ProMetic Life Sciences Inc. Annual Report 2010

FY2010 Annual Report · ProMetic Life Sciences Inc.

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Life Sciences Inc.
2010 Annual Report

Who We are

our name defines who we are: ProMetic is derived from the words Protein and
Mimetic. at ProMetic we design small chemical molecules that mimic unique and
specific interactions between proteins. These proprietary chemical structures can
be used in a myriad of commercial applications when incorporated into filters.
ProMetic creates affinity filters that bind and recover high levels of the valuable
therapeutic proteins. These same technologies allow us to create filters that bind
and remove high concentrations of pathogens. These proprietary chemical
structures also form the basis for our drug discovery platform.

WhaT We do

ProMetic’s technologies are used to remove pathogens from blood, and extract
and recover valuable proteins from plasma, as well as providing purification
technologies to the biopharmaceutical industry. ProMetic also develops novel,
orally active, first-in-class therapeutics for unmet medical needs in the fields of
hematology, oncology, nephrology, fibrosis and autoimmune diseases.

Overview
Significant events .......................................................................................... 1
Value drivers .................................................................................................. 4
Message to Shareholders ............................................................................... 8
Selected Financial Information .................................................................... 10
Management Team ....................................................................................... 11
Md&a ............................................................................................................ 13

Financial Statements
Consolidated Financial Statements ...............................................................39
Consolidated Balance Sheets ........................................................................ 41
Consolidated Statement of operations and Comprehensive Loss .................42
Consolidated Statements of Contributed Surplus .........................................43
Consolidated Statement of accumulated other Comprehensive Loss ............43
Consolidates Statements of Cash Flows.........................................................44
Notes to Financial Statements ......................................................................45
Board of directors .........................................................................................77
Corporate Information ..................................................................................78

ProMetic Life Sciences Inc. ar 10 P.1

SIGNIFICANT
EVENTS

2010 AND SUBSEQUENT TO YEAR END

ProMetic entered into a collaboration agreement with
Abraxis BioScience, Inc. (“Abraxis”) to develop and commercialize
various applications deriving from ProMetic’s prion capture
technology platform.

ProMetic presented data on its orally-active PBI-1402 compound
at the 15th Congress of the European Hematology Association about
the management of side effects induced by chemotherapy and the
treatment of certain cancers such as lung and pancreatic cancers,
and certain forms of leukemia.

ProMetic finalized an equity investment of $3 Million US and
a five year loan of $10 Million US with Abraxis.

ProMetic’s project with HemCon Medical Technologies, Inc. to
develop a sterile, single-use antibody capture device for the
removal of isoagglutinin antibodies met its first development
milestone and moved into the second phase of development.

Novozymes and ProMetic entered into a strategic alliance
regarding proprietary albumin purification technology based upon
a synthetic-ligand affinity adsorbent developed by ProMetic’s
UK subsidiary, ProMetic BioSciences Ltd. The new synthetic-ligand
affinity adsorbent, AlbuPure®, will be co-marketed by
both companies.

ProMetic announced that it had completed the first milestone of
its strategic collaboration with the Wuhan Institute of Biological
Products, a subsidiary of China National Pharmaceutical Group Corp
(“Sinopharm”), China’s largest pharmaceutical company. WIBP’s
products will be manufactured under licence using ProMetic’s
proprietary protein technologies.

ProMetic signed terms of a strategic agreement for PBI-1402 and
PBI-4419 with Allist Pharmaceuticals, Inc. (“Allist”) of China, who
will fund the development costs required for the regulatory
approval in China for the two products.

ProMetic’s scientists discovered new and proprietary compounds
that regulate fibrosis via a novel mechanism of action. Fibrosis is
part of the inflammatory process that leads to a loss of functionality
in vital organs such as kidney, heart, liver and lungs in certain
chronic diseases that affects hundreds of millions of patients.

Subsequent to the balance sheet date, the Company announced
that it had reorganized the terms of its secured debt, moving
$4 million of debt repayments to July 2012, effectively reclassifying
it from short-term to long-term debt and removing a significant
short-term pressure on cash flow.

ProMetic’s new facility, located in Laval, Quebec’s biotech cluster,
will undertake the development and manufacturing of high-value
plasma-derived therapeutic biosimilars for ProMetic’s current and
future clients.

On March 31, 2011, the Company entered into an agreement with
Abraxis, a wholly owned subsidiary of Celgene Corporation
(“Celgene”) whereby the Company will assign certain intellectual
property rights regarding a protein technology to Celgene for a
specific field of use. As consideration for the assignment of
intellectual property rights, the $10 million US loan entered into
with Abraxis in February 2010 will be eliminated.

This annual report may contain forward-looking statements regarding
future financial and operating results. It also contains forward-looking
statements with regards to partnerships, joint ventures and agreements
and future opportunities based on these. There are also statements
related to the discovery and development of intellectual property, as well
as other statements about future expectations, goals and plans. We have
attempted to identify these statements by use of words such as “expect”,
“believe”, “anticipate”, “intend”, and other words that denote future
events. These forward-looking statements are subject to material risks
and uncertainties that could cause actual results to differ materially from
those in the forward-looking statements. These risks and uncertainties
include but are not limited to the Company’s ability to develop, and

successfully manufacture pharmaceutical products, and to obtain
contracts for its products and services and commercial acceptance of
advanced affinity separation technology. Additional information on risk
factors can be found in the Company’s Annual Information Form for the
year ended December 31, 2010. Shareholders are cautioned that these
statements are predictions and these actual events or results may differ
materially from those anticipated in these forward-looking statements.
Any forward-looking statements we may make as of the date hereof are
based on assumptions that we believe to be reasonable as of this date and
we undertake no obligation to update these statements as a result of
future events or for any other reason, unless required by applicable
securities laws and regulations.

ProMetic Life Sciences Inc. ar 10 P.2

WHY INVEST
IN PLI?

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Bioseparation

Prion Removal

Plasma Proteins

Therapeutics

risk

+++

++++

THE COMPANY OFFERS RISK/REWARD SEGMENTS THAT APPEAL TO vARIOUS INvESTOR PROFILES.

ProMetic Life Sciences Inc. ar 10 P.3

BECAUSE
WE ARE
DIFFERENT

•

Not all cash-burn: ProMetic has an established
revenue stream derived from multiple industry
leaders

ProMetic is moving towards eBITda breakeven,
without revenue from key value drivers

•

Value drivers are close to delivering material
revenues

any one of these value drivers can significantly
increase share price beyond current value

Technology with proven track-record

Solid management that has demonstrated that
it can steer through tough market conditions and
still build value

•

ProMetic is set-up for “multiple shots at the goal”

ProMetic Life Sciences Inc. ar 10 P.4

VALUE
DRIVER
1

BIOSEPARATION
[ProMetic BioSciences Ltd – United Kingdom (PBL)]

Core Technologies
Affinity adsorbents for the production and purification
of biopharmaceuticals

Achievements
•

Profitable since 2007 - Continued revenue growth

•

Proprietary adsorbents embedded in partners /
clients’ manufacturing process translating into
recurring revenue streams

>12 FDA / EMEA approved products

Expanding client base

Opportunities
•

>25 products under development

•

Several clients’ products are expected to receive
regulatory approval = catalyst for additional revenue growth

•

New strategic alliances

ProMetic Life Sciences Inc. ar 10 P.5

VALUE
DRIVER
2 PRION REDUCTION

[Pathogen Removal and Diagnostic Technologies Inc – USA (PRDT)]

Core Technologies
Prion capture technology to improve the safety profile
of blood products and blood-derived therapeutics

Achievements
® filter for the removal of prions
•
CE-marked P-Capt
from red blood cell concentrates commercialized
with MacoPharma SA

•

Independent studies performed by the UK government
validate the safety and efficacy of the P-Capt® filter

®,
Improved safety profile for Octapharma AG’s OctaplasLG
the only commercially available prion-reduced plasma for
transfusion and expansion for use in new product, UniplasLG®

Opportunities
•
Adoption of the P-Capt

® filter by European governments

•

Additional commercial applications at industrial scale
with existing and future clients

ProMetic Life Sciences Inc. ar 10 P.6

VALUE
DRIVER
3 PLASMA PROTEINS

[ProMetic BioTherapeutics, Inc. – USA (PBT)]

Core Technologies
Plasma Protein Purification System (“PPPSTM”) for the recovery
of valuable plasma proteins

ProMetic’s prion capture technology platform incorporated
into the plasma protein manufacturing process

Achievements
•

ProMetic’s new facility in Laval, Quebec, will undertake the development and
manufacturing of high-value plasma-derived therapeutic biosimilars for ProMetic’s
current and future clients

Opportunities
•

Access to lucrative plasma-derived therapeutics market

•

New agreements adding to revenue stream

Manufacturing of plasma-derived therapeutics and value added services including
technical training of licensees’ staff, technology transfers, and engineering services
for licensees’ facility

ProMetic Life Sciences Inc. ar 10 P.7

VALUE
DRIVER
4 THERAPEUTICS

[ProMetic BioSciences Inc. – Canada (PBI)]

Core Technologies
In-house development of novel, orally-active therapeutics

•

First-in-class, novel mechanism of action with validated receptors

very high safety profile

Strong intellectual property position / second and third generation analogues

In vivo

proof of concepts completed

Target unmet medical needs

Achievements
•

Discovery of novel mechanism to reduce fibrosis that leads to kidney failure

•

Effects of drug candidates confirmed in multiple organs (kidneys, heart, lungs, liver)

Partnering with Allist to advance drug candidates toward clinical programs, and to
develop and commercialize compounds in China

Opportunities
•

Partnering of therapeutics to further advance the clinical programs of drug candidates,
driving value and contributing to global revenue

•

Rich pipeline of proprietary drug candidates targeting unmet medical needs –
inflammation / fibrosis, autoimmune diseases, oncology and hematology

ProMetic Life Sciences Inc. ar 10 P.8

MESSAGE
TO SHAREHOLERS

2010

We are step by step achieving
our objectives.

We believe that ProMetic’s
novel therapeutics and
proprietary technologies offer
solutions to many challenging
un-met medical needs.

ProMetic achieved a pivotal
milestone for its protein
technologies business with its
latest venture: a facility to
manufacture plasma proteins.

The financial environment continued to be very difficult for the
biotechnology industry in 2010. ProMetic faced many challenges,
such as regulatory delays for octapharma, one of our key
customers, which translated into a deferral of their orders originally
anticipated for the second half of 2010, into 2011. despite the existing
financial conditions, ProMetic successfully procured operating
capital at favourable terms that resulted in minimal dilution for
our shareholders.

2011 should prove to be a pivotal year for ProMetic. In 2010, we
continued to focus on creating multiple revenue streams through
the continued development and partnering activities for our novel
therapeutics and the added value activities in our protein
technologies unit. We were successful in keeping the Company’s
growth opportunities alive and we are confident that these
opportunities are ready to deliver and drive share price.

over the last year ProMetic was successful in maintaining and
advancing its key drivers. one example of this is the strategic
agreement that was finalized the last quarter of 2010 with allist
for two of ProMetic’s lead therapeutics. It is already known that
ProMetic’s PBI-family of therapeutic compounds target high-value
indications in the fields of fibrosis, oncology, anemia and
auto-immune diseases but this agreement is further confirmation
of their importance as future value-drivers for the Company.

ProMetic’s latest venture, a manufacturing facility for valuable
protein therapeutics located in Laval, Quebec’s biotech cluster,
should positively impact the Company’s revenue streams over the
course of the next few years. This undertaking has allowed the
Company to actively pursue new opportunities for the in-house
development of high-value therapeutics for our existing and future
clients. ProMetic will have access, through this new subsidiary, to
the lucrative plasma-derived therapeutics market.

In addition, this facility is being funded via third-party investments.
This, combined to very favourable leasing terms, removes a
significant capital expenditure hurdle for ProMetic, allowing it
to deliver on its objectives in a very cost-effective and
non-dilutive manner.

ProMetic Life Sciences Inc. ar 10 P.9

recent achievements
further secure the Company’s
growth opportunities.

We look forward to updating
you on the Company’s activities
during the year as we work to
achieve these important milestones.

The Company announced early on in 2011 that it had postponed
repayment of $4 million in secured debt to July 2012.

This was followed by a recent announcement that the Company
had entered into an agreement with abraxis, a wholly owned
subsidiary of Celgene, whereby the Company will assign certain
intellectual property rights regarding a protein technology
to Celgene, for a specific field of use. as consideration for the
assignment of intellectual property rights, the $10 million US
loan entered into with abraxis in February 2010, will be forgiven.

This demonstrates the Company’s commitment to minimize, as far,
as possible, the dilutive effect of financing on existing investors.

In closing, we would like to thank all of our employees and
collaborators for their continued hard work, the Board of directors
for their constant guidance, as well as our shareholders and
stakeholders for their ongoing support.

Pierre Laurin
President and Chief executive officer

ProMetic Life Sciences Inc. ar 10 P.10

SELECTED
FINANCIAL
INFORMATION

Revenues
(In thousands of Canadian dollars)

15,000

12,000

9,000

6,000

3,000

2006

2007

2008

2009

2010

EBITDA
(In thousands of Canadian dollars)

-5,000

-10,000

-15,000

-20,000

-25,000

2006

2007

2008

2009

2010

Common shares outstanding during the year
(In thousands)

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

2006

2007

2008

2009

2010

•

Until 2010, revenues showed
upward trend.

2010 revenues lower than forecast
due to regulatory delays at octapharma,
and due to delays caused by the
abraxis / Celgene merger.

•

delayed revenue will be pushed into 2011.

•

Lower than expected revenues in 2010
naturally impacted on eBITda position.

however trend shows reduction in losses
since 2006.

Cost-containment program functioning
successfully.

Technology value is building despite cuts
in r&d spend.

Since 2008, the Company has honoured its
pledge to minimise dilution, by raising funds
through debt rather than equity.

Since 2008, earlier venture debt has been
replaced with secured loans from patient
shareholders.

Subsequent to the balance sheet date
$10M US of debt has been eliminated in a
commercial transaction and a further $4M
of debt has been restructured, extending
payment into 2012, reducing short-term
cash pressure.

ProMetic Life Sciences Inc. ar 10 P.11

MANAGEMENT
TEAM

From Left to right

Pierre Laurin

President and
Chief executive officer
ProMetic Life Sciences Inc.

Steven Burton

Tom Chen

Chief executive officer
ProMetic BioSciences Ltd

Vice-President, Product and
asia/Pacific development
ProMetic BioTherapeutics, Inc.

Timothy hayes

Vice-President, Product
development, Quality and
regulatory affairs
ProMetic BioTherapeutics, Inc.

Christopher Penney

Bruce Pritchard

Patrick Sartore

Chief Scientific officer,
Therapeutics
ProMetic BioSciences Inc.

Chief Financial officer
ProMetic Life Sciences Inc.

Senior Legal Counsel, IP and
Corporate Secretary
ProMetic Life Sciences Inc.

ProMetic Life Sciences Inc. ar 10 P.12

ProMetic Life Sciences Inc. ar 10 P.13

This removes a significant near-term cash pressure for the Company,
but these additional sources of funds are not sufficient for the
Company to discharge its liabilities for the next 12 months. Continued
effort is placed by management on expanding the customer base for
existing marketed products and the Company is continuing to seek
additional financing alternatives, including non-dilutive financing,
collaboration and licensing arrangements, equity and debt financing.
The Company’s ability to increase its revenues or raise additional
capital to generate sufficient cash flows to continue as a going
concern is subject to significant doubt and significant risks all of
which are beyond management’s control. There can be no assurance
that such financing will materialize on a timely basis or obtained
on favourable terms. The consolidated financial statements do not
reflect the adjustments that might be necessary to the carrying
amount of reported assets, liabilities and revenues and expenses and
the balance sheet classification used if the Company were unable
to continue operations in accordance with this assumption. Such
adjustments could be material.

More financial information, including the Company’s annual
Information Form, is available on Sedar (www.sedar.com).

MD&A

The Management’s discussion and analysis of operating results
and Financial Position, prepared March 31, 2011, aims at helping
the reader to better understand the business of the Company and
the key elements of its financial results. It explains the trends of
the financial situation and the operating results of the Company
for the 2010 financial year compared to the 2009 operating results.

This Management’s discussion and analysis was prepared in
accordance with regulation 51-102 respecting Continuous
disclosure obligations and should be read in conjunction with
the 2010 consolidated financial statements and the accompanying
notes included in the annual report.

The use of these principles may not be appropriate because as at
december 31, 2010, there is significant doubt that the Company will
be able to continue as a going concern without raising additional
financial resources. Since inception, the Company has incurred
significant losses and has a working capital deficiency of $5.6 million
and a shareholders’ deficiency of $13.5 million as at december 31,
2010. The Company’s committed cash obligations and expected
level of expenditures for the year ending december 31, 2011, exceed
its committed sources of funds. To date, the Company has financed
its activities through bank loans, government financial support,
investment tax credits and the issuance of debt and equity.

additionally, on March 31, 2011, the Company concluded a
transaction with Celgene Corporation (“Celgene”) resulting in the
forgiveness of the $10 million US loan entered into with abraxis
BioScience, Inc. (“abraxis”) in February 2010, subject to meeting
certain administrative milestones (see Note 29 in the Consolidated
Financial Statements).

ProMetic Life Sciences Inc. ar 10 P.14

ForWard-LookINg
STaTeMeNTS

The information contained in Management’s discussion and analysis
of operating results and Financial Position contains statements
regarding future financial and operating results. It also contains
forward-looking statements with regards to partnerships, joint
ventures and agreements and future opportunities based on these.
There are also statements related to the discovery and development
of intellectual property, as well as other statements about future
expectations, goals and plans. We have attempted to identify these
statements by use of words such as “expect”, “believe”, “anticipate”,
“intend”, and other words that denote future events. These forward-
looking statements are subject to material risks and uncertainties
that could cause actual results to differ materially from those in
the forward-looking statements. These risks and uncertainties
include but are not limited to the Company’s ability to develop, and
successfully manufacture pharmaceutical products, and to obtain
contracts for its products and services and commercial acceptance
of advanced affinity separation technology. additional information on
risk factors can be found in the Company’s annual Information Form
for the year ended december 31, 2010. Shareholders are cautioned
that these statements are predictions and these actual events or
results may differ materially from those anticipated in these forward-
looking statements. any forward-looking statements we may make
as of the date hereof are based on assumptions that we believe to be
reasonable as of this date and we undertake no obligation to update
these statements as a result of future events or for any other reason,
unless required by applicable securities laws and regulations.

2010 IN SUMMARY
2010 can best be described as a year of building value and
opportunity, despite the fact that revenues did not reach anticipated
levels. The financial results for the first half of the year were in line
with expectations, however delays in programs caused by both
the regulatory process and strategic deals for two of our major
customers, octapharma ag (“octapharma”) and abraxis BioScience,
Inc. (“abraxis”), caused second half revenues to be disappointing.
as always, management responded by slowing expenditure as much
as possible, and by funding the shortfall using the least-dilutive
means available.

octapharma remains positive regarding the ultimate regulatory
approval of its octaplasLg® product by the Mhra and its ultimate
approval in additional key european Union countries. We therefore
expect orders for resin to recommence in 2011. Furthermore,
octapharma also announced recently that it is seeking regulatory
approval for a prion-depleted version of its UniplasLg® product,
which will also rely on ProMetic’s prion reduction technology.

during the year, abraxis, one of our strategic partners, announced
its acquisition by Celgene. The transaction, while exciting for
abraxis, caused a degree of hiatus in the development contracts
being undertaken for abraxis by ProMetic. The existing programs

continued, but at a slower pace than anticipated, and the new
programs which were anticipated to start toward the latter part
of 2010 were put on hold. These delays were related solely to the
transaction. ProMetic is confident that these programs will begin to
move forward at the anticipated pace during 2011 and beyond. We
draw attention to the Post-Balance Sheet section of this report which
discusses the significant changes to the loan agreement between
ProMetic and abraxis.

More positively, and referring to the building of value and
opportunity, during 2010, ProMetic’s Management was involved in
a significant amount of business development activity relating to
the Therapeutics business. This activity resulted in the first deal
involving PBI-1402 being announced just after the end of third quarter
of 2010. This transaction saw ProMetic sign the terms of a strategic
agreement with allist Pharmaceuticals, Inc. (“allist”) of China to
develop and commercialize ProMetic’s drug candidates PBI-1402 and
PBI-4419 in China. Specifically, the deal requires allist to fund and
accelerate the development programs for PBI-1402 and PBI-4419,
in return for exclusive commercial rights for the Chinese market.
ProMetic retains rights to data for other markets, representing
savings of over $10 million US in future development costs. In relation
to the clinical programs, PBI-1402 clinical development will be
further advanced for chemotherapy-induced anemia and cancer
related anemia indications and PBI-4419 will be developed for fibrotic
disease indications. The agreement includes $59 million US in future
potential milestone payments to ProMetic as well as royalties on
sales in China.

This deal is important for ProMetic for a number of reasons:

•

It validates earlier claims about the efficacy of the technology and
its commercial impact;

It demonstrates competition in the market for the technology
to other parties involved in due diligence, providing an impetus for
further transactions; and

It provides non-dilutive funding which will drive the technology
to the next value inflection point.

Subsequent to december 31, 2010, the results of other negotiations
during 2010 became apparent, with the announcement that ProMetic
had secured external funding for NewCo, a new subsidiary which
will, through a pilot plant leased on very favourable terms, allow the
business to capitalize on the development work undertaken by the
U.S. subsidiary, ProMetic BioTherapeutics, Inc. (PBT). This plant will
enable ProMetic and its licensees to manufacture plasma-derived
therapeutics at scale and to commercialize products for the multi-
million dollar plasma-derived therapeutics market.

ProMetic Life Sciences Inc. ar 10 P.15

operating costs for the year decreased to $20.8 million from
$21.8 million in the previous year. This decrease was attributable
principally to reduced amortization costs and impairment costs.
In general, all other operating costs were in line with those incurred
in 2009.

The debt on the balance sheet consists of loans from shareholders
and strategic business partners. Subsequent to december 31, 2010,
it was announced that the secured lenders had renegotiated their
loans with the Company, resulting in $4 million of debt being moved
from short-term to long-term creditors and relieving a significant
short-term pressure on cash flow.

on March 31, 2011, the Company entered into an agreement with
abraxis, a wholly owned subsidiary of Celgene, whereby the
Company will assign certain intellectual property rights regarding
a protein technology to Celgene for a specific field of use. as
consideration for the assignment of intellectual property rights,
the $10 million US loan entered into with abraxis in February 2010
will be forgiven. The agreement requires the Company to comply
with certain administrative milestones by February 9, 2012. Failure
to meet these milestones would result in a portion of the above
loan to be re-instated in the range of $6 million US to $8 million US.
The Company considers it unlikely that it will be unable to meet the
required milestones.

during the last week of March 2011, the Company received funds
in lieu of a series of equity investments in the Company by way of
private placements totalling $800,000. The aggregate number of
common shares to be issued by the Company in relation thereto
remains to be confirmed, as the Company awaits relevant common
share pricing (VWaP) confirmation from the Toronto Stock exchange.

The P-Capt® filter, although still not formally adopted by the Uk
government, increased its profile within the parliament, through
the efforts of ProMetic and MacoPharma Sa, who co-developed
the P-Capt® filter with ProMetic. Both companies have ensured
that newly appointed Ministers in the United kingdom and other
government officials have all relevant information in order that they
can make informed decisions. The P-Capt® prion filter, commercially
available since 2006, is the only proven approach to reducing the risk
of vCJd transmission from red blood cell concentrate.

analyzing the business segment performance for the year highlights
the reduced expenditure associated with the Therapeutics division.
Protein Technologies suffered from reduced gross profit contribution
due to lower year-on-year revenues. Furthermore, during 2009,

Protein Technologies benefited from an extra-ordinary gain of
$1.3 million from the acquisition of PrdT from the american red
Cross, which was not repeated during 2010. In addition, corporate
losses increased due to a number of factors including lower exchange
rate gains during 2010, as well as additional compliance costs
associated with work on conversion of future financial reporting to
International Financial reporting Standards.

analysing this table shows an increase in the annual loss of
$1.9 million from the previous year. of this, $1.3 million can be
explained by the PrdT gain in 2009 not being repeated in 2010
and $0.2 million associated with lower exchange gains in 2010.
When taken alongside the fact that revenues are also down
by $2.2 million in 2010, it can be seen that the ongoing expense
reduction programs remain effective.

2010 SIGNIFICANT EVENTS
Protein Technologies
•

In January 2010, ProMetic entered into a collaboration agreement
with abraxis BioScience, Inc. (“abraxis”) to develop and
commercialize various applications deriving from ProMetic’s prion
capture technology platform. This is a new strategic agreement in
addition to the joint-development of biopharmaceuticals from our
manufacturing platform technology.

•

In February 2010, ProMetic announced that the project with
hemCon Medical Technologies, Inc. to develop a sterile, single-use
antibody capture device for the removal of isoagglutinin
antibodies initiated in March 2009 met its first development
milestone and moved into the second phase of development.

In the same month, Novozymes and ProMetic entered into a
strategic alliance regarding proprietary albumin purification
technology based upon a synthetic-ligand affinity adsorbent
developed by ProMetic’s Uk subsidiary, ProMetic BioSciences Ltd.
The new synthetic-ligand affinity adsorbent, albuPure®, will be
co-marketed by both companies.

In March 2010, ProMetic announced that it had completed the first
milestone of its strategic collaboration with the Wuhan Institute
of Biological Products (“WIBP”), a subsidiary of China National
Pharmaceutical group Corp (“Sinopharm”), China’s largest
pharmaceutical company. WIBP’s products will be manufactured
under licence using ProMetic’s proprietary protein technologies.
These products will then move into clinical trials to demonstrate
their bioequivalence to commercialized products in order to
obtain required regulatory approval from the Chinese State Food
and drug administration (“Chinese SFda”).

Profit (Loss)*

Therapeutics
Protein Technologies
Corporate

Total Loss

* in thousands of dollars

2010

(1,920)
(3,033)
(6,330)

(11,283)

2009

Change %

2009
(as adjusted)

Change %
(as adjusted)

(2,727)
(872)
(5,729)

(9,328)

29.59%
(3377.01%)
(10.44%)

(2,727)
(1,387)
(5,929)

29.59%
(118.09%)
(6.71%)

(20.84%)

(10,043)

(12.24%)

ProMetic Life Sciences Inc. ar 10 P.16

•

during the first half of 2010, ProMetic completed delivery of the
largest order for a single Mimetic Ligand™ product. The total order
was worth approximately $8.9 million and approximately two-third
was recognized in 2010.

The WIBP project is progressing according to schedule. after the
successful completion of the initial technology transfer stage
earlier this year, ProMetic’s scientists have initiated the second
technology transfer stage and are moving ahead with the retrofit
of WIBP’s gMP pilot facility. ProMetic’s proprietary Plasma Protein
Purification System (“PPPS™”) will be integrated in WIBP’s facility
as part of this retrofit.

Initiation of the scale-up activities for the manufacturing of the
first gMP products for the Chinese market is expected in second
quarter of 2011. WIBP will then pursue regulatory approval from
the SFda for these products manufactured under licence using
ProMetic’s proprietary protein technologies, by demonstrating
their bioequivalence to commercialized products.

Therapeutics
•

ProMetic presented data on its orally-active PBI-1402 compound at
the 15th Congress of the european hematology association held in
Barcelona, Spain, June 9 – 13, 2010. Clinical and preclinical results
were presented about the management of side effects induced by
chemotherapy and the treatment of certain cancers such as lung
and pancreatic cancers, and certain forms of leukemia.

•

In addition, an oral presentation was made regarding the positive
clinical data generated in patients that developed anemia as a
result of their chemotherapy. The clinical trial demonstrated a
reduction in the need for blood transfusions in chemotherapy-
induced anemic patients. Furthermore, the trial data indicated
that the level of hemoglobin and red blood cells (“rBC”) never
exceeded recommended levels even when the drug was used at
high dose. This, combined with anti-cancer activity demonstrated
in numerous cancer models, supports the potential use of
PBI-1402 to address unmet medical needs in oncology.

The PBI-1402 development program also led to the discovery of
new and proprietary chemical compounds (“NCes”) that regulate
fibrosis via a novel mechanism of action. Fibrosis is part of the
inflammatory process that leads to a loss of functionality in vital
organs such as kidney, heart, liver and lungs in certain chronic
diseases that affects hundreds of millions of patients. These first-
in-class NCes are orally active, and have been confirmed to exhibit
strong anti-fibrotic activity in various in vivo models.

Further advances were also accomplished with the Company’s
portfolio of autoimmune disease drug candidates.

In october 2010, ProMetic signed the terms of a strategic
agreement for PBI-1402 and PBI-4419 with allist of China who will
fund the development costs required for the regulatory approval
in China for the two products. allist undertakes to perform
development activities according to standards meeting the Food
and drug administration’s (“Fda”) requirements, which will then
allow ProMetic to have full access to and use of data generated by
allist for markets outside China. This represents an investment by
allist in the programs well in excess of $10 million US.

•

allist will retain the rights for the Chinese market for PBI-1402 for
the chemotherapy-induced anemia and cancer related anemia
indications and for PBI-4419 for fibrotic diseases.

Corporate
•

In the first quarter of 2010, ProMetic finalized an equity investment
of $13 million US that includes a five year loan of $10 million US with
abraxis, bearing annual interest of 5%. reimbursement of the loan
is due in five annual instalments of $2 million US. abraxis has the
option to request that each annual instalment be converted into
ProMetic equity at future prevailing market price. Such conversion
may be subject to disinterested shareholder and TSX approvals.
The $3 million US equity investment was completed at $0.18 per
share to purchase 17,850,000 Common Shares of ProMetic.

Post-Balance Sheet
•

Subsequent to the balance sheet date the Company announced
that it had reorganized the terms of its secured debt, moving
$4 million of debt repayments to July 2012, effectively reclassifying
it from short-term to long-term debt and removing a significant
short-term pressure on cash flow.

•

Subsequent to the balance sheet date the Company announced
that it had established a new subsidiary, “NewCo”, which had
attracted seed investment of $1,5 million, representing a 10%
holding in NewCo, thus valuing the new subsidiary at $15 million.
NewCo will lease and operate a pilot manufacturing plant which
will provide ProMetic an opportunity to commercialize products
using its PPPSTM technology for the multi-million dollar plasma-
derived therapeutics market.

during the last week of March 2011, the Company received funds
in lieu of a series of equity investments in the Company by way of
private placements totalling $800,000. The aggregate number
of common shares to be issued by the Company in relation
thereto remains to be confirmed, as the Company awaits relevant
common share pricing (VWaP) confirmation from the Toronto
Stock exchange.

ProMetic Life Sciences Inc. ar 10 P.17

PRDT develops the prion capture technology platform that originated
from ProMetic’s collaboration with arC. PrdT’s technology forms
the basis of the revolutionary P-Capt® filter, a prion reduction device
developed with ProMetic’s commercialization partner MacoPharma
to increase the safety of red cell concentrate. P-Capt® has received
Ce mark approval in europe, and provides national blood agencies
with the means of significantly reducing the risk of vCJd transmission
through blood transfusion. This is particularly relevant since there is
no commercially available diagnostic test for detection of the blood-
borne form of the vCJd agent responsible for this fatal brain disease.
additionally, PrdT technology has been incorporated by octapharma
into its manufacturing process for octaplasLg® to further improve
the prion safety margin for this plasma product. octaplasLg® has
obtained regulatory approval in germany. Furthermore, octapharma
also announced recently that it is seeking regulatory approval for
a prion-depleted version of its UniplasLg® product, which will also
rely on ProMetic’s prion reduction technology. PrdT’s platform
technology has demonstrated its potential for additional uses in the
purification of blood derived products. Upwards of forty million units
of blood are collected in the world annually, affording ProMetic and
its partners’ enormous market opportunities.

PMI manufactures the raw agarose beads (Purabead™) that serves as
a platform for a large number of PBL’s affinity adsorbents.

ProMetic NewCo will undertake the development and
manufacturing of high-value plasma-derived therapeutic biosimilars
for ProMetic’s current and future clients. NewCo will be funded
via third-party investments and is anticipated NewCo will become
self-sustaining through end product services and sales to ProMetic’s
existing clients. an initial $1.5 million investment has been received
as part of a $2.5 million commitment. This new business venture has
also received pledges for additional funding from various institutions
and key stakeholders involved in ProMetic’s protein technologies
activities which could amount to additional financial contributions
of $3.5 million.

The Second business segment is Therapeutics which comprises of
one operating subsidiary:

•

ProMetic BioSciences Inc. (“PBI”), based in Laval, Quebec, Canada.

Core BUSINeSS
aNd STraTegy
CORE BUSINESS
ProMetic Life Sciences Inc. is a global biopharmaceutical business,
comprised of a group of companies focused on developing
technologies which bring pharmaceutical products to market that
are safer, cost-effective and more convenient than those already
available. ProMetic’s business is organized into two distinct operating
segments; Protein Technologies and Therapeutics, supported by a
head office in Montreal, Canada.

BUSINESS SEGMENTS
The Protein Technologies business segment comprises five
operating subsidiaries:

•

ProMetic BioSciences Ltd (“PBL”), based in the Uk (Isle of Man and
Cambridge);

ProMetic BioTherapeutics Inc (“PBT”), based in rockville, Md, USa;

Pathogen removal and diagnostic Technologies Inc. (“PrdT”), a
company registered in delaware, USa, operated under the control
of PBL;

ProMetic Manufacturing Inc. (“PMI”), based in Joliette, Quebec,
Canada; and

•

ProMetic “NewCo”, based in Laval, Quebec, Canada.

PBL develops ProMetic’s core bioseparations technologies
and products. Its proprietary affinity adsorbents and Mimetic
Ligand™ purification platform are used by numerous medical
and biopharmaceutical companies worldwide, with more
than 12 products, relying on ProMetic’s proven technology, having
received Fda / european Medecines agency’s (“eMea”) approval.
PBL’s technologies enable the capture of target proteins directly
from source material, and provide highly efficient and cost-effective
separation from other proteins and impurities delivering high
yields of purified product. as a result, manufacturing clients using
ProMetic’s bioseparations technologies experience significant
reductions in their cost of goods. PBL’s technology has also been
incorporated into various medical device products which specifically
capture and remove target molecules from biological fluids.

PBT develops manufacturing processes, based on PBL’s affinity
technology, to provide for highly efficient extraction and purification
of therapeutic proteins from human plasma. ProMetic’s PPPS™
multi-product sequential purification process, originally developed
in collaboration with the american red Cross (“arC”), employs
powerful affinity separation materials in a multi-step process to
extract and purify commercially important plasma proteins in
high yields.

ProMetic Life Sciences Inc. ar 10 P.18

PBI is a small-molecule drug discovery business, with a strong
pipeline of products. PBI scientists are focused in developing orally
active drugs that can emulate the activity of proven biologics, and
provide competitive advantages including improved pharmaco-
economics and safety profile. PBI’s therapeutics target unmet
medical needs in the following indications:

The encouraging positive results from the CIa clinical trial and
the anticancer effects reported in animal models suggest that
PBI-1402 is well suited for the treatment of anemia in oncology,
resulting in the PBI-1402 clinical platform being extended to
patients suffering from cancer-related anemia.

•

Inflammation / fibrosis;

autoimmune diseases;

oncology; and

anemia.

Typically, these first-in-class therapeutics are orally active,
with efficacy and high safety profiles confirmed in several in vivo
experiments and enjoy strong proprietary positions:

one of ProMetic’s lead candidates, PBI-1402 has demonstrated
positive clinical data in patients with anemia induced by
chemotherapy. New drug candidates and analogues to
PBI-1402 have also demonstrated the following key benefits:

•

PBI-1402 and analogues are orally active, whereas most other
drugs treating anemia are injectables.

PBI-1402 and analogues are affordable low molecular weight
synthetic candidate drugs, relative to costly recombinant proteins,
such as eSas.

PBI-1402 and analogues have a distinct mechanism of action from
ePo, as it does not bind to the same cell surface receptor as ePo.
It therefore provides great promise of serving as a stand-alone
therapeutic in the treatment of patients with anemia.

PBI-1402 has demonstrated anticancer activity in multiple
pre-clinical models, which could make it a drug of choice for the
treatment of anemia in cancer patients (Cancer related anemia
(“Cra”), Chemotherapy Induced anemia (“CIa”)).

PBI-1402 and analogues demonstrate anti-fibrotic activity which
supports the potential use for nephroprotection in patients with
chronic kidney disease and patients undergoing different drug
therapies typically toxic to the kidney and other vital organs.

The initial indication targeted by PBI-1402 is anemia in cancer
patients undergoing chemotherapy. Upwards of two thirds of cancer
patients treated with chemotherapy develop anemia. This represents
an estimated one million patients annually in the USa alone.

Since the publication of the Fda briefing document, the oncology
drugs advisory Committee in March 2008, treatment of choice for
these patients has been rBC transfusion and represents an unmet
medical need.

Moreover, approximately twenty million patients in the U.S. alone
are diagnosed with chronic kidney diseases (“Ckd”). Patients with
severe Ckd stages (3 and 4) often develop anemia before they
require hemodialysis. Ckd patients still at the pre-dialysis stage
could greatly benefit from an orally administered drug as a treatment
for their anemia. other experiments in animal models simulating
chronic renal failure in humans or acute renal toxicity induced by
toxic drugs such as some antibiotics and chemotherapeutic agents
have demonstrated the ability of PBI-1402 and new analogues to
correct anemia. What drew the most interest from the presentations
at the american Society of Nephrology annual meeting last Fall,
was evidence that PBI-1402 reduced significantly the fibrosis in the
kidney, the underlying cause that ultimately lead to the loss in the
kidney function.

These results indicate additional potential for PBI-1402 and new
analogues that are not related to anemia and offer alternative
potential avenues for a regulatory pathway.

PBI has several other compounds with in vivo proof of concept
validation in its library at differing stages of development. These
represent a complete, well defined platform with the ability to
produce high-value drugs. This will allow ProMetic to address unmet
medical needs and extremely complex medical conditions associated
with certain diseases, for which the market potential is immense.
at the present time, no significant research and development activity
is being undertaken on these other compounds.

In late 2010, ProMetic announced that it had signed the terms of a
strategic agreement for PBI-1402 and PBI-4419 with allist of China
who will fund the development costs required for the regulatory
approval in China for the two products. allist undertakes to perform
development activities according to standards meeting Fda
requirements, which will then allow ProMetic to have full access
to and use the data generated by allist for markets outside China.
This represents an investment in the programs well in excess of
$10 million US. allist will retain the rights for the Chinese market for
PBI-1402 for the chemotherapy-induced anemia and cancer related
anemia indications and for PBI-4419 for fibrotic diseases.

ProMetic Life Sciences Inc. ar 10 P.19

BUSINESS STRATEGY
ProMetic’s strategy in relation to its Protein Technologies business
segment has been well defined by management: applying ProMetic’s
proprietary technologies to new and existing markets for large-
scale drug purification, drug development, proteomics (the study
of proteins), and the elimination of pathogens. The ultimate benefit
that can be derived from ProMetic’s Protein Technologies unit is the
enabling of our partners to manufacture more affordable and safer
therapeutics, thus aligning ProMetic’s business perfectly with current
market pressures on the healthcare sector.

PBL’s bioseparations business is being expanded into a profitable,
cash-generative business through the securing of long-term supply
agreements with major pharmaceutical and biotech companies.
The profits and therefore excess cash generated by this business
unit will be used in the short-term to partly finance the losses of
ProMetic’s other business segments.

The strategy in relation to PBT is to establish key relationships
with biopharmaceutical companies to co-develop plasma derived
therapeutics relying on PBT’s proven high yield manufacturing
process. Typically through these partnerships, the therapeutics
developed are chosen to address totally unmet medical needs or
target very large and established markets but with a significant
safety and cost leadership advantage.

PRDT’s unique prion reduction technology has already been
commercialized through a long-term supply agreement with
octapharma, who have incorporated the technology into the
manufacturing process of their octaplasLg® and UniplasLg®
products. The strategy is to expand the commercialization of the
PrdT technology into use in rBC concentrate by the sale of the
P-Capt® prion filter. Thereafter, the Company will focus on applying
PrdT technology to other commercial applications.

Subsequent to year end, ProMetic created a new subsidiary,
NewCo, which has entered into a long-term lease on very favorable
conditions with Quebec’s Institut national de la recherche
scientifique (“INrS”) for an existing state-of-the-art facility. NewCo
will undertake the development and manufacturing of high-value
plasma-derived therapeutic biosimilars for ProMetic’s current and
future clients. NewCo will be funded via third-party investments
and is anticipated NewCo will become self-sustaining through end
product services and sales to ProMetic’s existing clients. an initial
$1.5 million investment has been received as part of a $2.5 million
commitment. This new business venture has also received pledges
for additional funding from various institutions and key stakeholders
involved in ProMetic’s protein technologies activities which could
amount to additional financial contributions of $3.5 million. This
relieves a significant capital expenditure hurdle for ProMetic, allowing
it to deliver in its objectives in a very cost-effective and non-dilutive
manner.

The following Strengths, Weaknesses, opportunities, and Threats
analysis is a helpful summary indicating how management focuses
its decisions in relation to the business strategy for the Protein
Technologies business segment.

Strengths

•

recurring revenues from external licensing and partnering
of technologies

Strong product pipeline

Innovative technologies

Validated products

Some products target niche markets

Turn-key services

Technologies integrated for long-term of client products

Solid management team

established sales force

Weaknesses

•

Some products target niche markets

ability to recognize revenues from complex contracts
with multiple deliverables

Opportunities

•

development of innovative products for new applications

ability to scale according to client needs

Vast partnering opportunities

Threats

•

ability to stay competitive in rapidly changing environment

Client products have to undergo regulatory process

Subject to client timeline

Fluctuating exchange rates

government processes

ProMetic Life Sciences Inc. ar 10 P.20

ProMetic’s strategy in relation to the Therapeutics business
segment has been to develop orally active compounds leading to
more convenient and cost-effective treatment regimes in already
developed markets or targeting unmet medical needs. ProMetic’s
Management strongly believes that this strategy is highly relevant in
the current market economy where cost pressures, above all else,
impact the adoption of new drugs.

The business model for this division is to partner promising drug
candidates upon completion of in vivo proof of concept studies.
While the Therapeutics Unit has several of such promising drug
candidates, Management has acted to cut the burn-rate of this
division such that only costs associated with the regulatory and
partnering activities for PBI-1402 and its analogues are incurred.

These cost-saving measures are clearly reflected in the financial
statements accompanying this discussion and analysis.

FINANCING STRATEGY
across the business, Management monitors closely the company’s
financial performance, both actual and forecasted, to ensure that
appropriate measures are taken to limit cash burn.

In late 2008, the Company declared that it would seek to finance
the business in the least dilutive means possible, recognizing that
shareholders had experienced dilution in the past.

In January 2011, the Company successfully restructured the secured
loans provided to the Company by a select group of stakeholders.
The restructuring arrangements postponed the repayment of
$4 million of ProMetic’s secured debt originally scheduled to occur
in the first half of 2011 to July 1st 2012. as consideration for the
above-mentioned debt restructuring, the stakeholders collectively
received 4,508,499 shares in ProMetic’s share capital at market
price, representing 1.28% of ProMetic’s outstanding shares or 1.26%
on a fully diluted basis. The stakeholders shall also collectively
received 2,857,139 warrants, which if exercised could, collectively
with the above-mentioned shares, represent 2.08% of ProMetic’s
outstanding shares or 2.04% on a fully diluted basis. The Toronto
Stock exchange has given conditional approval to this issuance of
shares and granting of warrants.

In addition, on March 31, 2011, the Company entered into an
agreement with abraxis, a wholly owned subsidiary of Celgene,
whereby the Company will assign certain intellectual property rights
regarding a protein technology to Celgene for a specific field of use.
as consideration for the assignment of intellectual property rights,
the $10 million US loan entered into with abraxis in February 2010
will be forgiven. The agreement requires the Company to comply
with certain administrative milestones by February 9, 2012. Failure
to meet these milestones would result in a portion of the above
loan to be re-instated in the range of $6 million US to $8 million US.
The Company considers it unlikely that it will be unable to meet the
required milestones.

Since 2009, the Company has been successful in securing “patient”
debt, principally from existing shareholders whose interests are
aligned with those of the business. In addition, funds were advanced
by octapharma, a customer with whom ProMetic has long-term
supply arrangements, with repayments being made against future
sales of product to that customer.

Certain of these arrangements have required the up-front payment
of interest in the form of shares. Therefore, the funding is partially
dilutive, but the level of dilution has been minimal in comparison to
the dilution level that would have been incurred if a straight equity
investment or other more commonly available instruments had been
used to finance the Company.

ProMetic Life Sciences Inc. ar 10 P.21

key PerForMaNCe drIVerS

The company has identified the following list of key performance drivers for each of the business units. It is the intention of the Company to
monitor and evaluate the progress of each performance driver and to provide status updates in the Company’s quarterly Md&a report.

PBL

EvENTS 2010 onwards

•

Maintain a profitable bioseparations business

•

generate positive cash-flow from operations

•

expand affinity adsorbent sales

•

establish long-term supply agreements

•

PBL has increased its contribution to the costs of the wider group
year-on-year since 2007.

PBL generated net cash inflows during 2009. These have already
increased in 2010.

New contracts signed and expansion on existing contracts –
halozyme, large european biopharmaceutical.

overall sales in PBL exceeded gBP 5M in 2009 and have reached
gBP 8.9M in 2010.

agreement signed with octapharma and halozyme and a major
pharmaceutical company during 2009.

octapharma launched second product, UniplasLg
incorporates ProMetic’s prion-capture technology.

®, which

•

develop new strategic alliances

•

Strategic alliance with Novozymes signed in 2010

PBT

•

drive collaboration programs with existing partners including
abraxis, WIBP/Sinopharm, kedrion, Blue Blood and Sartorius

•

expand the number of strategic partners and products developed

•

Build a solid pipeline of products

•

expand business to include manufacturing of bulk active for
existing partners and others

•

Collaboration with WIBP/Sinopharm proceeding well. WIBP/
Sinopharm personnel recently trained at PBT laboratories. Small
scale resin batches supplied in h2 2010.

Work with abraxis continues on the development of a key
compound and is progressing towards the next stage.

Further opportunities are being explored with other plasma
fractionators.

Current focus is on delivering quality results for existing
customers; these will be used as the catalyst to expand into new
relationships.

Currently 7 products are under development. a further 2 are being
actively pursued.

Work is progressing towards this objective, with production of first
bulk material for clinical trials expected in 2011.

ProMetic Life Sciences Inc. ar 10 P.22

PRDT

•

adoption of P-Capt

® in Uk

•

adoption of P-Capt
countries

® in Ireland as well as other european

expand commercial use of prion reduction resin in bulk
applications

PBI

•

Partner PBI-1402 and or NCe analogues

•

New data to support expanded potential uses

•

regulatory milestones in key markets

•

recommendation for adoption in children born after January 1,
1996 by SaBTo.

heightened awareness at senior levels of the Uk government.

PrISM study patient recruitment has been completed.

adoption in Macau

expansion of trials into Cavan general hospital and Crumlin
hospital in Ireland.

Contract with octapharma for octaplasLg
approval for UniplasLg®

®. octapharma seeking

•

The terms for a strategic agreement for PBI-1402 was PBI-4419
were announced with allist of China on october 18, 2010.

•

other partnering discussions are ongoing.

•

Peer-reviewed positive phase Ib/IIa clinical data presented at the
annual Meeting of the european haematology association.

Peer-reviewed data presented at the annual Meeting of the
american Society of Nephrology.

analogue NCes discovered to have higher potency as anti-fibrotic
agents.

autoimmune disease program revitalised with new discovery.

Fda guidance corroborating ProMetic’s regulatory pathway for
PBI-1402 and its analogues for anemia and cancer.

CaPaBILITy
To deLIVer reSULTS
CAPITAL RESOURCES
The Company has no commitments for capital expenditure at the
date of the financial statements.

as mentioned earlier, NewCo will be funded via third-party
investments. This relieves a significant capital expenditure hurdle for
ProMetic, allowing it to deliver in its objectives in a very cost-effective
and non-dilutive manner. It is anticipated NewCo will become
self-sustaining through end product services and sales to ProMetic’s
existing clients.

over the coming periods, it may be necessary for the Company
to invest in further capital expenditure in order to service the
requirements of some of its contracts. It is important to note
however that PBL’s current manufacturing capacity far exceeds its
current level of sales. at the present time, the resources are being
fully employed, but are manufacturing batch sizes which are below
the optimal size. PBL’s current manufacturing capacity can therefore
accommodate significant revenue growth such that there is no linear
relationship between the incremental costs and revenue growth.

as the Company grows and develops a sustainable revenue line and
resulting positive cash flow, it should be possible for the business to
raise cash for expansion through debt facilities.

ProMetic Life Sciences Inc. ar 10 P.23

LIqUIDITY
Current assets totaled $3.3 million as at december 31, 2010, and
$5.4 million as at december 31, 2009. attention is drawn to the going
concern (Note 1). Management plans to particularly improve the
Company’s going concern position.

accounts receivable were $1.8 million as at december 31, 2010,
compared to $2.6 million as at december 31, 2009. accounts
receivable consist mostly of trade receivables related to the
sale of resin, as well as research and development tax credits
receivable related to the activities of the Therapeutics and the
Protein Technology Units. The net capital assets reduced slightly to
$0.9 million as at december 31, 2010, compared with $1.1 million as at
december 31, 2009.

Cash was $0.3 million as at december 31, 2010.

as discussed earlier in the Md&a and subsequent to the balance
sheet date, the secured debt on the balance sheet has been
renegotiated, effectively making it long-term and as a result easing
pressure on short-term cash flows. In addition, the $10 million US
due to abraxis will also be eliminated as the loan agreement was
fully satisfied as part of a commercial transaction, details of which
are available in the Post-Balance Sheet section of this report. The
remaining unsecured debt has been provided by strategic business
partners, which provides for repayments against product shipments.

INTELLECTUAL PROPERTY
AND TECHNOLOGY
The Company and each of its business segments are entirely reliant
on its Intellectual Property (“IP”) assets in the form of Patents
and Trademarks, as well as know-how. The Company employs an
in-house Senior Legal Counsel and a Patent & Trademark Coordinator
who administer the IP portfolio. a significant budget is allocated
each year for the creation, maintenance and protection of the IP
portfolio. know-how is protected by confidentiality arrangements
and staff with said know-how is regarded as an important asset for
the ProMetic group.

HUMAN CAPITAL
The most vital non-capital resource is the know-how the Company’s
employees. ProMetic has a talented team of staff and an experienced
management team that share in the Company’s vision and recognize
its potential. all employees participate in the Company’s Stock
option Plan. The contribution of senior executives to the results of
corporate and business units is recognized through a combination of
base salary and benefits, and through equity based compensation.
The human resources and Compensation Committee has devised a
Compensation Policy for Senior Management, which it believes to be
aligned with Shareholder Interest.

ProMetic Life Sciences Inc. ar 10 P.24

reSULTS aNd oUTLook
RESULTS OF OPERATIONS
year ended december 31, 2010, compared to december 31, 2009

Selected Annual Information
The following selected annual information is derived from the
consolidated financial information of the Company for each of
the three most recently completed financial years. The financial
statements are prepared in accordance with Canadian gaaP. More
financial information, including the Company’s annual Information
Form, is available on Sedar (www.sedar.com).

(december 31 – in thousands of Canadian dollars, except for per share amounts)

revenues
Net loss
Net loss per share

2010

2009

2008

11,433
(11,283)

13,560
(9,328)

10,145
(20,178)

(basic and diluted)

(0.03)

(0.07)

Total assets
Long-term debt

8,593
13,763

11,084
5,433

19.152
3,949

Revenues
Total revenues for 2010, which were derived mainly from the Protein
Technologies unit, were $11.4 million compared with $13.6 million
in 2009.

These revenues came from contract development services and sales
of affinity adsorbents to major pharmaceutical companies. revenue
also arose from the release of non-refundable up-front payments,
and certain development revenues, from deferred revenues, relating
to the TeCPar project, which has now been terminated.

There were no significant revenues associated with the Therapeutics
business unit.

Costs of Goods Sold and Rechargeable Research
and Development Expenses
The combined costs of goods sold and rechargeable research and
development expenses for the year ended december 31, 2010,
totalled $5.1 million compared to $6.2 million for the year ended
december 31, 2009.

Based on the combined cost of goods sold and the rechargeable
research and development expenses, a gross profit of 55% was
achieved during 2010 compared to 54% for 2009.

Research and Development Expenses – Non rechargeable
Non rechargeable research and development expenses were
$9.6 million for the year ended december 31, 2010, compared to
$9.3 million for the year ended december 31, 2009. This increase
relates to strategic costs to support the business development
activities associated with the Therapeutics business.

Administrative and Marketing Expenses
administrative and marketing expenses were $5.5 million for the
year ended december 31, 2010 compared to $4.6 million for the year
ended december 31, 2009. The variance is mainly attributable to the
increase of legal fees related to corporate matters combined with
additional compliance costs associated with work on conversion
of future financial reporting to International Financial reporting
Standards.

Amortization Expenses
amortization and write-off expenses for the year ended december 31,
2010 were $0.7 million compared to $1.9 million for the year
ended december 31, 2009 reflecting the lack of significant capital
expenditure in recent years.

Net Results
The Company generated a net loss of $11.3 million or $0.03 per
share (basic and diluted), for the year ended december 31, 2010, as
compared to a net loss of $9.3 million or $0.03 per share (basic and
diluted) for year ended december 31, 2009. analysing the increase
in the annual loss of $1.9 million from the previous year, $1.3 million
can be explained by the PrdT gain in 2009 not being repeated
in 2010 and $0.2 million associated with lower exchange gains
in 2010. When taken alongside the fact that revenues are also down
by $2.2 million on 2009, it can be seen that the ongoing cost control
measures remain effective.

ProMetic Life Sciences Inc. ar 10 P.25

EBITDA BY BUSINESS UNITS

year ended december 31, 2010 – In millions of dollars

revenues
Cost
eBITda

Protein
Technologies

11,431
(13,654)
(2,223)

Therapeutics

Corporate

2
(1,869)
(1,867)

–
(4,616)
(4,616)

Total

11,433
(20,139)
(8,706)

The eBITda is a non Canadian gaaP measure employed by the Company to monitor its performance. Therefore, it is unlikely to be comparable
to similar measures presented by other companies. The Company calculates its eBITda by subtracting from revenues its Costs of goods
Sold, excluding amortization of capital assets, its research and development expenses rechargeable and Non-rechargeable as well as its
administration and Marketing expenses.

CASH FLOWS
Cash flows used in operating activities amounted to $11.1million for the year ended december 31, 2010, compared with $6.8 million for the year
ended december 31, 2009. In 2010 a significant amount of the funds received from abraxis were used to clear balances with suppliers. The cash
inflows from financing activities amounted to $11.3 million for the year ended december 31, 2010, resulting from the long-term debt and equity
provided by abraxis.

The cash outflows from investing activities amounted to $0.6 million for the year ended december 31, 2010, resulting from the acquisition of
patents and capital assets, compared to $0.2 million in 2009.

SUMMARY OF qUARTERLY RESULTS
The following unaudited quarterly information is presented in millions of Canadian dollars except for per share amounts.

December 31

September 30

June 30

March 31

December 31

September 30

June 30

1.1
(4.3)

2.1
(2.9)

5.1
(0.9)

3.2
(3.1)

4.3
(2.4)

3.2
0.2

2.3
(5.1)

2010

2009

March 31

3.8
(2.0)

(0.01)

(0.00)

(0.01)

(0.00)

(0.02)

(0.01)

351

350

341

331

327

320

317

revenues
Net profit/(loss)
Net loss per share

(basic and
diluted)

Weighted average
number of
outstanding
shares

ProMetic Life Sciences Inc. ar 10 P.26

OFF-BALANCE SHEET
ARRANGEMENTS
In the normal course of business, the Company finances certain of its
activities off-balance sheet through leases.

on an ongoing basis, the Company enters into operating leases for
buildings and equipment. Minimum future rental payments under
these operating leases, determined as at december 31, 2010, are
included in the contractual obligations table below.

CONTRACTUAL OBLIGATIONS
In the normal course of operations, the Company has entered into
several contracts resulting in the following payments over the next
few years:

(in thousands of dollars)

Payment due by period

In conjunction with the above, the Company had entered into an
agreement with the borrower providing that any payment made
by the Company under the guarantee immediately triggers an
equivalent receivable from the borrower. This receivable bears
interest at 10% per annum, is evidenced by a demand promissory
note and, upon termination of the Loan and the pledge agreement,
will be secured by 2,300,000 shares of the Company until all
payments of principal and interests owed to the Company are made.
This receivable will be recorded at fair value by the Company only
when its collectability is reasonably assured.

The Company risks losing a maximum amount of $2.3 million
including interests and penalties, without taking into
consideration the net proceeds arising from the disposal of
the 9,500,000 pledged shares of the Company. The Company has
not required any consideration in exchange for this guarantee.
as at december 31, 2009, the Loan had an outstanding balance of
$0.9 million.

Less
than 1
year

2,240
2,131

Total

13,747
11,435

1–2
years

5,540
2,611

3–4
years

1,989
1,591

After 4
years

3,978
5,102

–

on March 25, 2010, the parties entered into a settlement agreement,
which called for the Company to pay to Camofi an amount of
$800,000 US ($837,280 CdN) on april 1, 2010, in addition to a
payment of $250,000 US ($260,725 CdN) made by the Company in
January 2010, for the full payment of the outstanding balance of
the loan and the termination of the borrower’s and the Company’s
obligations.

Long-term debt
operating leases
Capital leases and
obligations

Total contractual
obligations

25,198

4,384

8,154

3,580

9,080

The Company has no significant research and development
obligations.

RELATED PARTY TRANSACTION
on december 5, 2008, the Company entered into an agreement to
provide a guarantee (the “guarantee”) in favor of Camofi Master LdC
(“Camofi”), relating to an amended and restated loan agreement
(the “Loan”) that Camofi had provided to a company (“the borrower”)
wholly owned by a senior officer of the Company. The Loan was
originally contracted in december 2007 for the purposes of
purchasing shares of the Company.

The guarantee provides that the Company must be prepared to
fulfill the borrower’s obligations with respect to the full payment of
capital and interest for the Loan if the borrower is unable to do so.
any such payment shall be made within two days of receipt of notice
of default from Camofi. alternatively, the borrower can force Camofi
to liquidate some or all of the shares of the Company that are held
as collateral to cover the Loan. If called upon under the guarantee,
the Company may choose either to pay in cash or request that the
borrower instruct Camofi to liquidate up to 2,300,000 shares of the
Company to repay the Loan.

In the year ended december 31, 2010, the Company recognized
an amount of $0.2 million as a loss on this guarantee ($0.9 million
in 2009). as at december 31, 2010, no receivable from the borrower
was recorded given collectability was not reasonably assured.

Concurrent with this settlement agreement being reached, an
amended and restated loan agreement was entered into between
the borrower and the Company requiring the borrower to fully repay
the Company no later than March 31, 2013. Furthermore, should
certain stock price thresholds be reached, the Company may require
the borrower to pay the unpaid balance of the loan. This amended
and restated loan agreement received shareholder approval at the
May 5, 2010 annual and extraordinary Meeting of the shareholders.
The said loan is secured by a pledge in favour of the Company by the
borrower of 9,500,000 shares of the Company stock. The loan is also
secured by a pledge in favour of the Company by Invhealth Capital
Inc. of all its shares of the borrower and by a pledge in favour of the
Company by the senior officer of the Company of 100% of the shares
of Invhealth Capital Inc.

as a result of a request by the TSX, ProMetic, during March 2010,
issued a press release disclosing the arrangements relating to the
guarantee.

ProMetic Life Sciences Inc. ar 10 P.27

POST BALANCE SHEET EVENTS
In January 2011, the Company successfully restructured the secured
loans provided to the Company by a select group of stakeholders.
The restructuring arrangements postpone the repayment of
$4 million of ProMetic’s secured debt originally scheduled to occur in
the first half of 2011 to July 1st 2012. as consideration for the above-
mentioned debt restructuring, the stakeholders will collectively
receive 4,508,499 shares in ProMetic’s share capital at market
price, representing 1.28% of ProMetic’s outstanding shares or 1.26%
on a fully diluted basis. The stakeholders shall also collectively
receive 2,857,139 warrants, which if exercised could, collectively
with the above-mentioned shares, represent 2.08% of ProMetic’s
outstanding shares or 2.04% on a fully diluted basis. The Toronto
Stock exchange has given conditional approval to this issuance of
shares and granting of warrants.

Subsequent to the balance sheet date the Company announced on
February 7, 2011, that it had established a new subsidiary, “NewCo”,
which had attracted seed investment of $1.5 million, representing
a 10% holding in NewCo, thus valuing the new subsidiary at
$15 million. NewCo will lease and operate a pilot manufacturing
plant which will provide ProMetic an opportunity to commercialize
products using its PPPSTM technology into the multi-million dollar
plasma-derived therapeutics market.

CAPITAL STOCk INFORMATION
Authorized Share Capital
The authorized share capital of the Company consists of an unlimited
number of common shares, and an unlimited number of preferred
shares issuable in series.

Issued and Outstanding Share Capital
The following details the issued and outstanding equity securities of
the Company:

Common Shares
as at december 31, 2010, the capital stock issued and outstanding
consisted of 353,164,339 common shares (331,743,400 as at
december 31, 2009).

as at March 31, 2011, the capital stock issued and outstanding
consisted of 357,672,838 common shares.

Stock Options
as at december 31, 2010, the Company has 8,987,451 stock options
outstanding with exercise prices ranging from $0.12 to $1.50.

OUTLOOk
Management’s outlook for 2011 remains positive. despite the fact
that revenues from our development contracts have been lower than
expected, resulting from amendments to the programs requested by
our clients, management has been able to control and modulate the
cost base of the business to respect previous eBITda forecasts.

Subsequent to the balance sheet date the Company announced on
February 7, 2011, that it had established a new subsidiary, “NewCo”,
which had attracted seed investment valuing the new subsidiary
at $15 million. NewCo will lease and operate a pilot manufacturing
plant which will provide ProMetic an opportunity to commercialize
products using its PPPS technology into the multi-million dollar
plasma-derived therapeutics market. NewCo will undertake the
development and manufacturing of high-value plasma-derived
therapeutic biosimilars for ProMetic’s current and future clients.
discussions with PBT’s partners will continue in 2011 and will drive the
level of anticipated business for this subsidiary.

ProMetic Life Sciences Inc. ar 10 P.28

octapharma remains positive regarding the ultimate regulatory
approval of its octaplasLg® product by the Medicines and
healthcare products regulatory agency (“Mhra”) and its ultimate
approval in additional key european Union countries, we therefore
expect orders for resin to recommence in 2011. Furthermore,
octapharma also announced recently that it is seeking regulatory
approval for a prion-depleted version of its UniplasLg® product,
which will also rely on ProMetic’s prion reduction technology.

In line with SaBTo’s recommendation, in November 2009, for
adoption of the P-Capt® filter for children born after January 1, 1996,
the Company, is hopeful that sales will commence during 2011 after
the reporting of the PrISM clinical study results.

Partnering discussions continue with regard to PBI-1402, its NCe
analogues and other therapeutics. Finally, and in line with earlier
commitments, Management will continue to control costs with a view
to driving profitability.

ongoing effects of foreign exchange variances will be monitored
and additional steps will be put in place in an effort to minimize the
impact going forward.

Revenues
(In thousands of Canadian dollars)

15,000

12,000

9,000

6,000

3,000

2006

2007

2008

2009

2010

EBITDA
(In thousands of Canadian dollars)

-5,000

-10,000

-15,000

-20,000

-25,000

2006

2007

2008

2009

2010

CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with Canadian
gaaP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the year. Significant items for which management
must make estimates relate to revenue recognition, the valuation
and assessment of recoverability of the investments, inventory,
licenses and patents, impairment of long-lived assets and tax credits
and calculation of stock-based compensation. reported amounts
and note disclosure reflect the overall economic conditions that
are most likely to occur and anticipated measures to be taken by
management. actual results could differ from those estimates.

Impairment of Long-Lived Assets
Capital assets and licenses and patents subject to amortization are
tested for recoverability when events or changes in circumstances
indicate that their carrying amount may not be recoverable. The
carrying amount of a long-lived asset is not recoverable when it
exceeds the sum of the undiscounted cash flows expected from its
use and eventual disposal. In such a case, an impairment loss must
be recognized and is equivalent to the excess of the carrying amount
of a long-lived asset over its fair value.

Research and Development and Tax Credits
research expenditures (net of related tax credits) are expensed as
incurred and include reasonable allocation of overhead expenses.
development expenditures (net of related tax credits) are deferred
when they meet the criteria for capitalization in accordance with
Canadian gaaP, and the future benefits could be regarded as
being reasonably certain. related tax credits are accounted for
as a reduction to research and development expenditures on the
condition that the Company is reasonably certain that these credits
will materialize. during 2010 and 2009, no development costs were
deferred.

Revenue recognition
The Company earns revenues from research and development
services, license fees and products sales, which may include multiple
elements. The individual elements of each agreement are divided
into separate units of accounting, if certain criteria are met. The
applicable revenue recognition method is then applied to each unit.
otherwise, the applicable revenue recognition criteria are applied to
combined elements as a single unit of accounting.

revenues from combined elements as a single unit of accounting
are recognized using the percentage of completion method, which
requires estimates. Under this method, revenues and profits are
recognized proportionally with the degree of completion of the
services under the contract when collection is reasonably assured.

revenues from research and development services are recognized as
the contracted services are performed in accordance with the terms of
the specific agreements and reasonable assurance of collection exists.

ProMetic Life Sciences Inc. ar 10 P.29

Certain license fees are comprised of up-front fees and milestone
payments. Up-front fees are deferred and recognized over the
estimated term of the substantive contractual obligations for the
Company, which involve estimates by management. Milestone
payments are recognized as revenue when the milestone is achieved,
customer acceptance is obtained and the customer is obligated to
make performance payment. Certain license arrangements require
no continuing involvement by the Company.

Stock-Based Compensation, Warrants, and Rights to Acquire Shares
When the Company issues warrants and stock options (to its
employees, directors and officers), a fair value is derived using the
Black-Scholes pricing model. The application of this pricing model
requires Management to make assumptions regarding several
variables, including the expected life of the options and warrants, the
price volatility of the Company’s stock over a relevant timeframe, the
determination of a relevant risk-free interest rate and an assumption
regarding the Company’s dividend policy in the future.

For the year ended december 31, 2010, the Company expensed
$345,000 for stock-based compensation compared to $338,000 for
the same period in 2009. regarding issuance of warrants and rights to
acquire shares, $6.5 million was accounted for in 2010, and $343,000
in 2009.

FUTURE ACCOUNTING STANDARDS
Certain new primary sources of Canadian generally accepted
accounting principles (standards) have been published but are not yet
in effect. The Company has not yet adopted any of these standards.
The new standards, which could potentially impact the Company’s
consolidated financial statements, are detailed as follows:

Business Combinations, Consolidated Financial Statements
and Non-Controlling Interests
In January 2009, the ClCa issued Section 1582 Business
Combinations, Section 1601 Consolidated Financial Statements and
Section 1602 Non-Controlling Interests, which supersede 1581 Business
Combinations and Section 1600 Consolidated Financial Statements.
The standards apply to annual and interim financial statements
relating to fiscal years beginning on or after January 1, 2011.
Section 1582 establishes standards for the accounting for a business
combination. It provides the Canadian gaaP equivalent to IFrS 3,
Business Combinations (January 2008) and applies prospectively
to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning
on or after January 1, 2011. Section 1601, together with Section 1602,
establishes standards for the preparation of consolidated financial
statements. Section 1602 establishes standards for accounting for
a non-controlling interest in a subsidiary in consolidated financial
statements subsequent to a business combination. It is equivalent to
the corresponding provisions of IaS 27, Consolidated and Separate
Financial Statements. earlier application of the standards is permitted.
If an entity applies the Sections before January 1, 2011, it shall disclose
that fact and apply Sections 1582, 1601 and 1602 at the same time. The
Company is currently evaluating the impact of adopting the standards
as part of its IFrS conversion plan.

Multiple Deliverable Revenue Arrangements
In december 2009, the CICa issued eIC 175 “Multiple deliverable
revenue arrangements” replacing eIC 142, revenue arrangements
with Multiple deliverables. This abstract was amended to: (1) provide
updated guidance on whether multiple deliverables exist, how
the deliverables in an arrangement should be separated, and the
consideration allocated; (2) require, in situations where a vendor
does not have vendor-specific objective evidence (“VSoe) or third-
party evidence of selling price, that the entity allocate revenue
in an arrangement using estimated selling prices of deliverables;
(3) eliminate the use of the residual method and require an entity
to allocate revenue using the relative selling price method; and
(4) require expanded qualitative and quantitative disclosures
regarding significant judgments made in applying this guidance.

The accounting changes summarized in eIC 175 are effective for
fiscal years beginning on or after January 1, 2011, with early adoption
permitted. adoption may either be on a prospective basis or by
retrospective application. If the abstract is adopted early, in a
reporting period that is not the first reporting period in the entity’s
fiscal year, it must be applied retroactively from the beginning of the
Company’s fiscal period of adoption.

The Company is currently assessing the future impact of these
amendments on its financial statements as part of its IFrS
conversion plan.

International Financial Reporting Standards
In March 2009, the Canadian accounting Standards Board reconfirmed
in its second omnibus exposure draft that Canadian gaaP for
publicly accountable enterprises will be replaced by International
Financial reporting Standards (“IFrS”) for interim and annual financial
statements relating to fiscal years beginning on or after January 1,
2011. accordingly, the Company will prepare its financial statements
in accordance with IFrS commencing January 1, 2011; thus, its first
quarter under IFrS reporting standards will be for the three months
ended March 31, 2011 for which current and comparative information
will be prepared under IFrS as well as an opening IFrS balance sheet
as at January 1, 2010 (the date of transition).

described below are the Company’s IFrS changeover plan, selected
key activities and their status, and the significant, known possible
high impact accounting areas on the Company’s financial reporting
identified to date.

This information is provided to allow investors and others to obtain
a better understanding of our IFrS changeover plan. readers are
cautioned, however, that it may not be appropriate to use such
information for any other purpose. This information also reflects
our most recent assumptions and expectations; circumstances may
arise, such as changes in IFrS, regulations or economic conditions,
which could have an impact on these assumptions or expectations.
The information presented below is therefore subject to change and
does not represent a final assessment of divergences noted by the
Company to date but is intended to highlight areas in which it has
achieved considerable progress.

ProMetic Life Sciences Inc. ar 10 P.30

IFRS changeover plan
The Company has developed a detailed plan for its changeover to
IFrS comprised of three phases:

•

Phase 1: Scope and Plan

Phase 2: design and Build

Phase 3: Implementation and review

The Company is progressing according to schedule as it prepares
for its March 31, 2011 unaudited interim financial statement under
IFrS. The effects of any Canadian gaaP to IFrS differences noted
to date during the Company’s changeover plan are in the process
of being quantified and reviewed. The Company has completed
its Phase 1 and 2 stages and is now well underway in Phase 3.
The findings of the Phases, insofar as they relate to the significant
accounting areas for conversion to IFrS that will impact the
Company’s financial statements are summarized below.

Phase 1: Scope and Plan
The objective of this phase was to identify the required changes to
the Company’s accounting policies and practices resulting from the
changeover to IFrS and to thereby determine the scope of the work
effort required for the subsequent phases of the project.

Phase 1 involved:

•

a review of all relevant IFrS standards to identify differences with
the Company’s current accounting policies and practices;

the separate consideration of one-time accounting choices that
must be addressed at the changeover date and those accounting
policy choices that will be applied on an ongoing basis in periods
subsequent to the changeover to IFrS;

Initiating the prioritization process for those differences that
could have a more than inconsequential impact on the Company’s
financial statements, business processes, or Information
Technologies systems.

Phase 2: Design and Build
Phase 2 involved the design and development of detailed solutions
to address the differences identified in Phase 1. Phase 2 activities
included:

•

the in-depth analysis, quantification and documentation of key
differences identified in Phase 1 requiring changes to existing
accounting policies;

identifying processes and controls which would require changes
to ensure compliance with the requirements of the applicable
international accounting standards;

The implementation of a change management strategy to address
the information and training needs of internal and external
stakeholders.

Phase 3: Implementation and Review
In the third and final phase of the Company’s changeover plan, the
changes that affect accounting policies and practices, business
processes, systems and internal controls are being implemented
and reviewed. These changes are being tested prior to the formal
reporting requirements under IFrS to ensure all significant
differences are addressed in time for the changeover.

Progress towards completion of the Company’s
IFRS changeover plan
as mentioned above, the Company has now finalized Phases 1 and 2.
It has reviewed all currently relevant IFrS standards and identified a
number of areas of likely and possible accounting differences under
IFrS as compared to Canadian gaaP.

IFRS 1 “First Time Adoption of Reporting Standards”
IFrS 1, “First-Time adoption of International Financial reporting
Standards” (“IFrS 1”), provides entities adopting IFrS for the
first time with a number of optional exemptions and mandatory
exceptions in certain areas to the general requirement for full
retrospective application of IFrS.

The areas below have been identified as having an impact on the
Company’s financial statements.

Cumulative translation differences – enables an entity to reset all
cumulative translation differences for all foreign operations to zero at
date of transition, with the balance transferred to retained earnings
(deficit). The Company will deem cumulative translation differences
relating to foreign operations to equal zero as at January 1, 2010.
This application is expected to result in a decrease of approximately
$735,000 to the Company’s opening IFrS deficit balance as at
January 1, 2010.

Share-based payment transactions – Full retrospective application
of IFrS 2 “Share-based Payment” may be avoided for certain share-
based instruments depending on the grant date, vesting terms and
settlement of any related liabilities. The Company will apply IFrS 2 to
equity instruments that were granted after 7 November 2002 and
vested before January 1, 2010.

For stock options that vest in installments, IFrS requires the use
of the graded vesting method for purposes of the measurement
and amortization of the fair value of stock based compensation to
earnings. This method requires that each installment within a grant
to be treated as a separate grant with its own separate fair value.
Canadian gaaP, as applied by ProMetic, however, permits the use
of a straight-line recognition model which considers the individual
installments to be measured as a single award. The expense would
then be recognized equally over the Company’s five year grant
period.

ProMetic Life Sciences Inc. ar 10 P.31

The graded vesting method results in a decrease of approximately
$300,000 thousand to the Company’s opening IFrS deficit balance
as at January 1, 2010. While graded vesting compared to straight-line
results in a greater proportion of the total expense being recognized
during the first 2 years of the options 5 year expected life, this
is offset by a lower overall expense under IFrS compared to
Canadian gaaP due to each successive installment having a longer
expected life.

In addition to the application of the transition adjustments above,
a difference relating to the measurement and recording of available
for sale securities for the Company’s aM-Pharma holding B.V
Convertible preferred shares has been identified. ProMetic has
determined that these shares, presently measured at cost under
Canadian gaaP will be measured at fair value for IFrS purposes.
The difference between the carrying value under current gaaP and
the asset’s fair value under IFrS is approximately $181,000 and will
be recorded as a decrease to the Company’s opening IFrS deficit
balance as at January 1, 2010.

The following summarizes other significant accounting areas
analyzed by management for conversion to IFrS that could possibly
impact the Company’s financial statements post transition:

IAS 32 “Financial Instruments Presentation” and IAS 39
“Recognition and Measurement”
The objective of IaS 39 is to establish principles for recognizing and
measuring financial assets, financial liabilities and some contracts
to buy or sell non-financial items. requirements for presenting
information about financial instruments are in IaS 32 Financial
Instruments: Presentation. IaS 32 applies to the classification
of financial instruments, from the perspective of the issuer, into
financial assets, financial liabilities and equity instruments. The
standards and their current Canadian gaaP equivalents, are based
on the same basic principles, however, the guidance is not fully
harmonized. as a result, certain instruments could be measured
and or classified differently under IFrS.

Notwithstanding the above, the scope of IaS 32 is broader than
Section 3863 “Financial instruments – Presentation”, due in part
to the broadened definition of what qualifies as a financial asset
and financial liability. Careful review of the definitions and scope
exemptions in IaS is being performed to conclude on this matter.

In terms of the options to acquire shares, and the recent loan and
equity financing, a review of the details of the arrangement(s) was
performed to determine whether the current treatment under
Canadian gaaP will continue to be appropriate under IFrS (measured
at fair value and presented in equity). Conditionally, no significant
differences were identified.

For embedded derivatives, none were identified in a cursory review,
by ProMetic, of long-term contracts still in force as at January 1,
2010 which had been in existence and entered into prior to the
January 1, 2003 which marked the Company’s transition date for
adopting embedded derivative accounting under Canadian gaaP.

IAS 36 “Impairment of Assets”
Under Canadian gaaP, capital assets and licenses and patents
subject to amortization are tested for recoverability when events or
changes in circumstances indicate that their carrying amount may
not be recoverable. IaS 36 requires that an entity assess at each
reporting date whether there is any indication that an asset may
be impaired. Conceptually, IaS 36 therefore requires a more active
ongoing consideration of all possible indicators of impairment.

as it relates to the measurement of the impairment loss, under
Canadian gaaP for assets other than financial assets, a write-down
to estimated fair value is recognized if the estimated undiscounted
future cash flows from an asset or group of assets are less than
their carrying value. Under IaS 36, a write-down is recognized if the
recoverable amount, determined as the higher of the estimated fair
value less costs to sell or the discounted future cash flows from an
asset or group of assets, is less than carrying value. In contrast,
under Canadian gaaP, impairments are measured at the amount by
which carrying value exceeds fair value.

The difference in testing and determining an impairment may
result in more frequent impairment charges, where carrying values
of assets may have been supported under Canadian gaaP on
an undiscounted cash flow basis, but cannot be supported on a
discounted cash flow basis.

IaS 36 also requires the reversal of any previous impairment
losses where circumstances requiring the impairment charge have
changed and reversed. With respect to long-lived assets, Canadian
gaaP does not permit the reversal of impairment losses under any
circumstances.

ProMetic will be required to actively assess a minimum set of
impairment indicators at each reporting period and document
this quarterly assessment. Under IFrS, ProMetic will need to
assess impairment in terms of the recoverable amount as defined
under IFrS. ProMetic will monitor possible subsequent reversals
of previously written down long-lived assets; this will require that
ProMetic track assets and their original carrying values as well as
implied accumulated depreciation for possible future reversals of
impairment allowed under IFrS.

ProMetic Life Sciences Inc. ar 10 P.32

IAS 37 “Provisions, contingent liabilities and contingent assets”
IaS 37, “Provision, Contingent Liabilities and Contingent assets”,
requires a provision to be recognized when all of the following
conditions have been satisfied: (1) there is a present obligation as
a result of a past transaction or event; and (2) it is probable that an
outflow of resources will be required to settle the obligation; and
(3) a reliable estimate can be made of the obligation. “Probable” in
this context means more likely than not. Under Canadian gaaP, the
criterion for recognition in the financial statements is “likely”, which is
a higher threshold than “probable”. Therefore, it is possible that there
may be some contingent liabilities which would meet the recognition
criteria under IFrS that were not recognized under Canadian gaaP.

during the fourth quarter of 2010 and prior to the end of the
first quarter of 2011, the Company will complete the design and
implementation effort required to ready business processes and
internal controls for the changeover. Based on the analysis to date,
no significant changes are anticipated to processes and internal
controls.

appropriate resources have been secured to complete the
changeover on a timely basis according to the Company’s plan
milestones. The Company continues to ensure that training needs
are met. Third-party subject matter experts continue to assist the
Company throughout the changeover.

Summarized below is a description of the Company’s progress
towards completion of selected key activities of our IFrS changeover
plan as of March 31, 2011.

other differences between IFrS and Canadian gaaP exist in relation
to the measurement of provisions, such as the methodology for
determining the best estimate where there is a range of equally
possible outcomes (IFrS uses the mid-point of the range, whereas
Canadian gaaP uses the low end of the range), and there is a
requirement under IFrS for provisions to be discounted where
material.

•

due to the difference with respect to the recognition threshold,
ProMetic considered in its assessment those provisions
appropriately not recognized under gaaP but that would
potentially need to be recognized under IaS 37.

In addition, ProMetic assessed whether there were any significant
current constructive obligations which would require recognition
under IFrS not required to be recognized under Canadian gaaP.

The Company has performed an analysis of its data system
infrastructure and internal controls and has concluded that
transition to IFrS will not result in a material modification to any of
its IT processes as a result of the differences it has identified to date.
Significant impacts identified, if any, on processes and controls will
be disclosed in future filings when the assessment will be finalized.

Phase 3 of the changeover plan began in the fourth quarter of 2010.
during 2010, the Company completed the selection of accounting
policies and transition options under IFrS. as described above some
adjustments to the opening IFrS deficit balance as at January 1, 2010,
are expected.

ProMetic Life Sciences Inc. ar 10 P.33

Selected Key Activities

Milestones / Deadlines

Progress to date

Financial statement preparation

•

Identify relevant differences between
IFrS and our accounting policies and
practices and design and implement
solutions;

•

assessment and quantification of the
significant effects of the changeover
completed by approximately the third
quarter of 2010;

evaluate and select one-time and ongoing
accounting policy alternatives;

•

Final selection of accounting policy
alternatives by third quarter of 2010.

Benchmark findings with peer companies;

Prepare financial statements and related
note disclosures to comply with IFrS;

Quantify the effects of changeover
to IFrS.

Training and communication

•

Provide training to affected employees,
management and the Board of directors
including the audit Committee;

engage third-party subject matter
experts to assist in the transition;

Communicate progress of
changeover plan to internal and
external stakeholders.

•

Timely training provided to align with
work under changeover - training
completed by end 2010;

Communicate effects of changeover
throughout 2010 and 2011.

Internal controls (financial reporting and disclosure controls and procedures)

•

revise existing internal control to address
significant changes to existing accounting
policies and practices, if any, including the
need for dual record-keeping during 2010;

For changes to accounting policies and
practices identified, assess the design
and effectiveness of related controls.

•

Changes completed by third quarter
of 2010 once accounting policy choices
have been finalized and approved.

•

Completed the identification of IFrS
differences;

assessment and quantification of the
impact of one-time transition choices
is complete and being reviewed;

Management recommended to the audit
Committee that the Company avail itself
of a one-time transition choice and reset
all cumulative translation gains and
losses to zero through the opening deficit
as at the date of transition;

Management also recommended to
the audit Committee that the Company
apply IFrS 2 to equity instruments that
were granted after 7 November 2002 and
vested before January 1, 2010;

draft annual and quarterly draft financial
statements as well as the related note
disclosures compliant with IFrS have
been created and are being reviewed;

•

The quantitative impacts as a result of
the changeover have been determined.

•

Third-party subject matter experts
continue to support management
throughout the changeover where
they assisted management with the
identification and implementation of
differences through Phases 1 and 2
and 3. Periodic internal and external
communications about progress are
ongoing.

Md&a disclosures began in
december 2008;

audit committee follows status of
conversion plan at interim and year-end
meetings.

ProMetic Life Sciences Inc. ar 10 P.34

rISk

Since inception, the Company has concentrated its resources on
research and development. It has had no net earnings, growing
revenues which do not yet fully offset the cost base of the Company,
resulting in negative operating cash flows, working capital
deficiencies and a shareholder’s deficiency as at december 31,
2010. The Company has financed its activities through bank loans,
government financial support and the issuance of debt and equity.
The Company’s ability to continue as a going concern is dependent
on raising additional funds either from the issuance of shares or
long-term debt and achieving profitable operations. The Company’s
ability to increase revenue or raise additional capital to generate
sufficient cash flows to continue as a going concern is subject to
significant doubt and significant risks, including those described
above. These financial statements do not reflect the adjustments
that might be necessary to the carrying amount of reported
assets, liabilities and revenues and expenses and the balance
sheet classification used if the Company were unable to continue
operations in accordance with this assumption.

Commercial Risk

The global economic environment may on occasion
impact the ability of the Company’s contracted customers
to progress on certain segments of r&d and service
agreements according to previously anticipated timelines.

The Company mitigates the commercial risk associated
to these contracts through constant monitoring of the
progression of customer r&d and service contracts and by
adjusting the Company’s cost base in line with the revised
revenue forecast to ensure that ProMetic respects its
eBITda (“earnings before interest, tax, depreciation and
amortization”), projections as far as possible.

Financial Risk

Until each of the units is independently financed, the
success of the Company is dependent on its ability to
support the development of its two operating units
and its ability to bring its products to market, obtain
the necessary regulatory approvals, and achieve future
profitable operations. This is dependent on the Company’s
ability to obtain adequate financing through a combination
of financing activities and operations. It is not possible
to predict either the outcome of future research and
development programs nor the Company’s ability, nor
its operating units’ ability, to fund these programs going
forward.

Credit Risk

Credit risk is the risk of financial loss to the Company
if a customer, partner or counterparty to a financial
instrument fails to meet its contractual obligations and
arises principally from the Company’s cash, investments,
receivables and share purchase loan to an officer. The
carrying amount of the financial assets represents the
maximum credit exposure.

The financial instruments that potentially expose the
Company to credit risk are primarily cash, restricted cash
and trade accounts receivables.

The Company invests its cash in high quality commercial
paper issued by government agencies and financial
institutions and diversifies its investments in order to
limit its exposure to credit risk, while following approved
investment guidelines.

The Company reviews a new customer’s credit history
before extending credit and conducts regular reviews of
its existing customers’ credit performance.

Liquidity Risk

Liquidity risk is the risk that the Company will not be able
to meet its financial obligations as they come due. given
the company’s current revenue expectations there is
some uncertainty as whether it will have sufficient working
capital to fund its current operating and working capital
requirements for the next 12 months. To the extent that the
Company does not believe it has sufficient liquidity to meet
its current obligations, the Management considers securing
additional funds through equity, debt or partnering
transactions. The Company manages its liquidity risk by
continuously monitoring forecasts and actual cash flows.

accounts payable and accrued liabilities are due within the
current operating period.

ProMetic Life Sciences Inc. ar 10 P.35

Market Risk

Market risk is the risk that changes in market prices, such
as interest rates and foreign exchange rates will affect the
Company’s income or the value of its financial instruments.

Interest Risk
The majority of the Company’s debt is at fixed rate, there is
limited exposure to interest rate risk.

Foreign Exchange Risk
The Company is exposed to the financial risk related to
the fluctuation of foreign exchange rates. The Company
operates in the United kingdom and in the U.S. and portion
of its expenses incurred and revenues generated are in
US dollar and in pound sterling. Financial instruments
potentially exposing the Company to foreign exchange
risk consist principally of cash, receivables, accounts
payable and accrued liabilities and long-term debt. The
Company manages the foreign exchange risk by holding
foreign currencies on hand to support foreign currencies
forecasted cash outflows, and the majority of the
Company’s revenues are in US dollar and in pound sterling
which mitigates the foreign exchange risk.

Equity Risk

The changes in the Company’s equity price could impact its
ability to raise additional capital.

oVerSIghT oF reLIaBILITy
oF dISCLoSUreS

Management has developed and maintains effective systems,
controls and procedures to ensure that information used internally
and disclosed externally is reliable and timely. during the past
year, the control framework has once again been tested against
the requirements of CoSo, a recognised control model. The Chief
executive officer and Chief Financial officer certify the filings as
required in Canada by Multilateral Instrument 52-109 (Certification
of disclosure in Issuers’ annual and Interim Filings).

The Board of directors oversees management’s responsibilities for
financial reporting through the audit Committee, which is composed
of four Independent directors who are not officers or employees of the
Company. The audit Committee meets regularly with management
and reviews the Company’s interim and annual consolidated financial
statements and Md&a and recommends them for approval to the
Board of directors. other key responsibilities of the audit Committee
include monitoring the Company’s system of internal control,
monitoring its compliance with legal and regulatory requirements
selecting the shareholders’ auditors and reviewing the qualifications,
independence and performance of the shareholders’ auditors.

ernst & young LLP, the shareholders’ auditors, have full independent
access to the audit Committee to discuss their audit and related
matters.

Furthermore, all members of the Board of directors and employees
of ProMetic must comply with the Company’s Information disclosure
policy. It addresses the management and use of information relating
to or concerning ProMetic, including press releases, documents filed
with securities regulatory authorities, including annual reports and
quarterly reports issued by the Company, letters to shareholders,
management presentations and information posted on the Company
website and disclosed via other electronic means of communication,
as well as the disclosure of confidential information to third parties.

The objective of this Information disclosure Policy is to ensure that all
information released to the public regarding ProMetic is:

•

Timely, factual and exact; and

Widely disseminated in compliance with applicable securities laws.

The disclosure Committee, which consists exclusively of
Management, is responsible for:

•

The contents and periodic review of this Information disclosure
Policy;

Its implementation;

overseeing and monitoring its implementation and enforcement;

Training of ProMetic management, directors and employees in
matters pertaining to the disclosure of information;

examining information and authorizing its disclosure (in electronic,
written or verbal form) before its dissemination to the public; and

•

Monitoring the Company’s and its subsidiaries’ website contents.

The disclosure Committee will report its activities to the audit
Committee at intervals throughout the year.

ProMetic Life Sciences Inc. AR 10 │ P.36

DISCLOSURE CONTROLS AND
PROCEDURES

Based on an evaluation of the effectiveness of ProMetic’s
disclosure controls and procedures, the President and Chief
Executive Officer (“CEO”) and the Chief Financial Officer
(“CFO”) have concluded that disclosure controls and
procedures were effective as of December 31, 2010, and that
their design provides reasonable assurance that material
information relating to ProMetic, including its consolidated
subsidiaries, is made known to them by others within those
entities, particularly during the period in which the annual
filings are being prepared.

INTERNAL CONTROL OVER
FINANCIAL REPORTING

Based on an evaluation of the effectiveness of ProMetic’s
internal controls over financial reporting, the Chief Executive
Officer (“CEO”) and the Chief Financial Officer (“CFO”) have
concluded that the internal controls were effective as of
December 31, 2010, and that their design provides
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements.

* The internal controls framework includes key policies and controls
such as the Corporate Table of Authorities as adopted by the Board
of Directors, Contract of Employment, Information Technology, Confi-
dentiality and Disclosure Agreement, Intellectual Property, and Insider
Policies.

APPROACH USED TO ASSESS
THEEFFECTIVENESS OF INTERNAL
CONTROLS AT PROMETIC

In order to assess the effectiveness of internal controls at
ProMetic, Management has taken a top-down, risk-based
approach as recommended by the Canadian Securities
Administrators and the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).

This involves three main stages:

1.Identifying and prioritising the key risk areas;

2.Identifying and evaluating the associated internal controls;

3.Classifying any deficiencies that may exist and putting
procedures in place to remedy these weaknesses.

1. IDENTIFYING AND PRIORITIZING
THE KEY RISK AREAS

Based on an assessment of the business, management
considers the following to be the current key risk areas for
ProMetic:

• Liquidity and going concern;

• Compliance with IFRS;

• Integrity of shareholder reporting.

Historical risk areas that management considers to have been
satisfactorily addressed are as follows:

• Revenue recognition – due to the complex nature of some

customer agreements;

• Cash management – due to an operating environment that

has historically meant restricted cash flows;

• IP – due to the size of the expenditure and the importance of

IP in safeguarding the Group’s future income streams;

• The Disclosure Committee – due to historical concerns

about its effectiveness;

• Payroll – due to the magnitude of the cost.

ProMetic Life Sciences Inc. ar 10 P.37

IDENTIFYING AND EVALUATING THE
ASSOCIATED INTERNAL CONTROLS
For liquidity and going concern; having gained comfort over the
management of cash (with regular cash flow forecasts being
produced and reviewed by senior management) issues still exist
over liquidity and going concern. The current projection is for a cash
runway into 2011, but beyond cash may be required to see the group
through to profitability. This could come from trading operations.
Improvements in forecasting have enabled this risk to be highlighted
at an early stage, enabling measures to be put in place to address
these concerns.

Threats to going concern other than cash do need to be considered,
however, and this process has been started by the group CFo and
Financial Controller with a thorough review of managing risks in the
ProMetic group.

Compliance with IFrS; the ProMetic group is obliged to prepare
Financial Statements to IFrS from 2011, which also requires the
publication of the comparatives (i.e. 2010) numbers to these
standards too. This requirement has been flagged early within the
ProMetic group and the conversion process is in its final stages with
the assistance of deloitte both in Canada and the Uk.

regarding shareholder reporting; there are concerns in this area,
especially in light of the Section 602 breach concerning Camofi that
was identified by the Toronto Stock exchange in the first quarter
of 2010. The risk is that there could be further breaches. It is the
intention to tighten up controls over this area to ensure that this does
not occur.

For revenue recognition; the issue lies not with accounting for
product sales, which is straight forward, but in ensuring revenues
from complex contracts with multiple deliverables are accounted
for in accordance with eIC-142. Comprehensive policy notes
are prepared by the CFo with input from the legal and business
development representatives responsible for the deal negotiations.
These are then circulated to the audit Committee and the auditors.
Collective agreement is sought before applying the policy.

revenue recognition reports are now prepared by the group CFo
which covers all complex customer agreements that give rise to
material revenue; which are reviewed and approved by an external
consultant (currently deloitte).

due to the historical issues regarding revenue recognition for PLI,
management now also ensure that significant consideration is given
to the issue of revenue recognition before agreements are reached
with customers. auditor opinion is also sought where required to
make sure that no problems arise once a deal has been finalized.

Cash and cash management is controlled tightly by the CFo in
conjunction with the Finance director in Canada and the Financial
Controller in the Uk. daily cash flow forecast covering a three month
cash horizon are updated three times each week and circulated to
the CFo and once a week to the Ceo . This level of visibility together
with regular reconciliation of bank accounts provides tight control
over cash.

The Intellectual Property (“IP”) is monitored and controlled by the
Legal department at PLI. all IP expenditure is made in compliance to
the group’s Corporate authorization Policy for operating and Capital
expenditures. The Legal team, group Ceo and PBL’s Ceo carry out
regular reviews of the IP portfolio.

The disclosure Committee composition and mandate complies with
current best practice and has recently been updated by the Board of
directors. The Charter of the disclosure Committee lays out its role
and responsibilities.

The Committee therefore has the correct structure (as
recommended by deloitte’s advisory notes on membership) and
its purpose is well defined The Committee did meet regularly and
did cover the issues that it was set up to do. The CFo chairs this
committee.

Payroll operations are linked closely to the function of the human
resources departments in Canada and the Uk as well as the
Compensation Committee where the payroll cost relates to senior
management. These functions feed exceptions into the regular
payroll process which, when combined by review and authorization
procedures implemented by finance personnel provides for a high
level of control.

ProMetic Life Sciences Inc. ar 10 P.38

CLASSIFYING ANY DEFICIENCIES
THAT MAY ExIST AND PUTTING
PROCEDURES IN PLACE TO REMEDY
THESE WEAkNESSES

having reviewed and tested the controls framework around each of
the key areas of risk identified and described above, management
has concluded that no material weaknesses exist.

The review and testing identified certain minor areas where controls
and operation of controls could be strengthened. Management will
address these during 2011.

Following a review of disclosures by the Toronto Stock exchange
in 2010, the Company was found, despite having sought external legal
counsel and followed adequate Corporate governance practices, to
have inadvertently breached certain disclosure regulations in relation
to the guarantee outlined in note 16 of the Financial Statements.

accordingly, the Company has undertaken to improve its external
legal counsel, and to ensure that its Senior executive officers, who
have compliance responsibility, undertake additional training in this
area. The intention is to attend this as soon as the Toronto Stock
exchange confirm the available dates.

SUMMary oF
QUarTerLy reSULTS

The following unaudited quarterly information is presented in
thousands of Canadian dollars except for per share amounts.

FOURTH qUARTER
The following information is a summary of selected unaudited
consolidated financial information of the Company for the three-
month periods ended december 31, 2010, and 2009.

revenues
operating expenses
operating loss
gain on extinguishment of debt
Impairment of an investment
Loss on disposition of capital

assets

Charges related to a guarantee
Net interest expense
Net loss

2010

1,116
4,797
(3,681)
-
186

20
-
454
(4,341)

2009

4,260
6,095
(1,835)
(341)
-

-
586
283
(2,363)

revenues for the fourth quarter of 2010 are $3.1 million lower than
the same quarter in 2009. This decrease is due to the selling of a
significant quantity of affinity resins from the subsidiary in the Uk
in 2009.

operating expenses are lower by $1.3 million in 2010. This mainly
relates to the costs of goods sold of the significant quantity of affinity
resins sold in the fourth quarter of 2009 and the gain on exchange
rate obtained in 2010 compare to a loss on exchange rate in 2009.

The net loss increased significantly during the fourth quarter
of 2010 mainly due to the increased gross profit resulting from
the 2009 sales.

Cash outflows from operating activities were $2.0 million compared
to $4.3 million for the same period in 2009. This decrease is
attributed to the collection of receivables in 2010, the delay in paying
suppliers in 2010 and the recognition of deferred revenues in 2009.

Cash inflows from financing activities of $0.9 million in 2010 were
lower compared to $2.3 million in the fourth quarter of 2009. This
decrease is mainly attributed to the different loan agreements
concluded in the fourth quarter of 2009.

CONSOLIDATED FINANCIAL STATEMENTS
yearS eNded deCeMBer 31, 2010 aNd 2009

ProMetic Life Sciences Inc. ar 10 P.39

MaNageMeNT rePorT
The accompanying consolidated financial statements for ProMetic Life Sciences Inc. are Management’s responsibility and have been approved
by the ProMetic Life Sciences Inc. Board of directors. These consolidated financial statements were prepared in accordance with Canadian
generally accepted accounting principles. They include some amounts that are based on estimates and judgments. The financial information
contained elsewhere in the annual report is consistent with those obtained in the consolidated financial statements.

To ensure the accuracy and the objectivity of the information contained in the consolidated financial statements, the management of ProMetic
Life Sciences Inc. maintains a system of internal accounting controls. Management believes that this system gives a reasonable degree of
assurance that the financial documents are reliable and provide an adequate basis for the consolidated financial statements, and that the
Company’s assets are properly accounted for and safe-guarded.

The Board of directors upholds its responsibility for the consolidated financial statements in this annual report primarily through its audit
Committee. The audit Committee is made up of independent directors who review the Company’s annual consolidated financial statements,
as well as Management’s discussion and analysis of operating results and financial position, and recommend their approval by the Board of
directors. ernst & young LLP, Chartered accountants, the external auditors designated by the shareholders, periodically meet with the audit
Committee to discuss auditing, the reporting of financial information and other related subjects.

Pierre Laurin
President and Chief executive officer

Bruce Pritchard
Chief Financial officer

Montreal, Canada
March 31, 2011

ProMetic Life Sciences Inc. ar 10 P.40

INdePeNdeNT aUdITorS’S rePorT
To the shareholders of ProMetic Life Sciences Inc.

We have audited the accompanying consolidated financial statements of ProMetic Life Sciences Inc. (the “Company”), which comprise the
consolidated balance sheet as at december 31, 2010, and the consolidated statements of operations and comprehensive loss, contributed
surplus, accumulated other comprehensive loss, deficit and cash flows for the year then ended, and a summary of significant accounting
policies and other explanatory information.

Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian
generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’s responsibility
our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in
accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.

an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements.
The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated
financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the
entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. an audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of ProMetic Life Sciences Inc.
as at december 31, 2010 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally
accepted accounting principles.

Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the consolidated financial statements which indicates that the Company incurred
a net loss of $11,283,000 during the year ended december 31, 2010 and, as of that date, the Company had a working capital deficiency of
$5,560,000 and a shareholders’ deficiency of $13,468,000. These conditions, along with other matters as set forth in Note 1, indicate the
existence of a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.

Other matter
The consolidated financial statements of ProMetic Life Sciences Inc. for the year ended december 31, 2009, were audited by another auditor
who expressed an unmodified opinion on those statements on February 23, 2010, except as to Note 15 and Note 26 c), which are as of
March 25, 2010.

(1)

ernst & young LLP
Chartered accountants
Montreal, Canada
March 31, 2011

(1) auditor Permit No. 20201

ProMetic Life Sciences Inc. ar 10 P.41

2010

2009

252
1,790
1,032
220
3,294

228
52
883
4,136
8,593

–

652
4,508
271
2,251
1,172
8,854

11,511
1,696
22,061

493
2,612
2,128
201
5,434

356
253
1,133
3,908
11,084

911
–
6,956
910
3,137
1,316
13,230

2,296
1,826
17,352

215,266
8,169
6,542
(480)
(242,965)
(13,468)
8,593

212,728
7,824
2,195
(735)
(228,279)
(6,267)
11,084

CoNSoLIdaTed BaLaNCe SheeTS

(See governing statutes, nature of operations and going concern uncertainty - note 1)
(In thousands of Canadian dollars)

december 31,

Assets (note 14)
Current assets
Cash
accounts receivable (note 5)
Inventories (note 6)
Prepaid expenses

restricted cash (note 7)
Investments (note 8)
Capital assets (note 9)
Licenses and patents (note 10)

Liabilities and shareholders’ deficiency
Current liabilities

Bank loan (note 11)
other loan (note 12)

accounts payable and accrued liabilities (note 13)

deferred revenues

Current portion of long-term debt (note 14)
Current portion of advance on revenues from a supply agreement (note 15)

Long-term debt (note 14)
advance on revenues from a supply agreement (note 15)

Shareholders’ deficiency
Share capital (note 16)
Contributed surplus
Future investment rights (note 16)
accumulated other comprehensive loss
deficit

The accompanying notes are an integral part of the consolidated financial statements.

Subsequent events (note 29)
Commitments (note 20)

ProMetic Life Sciences Inc. ar 10 P.42

CoNSoLIdaTed STaTeMeNTS oF oPeraTIoNS aNd CoMPreheNSIVe LoSS

(See governing statutes, nature of operations and going concern uncertainty - note 1)
(In thousands of Canadian dollars except for per share amounts)

years ended december 31,

Revenues

Expenses
Costs of goods sold excluding amortization of capital assets
research and development expenses rechargeable
research and development expenses non rechargeable
administration and marketing expenses
gain on foreign exchange
amortization and write-off of capital assets
amortization and write-off of license and patents

Loss before the following items
gain on disposal of capital assets
Impairment of an investment (note 8)
gain on derecognition of net investment liability in PrdT (note 4)
gain on extinguishment of debt (note 14)
Charges related to a guarantee (note 17)
Net interest expense and penalties (note 19)
Net loss
Net loss per share (basic and diluted)
Weighted average number of outstanding shares (in thousands)

Comprehensive loss
Net loss
Foreign currency translation adjustment at January 1, 2009 (note 2a)
Foreign currency translation adjustment
Total comprehensive loss
For supplemental operations information, see note 19

The accompanying notes are an integral part of the consolidated financial statements.

2010

2009

11,433

13,560

2,818
2,272
9,596
5,452
(77)
299
399
20,759

3,101
3,145
9,335
4,596
(304)
839
1,058
21,770

(9,326)
177
(186)
–
–
(180)
(1,768)
$ (11,283)
(0.03)

348,035

(8,210)
–
–
1,257
341
(943)
(1,774)
(9,328)
(0.03)
323,858

$ (11,283)
–

255

$ (11,028)

(9,328)
(885)
150
$ (10,063)

ProMetic Life Sciences Inc. ar 10 P.43

CoNSoLIdaTed STaTeMeNTS oF CoNTrIBUTed SUrPLUS

(See governing statutes, nature of operations and going concern uncertainty – note 1)
(In thousands of Canadian dollars)

years ended december 31, 2010 and 2009

Stock-based
compensation

Warrants

Other

Total
contributed
surplus

Contributed surplus, as at December 31, 2008

1,064

3,943

2,136

7,143

Stock-based compensation
Issuance of warrants
Contributed surplus, as at December 31, 2009

Stock-based compensation
Contributed surplus, as at December 31, 2010
The accompanying notes are an integral part of the consolidated financial statements.

338
–
1,402

345
1,747

–
–
2,136

–
343
4,286

–

$ 4,286

–
2,136

338
343
7,824

345
8,169

CoNSoLIdaTed STaTeMeNTS oF aCCUMULaTed oTher CoMPreheNSIVe LoSS

(See governing statutes, nature of operations and going concern uncertainty – note 1)
(In thousands of Canadian dollars)

years ended december 31,

Balance, beginning of the period
Foreign currency translation adjustment as at January 1, 2009 (note 2a)
Foreign currency translation adjustment
Balance, end of the period

The accompanying notes are an integral part of the consolidated financial statements.

2010

(735)
–
255
(480)

2009

–
(885)
150
(735)

as of december 31, 2010, the sum of deficit and accumulated other comprehensive loss is $243,445 ($229,014 in 2009).

CoNSoLIdaTed STaTeMeNTS oF deFICIT

(See governing statutes, nature of operations and going concern uncertainty – note 1)
(In thousands of Canadian dollars)

years ended december 31,

Deficit, beginning of the period
Net loss
adjustment related to future investment rights (note 16)
Share issue expenses
Deficit, end of the period
The accompanying notes are an integral part of the consolidated financial statements.

2010

2009

$ (228,279)
(11,283)
(3,333)
(70)

$ (242,965)

$ (218,897)
(9,328)
–
(54)
$ (228,279)

ProMetic Life Sciences Inc. ar 10 P.44

CoNSoLIdaTed STaTeMeNTS oF CaSh FLoWS

(See governing statutes, nature of operations and going concern uncertainty – note 1)
(In thousands of Canadian dollars)

years ended december 31,

Cash flows used in operating activities
Net loss

adjustments to reconcile net loss to cash flows used in operating activities

Non-cash interest on long-term debt
gain on derecognition of the net liability in PrdT
gain on disposal of capital assets
gain on extinguishment of debts
Charges paid with shares
Stock-based compensation
Impairment of an investment
reimbursement of advance on revenues from a supply agreement
Unrealized gain on exchange rate
amortization and write-off of capital assets
amortization and write-off of license and patents

Change in working capital items (note 24)

Cash flows from financing activities
Proceeds from share issuance
Share issue expenses
repayment of bank loan
Issuance of loan
Issuance of long-term debt
repayment of long-term debt
advance on revenues from a supply agreement

Cash flows used in investing activities

acquisition of an investment
disposal of an investment
Proceeds from sale of capital assets
additions to capital assets
additions to licenses and patents

Net decrease in cash during the year
Net effect of currency exchange rate on cash
Cash, beginning of the year
Cash, end of the year
For supplemental cash flow information, see note 24

The accompanying notes are an integral part of the consolidated financial statements.

2010

2009

$ (11,283)

(9,328)

958
–
(177)
–
51
345
186
(13)
(719)
299
399
(9,954)
(1,235)
(11,189)

3 501
(70)
(911)
652
10 671
(2 525)
–
11 318

–
114
255
(176)
(774)
(581)

(452)
211
493
252

634
(1,257)
–
(341)
399
338
–
–
(298)
839
1,058
(7,956)
1,137
(6,819)

–
57
–
–
6 845
(3 793)
3 306
6 415

(1)
50
–
(146)
(131)
(228)

(632)
208
917
493

NoTeS To CoNSoLIdaTed FINaNCIaL STaTeMeNTS

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

ProMetic Life Sciences Inc. ar 10 P.45

NoTe 1.

goVerNINg STaTUTeS, NaTUre oF oPeraTIoNS
aNd goINg CoNCerN UNCerTaINTy

ProMetic Life Sciences Inc. (“ProMetic” or the “Company”), incorporated under the Canada Business Corporations act, is an international
biopharmaceutical company engaged in the research, development, manufacturing and marketing of a variety of applications developed from
its own exclusive technology platform. The Company owns proprietary technology essential for use in the large-scale purification of drugs,
genomics and proteomics products as well as medical and therapeutic applications.

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles and on the
basis of the going concern assumption which assumes that the Company will continue in operation for the foreseeable future and accordingly,
will be able to realize its assets and discharge its liabilities in the normal course of operations. The use of these principles may not be
appropriate because as at december 31, 2010, there is significant doubt that the Company will be able to continue as a going concern without
raising additional financial resources. Since inception, the Company has incurred significant losses and has a working capital deficiency of
$5,560 and a shareholders’ deficiency of $13,468 as at december 31, 2010. The Company’s committed cash obligations and expected level of
expenditures for the year ending december 31, 2011 exceed its committed sources of funds. To date, the Company has financed its activities
through bank loans, government financial support, investment tax credits and the issuance of debt and equity.

The Company’s ability to continue as a going concern is dependent on raising additional funds either from the issuance of shares or long-term
debt and achieving profitable operations. In January 2011, the Company announced the renegotiation of its secured debt, resulting in the
postponement of $4,000 of related repayments from 2011 to July 2012 (see note 14). The Company has also been successful in raising $1.500 of
funds, subsequent to the balance sheet date, for NewCo, its new subsidiary, which has been established to operate a pilot-scale manufacturing
facility for plasma-derived therapeutics. The investors in NewCo have authorised the temporary use of these funds for working capital purposes
in the wider group (see note 29). additionally, on March 31, 2011, the Company concluded a transaction with Celgene Corporation (“Celgene”)
resulting in the forgiveness of the $10,000 US loan entered into with abraxis BioScience, Inc. (“abraxis”) in February 2010, subject to meeting
certain administrative milestones (see note 29). This removes a significant near-term cash pressure for the Company, but these additional
sources of funds are not sufficient for the Company to discharge its liabilities for the next 12 months. Continued effort is placed by management
on expanding the customer base for existing marketed products and the Company is continuing to seek additional financing alternatives,
including non-dilutive financing, collaboration and licensing arrangements, equity and debt financing. The Company’s ability to increase its
revenues or raise additional capital to generate sufficient cash flows to continue as a going concern is subject to significant doubt and significant
risks all of which are beyond management’s control. There can be no assurance that such financing will materialize on a timely basis or obtained
on favourable terms. These consolidated financial statements do not reflect the adjustments that might be necessary to the carrying amount of
reported assets, liabilities and revenues and expenses and the balance sheet classification used if the Company were unable to continue
operations in accordance with this assumption. Such adjustments could be material.

ProMetic Life Sciences Inc. ar 10 P.46

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 2.

ChaNgeS IN aCCoUNTINg PoLICIeS

Change in accounting policy – self-sustaining subsidiary

effective January 1, 2009, the Company reclassified its subsidiary ProMetic BioSciences Ltd from integrated to a self-sustaining foreign
operation because the subsidiary has demonstrated that it is no longer wholly dependent on its Canadian parent for capital requirements.
accordingly, the subsidiary now uses the pound sterling as its functional currency.

The Company has prospectively adopted the current rate method of foreign currency translation in accordance with Section 1651 of the
Canadian Institute of Chartered accountants’ (“CICa”) handbook. Under this method, revenues and expenses are translated using average
exchange rates for the applicable period, assets and liabilities are translated using the exchange rates in effect on the balance sheet dates.
resulting exchange differences are reported as a separate component of other comprehensive loss. as of January 1, 2009, the foreign
currency translation adjustment was ($885). This amount arose from the prospective adoption of the current rate method for foreign
currency translation of the accounts of its reclassified self-sustaining foreign operations.

Future accounting standards

Certain new primary sources of Canadian generally accepted accounting principles (standards) have been published but are not yet in
effect. The Company has not yet adopted any of these standards. The new standards, which could potentially impact the Company’s
consolidated financial statements, are detailed as follows:

Business Combinations, Consolidated Financial Statements and Non-Controlling Interests
In January 2009, the ClCa issued Section 1582 Business Combinations, Section 1601 Consolidated Financial Statements and Section 1602
Non-Controlling Interests, which supersede Section 1581 Business Combinations and Section 1600 Consolidated Financial Statements. The
standards apply to annual and interim financial statements relating to fiscal years beginning on or after January 1, 2011. Section 1582
establishes standards for the accounting for a business combination. It provides the Canadian equivalent to International Financing
reporting Standards (“IFrS”) 3, Business Combinations (January 2008) and applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2011. Section 1601, together
with Section 1602, establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for
accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is
equivalent to the corresponding provisions of IaS 27, Consolidated and Separate Financial Statements. earlier application of the standards
is permitted. If an entity applies the Sections before January 1, 2011, it shall disclose that fact and apply Sections 1582, 1601 and 1602 at the
same time. The Company is currently evaluating the impact of adopting the standards as part of its IFrS conversion plan.

Multiple deliverable revenue arrangements
In december 2009, the CICa issued eIC 175 “Multiple deliverable revenue arrangements” replacing eIC 142, revenue arrangements with
Multiple deliverables. This abstract was amended to: (1) provide updated guidance on whether multiple deliverables exist, how the
deliverables in an arrangement should be separated, and the consideration allocated; (2) require, in situations where a vendor does not
have vendor-specific objective evidence (“VSoe”) or third-party evidence of selling price, that the entity allocate revenue in an
arrangement using estimated selling prices of deliverables; (3) eliminate the use of the residual method and require an entity to allocate
revenue using the relative selling price method; and (4) require expanded qualitative and quantitative disclosures regarding significant
judgments made in applying this guidance.

The accounting changes summarized in eIC 175 are effective for fiscal years beginning on or after January 1, 2011, with early adoption
permitted. adoption may either be on a prospective basis or by retrospective application. If the abstract is adopted early, in a reporting
period that is not the first reporting period in the entity’s fiscal year, it must be applied retroactively from the beginning of the Company’s
fiscal period of adoption.

The Company is currently assessing the future impact of these amendments on its consolidated financial statements as part of its IFrS
conversion plan.

ProMetic Life Sciences Inc. ar 10 P.47

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 3.

SIgNIFICaNT aCCoUNTINg PoLICIeS

The significant accounting policies are described below.

Basis of presentation:

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles
(“gaaP”).

Use of estimates:

The preparation of financial statements in accordance with Canadian gaaP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year. Significant items for which management must make
estimates relate to revenue recognition, the valuation and assessment of recoverability of the investments, inventory obsolescence,
impairment of long-lived assets, the recoverability of tax credits and calculation of stock-based compensation. reported amounts and
note disclosure reflect the overall economic conditions that are most likely to occur and anticipated measures to be taken by
management. actual results could differ from those estimates.

Basis of consolidation:

The consolidated financial statements include the accounts of ProMetic Life Sciences Inc., of its subsidiaries ProMetic BioSciences Inc.,
7662114 Canada Inc., ProMetic BioSciences (USa), Inc., ProMetic BioSciences Ltd., ProMetic BioTherapeutics Inc., ProMetic Manufacturing Inc.
and Pathogen removal and diagnostic Technologies Inc. (hereinafter referred to as “PrdT”). The Company acquired control of PrdT and
applied the accounting treatment described in note 4 starting on September 23, 2009. all significant intercompany transactions and
balances have been eliminated.

Financial instruments:

The classification and measurement of the Company’s financial instruments is as follows:

•

Cash and restricted cash are respectively classified and designated as held-for-trading financial assets. They are measured at fair value
and changes in fair value are recognized in consolidated net loss.

•

accounts receivable, excluding tax credits receivable and sales taxes receivable, and the share purchase loan to an officer, are classified
as loans and receivables. They are measured at amortized cost, which is generally the amount on initial recognition less an allowance for
doubtful accounts.

•

The convertible preferred shares of aM-Pharma holding B.V., a private company, are classified as available-for-sale and they are
measured at cost.

•

Bank loan, other loans and accounts payable and accrued liabilities are classified as other financial liabilities. They are measured
at amortized cost using the effective interest method.

•

Long-term debt and advance on revenues from a supply agreement are classified as other financial liabilities. They are measured
at amortized cost, using the effective interest method. Financing costs are applied against long-term debt.

ProMetic Life Sciences Inc. ar 10 P.48

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 3. Significant accounting policies (cont.)

Inventories:

Inventories of raw materials, work in progress and finished goods are valued at the lower of cost and net realizable value. Cost is
determined on a first in, first out basis.

Investments:

When, in management’s opinion, there has been a loss in value of an investment that is other than a temporary decline, the investment is
written down to recognize the loss. In determining the estimated realizable value of its investment, management relies on its judgment and
knowledge of each investment as well as on assumptions about general business and economic conditions that prevail or are expected to
prevail. These assumptions are limited due to the uncertainty of projected future events.

Capital assets:

Capital assets are recorded at cost less accumulated amortization and write-downs. amortization is provided over the useful lives of
capital assets using the following method, annual rates and period:

asset

Leasehold improvements
equipment tools
office equipment and furniture
Computer equipment

Government grants:

Method

Straight-line
Straight-line
Straight-line
Straight-line

rate/period

Lease term of 12.5 and 15 years
5 years
5 years
5 years

government grants on capital expenditures are credited to capital assets and are amortized over the expected life of the relevant assets.
grants receivable in connection with operating expenditures are credited to the consolidated statement of operations in the period in
which the expenditures take place.

Licenses and patents:

Licenses and patents include acquired rights as well as licensing fees for product manufacturing and marketing. amortization is provided
over the useful lives of the licenses and patents acquired using the straight-line method over a period of 20 years.

Impairment of long-lived assets:

Capital assets and licenses and patents subject to amortization are tested for recoverability when events or changes in circumstances
indicate that their carrying amount may not be recoverable. The carrying amount of a long-lived asset is not recoverable when it exceeds
the sum of the undiscounted cash flows expected from its use and eventual disposal. In such a case, an impairment loss must be
recognized and is equivalent to the excess of the carrying amount of a long-lived asset over its fair value, which is generally determined on
a discounted cash flow basis.

Research and development:

research expenditures (net of related tax credits) are expensed as incurred and include a reasonable allocation of overhead expenses.
development expenditures (net of related tax credits) are deferred when they meet the criteria for capitalization in accordance with
Canadian gaaP, and the future benefits could be regarded as being reasonably certain. related tax credits are accounted for as a
reduction to research and development expenditures on condition that the Company is reasonably certain that these credits will
materialize. during fiscal years ended december 31, 2010 and 2009, no development costs were deferred.

ProMetic Life Sciences Inc. ar 10 P.49

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 3. Significant accounting policies (cont.)

Revenue recognition:

The Company earns revenues from research and development services, license fees and products sales, which may include multiple
elements. The individual elements of each agreement are divided into separate units of accounting, if certain criteria are met. The
applicable revenue recognition method is then applied to each unit. otherwise, the applicable revenue recognition criteria are applied to
combined elements as a single unit of accounting.

revenues from combined elements as a single unit of accounting are recognized using the percentage of completion method. Under this
method, revenues and profits are recognized proportionally with the degree of completion of the services under the contract when
collection is reasonably assured.

revenues from research and development services are recognized as the contracted services are performed in accordance with the terms
of the specific agreements and reasonable assurance of collection exists.

Certain license fees are comprised of up-front fees and milestone payments. Up-front fees are deferred and recognized over the estimated
term of the substantive contractual obligations for the Company. Milestone payments are recognized as revenue when the milestone is
achieved, customer acceptance is obtained and the customer is obligated to make performance payment. Certain license arrangements
require no continuing involvement by the Company.

revenue from product sales is recognized when there is persuasive evidence that an arrangement exists; products are shipped; the selling
price is fixed or determinable and collection is reasonably assured.

amounts received in advance of meeting the revenue recognition criteria is recorded as deferred revenue on the consolidated
balance sheet.

Foreign currency translation:

The Company’s foreign subsidiaries, except for the sub-group headed by ProMetic BioSciences Ltd (ProMetic BioSciences (USa) Inc.,
ProMetic Manufacturing Inc. and PrdT), are considered as integrated foreign operations. Foreign denominated monetary assets and
liabilities of Canadian and foreign operations are translated into Canadian dollars using the temporal method. Under this method,
monetary assets and liabilities are translated at year-end exchange rates while non-monetary items are translated at historical exchange
rates. expense items are translated at the exchange rates on the transaction date or at average exchange rates prevailing during the year.
exchange gains or losses are included in the consolidated statement of operations.

For the sub-group headed by ProMetic BioSciences Ltd, the current rate method is used. Under this method, revenues and expenses are
translated using average exchange rates for the applicable period, assets and liabilities are translated using the exchange rates in effect on
the balance sheet dates. resulting exchange differences are reported as a separate component of other comprehensive income.

Income taxes:

The Company uses the liability method of accounting for income taxes. Future income tax assets and liabilities are recognized in the
balance sheet for the future tax consequences attributable to differences between the financial statement carrying values of existing
assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using income tax rates
expected to apply when the assets are realized or the liabilities are settled. The effect of a change in income tax rates is recognized in the
year during which these rates change. Future income tax assets are recognized and a valuation allowance is provided if realization is not
considered “more likely than not”.

ProMetic Life Sciences Inc. ar 10 P.50

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 3. Significant accounting policies (cont.)

Stock-based compensation:

The Company maintains a stock option plan as described in note 16 b). The Company uses the fair value method to account for all
stock-based payments to employees and non-employees. The stock-based compensation is measured based on the fair value of the
award and is recognized over the related vesting period for employees and over the related service period for non employees.

Earnings per share:

Basic net loss per share is calculated using the weighted average number of common shares outstanding during the year. diluted net loss
per share is calculated using the treasury stock method giving effect to the potential dilution that could occur if securities or other
contracts to issue common shares were exercised or converted to such shares at the later of the beginning of the year or the issuance
date. The treasury stock method assumes that any proceeds that could be obtained upon the exercise of options, warrants and rights to
acquire shares would be used to repurchase common shares at the average market price during the year. The diluted net loss per share is
equal to the basic loss per share due to the anti-dilution effect of stock options, warrants and rights to acquire shares described in Note 16.

Share issue expenses:

The Company records share issue expenses in the consolidated statement of deficit.

NoTe 4.

aSSeT aCQUISITIoN

on September 23, 2009, the Company acquired american red Cross’ 51% interest in the voting shares of PrdT bringing its ownership to 77% of
the voting shares. In return, the Company paid a cash amount of $5 and will pay tapering royalties based on the revenues generated by PrdT
from specified technologies over the remaining lives of the patents.

This transaction has been accounted as an asset acquisition in accordance with the CICa emerging Issues Committee abstract 124 “definition of
a Business”. The assets acquired consisted mainly of patents.

Concurrent with the acquisition, the terms of the preferred shares previously issued by PrdT were modified and are no longer retractable at the
holder’s option. accordingly, the preferred shares, which were previously classified as a liability and as the excess of interest in the joint venture
PrdT over proportionate share in consolidated net assets, in the Company’s consolidated balance sheets as a result of proportionate
consolidation, are now considered as share capital of PrdT and were derecognized by the Company.

ProMetic Life Sciences Inc. ar 10 P.51

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 4. Asset acquisition (cont.)

as a result of the asset acquisition and the modification of PrdT’s preferred shares terms, the consolidated balance sheet items presented
under proportionate consolidation were derecognized resulting in a gain of $1,257 in the consolidated statement of operations and
comprehensive loss. The effect of this acquisition on the Company’s consolidated financial statements in 2009 was as follows:

Patents

excess of interest in PrdT over proportionate share in consolidated net assets
Preferred shares, retractable at the holder’s option

gain on derecognition of net investment liability in PrdT

Consideration paid in cash

5
(2,960)
4,217

(1,257)

Since September 23, 2009 and until PrdT generates profits, the Company assumes 100% of PrdT’s charges.

NoTe 5.

aCCoUNTS reCeIVaBLe

Trade
Tax credits and sales taxes receivable (note 12)
advance to an officer, without interest
other

NoTe 6.

INVeNTorIeS

raw materials
Work in progress and finished goods

2010

799
961
13
17
1,790

2010

222
810
1,032

2009

1 531
936
–
145
2,612

2009

538
1,590
2,128

during the year ended december 31, 2010, a total cost of products sold of $2,818 ($3,101 in 2009) was recognized as an expense.

during the year ended december 31, 2010, there were write-downs of inventories for a total of $65 ($47 in 2009) and there was no reversal of
provision previously recognized (nil in 2009).

ProMetic Life Sciences Inc. ar 10 P.52

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 7.

reSTrICTed CaSh

restricted cash

2010

2009

228

356

The restricted cash is composed of two guaranteed Investment Certificates, 0.35% and 0.45% pledged as security of letters of credit to
suppliers expiring in august 2012 and March 2013 for a total of $164. It also consists of a grant Treasury deposit for a total of $64 pledged in favor
of the Isle of Man government for grants received.

NoTe 8.

INVeSTMeNTS

Convertible preferred shares of aM-Pharma holding B.V., a private company based in the Netherlands.

253

2010

2009

The investment in the convertible preferred shares of aM-Pharma holding B.V. was considered to have an other than temporary impairment and
was written down by $186 (excluding the effect of the exchange rate) during the year ended december 31, 2010.

NoTe 9.

CaPITaL aSSeTS

Leasehold improvements
equipment and tools
office equipment and furniture
Computer equipment

accumulated amortization
Net book value

2010
Accumulated
amortization

Cost

2,088
2,640
423
551
5,702

2,168
3,227
511
679
6,585
5,702
883

Cost

2,638
4,912
503
1,079
9,132
7,999
1,133

2009
accumulated
amortization

2,481
4,218
408
892
7,999

deferred capital grants for a total of $42 in 2010 and of $30 in 2009 received from the Isle of Man government were credited to the cost of
capital assets (see note 26). during the year 2010, as a result of impairment, there were write-offs for a total of $41 as a result of disposal of
capital assets ($190 in 2009).

amortization of capital assets for the year 2010 was $258 ($649 in 2009).

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

ProMetic Life Sciences Inc. ar 10 P.53

NoTe 10.

LICeNSeS aNd PaTeNTS

Licenses
Patents

accumulated amortization
Net book value

2010
Accumulated
amortization

2,229
584
2,813

2009
accumulated
amortization

2,010
441
2,451

Cost

3,870
2,489
6,359
2,451
3,908

Cost

3,831
3,118
6,949
2,813
4,136

No write down or write-offs were made by the Company for licenses in 2010 ($142 in 2009) but $36 was written off for patents ($637 in 2009)
following an impairment review. The review was conducted in order to identify licenses and patents that were no longer of use to the Company.
In 2010, the amount was related to the Therapeutics operating segment. In 2009, $708 was related to the Therapeutics operating segment and
$71 to the Protein Technology operating segment.

The Company owns the rights, title and interest in and to the know-how, information, technology and patents relating to its Mimetic Ligands™
technology. a portion of these rights, title and interest were assigned to the Company by Cambridge University’s Institute of Biotechnology in
consideration of the payment of continuing royalties; the others having been developed by the Company.

The purpose of the strategic alliance between the Company and the american red Cross signed in January 2003 is to co-develop the
Plasma Protein Purification Scheme (“PPPS”) process and license to third parties proprietary technology for the recovery and purification of
valuable therapeutic proteins from human blood plasma. The PPPS process integrates novel technologies in a sequence that is expected to
significantly improve both the yield and range of valuable proteins capable of being isolated from human plasma. In april 2006, the Company
paid the american red Cross US $1,000,000 for an exclusive license for access to and use of intellectual property rights for PPPS project.
ProMetic will collect revenues derived from any licensing activities, such as royalties on net sales, lump sum amounts and/or milestone
payments. ProMetic will pay a royalty to the american red Cross of 12% of revenues derived from sales of all products to third parties. also,
every year, an annual minimum royalty of US $30,000 is payable.

an officer of the Company is entitled to receive royalties based on the sales of certain products made available to ProMetic before joining
the Company. These royalties are 0.5% of net sales or 3% of revenues received by the Company. This employee also has the exclusive right
to commercialize these products should ProMetic decide to stop developing and (or) commercializing them, subject to mutually acceptable
terms and conditions.

In the normal course of business, the Company enters into license agreements for the market launching or commercialization of intellectual
property. Under these licenses, including those mentioned above, the Company has committed to pay royalties ranging generally
between 0.5% and 10% of net sales from products it commercializes.

ProMetic Life Sciences Inc. ar 10 P.54

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 11.

BaNk LoaN

Bank loan for an authorized amount of $915 related to research and development tax credits, secured by
a hypothec for that amount on all present and future research and development tax credits bearing interest
at prime plus 2% (4.25% as at december 31, 2009) and repayable upon receipt of tax credits.

–

911

2010

2009

In 2010, the bank loan was fully repaid by the Company.

NoTe 12.

oTher LoaN

Loan from Investissement Quebec for an authorized amount of $652 related to research and development tax
credits, secured by a hypothec for that amount on all present and future accounts receivable bearing interest
at prime plus 4% (7% as at december 31, 2010)

652

–

2010

2009

The loan is reimbursable upon reception of the research and development tax credits.

NoTe 13.

aCCoUNTS PayaBLe aNd aCCrUed LIaBILITIeS

accounts payable
accruals related to a guarantee (note 17)
accrued liabilities

2010

2,561
–
1,947
$ 4,508

2009

4,039
920
1,997
6,956

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

ProMetic Life Sciences Inc. ar 10 P.55

NoTe 14.

LoNg-TerM deBT

Promissory note (note a)

other loans (note b)
Capital leases (note c)

Current portion of long-term debt

Note a) Promissory note:

Current portion

2010

2009

250

1,989
12
2,251

13,497
15
13,762

2,251
11,511

5,144
39
5,433

3,137
2,296

Loan from a director of the Company, for an amount of $250 bearing interest at a rate of 15% and repayable on demand.

Note b) Other loans:

Loan for an initial principal amount of $2,000 that could reach an amount of $5,000 under certain conditions. In consideration of the initial
loan, ProMetic has issued to the lender 4,025,000 fully paid common shares and 3,750,000 warrants at an exercise price of $0.12 per share
and exercisable for a period of three years. For accounting purposes, the initial loan contains both a liability component and an equity
component (the shares and the warrants). The Company used the Black-Scholes valuation model to calculate the fair value of the
warrants using a volatility of 85% and a free risk interest rate of 1.36%. The fair value of the shares was based on the quoted price
observed on the active market. The fair value of the shares and the warrants was respectively $513 and $172. By difference, the fair value
of the initial loan was $1,315 and this value is being accreted to its nominal value using the loan’s effective interest rate.

during 2009, the repayment terms of the loan were renegotiated in consideration of the issuance of 571,428 shares. ProMetic shall repay
$1,000 in March 2010 and $1,000 in March 2011. The loan bears no interest (effective rate of 42.50% after the renegotiation).
The renegotiation created debt extinguishment for accounting purposes and the initial loan was derecognized and a new loan recognized
at fair value creating a gain on extinguishment of a debt of $182. The fair value was estimated using discounted future cash flows.

The loan is secured by a hypothec of $6,000 on ProMetic and its subsidiary’s universality of movable property.

In March 2010, ProMetic repaid $1,000 of the loan. as at december 31, 2010, the carrying value of the loan was $910 ($1,536 as at
december 31, 2009).

on december 31, 2010, the Company and the lender signed a letter of intent to extend the payment terms of the debt from March 23, 2011
to July 1, 2012 for consideration to be mutually agreed upon within 30 days of the signing of the letter of intent. on January 24, 2011, the
repayment terms were formally renegotiated and the Company agreed to issue to the lender 1,335,828 fully paid common shares
and 714,285 warrants with an exercise price of $0.14 per share, exercisable for a period of three years. as per the new agreement, no cash
interest has been charged to the Company for this extension. The loan was therefore reclassified as a long-term liability as at
december 31, 2010. The renegotiation will be accounted for as a debt extinguishment for accounting purposes in January 2011.

Loan for an initial principal amount of $500 that could reach an amount of $1,000 under certain conditions. In consideration of the initial
loan, ProMetic issued to the lender 416,666 fully paid common shares and 500,000 warrants at an exercise price of $0.18 per share and
exercisable for a period of three years. For accounting purposes, the initial loan contains both a liability component and an equity
component (the shares and the warrants). The Company used the Black-Scholes valuation model to calculate the fair value of the
warrants using a volatility of 85% and a free risk interest rate of 1.74%. The fair value of the shares was based on the quoted price
observed on the active market. The fair value of the shares and the warrants was respectively $115 and $35. By difference, the fair value
of the initial loan was $350 and this value is being accreted to its nominal value using the loan’s effective interest rate.

ProMetic Life Sciences Inc. ar 10 P.56

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 14. Long-term debt (cont.)

during 2009, the repayment terms of the loan were renegotiated in consideration of the issuance of 285,714 shares. ProMetic shall repay
the loan to the lender in June 2011. The loan bears no interest (effective rate of 42.50% after the renegotiation). The renegotiation was
debt extinguishment for accounting purposes and the initial loan was derecognized and a new loan recognized at fair value creating a gain
on extinguishment of a debt of $103. The fair value was estimated using discounted future cash flows.

The loan is secured by a hypothec of $1,000 on ProMetic and its subsidiary’s universality of movable property.

as at december 31, 2010, the carrying value of the loan was $431 ($303 as at december 31, 2009).

on december 31, 2010, the Company and the lender signed a letter of intent to extend the payment terms of the debt from June 3, 2011 to
July 1, 2012 for consideration to be mutually agreed upon within 30 days of the signing of the letter of intent. on January 24, 2011, the
repayment terms were formally renegotiated and the Company agreed to issue to the lender 476,272 fully paid common shares
and 357,142 warrants with an exercise price of $0.14 per share, exercisable for a period of three years. as per the new agreement, no cash
interest was charged to the Company for this extension. The loan was therefore reclassified as a long-term liability as at december 31,
2010. The renegotiation will be accounted for as a debt extinguishment for accounting purposes in January 2011.

Loan for a principal amount of $500. In consideration of this loan, ProMetic has issued to the lender 1,375,000 fully paid common shares
and 375,000 warrants at an exercise price of $0.12 per share and exercisable for a period of three years. For accounting purposes, the loan
contains both a liability component and an equity component (the shares and the warrants). The Company used the Black-Scholes
valuation model to calculate the fair value of the warrants using a volatility of 90% and a free risk interest rate of 1.76%. The fair value of
the shares was based on the quoted price observed on the active market. The fair value of the shares and the warrants was respectively
$191 and $18. By difference, the fair value of the loan was $291 and this value is being accreted to its nominal value using the loan’s effective
interest rate.

during 2009, the repayment terms of the loan were renegotiated in consideration of the issuance of 285,714 shares. ProMetic shall repay
the loan to the lender in august 2011. The loan bears no interest (effective rate of 42.50% after the renegotiation). The renegotiation was
debt extinguishment for accounting purposes and the initial loan was derecognized and a new loan recognized at fair value creating a gain
on extinguishment of a debt of $56. The fair value was estimated using discounted future cash flows.

The loan is secured by a hypothec of $500 on ProMetic and its subsidiaries’ universality of movable property.

as at december 31, 2010, the carrying value of the loan was $398 ($279 as at december 31, 2009).

on december 31, 2010, the Company and the lender signed a letter of intent to extend the payment terms of the debt from august 21, 2011
to July 1, 2012 for consideration to be mutually agreed upon within 30 days of the signing of the letter of intent. on January 24, 2011,
the repayment terms were formally renegotiated and the Company agreed to issue to the lender 377,963 fully paid common shares
and 357,142 warrants with an exercise price of $0.14 per share, exercisable for a period of three years. as per the new agreement, no cash
interest was charged to the Company for this extension. The loan was therefore reclassified as a long-term liability as at december 31,
2010. The renegotiation will be accounted for as a debt extinguishment for accounting purposes in January 2011.

Loans for principal amounts of $1,500, $500, $470 and $250. In consideration for these loans, ProMetic has issued to the lenders a total
of 4,942,855 fully paid common shares and 2,039,999 warrants at exercise prices ranging from $0.12 and $0.22 per share and exercisable
for a period of three years. For accounting purposes, the loans contain both a liability component and an equity component (the shares
and the warrants). The Company used the Black-Scholes valuation model to calculate the fair value of the warrants using a volatility
of 90% and a free risk interest rate of 1.76% and 1.88%. The fair value of the shares was based on the quoted price observed on the active
market. The fair value of the shares and the warrants was respectively $538 and $118. By difference, the fair value of the loans was $2,064
and this value is being accreted to its nominal value using the loan’s effective interest rate.

ProMetic Life Sciences Inc. ar 10 P.57

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 14. Long-term debt (cont.)

No interest is applicable on the loans (effective rate between 23.39% and 29.05%). ProMetic shall repay $1,220 to the lenders in May 2010
and $1,500 in august 2011. The loans are secured by a hypothec of $2,720 on ProMetic and its subsidiaries’ universality of movable
property.

In May 2010, ProMetic repaid $720 of the loans. as at december 31, 2010, the carrying value of the loans was $1,812 ($1,912 as at
december 31, 2009).

on december 31, 2010, the Company and the lender signed a letter of intent to extend the payment terms of the two loans to July 1, 2012
for consideration to be mutually agreed upon within 30 days of the signing of the letter of intent. on January 24, 2011, the repayment terms
were formally renegotiated and the Company agreed to issue to the lender, for both loans, a total of 2,318,436 fully paid common shares
and 1,428,570 warrants with an exercise price of $0.14 per share, exercisable for a period of three years. as per the new agreement, no
cash interest was charged to the Company for this extension. The loans were therefore reclassified as a long-term liability as at
december 31, 2010. The renegotiation will be accounted for as a debt extinguishment for accounting purposes in January 2011.

Loan of $10 million US ($10.7 million Cad) from abraxis BioScience Inc., issued in February 2010. The long-term loan bears an interest rate
of 5% and is reimbursable in five annual instalments. abraxis BioScience Inc. has the option to request that each annual instalment be
converted into ProMetic common shares at the future prevailing market price at the time of the annual instalment. as at december 31, 2010
the carrying value of the loan was $9,946 (see Subsequent events – note 29).

repayable loan from the Isle of Man government for 492,000 pounds sterling ($0.9 million Cad). The loan bears no interest and was
repaid in august 2010. The loan was secured by a hypothec on ProMetic BioSciences Ltd. assets which have a cost of $5,435.

Note c) Capital leases:

obligations under capital leases bearing interest from 11.54% to 13.94% payable in monthly installments of $0.3 to $0.4 maturing from May 2011
to august 2012.

The instalments on the long-term debt for the next 5 years are as follows:

year ending december 31:

2011
2012
2013
2014
2015

2,252
5,993
1,989
1,989
1,989

ProMetic Life Sciences Inc. ar 10 P.58

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 15.

adVaNCe oN reVeNUeS FroM a SUPPLy agreeMeNT

advance on revenues from a supply agreement for an initial amount of 2 million pounds sterling ($3.4 million Cad) that could reach an amount
of 2.5 million pounds sterling, which is deemed to be the fair value, and bearing interest at 5% per annum. The advance is repayable by the
revenues received under the supply agreement as products are supplied. The advance has a 5 year term and the balance due at the maturity
date is repayable in cash. The current portion of the advance on revenues from a supply agreement was determined with the expected product
sales under the supply agreement in the coming 12 months. a reduction in the advance of $13 (excluding the effect on the exchange rate) was
made during the year ended december 31, 2010 ($49 in 2009), related to products supplied under the agreement.

NoTe 16.

Share CaPITaL

Authorized and without par value:

Unlimited number of common shares, participating, carrying one vote per share, entitled to dividends.

Unlimited number of preferred shares, no par value, issuable in one or more series.

1,050,000 preferred shares, series a, non-participating, non-voting, redeemable for cash or convertible into common shares, convertible at the
option of the holder into common shares at $0.50 per share except for unpaid dividends, convertible at a rate equal to the trading average of the
common shares on the Toronto Stock exchange during the 20 business days prior to the conversion, cumulative preferential cash dividend
of 12% per year, calculated monthly and payable quarterly.

950,000 preferred shares, series B, non-participating, non-voting, redeemable for cash or convertible into common shares, convertible at the
option of the holder into common shares at $0.60 per share except for unpaid dividends, convertible at a rate equal to the trading average of the
common shares on the Toronto Stock exchange during the 20 business days prior to the conversion, cumulative preferential cash dividend
of 12% per year, calculated monthly and payable quarterly.

2010

2009

Number

Amount

Number

amount

Issued and fully paid common shares

353,164,339

$ 215,716

331,743,400

$ 213,178

Share purchase loan to an officer, without interest
and due no later than december 31, 2011 (*)

Balance at end of the period

(450)

$ 215,266

(450)

$ 212,728

(*) The share purchase loan to an officer has been extended for a year having a new maturity date of december 31, 2011.

ProMetic Life Sciences Inc. ar 10 P.59

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 16. Share capital (cont.)

Share issue:

Changes in the issued and outstanding common shares were as follows:

Balance, at the beginning of year
Issuance of shares
adjusment related to future
Investment rights

2010

2009

Number

Amount

Number

amount

331,743,400
21,420,939

$ 213,178
3,553

317,401,768
14,341,632

$ 211,422
1,756

(1,015)

–

Balance, end of year

353,164,339

$ 215,716

331,743,400

$ 213,178

In February 2010, the Company issued 17,850,000 common shares to a strategic partner (abraxis BioScience Inc.) for a consideration of
$3,201 recorded in the share capital based on quoted price of the common shares on the issuance date. Issuance costs of $70 were
recorded in the consolidated statement of deficit in accordance with the Company’s accounting policy. also, in 2010, the Company
concluded a private placement for which 3,000,000 shares were issued for a consideration of $300. Interest charges for a total of $51 were
paid by the issuance of 428,082 shares. In addition, 142,857 shares were also issued at the beginning of 2010 after having received
regulatory approval in relation to a loan agreement concluded in 2009.

In February 2010, 14,495,452 future investment rights given to abraxis BioScience inc. on a previous financing dated September 3, 2008
were cancelled and immediately reissued having the same conditions except for the term which was extended from 3.5 years to 7 years.
These modified rights could not be exercised for a period of four months from their issuance. The fair value of these modified future
investment rights was determined using the Black & Scholes model, with a volatility of 81.46%, a risk free interest rate of 3% and a share
price of $0.18. The incremental value as a result of the modification of the term of the investment rights resulted in an adjustment to share
capital of $1,000.

reported concurrently with the February 2010 investment, were a further 30,296,036 future investment rights granted to abraxis
BioScience inc. having the same terms as the future investment rights above. due to certain contingencies associated with these rights
never having been resolved by abraxis, with no intention of resolution ever declared, these rights were never issued or recorded at fair
value at the time of the 2008 investment. Concurrent with the February 2010 investment, the contingencies associated with
these 30,296,036 future investment rights were resolved. as a result, the fair value of these has now been assessed using the Black &
Scholes model, with a volatility of 81.46%, a risk free interest rate of 3% and a share price of $0.18 resulting in an adjustment of $3,300 to
the Company’s deficit, on the basis that ProMetic has given nothing new in exchange for these rights.

In 2009, the Company issued 11,759,520 common shares and 6,664,999 warrants under strategic loan agreements for a consideration of
$1,700. an amount of $1,357 was recorded in the share capital based on the common shares quoted price on the issuance date. The
residual amount of $343 was recorded in contributed surplus for warrants. also, $399 in interest and penalties was paid by the issuance
of 2,582,112 shares.

ProMetic Life Sciences Inc. ar 10 P.60

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 16. Share capital (cont.)

as at december 31, 2010, the following warrants and rights to acquire shares were outstanding:

Warrants and rights
to acquire shares

2,999,394
3,750,000
500,000
1,500,000
539,999
375,000
14,495,452
30,296,036

Stock options:

expiry date

exercise price

January 2011
June 2012
June 2012
august 2012
december 2012
april 2013
February 2017
February 2017

US $0.30
$0.12
$0.18
$0.12
$0.22
$0.22
$0.47
$0.47

The Company has established a stock option plan for its directors, officers and employees or service providers. The plan provides that the
aggregate number of shares reserved for issuance at any time under the plan and any other employee incentive plans may not
exceed 15,913,317 common shares. Since September 10, 2001, the new options issued may be exercised over a period not exceeding 5 years
and 1 month from the date they were granted (options vest 20% per annum, after one year following the date they were granted or
immediately as they are granted). The exercise price is based on the average strike price of the five business days prior to the grant.

The following table summarizes the changes in the number of stock options outstanding over the last two years:

Number of options as at december 31, 2008
2009 granted
Forfeited
expired

Number of options as at december 31, 2009
2010 granted
Forfeited
expired

Number of options as at december 31, 2010

Weighted
average
exercise price
per share

$0.64
0.17
0.47
1.33
0.39
0.18
0.32
1.07
$0.33

options

7,956,417
3,033,000
(1,001,826)
(1,318,200)
8,669,391
951,800
(83,240)
(550,500)
8,987,451

ProMetic Life Sciences Inc. ar 10 P.61

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 16. Share capital (cont.)

The following tables summarize information about stock options outstanding as at december 31, 2010:

Number outstanding

Weighted average
remaining contractual
life (in years)

Weighted average
exercise price

Number exercisable

Weighted average
exercise price

range of
exercise price

0.12 – 0.18
0.28 – 0.40
0.41 – 0.60
0.61 – 0.90
0.91 – 1.35
1.36 – 1.50

3,902,300
3,274,817
1,092,000
518,334
100,000
100,000
8,987,451

3.95
2.07
1.22
1.97
1.30
1.30

0.17
0.37
0.47
0.64
1.00
1.50

3,340,300
2,279,787
981,750
311,800
100,000
100,000
7,113,637

In 2009, 3,733,731 stock options were exercisable at a weighted average exercise price of $0.56.

Weighted average exercise price of the options having an exercise price

Lower than the market price
equal to the market price
higher than the market price

Weighted average fair value of the options having an exercise price

Lower than the market price
equal to the market price
higher than the market price

0.17
0.36
0.47
0.64
1.00
1.50
0.32

2009

0.17
–
0.51

2009

0.09
–
0.28

grant date

2010

-
0.12
0.33

2010

0.06
0.12
0.24

ProMetic Life Sciences Inc. ar 10 P.62

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 16. Share capital (cont.)

Stock-based compensation and other stock-based payments:

The Company uses the Black-Scholes option valuation model to calculate the fair value of options at the date of grant, using the following
assumptions:

risk-free interest rate
dividend yield
expected volatility of share price
expected life

2010

2009

2.92%
0%
86.17%
5 years

1.26%
0%
87.82%
1 and 5 years

The estimated fair value of options granted for the year ended december 31, 2010 was $0.12 ($0.06 for 2009).

a compensation expense of $345 in 2010 and $338 in 2009 was recorded as a result of stock options granted to directors, officers,
employees and consultants.

NoTe 17.

reLaTed ParTy TraNSaCTIoN

on december 5, 2008, the Company entered into an agreement to provide a guarantee (the “guarantee”) in favour of Camofi Master LdC
(“Camofi”), relating to an amended and restated loan agreement (the “Loan”) that Camofi had provided to a company (the “borrower”) wholly
owned by a senior officer of the Company. The Loan was originally contracted in december 2007 for the purposes of purchasing shares of
the Company.

The guarantee provides that the Company must be prepared to fulfill the borrower’s obligations with respect to the full payment of capital and
interest for the Loan if the borrower is unable to do so. any such payment shall be made within two days of receipt of notice of default from
Camofi. alternatively, the borrower can force Camofi to liquidate some or all of the shares of the Company that are held as collateral to cover
the Loan. If called upon under the guarantee, the Company may chose either to pay in cash or request that the borrower instruct Camofi to
liquidate up to 2,300,000 shares of the Company to repay the Loan.

In conjunction with the above, the Company entered into an agreement with the borrower providing that any payment made by the Company
under the guarantee immediately triggers an equivalent receivable from the borrower. This receivable bears interest at 10% per annum, is
evidenced by a demand promissory note and, upon termination of the Loan and the pledge agreement, will be secured by 2,300,000 shares of
the Company until all payments of principal and interests owed to the Company are made. This receivable will be recorded at fair value by the
Company only when its collectability is reasonably assured.

The Company risks losing a maximum amount of $2,300 plus interest and penalties, without taking into consideration the net proceeds arising
from the disposal of the 9,500,000 pledged shares of the Company. The Company has not required any consideration in exchange for this
guarantee.

as at december 31, 2009, the Loan had an outstanding balance of $920.

on March 25, 2010, the parties entered into a settlement agreement, which called for the Company to pay to Camofi an amount of US$800,000
(CdN$837,280) on april 1, 2010, in addition to a payment of US$250,000 (CdN$260,725) made by the Company in January 2010, for the full
payment of the outstanding balance of the loan and the termination of the borrower’s and the Company’s obligations.

ProMetic Life Sciences Inc. ar 10 P.63

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 17. Related party transaction (cont.)

In the year ended december 31, 2010, the Company recognized an amount of $180 as a loss on this guarantee ($943 in 2009).
as at december 31, 2010, no receivable from the borrower was recorded given collectability was not reasonably assured.

Concurrent with this settlement agreement being reached, an amended and restated loan agreement was entered into between the borrower
and the Company requiring the borrower to fully repay the Company no later than March 31, 2013. Furthermore, should certain stock price
thresholds be reached, the Company may require the borrower to pay the outstanding balance of the loan. This amended and restated loan
agreement received shareholder approval at the May 5, 2010 annual and extraordinary Meeting of the shareholders. The said loan is secured by
a pledge in favour of the Company by the borrower of 9,500,000 shares of the Company stock. The loan is also secured by a pledge in favour of
the Company by Invhealth Capital Inc. (a wholly owned subsidiary of a senior officer of the Company) of all its shares of the borrower and by
a pledge in favour of the Company by the senior officer of the Company of all of his shares of Invhealth Capital Inc.

NoTe 18.

CaPITaL dISCLoSUreS

The Company’s capital consists of cash, bank loan, other loan, long-term debt and shareholders’ deficiency.

Bank loan
other loan
Long-term debt
Shareholder's deficiency
Cash

2010

2009

–
652
13,762
(13,468)
(252)
694

911
–
5,433
(6,268)
(493)
(417)

The Company’s objectives in managing capital is to ensure a sufficient liquidity position to finance its research and development activities,
administration and marketing expenses, working capital and overall capital expenditures, including those associated with patents and
trademarks. The Company makes every effort to manage its liquidity to minimize dilution to its shareholders, whenever possible.

To meet the objectives in managing capital, the Company may attempt to issue new shares or to seek additional debt financing. The Company is
not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains
unchanged from the year ended december 2009.

ProMetic Life Sciences Inc. ar 10 P.64

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 19.

INForMaTIoN INCLUded IN The CoNSoLIdaTed STaTeMeNTS oF oPeraTIoNS

gross research and development expenses

research and development tax credits

Interest and penalties on long term debt
Interest on bank loan and other interest expenses

Interest income on financial assets held for trading

NoTe 20.

CoMMITMeNTS

2010

2009

$ 13,469

13,197

(1,601)

1,646
129
1,775

(7)

(717)

1,554
265
1,819

(45)

The Company has total commitments of $11,791 under various operating leases for the rental of offices, production plant, and laboratory space
and office equipment. The minimum annual payments for the coming years are as follows:

2011
2012
2013
2014
2015 and thereafter

other commitments are included in note 10.

NoTe 21.

PeNSIoN PLaN

2,465
1,759
875
790
5,902
11,791

The Company contributes to a defined contribution pension plan for all of its permanent employees. The Company matches most employees’
contributions up to 4% (3% in 2009) of their annual salary. The Company’s contributions for the year are $346 ($302 in 2009).

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 22.

FINaNCIaL INSTrUMeNTS aNd FINaNCIaL rISk MaNageMeNT

Financial instruments

: The Company has classified its financial instruments as follows:

FINaNCIaL aSSeTS

Held for trading
Cash, measured at fair value
restricted cash, measured at fair value

Loans and receivables
accounts receivable and share purchase loan to an officer, recorded at amortized cost

Available-for-sale
Convertible preferred shares of aM-Pharma, recorded at cost

FINaNCIaL LIaBILITIeS

Other financial liabilities
Bank loan, other loan and accounts payable and accrued liabilities,
measured at amortized cost

Long-term debt, measured at amortized cost

advance on revenues from a supply agreement, measured at amortized cost

ProMetic Life Sciences Inc. ar 10 P.65

2010

2009

252
228
480

1,279

493
356
849

2,126

253

5,160

7,867

13,762

2,868
21,790

5,433

3,142
16,442

Fair value hierarchy
Financial instruments recorded at fair value on the balance sheet are classified using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 – valuation based on quoted prices observed in active markets for identical assets or liabilities.

Level 2 – valuation techniques based on inputs that are quoted prices of similar instruments in active markets; quoted prices for identical
or similar instruments in markets that are not active; inputs other than quoted prices used in a valuation model that are observable for
that instrument; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – valuation techniques with significant unobservable market inputs.

a financial instrument is classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair
value.

The financial instruments in the Company’s consolidated financial statements, measured at fair value, are the cash and the restricted cash.
Both financial instruments were classified as Level 1 by the Company since there is an active trading market for both of them.

ProMetic Life Sciences Inc. ar 10 P.66

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 22. Financial instruments and financial risk management (cont.)

Fair value:

The carrying value of cash, accounts receivable, guaranteed investment certificate, restricted cash, bank loan, other loan and accounts
payable and accrued liabilities equals their fair value because of the near-term maturity of these instruments.

The fair value of the investment aM-Pharma holding B.V. considered to have an other than temporary impairment and was written down
accordingly.

The other loans are carried at their amortized cost, which approximates fair value due to the use of discount rates the Company would
expect for similar loans. The carrying value of the long-term debt with abraxis BioSciences Inc. and the advance on the revenues from a
supply agreement are considered to approximate fair value as the rates are similar to those the Company would expect for similar loans
having the same maturities and relationships with the lenders.

Financial risk management

The Company has exposure to credit risk, liquidity risk and market risk.

The Company’s Board of directors has the overall responsibility for the oversight of these risks and reviews the Company’s policies on an
ongoing basis to ensure that these risks are appropriately managed.

Credit risk:

Credit risk is the risk of financial loss to the Company if a customer, partner or counterparty to a financial instrument fails to meet its
contractual obligations and arises principally from the Company’s cash, investments, receivables and share purchase loan to an
officer. The carrying amount of the financial assets represents the maximum credit exposure.

The financial instruments that potentially expose the Company to credit risk are primarily cash, restricted cash and trade accounts
receivable.

The Company reviews a new customer’s credit history before extending credit and conducts regular reviews of its existing customers’
credit performance.

The Company evaluates accounts receivables balances based on the age of the receivable, credit history of the customers and past
collection experience. as at december 31, 2010, there were doubtful amounts related to past due accounts as indicated in the
following table:

Trade and other receivables:

Current and not impaired
Past due in the following periods
31 to 60 days
61 to 90 days
over 90 days
allowance for doubtful accounts – over 90 days
Trade receivables
other receivables
Total accounts receivables

2010

2009

784

1,521

15
–
526
(526)
799
29
828

4
–
574
(568)
1,531
145
1,676

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

ProMetic Life Sciences Inc. ar 10 P.67

NOTE 22. Financial instruments and financial risk management (cont.)

The Company invests its cash in titles of high quality issued by government agencies and financial institutions and diversifies its
investment in order to limit its exposure to credit risk while implementing investment guidelines in place.

The reserve for doubtful accounts as at december 31, 2010 totaled $526. as at december 31, 2009, it amounted to $568.

The Trade accounts receivable include an amount from one customer which represents approximately 54% of the Company’s total
trade accounts receivable as at december 31, 2010 and one customer representing 80% of total trade receivable as at
december 31, 2009.

The Company derives significant revenues from certain customers. as at december 31, 2010, there was one customer who accounted
for 50% of total revenues. In 2009, there were three customers who each accounted for 30%, 21% and 17% of revenues respectively.

ii)

Liquidity risk:

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they come due. given the Company’s
current revenue expectations there is some uncertainty as whether it will have sufficient working capital to fund its current operating
and working capital requirements for the next 12 months. To the extent that the Company does not believe it has sufficient liquidity
to meet its current obligations, management considers securing additional funds through equity, debt or partnering transactions
(note 1). The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flows.

as at december 31, 2010

Less than
3 months

3 – 6 months

6 months to
1 year

More than
1 year

other loan
accounts payable and accrued liabilities
Long-term debt
advance on revenues from
a supply agreement

–
4,508
2,244

71
6,823

652
–
4

323
979

–
–
4

779
783

–
–
11,960

Total

652
4,508
14,212

1,696
13,656

2,869
$ 22,241

This table only covers liabilities and obligations, and does not anticipate any of the income associated with assets or rights.

iii)

Market risk:

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange rates, will affect the Company’s
income or the value of its financial instruments.

Interest risk:

The majority of the Company’s debt is at fixed rate, there is limited exposure to interest rate risk.

Foreign exchange risk:

The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company operates in the
United kingdom and in the United States and a portion of its expenses incurred and revenues generated are in U.S dollar and
in pound sterling. Financial instruments potentially exposing the Company to foreign exchange risk consist principally of cash,
receivables, accounts payable and accrued liabilities and long-term debt. The Company manages the foreign exchange risk by
holding foreign currencies to support forecasted cash outflows in foreign currencies. The majority of the Company’s revenues
are in US dollar and in pound sterling which serve to mitigates the foreign exchange risk.

ProMetic Life Sciences Inc. ar 10 P.68

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 22. Financial instruments and financial risk management (cont.)

as at december 31, 2010, the Company is exposed to currency risk through the following assets and liabilities denominated
respectively in U.S dollar and pound sterling.

in US dollar

Cash
accounts receivable
accounts payable and accrued liabilities
Long term debt

Net exposure

In sterling pound

2010
US dollar

2010
CDN dollar

2009
US dollar

2009
CdN dollar

78,460
646,459
(2,412,282)
(10,011,453)

78,036
642,968
(2,399,256)
(9,957,391)

237,708
156,681
(3,003,800)
(20,527)

248,785
163,982
(3,143,778)
(21,484)

(11,698,816)

(11,635,642)

(2,629,938)

(2,752,495)

2010
Pound sterling

2010
CDN dollar

2009
Pound sterling

2009
CdN dollar

Cash
accounts receivable
accounts payable and accrued liabilities
advance on revenues from a supply agreement

and long term debt

33,057
120,230
(407,388)

51,282
186,512
(631,981)

77,374
881,506
(734,495)

130,901
1,491,332
(1,242,617)

(1,848,817)

(2,868,070)

(2,348,443)

(3,973,096)

Net exposure

(2,102,918)

(3,262,257)

(2,124,058)

(3,593,480)

Based on the above net exposures as at december 31, 2010, and assuming that all other variables remain constant, a 10%
depreciation or appreciation of the Canadian dollar against the US dollar would result in a decrease or an increase of the
consolidated net loss of US$1,169,882 (Cad$1,163,564).

a 10% depreciation or appreciation of the Canadian dollar against the pound sterling would result in a decrease or an increase of
the accumulated other comprehensive loss of 210,292 pounds sterling (Cad$326,226).

The Company has not hedged its exposure to currency fluctuations.

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

ProMetic Life Sciences Inc. ar 10 P.69

NoTe 23.

INCoMe TaXeS
The following table reconciles the differences between the domestic statutory tax rate and the effective tax rate used by the Company in the
determination of the income tax expenses:

Net loss
Basic income tax rate
Computed income tax provision

decrease (increase) in income taxes resulting from:
Unrecorded potential tax benefit arising from current period losses and other

deductible temporary differences

expiration of net operating losses
effect of tax rate differences in foreign subsidiaries

Non-taxable items

Future tax rate differences

Significant components of the Company’s net future income tax balances are as follows:

Future income tax assets:
Net loss

Financing costs

Unused research and development expenses
accounts payable and accrued liabilities
Licenses and patents

deferred revenues

Interest expenses carry forward
Capital assets

Unrealized loss on exchange rate

accounting reserve
Start-up expense

Less: valuation allowance
Net future income tax assets

Future income tax liabilities:

Capital assets
Intellectual property

Unrealized loss on exchange rate

Net future income tax assets

2010

2009

$ (11,283)
30 %

(3,374)

(9,328)
31 %
(2,882)

2,387
1,475
(851)
769
(406)
–

342
1,272
(340)
705
903
–

2010

2009

$ 28,241
266
5,880
70
464
–
2,670
234
734
642
2,995
42,196
(40,987)
1,209

$ 26,240
467
5,135
517
380
191
2,325
167
–
94
2,748
38,264
(37,990)
274

(281)
(158)
(770)

(274)
–
–

–

ProMetic Life Sciences Inc. ar 10 P.70

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 23. Income taxes (cont.)

as at december 31, 2010, the Company had available the following deductions, losses and credits:

deductions:

research and development expenses, without time limit
Share issue expenses
Interest deductions carryover

Losses carried forward expiring in:

2011
2014
2015
2017
2018
2020
2021
2023
2024
2025
2026
2027
2028
2029
2030
2031

Canada

Federal

Provincial

Foreign
countries

19,010
950
–
19,960

26,011
950
–
26,961

–
–
6,676
6,676

–
2,363
1,726
–
–
–
–
–
–
–
6,550
7,256
8,580
3,151
4,528
622
34,776

–
1,969
1,205
–
–
–
–
–
–
–
5,086
5,951
7,268
2,099
3,358
149
27,085

217
–
–
993
370
12
1,503
2,649
4,514
4,366
8,520
9,537
8,569
4,328
7,525
–
53,103

as at december 31, 2010, the Company also had unused federal tax credits available to reduce future Canadian taxable income in the amount of
$5,164 and expiring between 2020 and 2031. Those tax credits have not been recorded and no future income tax liability has been recorded with
respect to those tax credits.

The Company has also accumulated capital loss carry forwards amounting to $37,546 which are available to reduce future taxable income, the
related tax benefits of which have not been recognized in the financial statements.

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

ProMetic Life Sciences Inc. ar 10 P.71

NoTe 24.

addITIoNaL INForMaTIoN oN The CoNSoLIdaTed STaTeMeNT oF CaSh FLoWS

Change in working capital items

accounts receivable
Inventories
Prepaid expenses
accounts payable and accrued liabilities
deferred revenues

Non-cash transactions

excess of the interest in the joint venture PrdT over

the proportionate share in the consolidated net assets

Preferred shares retractable at the holder’s option
Non-cash interests related to long-term debt

other cash flow information

Interests paid
Interests earned

2010

2009

716
1,005
(22)
(2,302)
(632)

1,707
281
36
(388)
(499)

(1,235)

1,137

2010

2009

–
–
958

174
(7)

(2,959)
(4,217)
16

374
45

ProMetic Life Sciences Inc. ar 10 P.72

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 25.

SegMeNTed INForMaTIoN
The financial information is presented in two different operating segments. The two operating segments are: In-house Therapeutics and Protein
Technology

In-house Therapeutics: This operating segment has lead compounds, namely PBI-1402 and analogues PBI-4419, which target unmet medical
needs such as the treatment of fibrosis in patients with chronic kidney diseases and certain cancers, and the side effects associated with
chemotherapy.

Protein Technology: This operating segment contains the financial information of the following activities:

BioTherapeutics: The developer of a unique, validated, state-of-the-art solution for plasma fractionation, the Plasma Protein Purification System
(PPPSTM).

Bioseparation: develops and markets bioseparation products based on applications of its patented Mimetic LigandTM technology.

Prion Capture/Pathogen Removal: Provides a technology platform that improves the safety profile of blood products and blood-derived
therapeutics.

revenues and expenses by operating segments

For the year ended december 31, 2010

revenues

Costs of good sold excluding amortization of capital assets

research and development expenses rechargeable

research and development expenses non rechargeable

1,869

administration and marketing expenses

amortization and write-off of capital assets

amortization and write-off of licenses and patents

gain on foreign exchange rate

Loss (gain) on disposal of capital assets

Impairment of an investment

Charges related to a guarantee

Interest expenses

Interest revenues

Net loss

Therapeutics

Protein
Technology

Corporate

Total

–

104

109

–

(191)

–

(5)

11,431

2,818

2,272

7,727

836

164

290

–

186

–

172

(2)

1,920

3,033

–

4,616

–

(77)

–

180

1,567

–

6,330

11,433

2,818

2,272

9,596

5,452

299

399

(77)

(177)

186

180

1,775

(7)

11,283

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 25. Segmented information (cont.)

For the year ended december 31, 2009

revenues

Costs of good sold excluding amortization of capital assets

research and development expenses rechargeable

research and development expenses non rechargeable

administration and marketing expenses

amortization and write-off of capital assets

amortization and write-off of licenses and patents

gain on deregognition of a net investment liability in PrdT

gain on extinction of debts

Charges related to a guarantee

gain on foreign exchange rate

Interest expenses

Interest revenues

Net loss

revenues by geographic segment

(1)

United States
Brazil
United kingdom
germany
austria
holland
denmark
Switzerland
Canada
australia
Italy
India
Finland
other countries

ProMetic Life Sciences Inc. ar 10 P.73

Therapeutics

Protein
Technology

Corporate

Total

–

1,687

–

177

793

–

114

(6)

2,727

13,522

3,101

3,145

7,649

720

617

265

(1,257)

–

159

(4)

872

–

3,876

–

(341)

943

(304)

1,545

(35)

5,729

2010

9,613
712
500
218
117
74
95
67
2
–
–
–
–
35
11,433

13,560

3,101

3,145

9,335

4,596

839

1,058

(1,257)

(341)

943

(304)

1,818

(45)

9,328

2009

10,270
–
488
14
2,193
19
69
128
56
148
99
46
14
16
13,560

(1) revenues are attributed to countries based on location of customer and not on location of subsidiaries

ProMetic Life Sciences Inc. ar 10 P.74

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NOTE 25. Segmented information (cont.)

assets by operating segments

Therapeutics
Protein Technology
Corporate

assets by geographic segments

Canada
United States
United kingdom

Capital assets and licenses and patents by operating segments

Therapeutics
Protein Technology
Corporate

Capital assets and licenses and patents by geographic segments

Canada
United States
United kingdom

acquisition of capital assets and licenses and patents by operating segments

Therapeutics
Protein Technology
Corporate

acquisition of capital assets and licenses and patents by geographic segments

Canada
United States
United kingdom

2010

2,759
5,577
257
8,593

2010

3,411
2,069
3,113
8,593

2010

1,831
3,122
66
5,019

2010

1,968
1,331
1,720
5,019

2010

442
519
6
967

2010

464
348
155
967

2009

2,812
7,690
582
11,084

2009

3,838
1,303
5,943
11,084

2009

1,713
3,224
104
5,041

2009

1,898
1,096
2,048
5,041

2009

213
257
2
472

2010

215
63
194
472

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

ProMetic Life Sciences Inc. ar 10 P.75

NoTe 26.

goVerNMeNT graNTS
The Company has received government grants from Isle of Man government for operating and capital expenditures.

For grants received in 2005 and 2006, $1,073 and $80 respectively, the Isle of Man government reserves the right to reclaim in part or all of the
grants should the Company leave the Isle of Man according to the following schedule – 100% repayment within 5 years of receipt, then a sliding
scale after that for the next 5 years – 6 years 80%, 7 years 60%, 8 years 40%, 9 years 20%, 10 years 0%.

The grants received amounted to $42 in 2010 and $30 in 2009.

No provision has been made in these consolidated financial statements for any future repayment to the Isle of Man government relating to the
above agreement.

NoTe 27.

CoNTINgeNCIeS

The Company was served with a lawsuit relating to a claim for payment for unpaid services for a total of $195. The Company believes that this
claim is not valid and is defending its position to this effect. on the basis that the Company does not feel that this claim will be successful,
no provision, for this sum, has been made in the consolidated financial statements.

The Company has also been served with a lawsuit relating to a claim for payment of fees with respect to a consulting agreement, with such
claim amounting to approximately US$650,000. The Company believes that this claim is not valid and is defending its position to this effect.
on the basis that the Company does not feel that this claim will be successful, no provision, for this sum, has been made in the consolidated
financial statements.

NoTe 28.

CoMParaTIVe FIgUreS

Certain figures for the prior years have been reclassified to conform to the current year’s consolidated financial statements presentation.

ProMetic Life Sciences Inc. ar 10 P.76

years ended december 31, 2010 and 2009

(In thousands of Canadian dollars except for number of shares or as otherwise specified)

NoTe 29.

SUBSeQUeNT eVeNTS

In January and February 2011, the Company received a total of $1,500 equity investment out of a $2,500 commitment for its new subsidiary
NewCo. The new subsidiary will undertake the development and manufacturing of high-value plasma-derived therapeutic biosimilars for
ProMetic’s current and future clients.

The Company has obtained a waiver from abraxis BioScience, Inc. to postpone the first US$2,000 repayment of the loan from February 9,
2011 to February 28, 2011 (note 14).

on March 31, 2011, the Company entered into an agreement with abraxis BioScience Inc., wholly owned subsidiary of Celgene Corporation,
whereby the Company will assign certain intellectual property rights regarding a protein technology to Celgene Corporation, for a specific
field of use. as consideration for the assignment of intellectual property rights, the US $10,000 loan entered into with abraxis BioScience,
Inc. in February 2010, will be forgiven. The agreement requires the Company to comply with certain administrative milestones by
February 9, 2012. Failure to meet these milestones would result in a portion of the above loan to be re-instated in the range of US $6,000 to
US $8,000. The Company considers it unlikely that it will be unable to meet the required milestones.

during the last week of March 2011, the Company received funds in advance of a series of equity investments in the Company by way of
private placements totalling $800. The aggregate number of common shares to be issued by the Company in relation thereto remains to be
confirmed, as the Company awaits relevant common share pricing (VWaP) confirmation from the TSX.

BOARD OF DIRECTORS

ProMetic Life Sciences Inc. ar 10 P.77

g.F. kyM aNThoNy(1)
Chairman of the Board
ProMetic Life Sciences Inc.
Chair
dFg Investment advisers

roBerT LaCroIX(1)
Senior Vice-President
CTI Capital Securities Inc.

PIerre LaUrIN
President and Chief executive officer
ProMetic Life Sciences Inc.

LoUISe MéNard(2) (3)
President
groupe Méfor inc. and
Corporate director

PaUL MeSBUrIS(1)
Senior Portfolio Manager &
Chief Compliance officer
excel Investment Counsel Inc.

NaNCy orr(1)
Consultant

LoUISe ParadIS(2) (3)
Senior Vice-President, Legal affairs and
Corporate Secretary
Banque de développement du Canada

roger PerraULT(2) (3)
Corporate director

BrUCe WeNdeL
Corporate director

BeNJaMIN WygodNy(2) (3)
President
angus Partnership Inc.

Positions – Committees
(1) Audit Committee

Paul Mesburis(Chairman)
g.F. kim anthony
robert Lacroix
Nancy orr

(2) Compensation Committee & HR Committee

Benjamin Wygodny (Chairman)
Louise Ménard
Louise Paradis
roger Perrault

(3) Corporate Governance Committee

Louise Ménard (Chairman)
Louise Paradis
roger Perrault
Benjamin Wygodny

ProMetic Life Sciences Inc. ar 10 P.78

CORPORATE INFORMATION

headQUarTerS
ProMetic Life Sciences Inc. (Canada)
531 Boulevard des Prairies, Bldg. 15
Laval, Quebec h7V 1B7
Canada
Tel: +450.781.0115
Fax: +450.781.4477
email: info@prometic.com
Web: www.prometic.com

Investor Relations
Tel: +450.781.0115
email: investor@prometic.com

on peut se procurer la version française du présent
rapport annuel en s’adressant au service des relations
avec les investisseurs de ProMetic Sciences de la Vie inc.
(coordonnés ci-dessus) ou sur notre site internet à l’adresse
www.prometic.com.

TheraPeUTICS

ProMetic BioSciences Inc. (Canada)
500 Cartier Blvd. West, Suite 150
Laval, Quebec h7V 5B7
Canada
Tel:
+450.781.1394
Fax: +450.781.1403
email: info@prometic.com

ProTeIN TeChNoLogIeS

ProMetic BioSciences Ltd (United Kingdom)
r&d
211 Cambridge Science Park
Milton road
Cambridge CB4 0Wa
United kingdom
Tel:
Fax:
email:
on-line Shop: www.prometicbiosciences.com

+44(0)1223.420.300
+44(0)1223.420.270
sales@prometicbiosciences.com

North American Sales Office
Tel:
Fax:
email:

+301.251.8821
+301.251.8826
sales@prometicbiosciences.com

Manufacturing (United Kingdom)
Freeport
Ballasalla, Isle of Man
IM9 2aP
British Isles
Tel: +44.1624.821.450
Fax: +44.1624.821.451
email: sales@prometicbiosciences.com

Manufacturing (Canada)
531 Boulevard des Prairies, Bldg. 15
Laval, Quebec h7V 1B7
Canada
Tel:
Fax:
email:

+450.781.0115
+450.781.4477
sales@prometicbiosciences.com

ProMetic BioTherapeutics, Inc. (United States)
9800 Medical Center drive, Suite C-110
rockville, Maryland 20850
USa
Tel:
Fax:
email:

+301.917.6320
+301.838.9023
info@prometic.us

aUdITorS
ernst & young LLP
800 rené-Lévesque Blvd. W., Suite 1900
Montreal, Quebec h3B 1X9
Canada

TraNSFer ageNT aNd regISTrar
Computershare Trust Company of Canada
1500 University Street, Suite 700
Montreal, Quebec h3a 3S8
Canada

LISTINg: ToroNTo SToCk eXChaNge
Symbol: PLI
outstanding shares as of december 31, 2010: 353,164,339

aNNUaL MeeTINg oF SharehoLderS
Wednesday, May 18 2011 at 10:30 (edT)
Le Centre Sheraton Montréal hotel
Salon 3, Level 2
1201 rené-Lévesque Blvd. West
Montreal, Quebec h3B 2L7
Canada

aNNUaL INForMaTIoN ForM
The 2010 annual Information Form of ProMetic Life Sciences Inc.
is available upon request from the Company’s head office or by
accessing the Sedar (System for electronic document analysis
and retrieval) site, www.sedar.com.

www.prometic.com

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