014. Sales
and marketing expenses were higher during the prior year primarily due to strategic investment in marketing and promotion for
Enablex, specifically in territories not previously addressed or underserved. As the promotional program matures, less spend has
been allocated to the product.



General and Administrative Expense



General and administrative expenses for
the year ended September 30, 2015 were $10,395,089, compared to $6,631,140 for the year ended September 30, 2014. Excluding the
impact of non-cash share based compensation, general and administrative expenses in the current year increased by $2,503,074 compared
to the previous year, primarily due to higher legal expenses relating to arbitration and litigation, increased headcount, increased
investment in business development and due diligence with respect to potential acquisitions, and the scaling up of operations
due to a larger product portfolio.










Amortization of Intangible Assets



The year ended September 30, 2015 included
amortization expense of $25,184,970, compared to $12,983,584 for the year ended September 30, 2014. The increase in amortization
is mainly due to the addition of Sintrom, Salagen, and Estraderm to the portfolio.



Interest Expense and Foreign Exchange
Gains and Losses



Interest expense of $5,975,357 was incurred
during the year ended September 30, 2015, compared to $3,468,940 for the year ended September 30, 2014. The higher interest charges
relate to the additional debt incurred for the purchase of Sintrom.



Foreign exchange gains of $1,294,980 were
recorded in the year ended September 30, 2015, primarily due to the appreciation in value of US dollar and Euro denominated balances,
Foreign currency gains of $1,008,834 were incurred in the prior year due to the appreciation of the Euro relative to the Canadian
dollar as well as the purchase of US dollars at favourable exchange rates in advance of the acquisition of Sintrom.



Derivative losses of $1,545,920 were recorded
in the year ended September 30, 2015, primarily related to the settlement and mark-to-market of unfavourable Euro foreign exchange
hedges during the period as well as the settlement and mark-to-market of an unfavourable interest rate swap in connection with
the Company’s senior debt. Derivative gains of $173,052 were recorded in the prior year due to the settlement and mark-to-market
of favourable Euro foreign exchange hedges.










RESULTS OF OPERATIONS FOR THE THREE
MONTHS ENDED SEPTEMBER 30, 2015 AND 2014



For the three months ended September 30,
2015, the Company generated net income of $22,512 ($0.00 per share), compared to a net loss of $4,549,086 ($0.06 per share) for
the prior year. EBITDA for the three months ended September 30, 2015 was $7,145,598, compared to EBITDA for the prior year comparative
period of $4,780,915. Adjusted EBITDA, which adds back (deducts) non-cash stock based compensation, foreign exchange, derivative
losses and (gains), investment expenses and acquisition costs, was $9,310,452 for the three months ended September 30, 2015, compared
to $3,390,362 for the prior year.



Revenues and Gross Margin



|                   |  | Three months ended September
    30 |           
|------------------ |  | ----------------------------------- | ----------
|                   |  | 2015                                |           
|                   |  |                                     |           
|Revenue:           |  |                                     |           
|Enablex/Emselex    |  | $                                   | 7,314,493 
|Sintrom            |  |                                     | 5,986,210 
|Salagen            |  |                                     | 1,493,033 
|Vancocin           |  |                                     | 871,589   
|Estraderm          |  |                                     | 479,154   
|Total Revenue      |  |                                     | 16,144,479
|Cost of Goods Sold |  |                                     | 4,019,863 
|Gross Margin       |  | $                                   | 12,124,616



Revenues were $16,144,479 for the three
months ended September 30, 2015 compared to revenues of $6,019,024 for the three months ended September 30, 2014. All revenues
in the prior year comparative period were attributable to sales of Vancocin, Enablex, and Sintrom. Revenues during the period
ended September 30, 2015 also include sales of Salagen and Estraderm.



Gross margin for the three months ended
September 30, 2015 was $12,124,616 (75%) compared to gross margin of $5,086,834 (85%) for the three months ended September 30,
2014. The lower margin as a percentage of revenue in the current period is primarily a result of recording Sintrom on a gross
basis (as discussed below).



Revenues from Sintrom during the three
months ended September 30, 2015 were $5,986,210, compared to $1,007,443. The increase is entirely related to three months of operations
in the current year versus less than one month of operation in the prior year (Sintrom was acquired September 8, 2014).



During the current period, the Company
recorded the majority of Sintrom revenues in the statements of operations entirely on a net basis, whereby revenues were recorded
net of cost of goods and selling expenses, subject to a transition arrangement whereby Novartis continues to provide certain sales
and distribution functions while the parties work through the process of transferring the necessary marketing authorizations.
As a result of this arrangement the Company is considered to be acting as an agent rather than principal and revenues are recorded
on a net basis. Had the Company recorded Sintrom on a gross basis, revenues and cost of goods would have been higher by $4,545,842.










During September 2015, the presentation
of revenues from Sintrom in Spain had switched from a net basis to a gross basis as a result of the marketing authorization and
commercial operations in Spain being transferred from Novartis to Merus. As a result, the revenues and cost of goods related to
any sales conducted directly by Merus were recorded separately on a gross basis as if Merus were acting as the principal. In addition
to switching to a gross basis in Spain, the Company also acquired and transferred to its partner the local inventory. These sales
resulted in a higher than normal level of revenues in September as Merus’ distributor in Spain built up inventory.



Revenues from Salagen during the three
months ended September 30, 2015 were $1,493,033. During the current period, the Company recorded Salagen revenues in the statements
of operations entirely on a net basis, whereby revenues were recorded net of cost of goods and selling expenses. Had the Company
recorded Salagen on a gross basis, revenues and cost of goods would have been higher by $350,732.



Revenues from Estraderm during the three
months ended September 30, 2015 were $479,154. During the current period, the Company recorded Estraderm revenues in the statements
of operations entirely on a net basis, whereby revenues were recorded net of cost of goods and selling expenses. Had the Company
recorded Estraderm on a gross basis, revenues and cost of goods would have been higher by $337,537.



Revenues attributable to Enablex for the
three months ended September 30, 2015 were $7,314,493, compared to $4,129,377 for the three months ended September 30, 2014. Revenues
for Enablex were higher in the current period compared to the same period last year due primarily to sales in Germany being recorded
at the full ex-factory price due to the expiration of a legacy marketing agreement.



Revenues attributable to Vancocin were
$871,589 for the three months ended September 30, 2015, compared to $882,204 for the three months ended September 30, 2014. The
slight decrease in revenue from this product in the current year comparative period was primarily due to the entry of a second
generic Vancomycin which began to impact the market during the third quarter of fiscal 2014.



Sales and Marketing Expense



The Company incurred sales and marketing
expenses of $188,927 for the three months ended September 30, 2015, compared to $614,698 for the three months ended September
30, 2014. Sales and marketing expenses were higher during the prior year period primarily due to strategic upfront investment
in marketing and promotion for Enablex, specifically in territories not previously addressed such as the UK.



General and Administrative Expense



General and administrative expenses for
the three months ended September 30, 2015 were $3,101,232, compared to $1,198,346 for the three months ended September 30, 2014.
Excluding the impact of non-cash share based compensation, general and administrative expenses in the three month period increased
by $1,543,463 compared to the previous year, primarily due to higher legal expenses relating to arbitration and litigation, increased
headcount, increased investment in business development and due diligence with respect to potential acquisitions, and the scaling
up of operations due to a larger product portfolio.



Amortization of Intangible Assets



The three months ended September 30, 2015
included amortization expense of $7,331,944, compared to $3,792,420 for the three months ended September 30, 2014. The increase
in amortization is mainly due to the addition of Sintrom, Salagen, and Estraderm to the portfolio.










Interest Expense and Foreign Exchange
Gains and Losses



Interest expense of $1,423,495 was incurred
during the three months ended September 30, 2015, compared to $1,192,304 for the three months ended September 30, 2014. The lower
interest charges relate to the lower debt balance that was incurred with respect to the purchase of Sintrom.



Foreign exchange losses of $137,749 were
incurred in the three months ended September 30, 2015, primarily due to the appreciation in value of US dollar denominated liabilities.
Conversely, foreign currency gains of $1,114,217 were recorded in the same period last year due to the appreciation of the Euro
relative to the Canadian dollar as well as the purchase of US dollars at favourable exchange rates in advance of the acquisition
of Sintrom.



Derivative losses of $1,548,775 were incurred
in the three months ended September 30, 2015, primarily the settlement and mark-to-market of unfavourable Euro foreign exchange
hedges during the period as well as the settlement and mark-to-market of an unfavourable interest rate swap in connection with
the Company’s senior debt. Derivative gains of $516,662 were recorded in the prior year due to the settlement and mark-to-market
of favourable Euro foreign exchange hedges.










SUMMARY OF QUARTERLY RESULTS



Seasonality



Merus’ product lines are generally
not susceptible to fluctuations as a result of seasonal variations. Historic revenues have not indicated that any of the Company's
products will have seasonal variations which would materially impact revenue.



|                           | Q4
    2015    | Q3
    2015     | Q2
    2015    | Q1
    2015    
|-------------------------- | -------------- | --------------- | -------------- | ---------------
|                           |                |                 |                |                
|Revenues                   | $16.14 million | $9.51 million   | $12.68 million | $10.63 million 
|Gross margin               | $12.12 million | $8.69 million   | $11.24 million | $9.37 million  
|                           |                |                 |                |                
|Net income (loss)          | $0.02 million  | ($1.81) million | $1.76 million  | ($0.22) million
|                           |                |                 |                |                
|Earnings (loss) per share: |                |                 |                |                
|Basic                      | $0.00          | ($0.02)         | $0.03          | ($0.00)        
|Diluted                    | $0.00          | ($0.02)         | $0.03          | ($0.00)        
|                           |                |                 |                |                
|EBITDA1                    | $7.15 million  | $5.84 million   | $9.42 million  | $7.46 million  



|                           | Q4
    2014     | Q3
    2014     | Q2
    2014     | Q1
    2014    
|-------------------------- | --------------- | --------------- | --------------- | ---------------
|                           |                 |                 |                 |                
|Revenues                   | $6.02 million   | $7.18 million   | $6.69 million   | $6.26 million  
|Gross margin               | $5.09 million   | $5.82 million   | $5.48 million   | $5.27 million  
|                           |                 |                 |                 |                
|Net income (loss)          | ($4.55) million | ($0.17) million | ($1.45) million | ($1.89) million
|                           |                 |                 |                 |                
|Earnings (loss) per share: |                 |                 |                 |                
|Basic                      | ($0.06)         | ($0.00)         | ($0.04)         | ($0.05)        
|Diluted                    | ($0.06)         | ($0.00)         | ($0.04)         | ($0.05)        
|                           |                 |                 |                 |                
|EBITDA                     | $4.78 million   | $3.76 million   | $2.52 million   | $2.07 million  



1EBITDA – Non-IFRS
Financial Measures - see definition under "Overall Performance"










LIQUIDITY AND CAPITAL RESOURCES



The Company currently manages its capital
structure and makes adjustments to it, based on cash resources expected to be available to the Company, in order to support its
future business plans. As at September 30, 2015, excluding provisions and obligations related to long term debt, the Company had
working capital of $47,162,873 compared to $16,274,224 at September 30, 2014. The increase in working capital was due primarily
to the completion of a prospectus offering, along with cash generated from operations, offset by the acquisition of two products
and scheduled repayments against the credit facility.



The Company’s plan of operations
in the next twelve months is to satisfy short-term debt obligations, while strategically looking for new acquisitions. The Company
completed four financings during the prior fiscal year, including two bought deal prospectus offerings, a preferred share financing
and an acquisition involving cash. The Company used the majority of these funds, along with additional debt financing primarily
for its acquisition of Sintrom in September 2014. In April 2015, the Company completed its most recent bought deal financing for
gross proceeds of $60 million and in May, the Company used a portion of those proceeds to acquire the rights to Salagen and Estraderm
for approximately $37 million.



The Company generates significant positive
cash flow from operations, however, the Company may raise additional financing, if required, to pursue the acquisition of other
pharmaceutical products. Management reviews the capital management approach on an ongoing basis and believes that this approach
is reasonable given the current state of financial markets. In the case of uncertainty over the ability to raise funds in current
or future economic conditions, the Company would manage capital by minimizing ongoing expenses.



Cash provided by operations of the Company
was $3,546,644 and $20,350,329 for the three months and year ended September 30, 2015, respectively, compared to $3,473,690 and
$12,762,554 for the three months and year ended September 30, 2014, respectively. The increase in cash flows from operations in
the current year period was primarily a result of increased revenues with respect to Enablex, cash flows generated from the Sintrom
operations for the entire year, and the contribution of Salagen and Estraderm.



Cash provided by (used in) financing activities
for the three months and year ended September 30, 2015 was ($4,000,000) and $44,295,988, respectively, compared to cash provided
by financing activities for the three months and year ended September 30, 2014 of $64,260,944 and $108,807,923, respectively.
The current year period includes proceeds of the prospectus offering and option exercises offset by scheduled debt repayments
and dividends paid on the preferred shares. The prior year comparative period includes proceeds from a debt financing, preferred
share financing, and a smaller prospectus offering offset by scheduled debt repayments on the former debt facility.



Cash used by investing activities was
$142,231 and $38,017,707 for the three months and year ended September 30, 2015, respectively compared to cash used by investing
activities of $115,440,074 and $115,296,277 for the three months and year ended September 30, 2014, respectively. Cash used during
the current period related primarily to the purchase of Salagen and Estraderm, along with technology transfer costs for Enablex,
Sintrom, and Vancocin. Cash used by investing activities in the prior year was primarily related to the purchase of Sintrom and
technology transfer costs for Enablex, offset by cash acquired on the acquisition of a company.










COMMITMENTS



(a) Operating lease
commitments



The Company has entered
into operating lease agreements for office premises and equipment with minimum annual lease payments to expiry as follows:



|                 |  | September
    30, 2015 |        
|---------------- |  | ---------------------- | -------
|Less than 1 year |  | $                      | 105,576
|1 to 2 years     |  |                        | 105,576
|2 to 3 years     |  |                        | 26,394 
|Thereafter       |  |                        | -      
|Total            |  | $                      | 237,546



(b) Liability settlement



The table below analyzes the Company’s
non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial
position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows
and do not include capitalized transaction costs.



|                                         |  |       |            |  | Fiscal year ended September
    30 |  
|---------------------------------------- |  | ----- | ---------- |  | ---------------------------------- | -
|At September 30, 2015                    |  | Total |            |  | 2016                               |  
|Debt                                     |  | $     | 64,000,000 |  |                                    | $
|Accounts payable and accrued liabilities |  |       | 8,314,308  |  |                                    |  
|Income taxes payable                     |  |       | 1,460,249  |  |                                    |  
|Total                                    |  | $     | 73,774,557 |  |                                    | $



OFF BALANCE SHEET ARRANGEMENTS



The Company has no off balance sheet arrangements.



RELATED PARTY TRANSACTIONS



At September 30,
2015, there were no amounts owing to or from related parties. The remuneration of directors and other members of key management
personnel are as follows:



|                         |  | Year ended September 30 |          
|------------------------ |  | ----------------------- | ---------
|                         |  | 2015                    |          
|                         |  |                         |          
|Salaries                 |  | $                       | 1,538,240
|Share based compensation |  |                         | 2,512,459
|                         |  | $                       | 4,050,699










CHANGES IN CRITICAL ACCOUNTING POLICIES AND ESTIMATES



Accounting policies



There were no changes in the Company’s
critical accounting policies during the period.



DISCLOSURE CONTROLS AND PROCEDURES



Disclosure controls and procedures form
a framework designed to provide reasonable assurance that information disclosed publicly fairly presents in all material respects
the financial condition, results of operations and cash flows of the Company for the periods presented in this MD&A. The Company's
disclosure controls and procedures framework includes processes designed to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to management by others within those entities to allow timely decisions
regarding required disclosure.



The Company’s management, with the
participation of its CEO and CFO is responsible for establishing and maintaining adequate internal control over financial reporting.
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.



As at September 30, 2015, management evaluated
the design and operating effectiveness of the Company’s internal controls over financial reporting and concluded as at September
30, 2015, the Company’s internal controls over financial reporting were operating effectively.



There were no material changes made to
the Company’s internal controls over financial reporting during the year ended September 30, 2015 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control over financial reporting. In addition, management
assessed disclosure controls and procedures to be effective as of September 30, 2015.










DISCLOSURE OF OUTSTANDING SHARE DATA



Common Shares



The Company’s authorized share capital
consists of an unlimited number of common shares without par value. As at December 3, 2015 the Company had 102,301,641 common
shares issued and outstanding.



Preference Shares



The Company
is authorized to issue an unlimited number of preferred shares without par value. The preferred shares may be issued in series
on such terms as determined by the directors of the Company in accordance with the special rights and restrictions as set out
in the Articles of the Company. As of February 11, 2015, the Company had 10,000 Series A Preferred Shares issued and outstanding,
each with a liquidation value of $1,000, for a total value of $10,000,000. The Series A Preferred Shares pay a dividend
of 8% per annum, subject to adjustment if the Company does not redeem these Preferred Shares after October 31, 2019. At any time
at the option of the holder, the Series A Preferred Shares may be converted into the Company’s common shares at a conversion
price of $2.20 per share. The Series A Preferred Shares are redeemable at the option of the Company at any time after October
31, 2019. The Series A Preferred Shares are also redeemable by the Company at any time in the event of a change of control subject
to payment of a change of control premium.



Stock Options



The Company has 3,818,500 stock options
outstanding as at December 3, 2015.



Share Purchase Warrants



The
Company has no share purchase warrants outstanding as at December 3, 2015.



ADDITIONAL INFORMATION



Additional information about the Company
is available on SEDAR at http://www.sedar.com.