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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-
acceleratednon-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 financial statement item the registrant has elected to follow:
Item 17       X        Item 18   No  _______________

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, 2006,2007, the rate for Canadian dollars was US $0.9079$0.9349 for Cdn $1.00.

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TABLE OF CONTENTS

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GLOSSARY OF TERMS

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

"angina"means chest pain;

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

"anti-hypertensive"means blood pressure reducing;

"arrhythmia" means irregular heart rhythm;

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

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

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

"GCP"means Good Clinical Practices;

"GLP"means Good Laboratory Practice;

"GMP" means Good Manufacturing Practice;

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

"in-vitro" means test tube;

"in-vivo" means live animal;

"ischemia" means the lack of blood flow;

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

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

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

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

"NSAID" means non-steroidal anti-inflammatory drugs;

"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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As used in this annual report, the “Corporation” or “Company” refers to “Medicure Inc.”, the company resulting from the amalgamation of Medicure Inc. and Lariat Capital Inc., and “Medicure” refers to “Medicure Inc.” prior to its amalgamation with Lariat Capital Inc. Unless otherwise indicated, all references to dollar amounts in this annual report are to Canadian dollars.

FORWARD LOOKING STATEMENTS

Medicure Inc. cautions readers that certain important factors (including without limitation those set forth in this Form 20-F) may affect the Corporation’s actual results in the future and could cause such results to differ materially from any forward-looking statements that may be deemed to have been made in this Form 20-F annual report, or that are otherwise made by or on behalf of the Corporation. These statements may include, but are not limited to, plans regarding the development and advancement of MC-1, statements about the Corporation’s AGGRASTAT® operations, statements concerning the Corporation’s partnering and regulatory discussions, future financial position, future revenues, projected costs, and management’s strategy. For this purpose, any statements contained in the annual report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “except,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” or the negative or other variations of comparable terminology, are intended to identify forward-looking statements.

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., “Medicure” refers to “Medicure Inc.” prior to its amalgamation with Lariat Capital Inc. and “Lariat” refers to Lariat Capital Inc. prior to its amalgamation with Medicure Inc. Unless otherwise indicated, all references to dollar amounts in this annual report are to Canadian dollars.

Additional information about the Corporation may be found atwww.sedar.com.

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, 20062007 and 20052006 and for the fiscal years ended May 31, 2007, 2006 and 2005 and 2004 was extracted from the audited consolidated financial statements of the Corporation included in this annual report on Form 20-F. The information contained in the selected financial data is qualified in its entirety by reference to the more detailed consolidated financial statements and related notes included in Item 17 - - Financial Statements, and should be read in conjunction with such financial statements and with the information appearing in Item 5 - Operating and Financial Review and Prospects. The selected financial data as at May 31, 2005, 2004 2003 and 20022003 and for the fiscal years ended May 31, 20032004 and 20022003 was extracted from the audited financial statements of the Corporation not included in this annual report. Reference is made to Note 1013 of the consolidated financial statements of the Corporation included herein for a discussion of the material measurement differences

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 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.

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To date, the Corporation has not generated sufficient cash flow from operations to fund ongoing operational requirements and cash commitments. The Corporation has financed its operations principally through the sale of its equity securities. While the Corporation believes it has sufficient capital and liquidity to finance current operations, nevertheless, its ability to continue operations is dependent on the ability of the Corporation to obtain additional financing. See “Item 3 - Key Information - D. Risk Factors.” Based on the Corporation’s current plans and upon closing of the transactions disclosed in “Item 8B – Financial Information – Significant Changes” below, the Corporation’s available working capital will be sufficient into the first quarterhalf of fiscal 2008.2009.

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

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

8

Note 1: Includes 1,280,000 Class A common shares outstanding. On March 1, 2003 all of the Corporation’s issued and outstanding Class A common shares – totalling 1,280,000 shares – were converted into common shares of the Corporation on the basis of one common share for each Class A common shares in accordance with the Corporation’s Articles of Continuance. Prior to the conversion, the Class A common shares were identical in all respects to the common shares, except that the holders were eligible for the Manitoba Equity Tax Credit until February 28, 2003.

Comparability of Data

On November 22, 1999, Lariat acquired all of the issued and outstanding common shares of Medicure in consideration for the issuance of 9,500,000 common shares of Lariat. As control of Lariat passed to the former shareholders of Medicure resulting in a reverse acquisition, Medicure is deemed to be the acquirer for accounting purposes. Accordingly, the net assets of Medicure are included in the balance sheet at their book values and the deemed acquisition of Lariat is accounted for by the purchase method with the net assets of Lariat recorded at their fair value at the date of acquisition.

The selected financial data for the fiscal years ended May 31, 2007, 2006, 2005, 2004 2003 and 20022003 includes the operations of Medicure International Inc., a Barbados corporation (“Medicure International”), commencing June 1, 2000. The selected financial data for the year ended May 31, 2002 includes the operations of2000, and Medicure Pharma Inc., a United States corporation, and Medicure Europe Limited, a United Kingdom corporation, commencing SeptemberJune 1, 1999 combined with the activities of Lariat beginning on November 22, 1999, the effective date of the reverse takeover.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 to renderif the Corporation is, or would after the payment be, insolvent. Dividend policy will be based on the Corporation's cash resources and needs and it is anticipated that all available cash will be required to further the Corporation’s research and development activities for the foreseeable future.

Exchange Rates

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

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Notes:

⁽¹⁾ Figures are extracted from daily exchange rates

As of June 30, 2006,July 31, 2007, the exchange rate to convert one Canadian dollar into the U.S. dollar was 0.8959.0.9374.

B. Capitalization and Indebtedness

Not applicable

C. Reasons for the Offer and Use of Proceeds

Not applicable

D. Risk Factors

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

We arePrior 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 company and we expectdevelopment-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 ourits future operating performance and may cause the market price of ourits stock to decline.

With the exception of Aggrastat® (see Item 4(B))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 and as1997. As of May 31, 2006,2007, the date of its last audited financial statements, the Corporation had an accumulated deficit of $46,127,566.$77,830,952. The Corporation incurred net losses of $31,703,386 for the year ended May 31, 2007, $12,607,074 for the year ended May 31, 2006, $14,865,910 for the year ended May 31, 2005, $5,989,086 for the year ended May 31, 2004 and $4,193,688 for the year ended May 31, 2003 and $3,875,087 for the year ended May 31, 2002. 2003.

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

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

The Corporation may never receive regulatory approval in Canada, the United States or abroad for any of ourits 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 ourits current and future therapeutic products in one or more significant markets may adversely affect ourits 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®AGGRASTAT®, all of the Corporation’s products are currently in the research and development stages (see Item 4(B)).stages. The Corporation may never have another commercially viable drug product approved for marketing. To obtain regulatory approvals for the Corporation’sits products and to achieve commercial success, human clinical trials must demonstrate that the products are safe for human use and that they show efficacy. Even the Corporation’s most clinically advanced product, MC-1, has not enteredis only currently being studied in critical Phase III clinical trials. Unsatisfactory results obtained from a particular study or clinical trial relating to one or more of the Corporation’s products may cause the Corporation to reduce or abandon its commitment to that program.

If the Corporation fails to successfully complete its clinical trials, the Corporationit 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 ourits leading product, MC-1 or ourits second clinical candidate, MC-4232. Regulatory approvals also may be subject to conditions that could limit the market for MC-1 or MC-4232 or make either product or both products more difficult or expensive to sell than anticipated. Also, regulatory approvals may be revoked at any time, including the Corporation’sfor 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 the Corporationit fails to obtain regulatory approvals in Canada, the United States and abroad to market and sell MC-1 or MC-4232 or any current or future drug products, including any limitations imposed on the marketing of such products.

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

The Corporation has a contract with CanAm Bioresearch Inc. (“CanAm”) and Clinical Development Research Institute Inc. (“CDRI”) to perform for it a significant amount of ourits research and development activities. Because of the specialized scientific nature of the Corporation’s business, the loss of services of CanAm or CDRI 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 the Corporation’sits 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

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

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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 the Corporation’sits 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 the Corporationit 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 the Corporationit is unable to do so, itsthe Corporation’s business, financial condition and results of operations may suffer.

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

The Corporation’s success of the Corporation 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 clinical and preclinical products. These relationships will be crucial to the Corporation’s intention to license to or contract with larger, international pharmaceutical companies the manufacturing, marketing, sales and distribution of any products it may commercialize for production. To date, the Corporation has not entered into any such arrangements and may never be able to establish such arrangements on favourable terms. There can be no assurance that any licensing or other agreements will be established on favourable terms, if at all. The failure to establish successful collaborative arrangements with respect to certain products may negatively impact the Corporation'sCorporation’s ability to develop and commercialize thoseits products, and may adversely affect the Corporation’sits business, financial condition and results of operations.

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

The Corporation may fail to obtain acceptable prices or appropriate reimbursement for its products and the Corporation’sits 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

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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

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the Corporation’s products and related treatments, the Corporation’s ability to commercialize its products would be adversely affected. There can be no assurance that the Corporation’s products and related treatments will be eligible for reimbursement.

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

If purchasers or users of the Corporation’s products and related treatments are not able to obtain appropriate reimbursement for the cost of using such products and related treatments, they may forgo or reduce such use. Even if the Corporation’s products and related treatments are approved for reimbursement by Medicare and private insurers, of which there can be no assurance, the amount of reimbursement may be reduced at times, or even eliminated. This would have a material adverse effect on the Corporation’s business, financial condition, and results of operations.

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

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

In August 2006, wethe Corporation entered into a term loan financing facility totallingtotaling approximately US$15.84 million with a syndicate of lenders, led by Merrill Lynch Capital a division of Merrill Lynch Business Financial ServicesCanada Inc., and including Silicon Valley Bank and Oxford Finance Corporation (the “Credit Facility”). Under the Credit Facility, ourthe Corporation’s lenders may require that all or a portion of the principal amount of the Credit Facility or that all or a portion of such principal amount 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 ourthe Corporation’s common shares from trading on the TSX and Amex;AMEX;

• the issuance of any judgments or orders against usthe 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 oursthe 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;extended or in any other document delivered pursuant thereto;

• a default under any guarantee of the Credit Facility;

• an unpermitted payment by any obligor under the Credit Facility on account of any debt that has been subordinated to the Credit Facility;

• the occurrence of any fact, event or circumstance that could reasonably be expected to result in a material adverse effect; and

• actual or anticipated (such anticipation by the lenders to be based on their reasonable judgment based on information received from the Corporation) breach of certain financial covenants (including a requirement that athe Corporation achieve certain minimum net revenue targets from the sale of AGGRASTAT® as at December 31 of each year during the term of the Credit Facility).

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

As disclosed in “Item 8B – Financial Information – Significant Changes” below, subsequent to May 31, 2007 the Corporation entered into two non-binding agreements that would, if they close, provide the Corporation with additional working capital is required to be raised bytotaling US$40 million. The Corporation anticipates that it will meet the Corporation by March 31, 2007 through a collaborative partnership or equity issuance), including financial covenantsworking capital covenant described above upon the lenders deemclosing of the Corporation likely to fail under the Credit Facility for the next succeeding financial reporting period.above financings.

Upon the occurrence and during the continuance of an event of default, the interest rate on the Credit Facility will be increased by 1.5% . The lenders under the Credit Facility may also require all or a portion

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of the Credit Facility be redeemed in cash upon a change of control. We haveThe Corporation has not established a sinking fund for payment of the Credit Facility, nor do wedoes it anticipate doing so.

OurThe Corporation’s substantial debt could impair ourits financial condition. We areThe Corporation is highly leveraged and havehas substantial debt service obligations.

As of August 10, 2006, weMay 31, 2007, the Corporation had approximately US$15.84 million of principal indebtedness outstanding under the Credit Facility that bears interest at a floating rate.rate at one-month LIBOR plus 6.5% per annum. This substantial indebtedness could have important consequences for us.the Corporation. For example, it could:

• increase ourthe Corporation’s vulnerability to general adverse economic and industry conditions;conditions, including increases to interest rates;

• impair ourthe Corporation’s ability to obtain additional financing in the future for working capital needs, capital expenditures or general corporate purposes;

• require usthe Corporation to dedicate a significant portion of ourits existing cash and proceeds from any future financing transactions to the payment of principal and interest on ourits debt, which would reduce the funds available for ourits operations;

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• limit ourthe Corporation’s flexibility in planning for, or reacting to, changes in the business and the industry in which we operate;it operates; and

• place usthe Corporation at a competitive disadvantage compared to ourits competitors that have less debt.

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

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

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

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

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

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

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

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

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

15

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

14

claim or recall a product may have a material adverse effect on theits business, financial condition and future prospects of the Corporation.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, the Corporation’sits competitive position will be adversely affected.

The Corporation’s success of the Corporation 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 1838 United States patents as at May 31, 2006.patents. The Corporation has additional pending United States patent applications. The Corporation’s pending and any future patent applications may not be accepted by the United States Patent and Trademark Office or any other jurisdiction in which applications may be filed. Also, processes or products that may be developed by the Corporation in the future may not be patentable.

The patent protection afforded to biotechnology and pharmaceutical companies is uncertain and involves many complex legal, scientific and factual questions. There is no clear law or policy involving the degree of protection afforded under patents. As a result, the scope of patents issued to the Corporation may not successfully prevent third parties from developing similar or competitive products. Competitors may develop similar or competitive products that do not conflict with the Corporation’s patents. Litigation may be commenced by the Corporation to prevent infringement of its patents. Litigation may also commence against the Corporation to challenge the Corporation’sits 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'sCorporation’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 the Corporation’sits 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'sCorporation’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 the Corporation'sits 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 of the Corporation will depend partly on its ability to operate without infringing upon the patents and other proprietary rights of third parties. The Corporation is not currently aware that any of its

16

products or processes infringe the proprietary rights of third parties. However, despite theits best efforts, of the Corporation it 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 the Corporationit prevails. If itthe Corporation does not prevail, the Corporationit may be required to stop the infringing activity or enter into a royalty or licensing agreement, in addition to any damages the Corporationit 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 the Corporation,it, which may significantly impair the Corporation’s ability to market its products and adversely affect its business, financial condition and results of operations.

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The Corporation is andsubject to stringent governmental regulation, in the future may become subject to additional stringent governmental regulations and if the Corporationit is unable to comply, with them, 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, the Corporationit may be fined or suffer other consequences that could materially affect its business, financial condition or results of operations.

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

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

The Corporation does not currently have the required clinical data and results to successfully market its clinical and preclinical product candidates in any jurisdiction; future clinical or preclinical results may be negative or insufficient to allow the Corporationit 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 product candidatesproducts 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 threetwo years or longer before ourits 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, the Corporation’sits 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 makemakes public statements regarding timing of the accomplishment of objectives material to its success, such as the commencement and completion of clinical trials, anticipated

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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 ourits 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 the Corporation’sits common shares could decline.

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

Although the Corporation does not currently manufacture commercial quantities of its products, we producethe Corporation produces limited quantities of such products for the Corporation’sits clinical trials. The Corporation’s research and development processes involve the controlled storage, use, and disposal of hazardous materials and hazardous biological materials. The Corporation is subject to laws and regulations governing the use, manufacture, storage, handling, and disposal of such materials and certain waste products. Although the Corporation believes that its safety procedures for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, the Corporation could be held liable for any damages that result, and any such liability could exceed its resources. There can be no assurance that the Corporation will not be required to incur significant costs to comply with current or future environmental laws and regulations, or that its business, financial condition, and results of operations will not be materially or adversely affected by current or future environmental laws or regulations.

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

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

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

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

The Corporation has not to date generated any revenues from sales. The timing of generation of any sales is uncertain. The Corporation has limited financial resources and has financed its operations through the sale of securities, primarily common shares. The Corporation has significant on-going cash expenses and no ability to generate cash from operations. To meet its on-going cash needs the Corporation will need to continue its reliance on the sale of such securities for future financing, resulting in dilution to its existing shareholders. The Corporation’s long-term capital requirements may be notably significant and will depend on many factors, including continued scientific progress in its product discovery and development program, progress in its pre-clinical and clinical evaluation of products and product candidates, time and expense associated with filing, prosecuting and enforcing its patent claims and costs associated with obtaining regulatory approvals. In order to meet such capital requirements, the Corporation will consider contract fees, collaborative research and development arrangements, public financing or additional private financing (including the issuance of additional equity securities) to fund all or a part of particular programs.

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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 of the Corporation to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as theits business performance of the Corporation.performance. If the Corporation’sits capital resources are exhausted and adequate funds are not available, itthe 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 the Corporationit to relinquish rights to certain of its technologies or products.

17As disclosed in “Item 8B – Financial Information – Significant Changes” below, subsequent to May 31, 2007 the Corporation entered into two non-binding agreements that would, if they close, provide the Corporation with additional working capital totaling US$40 million.

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

As of May 31, 2006,2007, the Corporation had 96,046,465116,314,509, common shares issued and outstanding. A further 3,300,0284,235,528 common shares are issuable upon exercise of outstanding stock options and another 6,706,86010,691,468 common shares are issuable upon exercise of share purchase warrants, all of which may be exercised in the future resulting in dilution to the Corporation’s shareholders. The Corporation’s stock option plan allows for the issuance of stock options to purchase up to a maximum of 7,200,000 of the common shares issued and outstanding as of May 31, 2006. Under the plan the Corporation is able to grant an additional 2,954,667 share options as at May 31, 2006.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 the shareholders of the Corporation.its shareholders.

On May 31, 2006,2007, the Corporation’s common shares closed at a price of $1.70 (US$1.59CDN$1.23 on the Amex).TSX and US$1.14 on the AMEX. For the period from June 1, 20052006 to May 31, 2006,2007, the high and low trading prices of the Corporation’s common shares on the TSX were $2.37CDN$1.88 and $0.83,CDN$1.10, respectively, with a total trading volume of 71,417,10034,840,400 shares. For the period from June 1, 20052006 to May 31, 2006,2007, the high and low trading prices of the Corporation’s common shares on the AmexAMEX were US$2.071.70 and US$0.66,0.91, respectively, with a total trading volume of 21,498,300.26,426,800.

Daily trading volume on the TSX inof the Corporation’s common stockshares for the period from June 1, 20052006 to May 31, 20062007 has fluctuated, with a high of 4,283,000617,500 shares and a low of 12,300 shares,13,800shares, averaging approximately 283,401138,256 shares. Daily trading volume on the AmexAMEX in the Corporation’s common stockshares for the period from June 1, 20052006 to May 31, 20062007 has fluctuated with a high of 3,207,600939,700 and a low of nil,3,800, averaging approximately 85,311.105,286. Accordingly, the trading price of the Corporation’s common stockshares 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 the Corporation’sits products, competition by new products or new innovations, fluctuations in theits operating results, of the Corporation, general and industry-specific economic conditions and developments pertaining to patent and proprietary rights. The trading price of the Corporation’s common shares may be subject to wide fluctuations in response to a variety of factors and/or announcements concerning such factors, including:

• actual or anticipated period-to-period fluctuations in financial results;

• litigation or threat of litigation;

• failure to achieve, or changes in, financial estimates by securities analysts;

• new or existing products or services or technological innovations by the Corporation or its competitors;

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• 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;

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• additions or departures of key personnel;

• sales of the Corporation’s common shares, including by holders of the notes on conversion or repayment by the Corporation in common shares;

• economic and other external factors or disasters or crises;

• limited daily trading volume; and

• developments regarding the Corporation’s patents or other intellectual property or that of its competitors.

In addition, the securities markets in the United States and Canada have recently experienced a high level of price and volume volatility, and the market price of securities of biotechnology companies have experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. In addition, because of the limited public float, there may be limited liquidity for the Corporation’s common shares. It is expected that such fluctuations in price and limited liquidity will continue in the foreseeable future which may make it difficult for a shareholder to sell shares at a price equal to or above the price at which the shares were purchased.

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

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

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

Sales of substantial numbers of the Corporation’s common shares could cause a decline in the market price of theits 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 theits common shares.

WeThe Corporation may be unable to meet ourits obligations under ourthe outstanding Credit Facility.

As of August 10, 2006,May 31, 2007, the CorporationCorporaton had approximately US$15.84 million of principal indebtedness outstanding under the Credit Facility, which bears interest at one-month LIBOR plus 6.5 percent per annum. The term of the Credit Facility is over 42 months, with interest due and payable at commencement of the loan payable on the first day of the month. Commencing in June 2007, principal is payable monthly on a straight-line amortization schedule over 33 consecutive monthly instalments.installments. There is no guarantee that the Corporation will have adequate resourcesbe able to meet theseits obligations on a timely basis.under the Credit Facility.

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

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

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

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

The Corporation was a passive foreign investment company (“PFIC”) in the 20052006 taxable year and the Corporation believes there is a significant likelihood that it will be classified as a PFIC in the 2006

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2007 taxable year and possibly in subsequent years. OurThe Corporation’s classification as a PFIC could have significant and adverse tax consequences for United States holders of the Corporation’sits common shares. It may be possible for United States holders of the Corporation’s common shares to mitigate these consequences by making a so-called “qualified electing fund” election. (See “Taxation”“Certain Income Tax Consequences” below.)

The Corporation has adopted a shareholder rights plan.

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

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

On December 22, 1999, the Corporation was formed by the amalgamation of Medicure Inc. with Lariat was incorporated by Certificate of Incorporation issuedCapital Inc. pursuant to the provisions of theBusiness Corporations Act (Alberta) on June 3, 1997. On February 11, 1999, by Certificate of Amendment and Registration of Restated Articles, the Articles of Lariat were amended to remove the private company restriction. Lariat was formed as a Junior Capital Pool company, as defined by, and under the rules of the Alberta Stock Exchange with the expressed intent of acquiring a project or company through a reverse take over. With the exception of this intent and the associated search for potential acquisitions, Lariat had no substantial prior business activities.

Medicure was incorporated by Certificate of Incorporation issued pursuant to the provisions ofThe Corporations Act (Manitoba) on September 15, 1997. Medicure was continued from Manitoba to Alberta by Certificate of Continuance issued pursuant to the provisions of theBusiness Corporations Act(Alberta) on December 3, 1999. On December 22, 1999, Medicure and Lariat were amalgamated by Certificate of Amalgamation issued pursuant to the provisions of theBusiness Corporations Act (Alberta) as Medicure Inc.. The Corporation was continued from Alberta to the federal jurisdiction by Certificate of Continuance issued pursuant to the provisions of theCanada Business Corporations Acton February 23, 2000.

Medicure was formed as a private Manitoba company to advance the discoveries of Dr. Naranjan Dhalla of the University of Manitoba. Dr. Dhalla and Dr. Albert Friesen were the principal owners of the corporation as first formed, together with certain other individuals who contributed to the project. The first order of business was the completion of a licensing agreement to acquire the technology rights from the University of Manitoba, which owned the technology by virtue of the fact that it was invented by employees of the University. From that date until the merger with Lariat, the Corporation's primary focus was on the preclinical testing and development of the lead product, identified as MC-1. In 1998 other research involving synthesis and testing of other potential therapeutics was commenced through a research contract with the University of Manitoba. Various business activities were conducted in support of these primary research projects including but not limited to; (1) the application for and approval of government sponsored research awards, (2) the search for alternative sources of investment capital to fund operations, and (3) the ongoing search for other potential therapeutics. Business and administrative functions were handled by Genesys Venture Inc., a consulting corporation, that at the time, was owned entirely by Dr. Friesen. Operations and research, until the merger, were primarily funded by Dr. Friesen, with assistance from government grants. On November 22, 1999 Medicure was acquired by Lariat by way of a reverse takeover as Lariat’s “Major Transaction” as a Junior Capital Pool company within the meaning of the Alberta Securities Commission Rule 46-501, the Alberta Securities Commission Companion Policy 46-501CP and The Alberta Stock Exchange Circular 7. Pursuant to the terms of the Major Transaction, Lariat acquired all of the issued and outstanding shares of Medicure in exchange for 9,500,000 shares of Lariat, at a deemed price for securities regulatory purposes only of $0.20 per share for aggregate deemed value of $1,900,000. The Major Transaction was negotiated entirely at arm’s length. As a result of the share exchange, control of Lariat passed to the former shareholders of Medicure. This type of transaction is commonly referred to as a “reverse takeover”. Under reverse takeover accounting, for financial reporting purposes, the Corporation is considered to be a continuation of the operations formerly carried on by Medicure.

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The Corporation’s current legal and commercial name is Medicure Inc. and its current registered office is 30^th Floor, 360 Main Street, Winnipeg, Manitoba, Canada, R3C 4G1. The Corporation’s head office is located at 4-1200 Waverley Street, Winnipeg, Manitoba, Canada, R3T 0P4.

The MC-1 technology was originally licensed to Genesys Pharma Inc. by the University of Manitoba, on August 18, 1997. Genesys Pharma Inc., which had made a small investment on some preliminary research, transferred the technology without cost, except for costs designated in the license, to Medicure Inc. on September 26, 1997. On August 30, 1999 Medicure Inc. completed a new license agreement with the University of Manitoba in order to slightly modify the terms of the original license agreement transferred from Genesys Pharma Inc., and to have the documentation properly prepared in the Corporation’s own name.

On June 1, 2000 the Corporation licensed the world-wide development and marketing rights (except for Canada) for MC-1, the Corporation’s lead product, to the Corporation’s wholly owned subsidiary, Medicure International Inc.. Medicure International Inc. then entered into a development agreement with CanAm to perform research and development on 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 agreement have agreed that the aggregate amount of all invoiced expenditures shall not exceed $30,000,000 over the term of the agreement. CanAm is a private Canadian company owned by Marcus Enns, a former employee of the Corporation and Peter de Visser, a former director of the Corporation. Peter de Visser resigned as a director of the Corporation in December 2001.

On July 2, 2004, Medicure International Inc. also entered into a development agreement with CDRI to perform clinical development on 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 agreement have agreed that the aggregate amount of all invoiced expenditures shall not exceed $30,000,000 over the term of the agreement. CDRI is a private Canadian company owned by Jim Charlton, a former employee of the Corporation.

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 plus inventory.19,000,000. To finance the acquisition, the Company entered into the Credit Facility totaling US$15.84 million with a syndicate of lenders, led by Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., and including Silicon Valley Bank and Oxford Finance Corporation. The term of the Credit FacilityInterest is over 42 months, with interest due and payable at commencement of the loan payable on the first day of the monthmonthly at one-month LIBOR plus 6.5 percent per annum. Commencing in June 2007, principal of US$480,000 is payable monthly on a straight-line amortization schedule over 33 consecutive monthly installments.with the term loan maturing February 1, 2010. The Credit Facility is secured by a security interest in all existing and after-acquired assets of the Company including intellectual property. Subsequent to year end, the Corporation signed a non-binding term sheet dated August 20, 2007 to monetize a percentage of the Corporation’s current and potential future commercial revenues with Manchester Securities Corp., an affiliate of Elliott Associates, L.P. (Elliott) (see Item 8B – Financial Information – Significant Changes below). The proposed financing is subject to a number of closing conditions, including the amendment of the Corporation’s credit agreement dated August 8, 2006 and the execution of a definitive agreement. The transaction is expected to close in September 2007.

Since its amalgamation, the Corporation, directly and through certain research contracts, has been engaged in the research and development of human therapeutic drugs for cardiovascular disease. In certain instances, therapeutics developed by the Corporation may also provide benefit for other diseases. The Corporation’s lead product, MC-1, is based upon scientific discoveries led by Dr. Naranjan S. Dhalla of The Institute of Cardiovascular Sciences and the Department of Physiology, of the Faculty of Medicine, the University of Manitoba in Winnipeg, Manitoba, Canada. The Corporation’s focus is on the clinical development and commercialization of MC-1 for treatment of cardiovascular disease and on the discovery and development of other cardiovascular therapeutics. There is currently an aggregate of 39 full time scientific researchers and support staff who are retained as employees by CanAm and CDRI who are performing the Corporation’s scientific research pursuant to the development agreements.

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B. Business Overview

Plan of Operation

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

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

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

InOn August 8, 2006, the CorporationCompany acquired the U.S. rights to its first commercial product, Aggrastat®AGGRASTAT® Injection (tirofiban hydrochloride) in the United States and its territories (Puerto Rico, Virgin Islands, and Guam). Aggrastat®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). Aggrastat® was not being actively promoted at the time of acquisition. The Corporation plans to launchCompany launched product sales and marketing efforts, with a targeted, dedicated cardiovascular sales force and medical science liaison organization induring the first halfsecond quarter of fiscal 2007. Aggrastat^®AGGRASTAT® is complimentarycomplementary to the Corporation’sCompany’s cardiovascular strategy and provides the CorporationCompany with a presence in the marketplace.

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

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

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

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

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

It is the Corporation’s intention to actively search for a partnership with a large pharmaceutical company. Such a partnership would conceivably provide funding for Phase III clinical trials, add experience to the product development process and bring in overall marketing expertise. While the Corporation has had

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informal discussions with potential partners, no formal agreement, or letter of intent, has been entered into by the Corporation as of the date hereof.

Potential Products in Development Stage

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

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

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

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

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

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

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

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

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

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

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

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

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

According to theAmerican Heart Association, cardiovascular disease is the most prevalent serious disease in the United States, affecting approximately 71.379.4 million people.¹According to theAmerican Heart Association, approximately one in three Americans have some form of cardiovascular disease. In 2003,2002, cardiovascular disease was the underlying or contributing causeincause in 58% of all deaths in the United States.²¹

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

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

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

As at May 31, 2006,2007, the Corporation had 1838 issued United States patents: United States Patent No. 5,504,090, United States Patent No. 5,733,916, United States Patent No. 6,001,842, United States Patent No. 6,051,587, United States Patent No. 6,043,259, United States Patent No. 6,339,085, United States Patent No. 6,417,204, United States Patent No. 6,489,345, United States Patent No. 6,548,519, United

^{________________________________________
1}American Heart Association,Heart Diseasepatents (see Item 5 – Operating and Stroke Statistics - - 2006 Update.

²Health Canada,Heart DiseaseFinancial Review and Stroke in Canada, 1997, Chapter 2.1.

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States Patent No. 6,586,414, United States Patent No. 6,605,612, United States Patent No. 6,677,356, United States Patent No. 6,667,315, United States Patent No. 6,780,997, United States Patent No. 6,861,439, United States Patent No. 6,867,215, United States Patent No. 6,890,943Prospects – C. Research and United States Patent No. 6,897,228.Development, Patents and Licenses, Etc. below).

Competitors’ Current Products

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

It is recognized that cardiovascular treatments have been of great benefit in reducing mortality and morbidity from a range of conditions. The existing cardiovascular drugs can be categorized into several main drug classes, as distinguished by their mechanism of action. Some of the primary drug classes include: ACE Inhibitors (2003(2005 US sales estimated at US$2.82.2 billion), Angiotensin II Inhibitors (2003(2005 US sales estimated US$2.12.9 billion), oral anti-platelets (2003(2005 US sales estimated US$2.43.8 billion), Beta-Blockers (2003(2005 US sales estimated at US$1.62.1 billion), and Calcium Channel Blockers (2003(2005 US sales estimated at US$4.44.6 billion), each class has particular benefits as well as an array of alternative products.³Cross-use of drugs between different types of cardiovascular disease categories makes it difficult to differentiate sales by the more specific market segment (such as for myocardial infarction, ischemic reperfusion injury, etc.).

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

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

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

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

Competitors’ Products in Development

As there remains unmet needs for treatmentMany companies, including large pharmaceutical and biotechnology companies, are conducting development of certain formsproducts that are intended to address a same or similar medical need. Many of cardiovascular diseasethese companies have much large financial and stroke, management ofother resources than the Corporation believes there is room for an increased number of noveldoes, including those related to research products.

^{________________________________________
3}Sales estimates provided byIMS Health Data, 2003.and development, manufacturing, and sales and marketing. The Corporation also

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ThePharmaceutical Researchers faces competition in recruiting scientific personnel from colleges, universities, agencies, and Manufacturers of America have identified 146 separate products in development for heart diseaseresearch organizations who seek patent protection and stroke in their 2005 Survey: Medicines in Development for Heart Disease and Stroke. A large proportion of products in development are modifications of existing therapeutic classes or new indications for drugs already on the market.

The Corporation’s clinical trials for MC-1 focus on ischemia and ischemic reperfusion injury for cardiovascular diseases and will also focus on stroke. The following tables provide an overview of many of the competitors’ products in development pertaining to Percutaneous Coronary Intervention (PCI) or angioplasty, CABG, ACS and stroke:

PCI: Products in Development⁴

CABG: Products in Development⁵

ACS: Products in Development⁶

^{________________________________________
4}Pharmaceutical Researchers and Manufacturers of America,Survey: New Medicines in Development for HeartDisease and Stroke 2005; company websites.

⁵Pharmaceutical Researchers and Manufacturers of America,Survey: New Medicines in Development for HeartDisease and Stroke 2005; company websites.

⁶Pharmaceutical Researchers and Manufacturers of America,Survey: New Medicines in Development for HeartDisease and Stroke 2005; company websites.

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Stroke: Products in Development⁷

Some of the products set forth above have the advantage of being further along in development than the Corporation’s products. However, market share for new products depends primarily upon the relative strengths of a product in areas such as safety, effectiveness, cost, and dose form.

It is noted that cardiovascular drugs are often prescribed together and therefore products do not necessarily compete for use on an individual patient. MC-1’s use in many indications is expected to be as adjunct therapy, that is, it will be given together with other therapeutics. Historically, the challenge of competing with earlier products has not acted as a significant barrier to entry for new products, provided that the new product has some advantage relative to earlier products.

The Corporation’s second clinical candidate, MC-4232, is being developedlicensing agreements for the treatment of diabetic patients with hypertension. 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. To date, only one combination product has been developed to address both hypertension and a metabolic function. This product is Caduet ®, a combination of the calcium channel blocker Norvasc ® and the statin Lipitor ®. Caduet ® was approved in 2004. The Pharmaceutical Research and Manufacturers of America Survey of New Medicines in Development for Heart Disease and Stroke 2005 does not identify any other products in development that are taking this approach. While Caduet ® targets hypertension and lipid lowering (primarily LDL cholesterol lowering), it does not address specific metabolic dysfunctions (such as elevated HbA1C) faced by the diabetic population.

The market for management of high blood pressure is one of the largest in the pharmaceutical industry but is also one of the most competitive. Approximately 50 million Americans are affected by hypertension (American Heart Association).Decision Resources expects hypertension drug global sales to reach US $22 billion by 2008. The following table presents a list of competitors’ products on the market pertaining to hypertension.

STANDARD OF CARE PHARMACOLOGICAL TREATMENTS FOR HYPERTENSION⁸

^{________________________________________
7}Pharmaceutical Researchers and Manufacturers of America,Survey: New Medicines in Development for HeartDisease and Stroke 2005; company websites.

⁸ Company websites.

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The market for oral diabetic drugs was $5 billion in the US for 2002 (IMS Health Data, Diabetes Therapy Report, 2004). This is the largest drug class within the diabetic market, and had the highest compound annual growth rate between 1998 and 2002.

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STANDARD OF CARE PHARMACOLOGICAL TREATMENTS FOR TYPE 2 DIABETES⁹

The market for drugs to manage hypertriglyceridemia includes fibric acid derivatives (total US sales of $0.7 billion in 2003), statins (total US sales of $13.7 billion in 2003), and niacin (total US sales of $0.3 billion in 2003) (IMS Health Data).

STANDARD OF CARE PHARMACOLOGICAL TREATMENTS FOR
HYPERTRIGLYCERIDEMIA¹⁰

The Corporation has recently purchased the U.S. sales and marketing rights to Aggrastat® Injection (tirofiban hydrochloride). Aggrastat® is a GP IIb/IIIa receptor antagonist which is approved for ACS. Recent figures indicate that U.S. sales of Aggrastat® Injection in the 12 months to May 2006 were $10.8 million (IMS Health Data). Other products currently on the market for the management of ACS are outlined in the table below:

^{________________________________________
9}American Diabetes Association,Position Statement: Standards of Medical Care in Diabetes, 2005; company websites.

¹⁰American Association of Clinical Endocrinologists,Medical Guidelines for Clinical Practice for the Diagnosis andTreatment of Dyslipidemia and Prevention of Atherogenesis, 2000.

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STANDARD OF CARE PHARMACOLOGICAL TREATMENTS FOR ACS¹¹

Due to new product developments and potential clinical and preclinical findings, the above tables may not be inclusive of all competitors’ products.technologies they develop.

Competitive Strategy and Position

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

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

C. Organizational Structure

Medicure International Inc., a wholly owned subsidiary of the Corporation, was incorporated pursuant to the laws of Barbados, West Indies, on May 23, 2000. Medicure International Inc.’s registered office is located at Whitepark House, White Park Road, Bridgetown, Barbados. Medicure International Inc.’s head office is located at 2nd Street, Holetown, St. James, Barbados.

Medicure Pharma Inc., a wholly owned subsidiary of the Corporation, was incorporated pursuant to the laws of the State of Delaware, United States of America, on September 30, 2005. Medicure Pharma Inc.’s registered office is 2711 Centerville Road, Suite 400, Wilmington, Delaware, 19808. Medicure Pharma Inc.’s head office is located at 200 Cottontail Lane, Somerset, NJ, 08873.

American Cardio Therapeutics Inc., a company that is 49% owned by Medicure Pharma Inc., was incorporated pursuant to the laws of the State of Delaware, United States of America, on September 30,

^{________________________________________
11}American College of Cardiology/American Heart Association,Guideline Update for the Management of Patientswith Unstable Angina and Non-ST-Segment Elevation Myocardial Infarction, 2002.

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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, 2006, Medicure Pharma Inc.,2007, American Cardio Therapeutics Inc. and Medicure Europe Limited werewas involved in no material transactions.

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

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D. Property, Plants and Equipment

Office Space

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

Research Facilities

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

ITEM 4A. UNRESOLVED STAFF COMMENTS

The Corporation is an accelerated filer as defined in Rule 12b-2 under theSecurities 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, 20062007 and there are no unresolved comments as of the date of the filing of this Annual Report with the Commission.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This section contains forward-looking statements involving risks and uncertainties. The Corporation's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under part Item 3 - Key Information - D. Risk Factors. The following discussion of the financial condition, changes in financial conditions and results of operations of the Corporation for the years ended May 31, 2006,2007, May 31, 20052006 and May 31, 20042005 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 1013 to the consolidated financial statements of the Corporation included herein.

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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 1013 to the audited consolidated financial statements for the year ended May 31, 2006.2007. These accounting principles require management to make certain estimates and assumptions. Management believes that the estimates and assumptions upon which the Corporation relies are reasonable based upon information available at the time these estimates and assumptions are made. Actual results could differ from these estimates. Future estimates and assumptions may lead to different judgments than those applied in the preparation of these consolidated financial statements. Areas of significant estimates include revenue recognition, research and development costs, clinical trial expenses, the assessment of net recoverable value of intangible assets, income taxes and stock-based compensation.

Revenue recognition

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

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

Interest income is recognized as earned.

Research and development costs

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

Clinical trial expenses

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

Intangible assets

Costs incurred in obtaining patents are capitalized and amortized upon issuance on a straight-line basis over the remaining legal life of the respective patents, being approximately twenty years, or itstheir economic life, if shorter. The cost of servicing the Corporation’sCompany’s patents is expensed as incurred. Technology licenses, which include licenses and rights to technologies,Intangible assets are initially recorded at fair value based on consideration paidacquisition cost and are amortized on a straight-line basis overbased on the following estimated useful lives:

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 underlying technologies. 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 CorporationCompany expects to derive from the costs incurred to date and the Company’s ongoing development plans. Management has reviewedA change in any of these assumptions could produce a different fair value, which could have a material impact on the carrying valueCompany’s results of its intangibleoperations.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, future income tax assets and no adjustment was madeliabilities are recognized for the future tax consequences attributable to differences between the capitalized costs.

Refundable investmentfinancial statement carrying amounts of existing assets and liabilities and their respective tax credits
The Corporation incurs researchbases. Future income tax assets and development expenditures,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 eligible for refundable investment tax credits. The investment tax credits are based on management's estimates of amountsexpected to be recovered.recovered or settled. The effect on future tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of substantive enactment. Given the Company’s history of net losses and expected future losses, the Company is of the opinion that it is more likely than not that these tax assets will not be realized in the foreseeable future and therefore, a full

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valuation allowance has been recorded against these income tax assets. As a result, no future income tax assets or liabilities are recorded on the investment tax credits are subject to audit by the taxation authorities, the actual amounts received may vary materially from the estimate recognized. Any adjustments to amounts accrued are recognized as determinable.Company’s balance sheets.

Stock-based compensation

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

The stock-based compensation recorded by the Corporation is a critical accounting estimate because of the value of compensation recorded, the volume of the Corporation’s stock option activity, and the many assumptions that are required to be made to calculate the compensation expense. The Black-Scholes

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model is not the only permitted model to calculate the fair value of stock options. A different model, such as the binomial model, as well as any changes to the assumptions made may result in a different stock compensation expense calculation. The Corporation recorded stock compensation expense in fiscal 20062007 of $745,570 (2005$1,025,310 (2006 - $504,878; 2004$745,570; 2005 - $386,048)$504,878).

A. Operating Results

General

The Corporation has concentrated primarily on research and development and has yet to and may never derive any revenues from its general operations.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 development stage companybusiness in a highly competitive industry, characterized by frequent new product introductions. The Corporation has historically incurred net losses and anticipates that such losses will increase as it continues its development and clinical trials and eventually seeks regulatory approval for the sale of its products.

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

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

Net product sales for fiscal 2007 were $5,945,000, compared to nil in fiscal 2006. Net product sales reflect reduction of gross sales at the time of initial sales recognition for estimated wholesaler chargebacks, returns and discounts. The Company began recognizing revenue for AGGRASTAT® effective August 9, 2006, the date following its acquisition. The Company currently sells AGGRASTAT® to drug wholesalers. These wholesalers subsequently sell AGGRASTAT® to the hospitals where health care providers administer the drug to patients. Wholesaler management decisions to increase or decrease their inventory of AGGRASTAT® may result in sales of AGGRASTAT® to wholesalers that do not track directly with demand for the product at hospitals. The Corporation only began selling AGGRASTAT® in August 2006, and wholesaler buying patterns have sometimes been unpredictable.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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The MATCHED (MC-1 and ACE Therapeutic Combination for Hypertensive Diabetics) study evaluated MC-1 alone and in combination with an ACE inhibitor encompassing 120 patients with co-existing diabetes and hypertension. The study was designed as a Phase II trial to determine the optimal dose and

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endpoint for Phase III development of MC-4232. MATCHED was a randomized, parallel group, crossover, double-blind, placebo-controlled comparison of 100, 300 or 1000 mg of MC-1 alone and in combination with 20 mg of lisinopril. The results demonstrated the positive clinical effects of MC-4232 on important primary and secondary blood pressure and metabolic endpoints.

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

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

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

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

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

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

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

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

Year Ended May 31, 2005 Compared to the Year Ended May 31, 2004

Interest and other income for fiscal 2005 totaled $395,000 as compared to $445,000 for fiscal 2004. Interest and other income in fiscal 2005 is slightly higher than fiscal 2004. Interest and other income in fiscal 2005 is lower than fiscal 2004 due to lower average cash and cash equivalents balance. The

34

Corporation anticipates that investment income will continue to fluctuate in relation to cash and short term investment balances and interest yields.

Research and development expenditures increased to $13,564,000 in fiscal 2005 as compared to $4,435,000 for fiscal 2004 and represent 89% of the Corporation’s total expenditures in fiscal 2005. As expected, research and development expenditures were higher as compared to the same periods in fiscal 2004 due to the ongoing Phase II/III Coronary Artery Bypass Graft (“CABG”) trial attributed to MC-1, called MEND-CABG and the Phase II MATCHED study with MC-4232.

The Corporation’s 900 patient, MEND-CABG trial reached full enrollment in July 2005. The MEND-CABG study is a Phase II/III placebo controlled, double-blinded study of MC-1, designed to evaluate the potential of the Corporation's lead drug in reducing ischemic damage resulting from CABG procedures. The Phase II portion of the trial is being conducted at approximately 40 cardiac centres throughout Canada and the US and is managed by Montreal Heart Institute and Duke Clinical Research Institute (“DCRI”). The study's primary efficacy parameter is the reduction in combined incidence of cardiovascular and cerebrovascular death, non-fatal myocardial infarction (heart attack) and non-fatal cerebral infarction (stroke), up to and including 30 days following CABG surgery. For the year ended May 31, 2005, total expenditures for the MEND-CABG trial were $8,788,000 as compared to $1,352,000 in fiscal 2004. The costs increased in direct relation to the increase in the number of clinical sites initiated in the study and the associated increase in the number of patients enrolled.

The Corporation will compile and analyze all efficacy and safety endpoints up to postoperative day 30 (“POD 30”), and plans on reporting these results in the fall of 2005. The secondary endpoint of postoperative day 90 (“POD 90”) will follow shortly thereafter.

The initiation of the MEND-CABG trial was based on the Phase II, MEND-1 trial, managed by Duke Clinical Research Institute, which showed that the Corporation's lead product, MC-1, reduces ischemic heart damage following angioplasty as determined by the release of the amount of the marker cardiac enzyme, CK-MB. 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 increase in research and development expenditures was also due to the clinical development program of MC-4232, a combination of MC-1 and an ACE Inhibitor. As part of the Phase II/III clinical development program of MC-4232, the Corporation is conducting the Phase II MATCHED study. The MATCHED study will evaluate MC-1 alone and in combination with an ACE inhibitor encompassing up to 120 patients with co-existing diabetes and hypertension. This study will assess effects on a variety of important parameters in diabetic hypertensive patients, including blood pressure and metabolic function. For the year ended May 31, 2005, total expenditures for the MATCHED trial were $1,731,000 as compared to $12,000 in fiscal 2004.

General and administrative expenses include salaries and related costs for those employees not directly involved in research and development, but are required to support ongoing business development and corporate stewardship activities. The balance also includes professional fees such as legal, audit, investor and public relations and business development activities. General and administration expenses totaled $2,256,000 for the year ended May 31, 2005, as compared to $1,958,000 for the year ended May 31, 2004. The overall increase in costs during the fiscal year ended May 31, 2005 as compared to the same period in fiscal 2004 is primarily driven by increased business development and investor relations activities, professional fees and stock-based compensation expense.

Foreign exchange gain for fiscal 2005 totaled $64,000 as compared to nil for fiscal 2005. The increase in the foreign exchange gain for the year ended May 31, 2005 is primarily a result of the strengthening of the U.S. dollar relative to the Canadian dollar during this period. While the functional currency of the Corporation is the Canadian dollar, the Corporation is holding U.S. dollars in anticipation of the significant U.S. dollar denominated clinical trial costs incurred as a result of the MEND-CABG study.

Refundable investment tax credits for fiscal 2005 totaled $553,000 as compared to nil for fiscal 2004. As Medicure is a public company, the federal investment tax credits (“ITCs”) for qualified Scientific Research and Experimental Development (“SR&ED”) expenditures are not refundable and are calculated

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at a rate of 20%. These ITCs can be applied to reduce future income taxes payable with a ten-year carry forward period. Certain eligible SR&ED expenditures incurred in Quebec qualify for Quebec refundable tax credits and are earned on payments made in Quebec for SR&ED labour, SR&ED contracts and to prescribed research centres.

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

For the year ended May 31, 2005, the Corporation recorded a consolidated net loss of $14,866,000 or $0.22 per share compared to a consolidated net loss of $5,989,000 or $0.11 per share for the year ended May 31, 2004. As stated above, these results of operations were mainly attributable to the Corporation’s clinical development program and the increased business development activity required to support the program. The Corporation expects to incur a loss next year as it continues to invest in product research and development.

The weighted average number of common shares outstanding used to calculate basic and diluted loss per share increased to 66,717,715 for the year ended May 31, 2005 from 55,738,716 for the year ended May 31, 2004.32

B. Liquidity and Capital Resources

Since the Company’s inception, the Corporationit has financed its operations primarily from public and private sales of equity, debt financing, the exercise of warrants and stock options, and interest income on excess funds available for investment and government grants and tax credits.held.

Cash used in operating activities for fiscal 20062007 was $12,678,000,$25,247,000, compared to $12,068,000$12,678,000 for fiscal 2005.2006, reflecting the larger loss in 2007. Cash used in operating activities was composed of net loss, add-backs or adjustments not involving cash and a net change in non-cash working items, and amortization of prepaid expenses.items.

Cash provided by financing activities in fiscal 20062007 was $41,252,000,$45,021,000, compared to $133,000$41,252,000 in fiscal 2005.2006. The main sources of cash in fiscal 20062007 were net proceeds from public and private placement financings of $40,957,000,$27,577,000, compared to $nil$40,957,000 in fiscal 2005.2006, and the debt financing associated with the Company’s acquisition of AGGRASTAT® of US$15,840,000 in fiscal 2007, compared to nil in fiscal 2006.

On August 19, 2005,8, 2006, the CorporationCompany secured US$15,840,000 in a term loan facility with various lenders to acquire the rights to AGGRASTAT® in the United States and its territories from MGI PHARMA, Inc. The term of the loan facility is over 42 months, with interest accruing at one-month LIBOR plus 6.5 percent per annum. Commencing in June 2007, principal is payable monthly on a straight-line amortization schedule over 33 consecutive monthly installments.

On December 22 and 28, 2006, the Company raised net proceeds of $4,139,000US$25,900,000 through a private placement. The placement resulted in the issuance to investors of 5,205,50019,923,044 common shares and warrants to purchase an additional 2,602,7503,984,608 common shares. The purchase price of the common shares was $0.90$1.30 per share, and the warrants are exercisable for a period of five years at an exercise price of $1.18$1.70 per share.

On January 4, 2006, the Corporation raised net proceeds of $10,858,000 through a public offering. A total of 7,750,000 common shares of the Corporation were issued at $1.55 per share.

On May 9, 2006, the Corporation raised net proceeds of $25,960,000 through a private placement. The Corporation issued 16,000,000 common shares at a price of US$1.60, together with warrants, to purchase 4,000,000 additional common shares. The warrants have a five-year term and an exercise price of US$2.10.

The Corporation also raised $252,000$287,000 from the exercise of stock options in fiscal 2006,2007, compared to $133,000$252,000 in fiscal 2005.2006.

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

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

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

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

Cash used in investing activities in fiscal 20062007 was $1,244,000,$22,925,000, compared to $429,000$1,244,000 in fiscal 2005.2006. The increase of $815,000 was mainlyprimarily due to an increasethe Company’s acquisition of the rights to AGGRASTAT® in patent coststhe United States and intangible assets.its territories in August 2006.

As at May 31, 2006,2007, the Corporation had cash and cash equivalents totaling $34,920,000$31,770,000 compared with $7,591,000$34,920,000 at the previous year-end.

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These funds are committed to short-term investments and as a result management does not believe that the fair value of these investments would be adversely impacted to any significant degree by a fluctuation in market interest rates. The total number of common shares issued and outstanding at May 31, 20062007 was 96,046,465116,314,509 as compared to 66,826,66096,046,465 at May 31, 2005.2006.

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

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

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

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

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

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

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

At May 31, 2005, theThe Corporation had net working capital of $5,926,134 compared to net working capital of $20,525,245long-term debt at May 31, 2004. During the period ended August 19, 2005, no additional stock options were exercised.

The Corporation had no long-term debt as of May 31, 2006. Subsequent to May 31, 2006, the Corporation entered into the Credit Facility2007 totalling US$15.84 million with a syndicate of lenders, led by Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., and including Silicon Valley Bank and Oxford Finance Corporation. The term of the Credit Facility is over 42 months, with interest accruing at one-month LIBOR plus 6.5 percent per annum. Commencing in June 2007, principal is payable monthly on a straight-line amortization schedule over 33 consecutive monthly installments. The Credit Facility is secured by a security interest in all existing and after-acquired assets of the Corporation including intellectual property.

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

Research and Development

Drug development and design begins with an idea, or theoretical concept for treating a given disorder. The idea is advanced through the drug design process, resulting in preliminary candidates that have theoretical potential. Candidates are improved to achieve the optimal effectiveness with limited toxicity.

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Following preclinical testing, products with the greatest potential become lead candidates and are advanced into clinical trials (human testing) with the intent of having them receive regulatory approval for marketing.

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

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

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

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

For the period from inception on September 15, 1997 to May 31, 2006,2007, the Corporation has expended approximately $36,579,000$59,743,000 net of government assistance and investment tax credits, which aggregate approximately $1,482,000,$1,654,000, on the research and development of MC-1, MC-4232 and other compounds.

Patents and Licenses

The Corporation has been issued 1838 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 24 additional26 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 1838 patents issued to the Corporation are as follows:

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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 6,339,0857,230,009 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, and an ensuing newupdated License Agreement dated August 30, 1999 and a newly revised version executed November 24, 2006, which supersedes all previous versions, (the ‘‘Licence Agreement’’) the University of Manitoba licensed the exclusive worldwide use of the patents and the MC-1 technology to the Corporation. Pursuant to the License Agreement, the Corporation has agreed to pay the University of Manitoba a royalty payment of up to 3% of net sales from any cardiovascular product derived from the MC-1 technology. The License Agreement commencedwas originally signed on August 30, 1999 and subsequently amended on November 24, 2006 and shall terminate:terminate if a patent or patents, domestic or foreign, are obtained prior to commercialization of a Licensed Product, the expiration date of the last to expire of any patents covered by the Patent Rights.

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

Patents 5,292,756, 5,658,929, 5,733,919, 5,814,643, 5,880,136, 5,965,581, 5,972,967, 5,978,698, 6,040,317, 6,136,794, 6,538,112 and 6,770,660 were purchased by the Corporation from MGI GP, INC. (a Delaware corporation doing business as MGI PHARMA and its Affiliate, Artery, LLC). Pursuant to an Asset Purchase Agreement dated August 8, 2006, MGI GP, INC. sold the exclusive use of the patents to the Corporation in the specified territory (the United States of America including the Commonwealth of Puerto Rico; Guam; and the United States Virgin Islands). Pursuant to the Asset Purchase Agreement the

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Corporation agreed to pay MGI GP, INC. a one time fee for the procurement of the acquired assets. The 24Asset Purchase Agreement was executed August 8, 2006.

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

There are 43 pending United States patent applications, including those41 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

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Eurasian Patent Convention, the European Patent Convention, and the Agreement Establishing the African Intellectual Property Organization. The PCT does not eliminate the necessity of prosecuting the international application in the national phase of processing before the national or regional offices, but it does facilitate such prosecution in several important respects by virtue of the procedures carried out first on all international applications during the international phase of processing under the PCT. The formalities check, the international search and (optionally) the international preliminary examination carried out during the international phase, as well as the automatic deferral of national processing which is entailed, give the applicant more time and a better basis for deciding whether and in what countries to further pursue the application. Further information may be obtained from the official WIPO internet website (http://www.wipo.int).

On June 1, 2000 the Corporation entered into the Medicure International Licensing Agreement whereby it licensed the world-wide development and marketing rights for MC-1, except for Canada, to its wholly owned subsidiary, Medicure International Inc. As consideration for the grant of the license, Medicure International Inc. agreed to pay the Corporation a fee of $1.00 upon the completion of specified milestones in the development process, together with a variable royalty of 7% to 9% of net sales of MC-1 (if any sales are ever in fact made). The term of the Medicure International Licensing Agreement will expire on the date of expiration of the last to expire patent on MC-1, or in the absence of any such patent, on the 10th anniversary of the date of the first commercial sale of MC-1 in the country where it was last introduced (if it is ever so introduced). The Medicure International Licensing Agreement may be

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terminated under a number of circumstances and, in any event, by either party at any time by providing the other with at least 90 days prior written notice of its intention to terminate the Medicure International Licensing Agreement.

Medicure International Inc. subsequently entered into a development agreement with CanAm on June 1, 2000 and CDRI on July 2, 2004 to perform research and development of MC-1 and other compounds at cost, plus a reasonable mark-up not to exceed ten percent of any amount invoiced. The parties to the development agreements have agreed that the aggregate amount of all invoiced expenditures shall not exceed $30,000,000 over the term of each agreement. The term of the development agreements is to expire on the completion of all research and development activities by CanAm and CDRI, and the written acknowledgment by CanAm, CDRI and Medicure International Inc. that no further research projects will be undertaken (see Item 6 - Directors, Senior Management and Employees - A. Directors and Senior Management)

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

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

D. Trend Information

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

E. Off-balance Sheet Arrangements

As part of the Corporation’s ongoing business, it does not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities or SPE, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of May 31, 2006,2007, the Corporation was not involved in any unconsolidated SPE transactions.

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F. Contractual Obligations

The following tables set forth the Corporation’s contractual obligations as of May 31, 2006:2007:

* The timingIn conjunction with the acquisition of expendituresAGGRASTAT®, the Company entered into manufacturing and payments for research and development obligations is largely at the discretionsupply agreements to purchase a minimum quantity of the Corporation and the agreements may be terminated at any time provided thirty (30) days notice is provided. The development agreements are described in more detail below.AGGRASTAT® from third parties.

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

In addition to the contractual obligations disclosed above, the Company and its wholly-owned subsidiary, Medicure International Inc.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. During the year ended May 31, 2006, the Corporation incurred an aggregate of $8,428,000 (2005 - $8,985,000) in expenditures under these agreements which is included in research and development expenses in the statement of operations. As at May 31, 2006, the Corporation is committed to fund a further $66,000 related to clinical research agreements with clinical research organizations (“CROs”) and clinical sites.

The contracts with the CROsclinical research organizations (CROs) are payable over the terms of the trials and the timing of payments is largely dependent on various milestones being met, such as the number of patients recruited, number of monitoring visits conducted, the completion of certain data management activities, trial completion, and other trial-related activities. As at May 31, 2007, the Company is committed to fund up to a further $3,857,000 related to clinical research agreements with CROs.

The Corporation is also liable for the payment of certain pass through costs. As part of these trials, the CorporationCompany also entered into agreements with the clinical sites participating in the trials. TheseThe site agreements require payments over the course of the study based on various activities being completed by the site, such as patient visits and various testing and measurement activities required per the study protocol. The Company is also liable for the payment of certain pass through costs. A significant portion of the amounts due to the sites for these activities is not payable until after the completion of these activities. As at May 31, 2007, the trial. This “holdback” results in a significant accrual of trial-related expenses during the course of the study, as the expenseCompany is recognized for accounting purposes but the cash payment is not made until after the trial is completed. committed to fund up to an estimated $13,107,000 related to site agreements. The CRO and site agreements are cancellable upon termination notice.

In addition, the CorporationCompany has committed to fund a further $3,700,000$30,699,000 in research and development activities under two development agreements with contract research organizations. The timing of expenditures and payments is largely at the discretion of the CorporationCompany and the agreements may be terminated at any time provided thirty (30) days notice is provided. Subsequent to May 31, 2006, the Corporation amended development agreements with third parties such that a further $35,000,000 was committed to research and development expenditures. The commitment is not included in the table above.

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

The CorporationCompany has granted royalties to third parties based on future commercial sales of MC-1, aggregating up to 4.75%3.9% on net sales. To date, no royalties are due and/or payable.

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

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

No dividends have been declared or paid on any shares of the Corporation since its incorporation. There can be no assurance that the Corporation will ever declare any dividends on any of its shares, or if

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declared, what the dividend amounts will be or whether such dividends, once declared, will continue for any future period.

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

Directors and Senior Management

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

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

The founder of Medicure Inc., Dr. Friesen holds a Ph.D. in protein chemistry from the University of Manitoba. Dr. Friesen played a key role in founding several health industry companies including Rh Pharmaceuticals (acquired by Cangene Inc.), ABI Biotechnology (acquired by Apotex Inc.), Viventia Biotech Inc., Genesys Pharma Inc. and KAM Scientific Inc. Dr. Friesen has experience in the establishment of pharmaceutical production facilities and has also managed and initiated the research and clinical development of several pharmaceutical candidates. Dr. Friesen is a founder of the Industrial Biotechnology Association of Canada (IBAC) and past Chairman of its board of directors and former member of the Industrial Advisory Committee to the Biotechnology Research Institute in Montreal. Dr. Friesen previously served as a senior executive of other publicly-traded companies, including a position as President of Viventia Biotech Inc. (formerly Novopharm Biotech Inc.) In addition to his role with the Corporation, Dr. Friesen is currently the President and Chairman of Genesys Venture Inc., a biotech incubator, based in Winnipeg. Dr. Friesen provides his services to the Corporation through A.D. Friesen Enterprises Ltd., his private consulting corporation. Dr. Friesen devotes substantially all of his time to the Corporation.

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

Arnold Naimark, O.C., O.M., M.D., L.L.D., F.R.C.P.(C), F.R.S.C.F.R.S.C, FCAHS,. has had a distinguished career withinin biomedical research, medicine and higher education. Dr. NaimarkHe is President Emeritus and Dean of Medicine Emeritus of the University of Manitoba, and is currently Director of the University of ManitobaUniversity’s Centre for the Advancement of Medicine,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 a Director of Inspiraplex and of the Robarts Research Institute and is a member of the Research Council of the Canadian Institute for Advanced Research. Dr. Naimark served as Head of the Department of Physiology and later as Dean of the Faculty of Medicine at the University of Manitoba, following which he served as the University’s President and Vice-Chancellor (15 years). Dr. Naimark has served on many other committees and boards, in such positions as a 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 also received several honouraryhonorary degrees and awards, including the Order of Canada.Canada and the Order of Manitoba.

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

Mr. McDole is currently a director of several Canadian healthcare companies. Mr. McDole is Past President of AstraZeneca Canada Inc. He was named President and CEO of AstraZeneca Canada Inc.'s pharmaceutical operations in 1999 and immediately led the merger of Astra Pharma and Zeneca Pharma Inc. Prior to this, Mr. McDole was president and CEO of Astra Pharma Inc., a position he assumed in 1985 after having served as Executive Vice-President. Mr. McDole is a member of the Canadian Healthcare Marketing Hall of Fame, and has been recognized by Canadian Healthcare Manager Magazine with the Who's Who in Healthcare Award in the pharmaceutical category. In recognition of Mr. McDole's outstanding contributions to the biotech and pharmaceutical industries, the University of Manitoba recently established The Gerry McDole Fellowship in Health Policy and Economic Growth.

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

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

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

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

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

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

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

Dawson Reimer, MAES - Vice-President, Operations

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

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

Derek Reimer came to the Corporation from Deloitte & Touche LLP where he most recently served as a Senior Manager in the Assurance and Advisory Services group. In this role, Mr. Reimer dealt mainly with major corporate clients, including several TSX 100 companies, providing advice regarding complex accounting, regulatory, and compliance issues. His previous experience includes several years providing international accounting services to clients exclusively in the financial services industry. Mr. Reimer is a

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Chartered Accountant who also holds a Bachelor of Commerce (Hons.) degree in accounting from the University of Manitoba. Mr. Reimer is responsible for managing financial systems, programs and processes to ensure the successful accomplishment of the Corporation’s business objectives.

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

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

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

Dr. Gluchowski received his PhD. in organic chemistry from Texas A&M University. Dr. Gluchowski has been active in the life sciences industry for over 20 years, including extensive experience in both executive and senior scientific positions. His experience includes serving as President and Chief Scientific Officer at Ceretek, a drug discovery company focused on developing novel therapeutics targeting Lipid G-Protein Coupled Receptors (L-GPCRs). He also served as Director of Chemistry at Synaptic Pharmaceutical Corp. where he founded the Chemistry Department and led several drug discovery and development project teams including a Benign Prostatic Hyperplasia project in collaboration with Merck

& Co., Inc. He began his professional career at Allergan, Inc. where he initiated medicinal chemistry programs that led to the discovery and development of Alphagan® and Lumigan® for the treatment of glaucoma. The combined total sales for Alphagan® and Lumigan® in 2005 exceeded USD$400 million. He is the sole or co-inventor on over 75 patents issued in the U.S, and has published over 45 peer-reviewed articles and book chapters. Dr. Gluchowski provides his services to the Corporation’s research and development activities through a consulting contract with CanAm Bioresearch Inc.

Business Management

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

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

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

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

Heather Hlady – Director, Sales and Marketing

Heather Hlady received her B. Sc. in Chemistry from the University of Alberta. Ms. Hlady has over 14 years of pharmaceutical management, sales and marketing experience. Ms. Hlady has spent her career with Jouveinal, Pfizer and most recently, Biovail. Her experience with Jouveinal brought a portfolio of eight different products, including the launch of two products to the market. In 1997, she moved to Pfizer Canada where she was a District Manager for the cardiovascular portfolio. In her role as District

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Manager, she managed the sales and performance of the cardiovascular product budgets, marketing and promotion, and was involved in the launch of two products to the market. Ms. Hlady holds the responsibility for the launch of the sales and marketing teams for Aggrastat® in the US, the branding and marketing of Medicure as a company, and for creating a dynamic and strategic plan for the extension of the product line.

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Scientific Management

Dr. Naranjan S. Dhalla - Chief Scientific Officer

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

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

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

Mr. Westin will beis responsible for the design and management of clinical studies for Medicure’s lead compound, MC-1, and for the clinical aspects of other business development and research projects. Mr. Westin provides his services to the Corporation's research and development activities through a consulting contract with CDRI Inc. (see “Directors and Senior Management” under this item).

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

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

Dr. Ahmad Khalil – Medical Director

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

Dr. Jim Diakur - Director of Chemistry

Dr. Diakur is an experienced medicinal chemist who was previously employed as Research Assistant Professor at the Noujaim Institute for Pharmaceutical Research in the Faculty of Pharmacy, University of Alberta. At the institute, Dr. Diakur’s group was focused on the development of carbohydrate-based

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pharmaceuticals for diabetes, cancer and inflammation and on carbohydrate-based drug carriers for targeted drug delivery. He also has over ten years of industrial research and management experience in the field of chemistry with Chembiomed Inc. and Biomira Inc. Among other achievements, Dr. Diakur managed a team of scientists responsible for the preclinical development of injectable carbohydrate-based immunotherapeutic agents. Dr. Diakur is employed by CanAm Bioresearch Inc. and works on the Corporation’s research and development pursuant to the Development Agreement.

Dr. Deborah Douglas – Director of Physiology

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

Dr. Marjorie Zettler – Director of Scientific Affairs

Dr. Zettler received her Ph.D. in Physiology from the University of Manitoba. Her research, which was carried out in the Division of Stroke and Vascular Disease at the St. Boniface Research Centre, focused on mechanisms of cardiovascular disease progression. Dr. Zettler has authored several peer-reviewed papers and is the recipient of numerous research awards. Dr. Zettler provides her services to Medicure through an employment agreement with CDRI Inc.44

Dr. Paul Armstrong - Clinical Consultant

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

Scientific Advisory Board

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

Dr. Paul Armstrong - Chairperson

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

Dr. Stephen Hanessian

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

Dr. Morris Karmazyn

Dr. Karmazyn is a Professor in the Department of Pharmacology and Toxicology at the University of Western Ontario in London, Ontario. Dr. Karmazyn is internationally recognized and has received

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numerous distinctions for his research in the field of myocardial ischemia and ischemic reperfusion injury.

Dr. John McNeill

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

Dr. Eldon Smith

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

Dr. Pierre Theroux

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

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Dr. Jeffrey Weitz

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

Dr. Trevor Hassell

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

Dr. A. Michael Lincoff

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

B. Compensation

No compensation of any kind was paid to the directors and executive officers of the Corporation during the year ended May 31, 2006,2007, except for stock-based compensation described in Item 6(E) below and as follows:

On October 1, 2001, a compensation agreement was entered into between the Corporation and A.D. Friesen Enterprises Ltd., a corporation owned by Dr. Friesen and subsequently amended on October 1, 2003, October 1, 2005, and October 1, 2005.2006. For the year ended May 31, 2006,2007, the Corporation paid A.D. Friesen Enterprises Ltd., $191,667$289,333 in consulting compensation.compensation, including bonuses. Dr. Friesen is also eligible for an annual bonus, if certain objectives of the Corporation are met, as determined by the Board of Directors.

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Moray Merchant serves the Corporation as Vice President, Market and Business Development and received a salary of $158,333$176,250 payable in equal semi-monthly instalments in fiscal 2006.2007.

Dawson Reimer serves the Corporation as Vice President, Operations and received a salary of $84,167$98,333 payable in equal semi-monthly instalments in fiscal 2006.2007.

Derek G. Reimer serves the Corporation as Chief Financial Officer and Secretary and received a salary of of $108,333$128,333 payable in equal semi-monthly installments in fiscal 2006.2007.

During the year ended May 31, 2006,2007, the Corporation paid directors a total of Nil (Year ended May 31, 2006: Nil; Year ended May 31, 2005: Nil; Year ended May 31, 2004: Nil; Year ended May 31, 2003: Nil; Year ended May 31, 2002: Nil) for consulting fees.

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

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

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C. Board Practices

The Board of Directors presently consists of five directors. Three directors who were elected at the Corporation’s annual and specialgeneral meeting of the shareholders held on October 25, 2005.11, 2006. Each director holds office until the next annual general meeting of the Corporation or until his successor is elected or appointed, unless his office is earlier vacated in accordance with the Articles of the Corporation, or with the provisions of theCanada Business Corporations Act. Dr. Albert D. Friesen has served as a director of the Corporation since September 1997. Dr. Arnold Naimark has served as a director of the Corporation since March 2000, Dr. William A. Cochrane hashad served as a director of the Corporation since October 2000 and resigned as of June 28, 2006. Gerald McDole has served as a director of the Corporation since January 2004. On June 29, 2005, James G. Umlah resignedPeter Quick has served as a memberdirector of its board of directors due to increasing business commitments. Peter Quick was appointed onthe Corporation since November 29, 2005 and2005. Kishore Kapoor was appointed as a director of the Corporation on June 28, 2006, subject to regulatory approval.2006.

Audit and Finance Committee

Pursuant to Section 171 of theCanada Business Corporations Act (the “Act”), the Corporation is required to have an Audit Committee. As at the date hereof, the members of the Audit and Finance Committee is comprised of four independent directors: Kishore Kapoor (Chair), Dr. Arnold Naimark, Gerald McDole and Peter Quick. The relevant experience of each member is described above. (See “Item 6. Directors, Senior Management and Employees”) Section 171(1) of the Act requires the directors of a reporting corporation to elect from among their number a committee composed of not fewer than three directors, of whom a majority must not be officers or employees of the corporation or an affiliate of the corporation. Section 171(3) of the Act provides that, before financial statements are approved by the directors, they must be submitted to the audit committee for review. Section 171(4) of the Act provides that the auditor must be given notice of, and has the right to appear before and to be heard at, every meeting of the audit committee, and must appear before the audit committee when requested to do so by the committee. Finally, section 171(5) of the Act provides that on the request of the auditor, the audit committee must convene a meeting of the audit committee to consider any matters the auditor believes should be brought to the attention of the directors or members.

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

The charter of the Audit and Finance Committee is reproduced below and can be found on ourthe Corporation’s website atwww.medicure.com.

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AUDIT AND FINANCE COMMITTEE CHARTER

GENERAL FUNCTIONS, AUTHORITY, AND ROLE

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

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

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

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

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

MEMBERSHIP

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

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

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

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

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

RESPONSIBILITIES

The responsibilities of the Audit and Finance Committee shall be as follows:

Frequency of Meetings

Meet quarterly or more often as may be deemed necessary or appropriate in its judgment, either in person or telephonically.

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

Reporting Responsibilities

Provide to the Board of Directors proper Committee minutes.

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

Charter Evaluation

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

Whistleblower Mechanism

Adopt and review annually a procedure through which employees and others can anonymously inform the Audit and Finance Committee regarding any concerns about the Corporation's accounting, internal accounting controls or auditing matters. The procedure shall include responding to and the retention of, any such complaints.

Legal Responsibilities

Perform such functions as may be assigned by law, by the Corporation's certificate of incorporation, memorandum, articles or similar documents, or by the Board of Directors.

INDEPENDENT AUDITOR

Nominations

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

Compensation and Evaluation

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

Approval in Advance of Related Party Transactions

Pre-approval of all “related party transactions,” which are transactions or loans between the Corporation and a related party involving goods, services, or tangible or intangible assets that are (1) material to the Corporation or the related party, or (2) unusual in their nature or conditions. A related party includes an affiliate, major shareholder, officer, other key management personnel or director of the Corporation, a company controlled by any of those parties or a family member of any of those parties.

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Engagement Procedures for Audit and Non-audit Services

Approve in advance all audit services to be provided by the independent auditor. Establish policies and procedures that establish a requirement for approval in advance of the engagement of the independent auditor to provide permitted non-audit services and to prohibit the engagement of the independent auditor for any activities or services not permitted by any of the Canadian provincial securities commissions, the SEC or any securities exchange on which the Corporation's shares are traded including any of the following ten types of non-audit services:

Bookkeeping or other services related to accounting records or financial statements of the Corporation;

Financial information systems design and implementation consulting services;

Appraisal or valuation services, fairness opinions, or contributions-in-kind reports;

Actuarial services;

Internal audit outsourcing services;

Any management or human resources function;

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Broker, dealer, investment advisor, or investment banking services;

Legal services;

Expert services related to the auditing service;

and Any other service the Board of Directors determines is not permitted.

Hiring Practices

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

Independence Test

Take reasonable steps to confirm the independence of the independent auditor, which shall annually include:

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

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

As necessary, taking, or recommending that the Board of Directors take, appropriate action to oversee the independence of the independent auditor and evaluate whether it is appropriate to rotate the independent auditor on a regular basis.

Audit and Finance Committee Meetings

Notify the independent auditor of every Audit and Finance Committee meeting and permit the independent auditor to appear and speak at those meetings.

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At the request of the independent auditor, convene a meeting of the Audit and Finance Committee to consider matters the auditor believes should be brought to the attention of the directors or shareholders.

Keep minutes of its meetings and report to the Board for approval of any actions taken or recommendations made.

Restrictions

Confirm with management and the independent auditor that no restrictions are placed on the scope of the auditors' review and examination of the Corporation's accounts.

OTHER PROFESSIONAL CONSULTING SERVICES

Engagement Review

As necessary, consider with management the rationale and selection criteria for engaging professional consulting services firms.

Ultimate authority and responsibility to select, evaluate and approve professional consulting services engagements.

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AUDIT AND REVIEW PROCESS AND RESULTS

Scope

Consider, in consultation with the independent auditor, the audit scope, staffing and planning of the independent auditor.

Review Process and Results

Consider and review with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61, as the same may be modified or supplemented from time to time.

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

The Corporation's audited and unaudited financial statements and related notes;

The Corporation's MD&A and news releases related to financial results;

The independent auditor's audit of the financial statements and its report thereon;

Any significant changes required in the independent auditor's audit plan;

The appropriateness of the presentation of any non-GAAP related financial information;

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

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

Review the management letter delivered by the independent auditor in connection with the audit.

Following such review and discussion, if so determined by the Committee, recommend to the Board that the annual financial statements be included in the Corporation's annual report.

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

Review and discuss with management and the independent auditor the adequacy of the Corporation's internal accounting and financial controls that management and the Board of Directors have established and the effectiveness of those systems, and inquire of management and the independent auditor about significant financial risks or exposures and the steps management has taken to minimize such risks to the Corporation.

Meet separately with the independent auditor and management, as necessary or appropriate, to discuss any matters that the Audit and Finance Committee or any of these groups believe should be discussed privately with the Audit and Finance Committee.

Review and discuss with management and the independent auditor the accounting policies which may be viewed as critical, including all alternative treatments for financial information within generally accepted accounting principles that have been discussed with management, and review and discuss any significant changes in the accounting policies of the Corporation and industry accounting and regulatory financial reporting proposals that may have a significant impact on the Corporation's financial reports.

Review with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures, if any, on the Corporation's financial statements.

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Review with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which raise material issues regarding the Corporation's financial statements or accounting policies.

Review with the Corporation's General Counsel legal matters that may have a material impact on the financial statements, the Corporation's financial compliance policies and any material reports or inquiries received from regulators or governmental agencies related to financial matters.

SECURITIES REGULATORY FILINGS

Review filings with the Canadian provincial securities commissions and the SEC and other published documents containing the Corporation's financial statements.

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

RISK ASSESSMENT

Meet periodically with management to review the Corporation's major financial risk exposures and the steps management has taken to monitor and control such exposures.

Assess risk areas and policies to manage risk including, without limitation, environmental risk, insurance coverage and other areas as determined by the Board of Directors from time to time.

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

ADOPTION OF AUDIT AND FINANCE COMMITTEE CHARTER

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

53Executive Compensation, Nominating and Corporate Governance Committee

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

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

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

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Committee is responsible for reviewing and recommending changes to the compensation of directors as necessary.

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

D. Employees

In addition to the individuals disclosed in Section A. Directors and Senior Management of this item, the Corporation has 36 employees, of which 26 employees are dedicated to the Corporation’s research and development activites. In addition, CanAm and CDRI have a combined staff of 3923 research scientists, technicians and staff dedicated solely to the Corporation’s research and development activities.

E. Share Ownership

With respect to the persons referred to above in Section B.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, 2006.2007.

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Incentive Stock Options

The following table discloses the stock options beneficially held by the aforementioned persons, as of May 31, 2006.2007. The stock options are for shares of Common Stock of the Corporation.

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

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

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

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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of May 31, 2006,2007, the following table sets forth the beneficial ownership of the Corporation's common shares by each person known by the Corporation to own beneficially more than 5% of the issued and outstanding common shares of the Corporation. Information as to shares beneficially owned, directly or indirectly, by each nominee or over which each nominee exercises control or direction, not being within the knowledge of the Corporation, has been furnished by the respective nominees individually. CDS & Company, Toronto, Ontario is a brokerage clearing house that owns 74,214,997 (77.3%74,557,872 (64.1%) of common shares of the Corporation on behalf of beneficial owners. The Corporation does not know the majority of the ultimate beneficial owners of these common shares.

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

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As of July 19, 2006,11, 2007, there were 1,1707,325 shareholders of record worldwide. As of this date there were 1,444 shareholders of record in the United States holding a total of 14,964,84036,853,067 common shares of the Corporation.

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

As of May 31, 2006,2007, the total number of issued and outstanding common shares of the Corporation beneficially owned by the directors and executive officers of the Corporation as a group was 7,901,3347,850,334 (or 8.23%6.75% of common shares).

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

B. Related Party Transactions

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

On October 1, 2001, a two-year consulting contract was entered into with A.D. Friesen Enterprises Ltd., a corporation owned by Dr. Friesen. This agreement, which was subsequently amended on February 1, 2002, paid A.D. Friesen Enterprises Ltd. an annual salary of $150,000 payable in monthly installments. On October 1, 2003 a new two year consulting contract was entered into with A.D. Friesen Enterprises Ltd. for an annual salary of $175,000. On October 1, 2005, a one-year consulting contract was entered into with A.D. Friesen Enterprises Ltd. for an annual salary of $200,000. On October 1, 2006, a two-year consulting contract was entered into with A.D. Friesen Enterprises Ltd. for an annual salary of $250,000. This salary is reviewed annually by the Board. Dr. Friesen is also eligible for grants of incentive stock options and bonuses, if certain objectives between the Board and Dr. Friesen are met, as determined by the Board. During the year ended May 31, 2007, the Corporation paid a total of $289,333 to A.D. Friesen Enterprises Ltd. During the year ended May 31, 2006, the Corporation paid a total of $191,667 to A.D. Friesen Enterprises Ltd. DuringFor the year ended May 31, 2005, the Corporation paid a total of $175,000 to A.D. Friesen Enterprises Ltd. For the year ended May 31, 2004, the Corporation paid a total of $166,667 to A.D. Friesen Enterprises Ltd.

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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 2006, $25,7632007, $24,760 was paid in excess of minimum rental payments for overhead costs. The agreement is for a five year term, expiring on February 28, 2007.

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

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C. Interests of Experts and Counsel

Not applicable

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements or Other Financial Information

Financial Statements

AttachedIncluded in Item 17 hereto are the consolidated financial statements of the Corporation for the years ended May 31, 2007, 2006 2005 and 2004.2005. The consolidated financial statements including related notes are accompanied by the report of ourthe Corporation’s independent registered public accounting firm, KPMG LLP.

Legal Proceedings

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

Dividend Policy

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

B. Significant Changes

Since May 31, 2006, the date of the most recent financial statements, no significant changes have occurred with the exception of the following:

InOn August 2006, the Corporation acquired the rights to Aggrastat® Injection (tirofiban hydrochloride) in the United States and its territories (Puerto Rico, Virgin Islands, and Guam) for total cash consideration of US$19 million plus inventory from MGI Pharma Inc. Aggrastat®, a glycoprotein (GP) IIb/IIIa inhibitor, is used for the treatment of acute coronary syndrome (ACS) including unstable angina and non-Q-wave myocardial infarction. To finance the acquisition,20, 2007, the Corporation entered into Credit Facility totaling

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US$15.84 milliona securities purchase agreement with a syndicatean unrelated investor to raise gross proceeds of lenders, led by Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., and including Silicon Valley Bank and Oxford Finance Corporation. The termUS$15 million. Under the terms of the Credit Facilityagreement, the Corporation intends to issue approximately 13.04 million common shares together with warrants to purchase approximately 3.9 million additional common shares (the common shares and warrants comprise the Units), at a price of US$1.15 per Unit. The warrants have a five-year term and will have an exercise price of US$1.50 each. The agreement is over 42 months, with interest dueexpected to close in September 2007, and payable at commencementis subject to standard closing conditions including regulatory approval. In a separate transaction, the Corporation has signed a non-binding term sheet dated August 20, 2007 to monetize a percentage of the loan payableCorporation’s current and potential future commercial revenues with Manchester Securities Corp., an affiliate of Elliott Associates, L.P. (Elliott) for a US$25 million up-front cash payment. Under the proposed terms, Elliott will receive an annual return that will be calculated as a percentage of AGGRASTAT® net sales subject to an escalating minimum annual return, until 2019. The minimum annual returns start at US$2.5 million in 2007 and escalate to US$6.9 million in 2016. Elliott will also receive the option to convert its rights based on AGGRASTAT® to MC-1 within six months after MC-1’s commercialization, if achieved. The exact percentage of AGGRASTAT® or MC-1 revenue that Elliott will receive is tiered and declines as certain revenue levels are achieved. Upon conversion to MC-1, Elliott is entitled to a blended return of approximately 7 percent on the first day of the month at one-month LIBOR plus 6.5US$75 million in MC-1 revenues and 3 percent per annum. Commencing in June 2007, principal is payable monthly on a straight-line amortization schedule over 33 consecutive monthly installments. The Credit Facility isthereafter. Elliot’s participation rights shall be secured by a first security interest in all existing and after-acquired assetsthe intellectual property rights of the Corporation in AGGRASTAT® and MC-1 (subject to certain specified MC-1 lien release terms), the proceeds derived from the commercialization of AGGRASTAT® and MC-1 (including without limitation any royalties receivable derived from any licensing of AGGRASTAT® and MC-1 to any third party and accounts receivable from the sale of AGGRASTAT® and MC-1 products), and all intellectual, proprietary and other rights (including without limitation contractual promotion and licensing rights and benefits) associated with, or derived from, AGGRASTAT® and MC-1. The proposed terms also include an option for the Corporation to terminate the agreement for a payment of US $70 million to Elliott if the

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

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

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

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

ITEM 9. THE OFFERING AND LISTING

A. Offer and Listing Details

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

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