Rusoro Mining Ltd. — Management Reports 2021

Mar 31, 2021

VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

The following is Management’s Discussion and Analysis (“MD&A”) of the financial condition and operating results of Valeo Pharma Inc. (“Valeo” or the “Corporation”) for the first quarter ended January 31, 2021. This document should be read in conjunction with the unaudited interim condensed consolidated financial statements and notes thereto for the quarter ended January 31, 2021 which have been prepared in accordance with International Financial Reporting Standards . All amounts herein are expressed in thousands of Canadian dollars (unless otherwise indicated) except for share and per share amounts. All other currencies are in thousands. This discussion and analysis was prepared by management from information available as at March 31, 2021. Further information about Valeo Pharma Inc., including the Annual Information Form, is available online on SEDAR at www.sedar.com.

Non-IFRS Financial Measures

The non-IFRS measures included in this MD&A are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other issuers. When used, these measures are defined in such terms as to allow the reconciliation to the closest IFRS measure. These measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from our perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Despite the importance of these measures to management in goal setting and performance measurement, we stress that these are non-IFRS measures that may have limits in their usefulness to investors.

We use non-IFRS measures, such as EBITDA and Adjusted EBITDA to provide investors with a supplemental measure of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS financial measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the valuation of issuers. We also use non-IFRS measures in order to facilitate operating performance comparisons from period to period, prepare annual operating budgets, and to assess our ability to meet our future debt service, capital expenditure and working capital requirements.

The definition and reconciliation of EBITDA and Adjusted EBITDA used and presented by the Corporation to the most directly comparable IFRS measures follow below:

EBITDA is defined as net (loss)/income adjusted for income tax, depreciation of property and equipment, amortization of right of use asset, amortization of intangible assets, interest on short and long-term debt and other financing costs, interest income, licensing revenue and changes in fair values of derivative financial instruments. Management uses EBITDA to assess the Corporation’s operating performance.

Adjusted EBITDA is defined as EBITDA adjusted for, as applicable, 1) share based compensation and other warrants or options issuance costs, 2) settlement for contract terminations such as severance for executives, or penalties for early termination of multi-year contracts, 3) impairment of intangible asset, 4) charges related to product recalls or contractual inventory returns not related to product shelf life, and 5) listing fees not related to share issuance. We use Adjusted EBITDA as a key metric in assessing our business performance when we compare results to budgets, forecasts and prior years. Management believes Adjusted EBITDA is a more accurate measure of cash flow generation than, for example, cash flow from operations, particularly because it removes cash flow fluctuations caused by unusual changes in working capital. A reconciliation of net (loss)/income to EBITDA (and Adjusted EBITDA) are presented later in this document.

Oher non-IFRS measures that are useful for interpreting our results are presented below:

Cost of Sales as % of Gross Revenues provides a better appreciation of the real COGS for product sold. We track this ratio to better appreciate the impact of introducing more profitable products into our commercial pipeline of product. While gross margin provides the net contribution of product sold after deducting recurrent and non-recurrent adjustments, cost of sales as % of gross revenues gives a better indication of the gross product margins.

Gross to net sales ratio represents the ratio of net product revenues over gross product revenues and reflects the impact of sales adjustments and other deductions to product revenues. We use gross to net sales ratio as a management tool to better appreciate the impact of sales adjustments and deductions on our revenue performance and ultimately our profitability. Sales adjustments and other deductions include items such as early payment discounts, product returns, price adjustments, professional allocations to retailers/pharmacies, sales upcharges, product listing agreement fees and others.

Cautionary note regarding forward-looking statements

This MD&A may contain some forward-looking information as defined under applicable Canadian securities laws. Forward looking information can generally be identified using forward-looking terminology such as “may”, “anticipate”, “expect”, “intend”, “estimate”, “continue” or similar terminology. Forward looking information is subject to various known and unknown risks and uncertainties, many of which are beyond the ability of the Corporation to control or predict, that may cause the Corporation’s actual results or performance to be materially different from actual results and are developed based on assumptions about such risks and other factors set out herein.

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Management’s Discussion and Analysis for the first quarter ended January 31, 2021

VALEO PHARMA INC.

GLOSSARY TERMS

Calendar & Financial COGS Cost of Goods Sold (or Cost of Sales) IR Investors Relation G&A General and Administrative S&M Sales and Marketing SBC Share-Based Compensation SG&A Sales General and Administrative FY-21 Fiscal Year 2021 FY-20 Fiscal Year 2020 Q1-21 First quarter FY-21 Q4-20 Fourth quarter FY-20 Q3-20 Third quarter FY-20 Q2-20 Second quarter FY-20 Q1-20 First quarter FY-20 Q4-19 Fourth quarter FY-19 Q3-19 Third quarter FY-19 Q2-19 Second quarter FY-19 QoQ Current year quarterly results vs last year’s quarterly results YE-20 Year-end 2020, October 31, 2020 YTD Year to date YoY Current FY results vs last FY results W/C Working Capital, defined as short-term assets less short-term liabilities

Corporate & Operations Biosimilar Biologic drug that is highly similar to a biologic drug. COVID-19 Mild to severe respiratory illness caused by a coronavirus CSE Canadian Securities Exchange CTA Clinical Trial Application with Health Canada DIN Drug Identification Number FDA United States Food and Drug Administration FSE Frankfurt Stock Exchange GDUFA Generic Drug User Fee Act in the USA HC Health Canada ICS Inhaled Corticosteroid INESSS Quebec’s Institut National d’Excellence en Santé et Services Sociaux KAM Key Account Manager KOL Key Opinion Leader LABA Long-Acting Beta2 Agonist LAMA Long-Acting Muscarinic Antagonist LMWH Low Molecular Weight Heparin MHI Montreal Heart Institute NDS New Drug Submission with Health Canada OTCQB U.S. over-the-counter venture market pCPA pan-Canadian Pharmaceutical Alliance PD Parkinson’s Disease PLA Product listing agreement PMPRB Patented Medicine Prices Review Board RAMQ Régie de l’assurance maladie du Québec SKU’s Stock Keeping Units VPI Wholly owned subsidiary of Valeo focussed on the commercialization of generic products

OVERVIEW OF THE BUSINESS AND BUSINESS STRATEGY

The Corporation is a specialty pharmaceutical Corporation which sources, acquires or in-licenses brand and generic products for sale in Canada. Valeo’s business objective is to become an anchor Canadian healthcare Corporation by focusing on the commercialization of innovative products that improve patient lives and support healthcare providers. The Corporation operates in two distinct business divisions: branded prescription/OTC products, and hospital injectable products. Such divisions have been selected in order to leverage the Corporation’s expertise and create operational synergies. Therapeutic fields are selected based on market potential (size and growth prospects), competitive landscape, and resource requirements needed to reach the target audience and execute our commercialization strategy. For our branded prescription/OTC product division, Valeo’s current and future product pipeline will include innovative products, with a focus on neurology, oncology, and hospital specialty products. Our second business division, hospital injectable products, consists primarily of licensing injectable generic drugs that are used in a hospital setting. On a selective basis, the Corporation may also acquire Canadian rights to non-hospital-based generics.

Valeo’s business model consists of acquiring the exclusive Canadian rights to regulatory approved or late-stage development products, either through acquisitions, long-term in-licensing or distribution agreements with pharmaceutical companies that do not have a presence in Canada and then providing all of the services required to register and commercialize these pharmaceutical products in Canada. Preferences are for products that are already approved in other territories such as the United States, Europe, or Asia and also for innovative products addressing major unmet medical needs. Some of these products may require up-front, regulatory and or commercial stage milestone payments and all require regulatory approval from Health Canada prior to commercialization.

The Corporation has 38 full time employees and consultants including a team of 14 pharmaceutical representatives and medical science liaison staff. Valeo maintains a dedicated warehousing space in Kirkland, Quebec to handle all the inventory requirements for Canada. Valeo’s 20,000 square foot facility includes 14,000 square feet of warehouse space, three licensed narcotics vaults, the capability to handle cold chain requirements and shipping needs. There is ample space in our warehouse to facilitate the addition of several new products to our growing Canadian portfolio. Valeo also operates a sophisticated SAP enterprise resource planning system and possesses the in-house expertise to handle all activities associated with regulatory, quality control, supply chain, commercial and medical, and pharmacovigilance. The ability to handle such a broad range of activities has been a key factor in our successful in-licensing activities and acquisition of thirdparty product rights for Canada.

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VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

The Corporation has two wholly owned subsidiaries: VPI Pharmaceuticals Inc., located within the Corporation’s premises in Kirkland, Québec, which specializes in the development and commercialization of generic products and Valeo Pharma Corp. located in the United States.

Product Portfolio

As at the end of Q1-21 Valeo Pharma’s product portfolio included eight (8) commercial stage products as well as five (5) products in prepre-launch phase and one (1) product currently at a regulatory stage. Regulatory stage products include products that have been submitted to HC with approvals pending, as well as products that Valeo intends to submit to HC during FY-21. Pre-launch stage products include products for which we already have obtained the DIN from HC, and where supply of finished products is being arranged prior to launch. Commercial stage starts at the time the first shipment to wholesalers/retailers is done. The submission of some of these products may be postponed should Valeo not be able to fully access the information required for ensuring a successful review by HC.

Our product portfolio includes 2 products that are expected to have a material impact on our revenues over the coming quarters, namely Hesperco[TM] , a flavonoid used to support the immune system, and Redesca ® , a LMWH biosimilar used for the treatment and prevention of blood clots, a $200 million market in Canada.

Valeo continues to search for innovative products within its targeted areas of focus and maintains active business development activities to achieve this goal. Our experienced management team has a long and proven track record of successfully sourcing, developing, and commercializing drugs in a variety of therapeutic areas at all stages of their life cycle in Canada.

The regulatory environment is such that the average timeline from commencing the registration process to receiving marketing approval ranges from 12-18 months. In circumstances where a product has an existing DIN, the time between the signing of the license and the start of commercialization is approximately 6-9 months. Valeo possesses all the required expertise to manage all aspects relative to the filing, registration, as well as successfully launching the products currently in its pipeline. Additional therapeutically focused personnel in marketing and sales will be added as current and future in-licensed products approach the end of their respective approval process.

Commercial Stage:

	Products Indications Partners Regulatory, Commercial Status, and other important information
	Onstryv® (License) Idiopathic PD as an add-on for patients on stable dose of Levodopa (L-dopa) alone or in combination with other drugs, to help with "off" episodes. Zambon S.p.A. (“Zambon”), Marketed since Q3-19 and expected to reach peak sales within 3-5 years post launch. On February 6th,2020, Valeo received notice of a positive recommendation by INESSS to the Quebec Health Minister (the “Minister”) for inclusion of Onstryv® on the list of drugs covered by RAMQ. Quebec public listing is imminent but still pending.
	M-Eslon (Distribution Agreement) Extended-release morphine sulphate used for pain management. Ethypharm Inc. Distributed in Canada since 2015.
	Yondelis® Trabectedin (license) Soft tissue sarcoma PharmaMar S.A. Commercial launch took place early Q4-20. Over the coming year, Valeo will be implementing various initiatives such as Patient-Access-Programs, aimed at expanding the use of this product.
	Hesperco Bioflavonoid antioxidant used for immune support. Co-developed by Valeo and Ingenew Pharma. During FY-20, the Corporation initiated the formulation development and manufacturing of Hesperco. The product is commercially available since October 2020 via on-line selling as well as Amazon Canada. Further to the start of a clinical trial by the prestigious Montreal Heart Institute (see Corporate Highlights), Hesperco is expected to be available at most Canadian retailers in Q2-21. US launch will also take place in Q2-21.
	AmetopTM Gel For skin Anesthesia prior to venepuncture or venous cannulation Alliance Pharma Marketed since Q4-20.
	Benztropine (Distribution Agreement) Anticholinergic agent used for the treatment of PD Asia/Pacific Generic Mfg. Marketed since Q4-18, hospital specialty distribution.
	Ethacrynate Sodium Loop diuretic for high blood pressure and associated swelling Owned by Valeo Marketed in Canada since Q3-18. Sold in the US since Q4-20 via our US distribution partner.
	Ondansetron ODT Prevention of nausea and vomiting caused by cancer chemotherapy European Generic Mfg. Commercially available in retail pharmacies across Canada since Q4-18. Valeo will cease to commercialize this product in the first half of 2021.

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VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

Pre-launch

	Product Indication Partner Regulatory, Commercial Status, and other important information
	Enerzair® Breezhaler® (Commercial Agreement) LABA/LAMA/ICS fixed triple dose asthma drug. Novartis Pharmaceuticals Canada Inc. Approved by HC in Q3-20. The Canadian maintenance asthma market is estimated at $700M and growing annually by 2-3%. Valeo entered into a Commercialization & Supply Agreement for the product in Q2-21 with commercial activities expected to start in April 2021. Initiatives to have Enerzair®Breezhaler®included for provincial reimbursement across Canada have commenced and should be completed in the first part of Calendar 2022. Private coverage initiatives have also commenced with coverage expected to reach 90% by year end 2021.
	Atectura® Breezhaler® (Commercial Agreement) LABA/ICS dual combination active asthma drug. Novartis Pharmaceuticals Canada Inc. Approved by HC in Q3-20. The Canadian maintenance asthma market is estimated at $700M and growing annually by 2-3%. Valeo entered into a Commercialization & Supply Agreement for the product in Q2-21 with commercial activities expected to start in April 2021. Initiatives to have Atectura®Breezhaler®included for provincial reimbursement across Canada have commenced and should be completed in the first part of Calendar 2022. Private coverage initiatives have also commenced with coverage expected to reach 90% by year end 2021.
	Redesca® (Distribution Agreement) LMWH - Anticoagulant biosimilar used to treat and prevent deep vein thrombosis and pulmonary embolism. Shenzhen Techdow Pharmaceuticals Co., Ltd. Approved by HC Q1-21. The Canadian market for LMWH exceeds $200M on an annual basis (Source: IQVIA, 2019). Redesca®has more than 8 years of proven in-market safety internationally and more than 150 million patient days treated in Europe alone. Discussions to have Redesca®included for provincial reimbursement across Canada have been initiated and on December 18th,2020, Valeo received notice of a positive recommendation by INESSS to the Quebec Health Minister (the “Minister”) for the inclusion of Redesca®on the list of drugs covered by RAMQ. Commercial launch is expected to occur in the first half of FY-21 supported by a dedicated salesforce.
	Amikacin Injectable Antibiotic European Generic Mfg. Approved by HC in 2020. Annual market size for this product is $2.5M. Supplies have been secured and sales expected to commence during Q2- 21.
	Pip-Tazo (Piperacillin/ tazobactam) Injectable Antibiotic European Generic Mfg. Approved by HC, manufacturing and supply of the API and finished products have been impacted by the Covid-19 outbreak. Valeo expects to launch the product before the end of FY-21.
Regulatory Stage
	Product Indication Partner Regulatory, Commercial Status, and other important information
	Undisclosed Hospital Product #1 Injectable Antifungal Undisclosed The Corporation has acquired the Canadian rights to this product not yet approved by HC. The Product has been filed with HC with approval expected in FY-22 with sales expected to commence within 6 months of HC approval.

Q1-2021 Results Overview

Over the last year, Valeo has made continued progress in building its regulatory stage and commercial pipeline as well as attracting talent with a goal of establishing Valeo as a leading Canadian based specialty pharmaceutical Corporation. With 8 products now contributing to our top line and 5 more expected to be launched over the coming year, Valeo is well positioned to achieve its growth objectives.

Our Q1-21 results include the favorable YoY impact of new commercial stage products launched during the latter part FY-20 such as Ametop, Yondelis [®] , and Sodium Ethacrynate launched in the US. These products have already begun to impact revenues without adding SG&A expenses. This is part of our strategy to expand our commercial pipeline and help drive profitability going forward.

Health Canada Approval of Redesca ®

Following the Health Canada approval of Redesca® in December 2020 as well as a positive recommendation by INESSS to the Quebec Health Minister (the “Minister”) for the inclusion of Redesca® on the list of drugs covered by RAMQ, we have accelerated pre-launch activities aimed at ensuring a successful launch in the first half of 2021, namely:

• i. Implemented a dedicated sales team of eleven (11) highly experienced Key Account Managers to cover all Canadian provinces.

• ii. Establishment of a high-profile KOL network.

• iii. Hired consultants to secure accelerated market access for Redesca [®] with public and private payors.

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VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

• iv. Triggered our supply arrangement with our Licensor and partner to rapidly secure commercial lots of our products, (8 SKU’s of prefilled syringes and vials for hospitals and pharmacies).

The above listed activities and related costs as well one-time non-recurrent expenses such as recruitment fees and on-boarding of key personnel and KOL’s have impacted our operating results for Q1-21. We are convinced that the unique opportunity to successfully launch Redesca® across Canada in Q2-21 warrants early investments and staff commitments that will be highly rewarded in the short and medium term.

Hesperco[TM] – now being tested by MHI for the reduction of Covid-19 related symptoms and problems.

Concurrent with the decision by the MHI to initiate a clinical trial in Q1-21 to evaluate the ability of hesperidin, the medicinal ingredient in Hesperco™ capsules, to reduce the severity of symptoms and the need for hospitalization in COVID-19 patients, we have implemented a series of commercial initiatives aimed at promoting Hesperco™ through various sales channels. Those initiatives include:

• i. Active social media advertising

• ii. Hired consultants to support our commercial team and secure shelf space and listings with major Canadian retailers

• iii. Amazon Canada and Amazon US launch initiatives

• iv. Development and launch of a dedicated website and on-line selling platform

• v. Development and print of in-store marketing material

• vi. Active web marketing through various specialized platforms such as MD Briefcase and other health professional channels

Same as for Redesca [®] , the above costs are expected to provide short-, medium- and long-term benefits to the Corporation and help accelerate the branding and commercial success of our unique Hesperidin formulation. We expect MHI to complete the Hesperidin clinical trial during calendar Q3-21 with results to be announced shortly thereafter.

Aside from the above-described activities, we will continue to implement initiatives aimed at increasing our short term and our mediumterm revenues and to improve our revenue mix and the margins derived from our product sales.

Non-IFRS Financial Measures for financial analysis

During the last year, our results have been impacted by several non-recurrent costs and adjustments which have had a negative (onetime) impact during the quarter. Despite stable cost of sales to gross revenues ratio which is indicative of stable product mix, (see “Selected Quarterly Financial Information”) these non-recurrent costs and adjustments have negatively impacted our net sales margins. Also, despite significant non-recurrent SG&A items (See “EBITDA & Adjusted EBITDA Reconciliation”) we have managed to keep our total SG&A reasonably flat compared to prior period. These non-recurrent SG&A items include write-off of intangible assets, cost to secure our OTCQB listing in the US, non-recurrent investors relations expenses and material penalties for terminating a multi-year marketing agreement. This sets the stage for improved net margins going forward.

With new products sequentially contributing to our revenues, and the benefit of operational streamlining, we expect our key operational metrics (gross to net ratio, product mix and SG&A leverage) to improve, thus driving incremental gross and net margins and positioning Valeo to become a highly profitable EBITDA Corporation.

During the past year we have introduced several new Non-IFRS financial metrics which are meant to help better appreciate our progress. We have introduced Gross revenues and Gross to net revenues ratio which help track the growth of our revenues and items impacting our net revenues. We have introduced a cost of sales to gross revenues which is a better indicator of our product mix performance. The total SG&A to Gross revenues will facilitate tracking our operational leverage. Finally, the Adjusted EBITDA reconciliation will become our key operational metric as it eliminates share-based compensation and the cost of financial instruments which we expect will be converted over the coming year. Adjusted EBITDA also helps eliminate non-recurrent items which impact our operational results and affects the reader’s ability to track our performance.

Q1-21 CORPORATE HIGHLIGHTS

Financial Results

Q1-21 vs Q1-20 Performance

• Net Revenues up 11% at $1.9 million compared to $1.7 million.

• Gross Margin up 20%, at $0.4 million compared to $0.3 million.

• Net loss after taxes of $1.7 million compared to $1.1 million.

• EBITDA Loss up 50% at $1.4 million as compared $0.9 million.

• Adjusted EBITDA (L) up 24% at $1.1 million compared to $0.9 million

Products

• On November 12, 2020, the Corporation announced that it had received a Notice of Compliance from HC granting market authorization for Amikacin, an antibiotic used within the hospital setting. Valeo also announced that shipments of Ethacrynate Sodium had commenced in the U.S. market.

• On December 9, 2020, the Corporation announced that Health Canada has issued a Notice of Compliance for Redesca® and Redesca® HP LMWH biosimilars.

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VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

• On January 25, 2021, the Corporation announced that it has received notice of a positive recommendation by INESSS to the Health Minister for the inclusion of Redesca® and Redesca® HP, on the list of medications covered by the RAMQ for the prevention and treatment of thromboembolic disorders.

Other Corporate and Operating Highlights

• On December 29, 2020, the Corporation announced that its common shares were eligible for electronic clearing and settlement through the Depository Trust Company (“DTC”) in the United States. DTC is a subsidiary of the Depository Trust & Clearing Corporation, a U.S. company that manages the electronic clearing and settlement of publicly traded companies. Securities that are eligible to be electronically cleared and settled through DTC are considered “DTC eligible”. This electronic method of clearing securities speeds up the receipt of stock and cash, and thus accelerates the settlement process for investors and brokers, enabling the stock to be traded over a much wider selection of brokerage firms.

• On January 18, 2021, the Corporation announced the appointment of Mr. Frederic Fasano to the newly created position of President and Chief Operating Officer, to augment its senior leadership team and support expansion of Valeo’s commercial activities. Mr. Fasano was also elected to the Corporation’s Board of Directors. Valeo announced that, in addition to continuing in his role as CEO, Mr. Saviuk would assume the role of Vice-Chairman of Valeo’s Board of Directors. Mr. Richard MacKay remains Chairman of the Board.

Subsequent to the end of the quarter

• On February 17, 2021, the Corporation announced that the Montreal Heart Institute initiated a clinical trial to evaluate the ability of hesperidin, the medicinal ingredient in Hesperco™ capsules, to reduce the severity of symptoms and the need for hospitalization in COVID-19 patients. Hesperidin interferes and inhibits 2 key proteins of SARS-CoV-2 responsible for the infection of healthy cells, suggesting that hesperidin may disrupt the replication rate of the virus and enable infected patients to build natural immunity. Hesperidin’s safety profile and immune-modulatory activity make it a highly promising molecule to intervene at various stages of the COVID-19 infection process.

• On March 29, 2021, the Corporation announced that it had entered into a Commercial and Supply Agreement (the “Agreement”) with Novartis Pharmaceuticals Canada Inc. (“Novartis”) for the Canadian commercialization by Valeo of two innovative asthma therapies, ENERZAIR® BREEZHALER® (indacaterol, glycopyrronium and mometasone furoate) and ATECTURA® BREEZHALER® (indacaterol and mometasone furoate). Under the Agreement, Valeo will be responsible for medical and commercial activities for ENERZAIR® BREEZHALER® and ATECTURA® BREEZHALER® for an initial 8-year period. At present, almost 4 million Canadians are living with asthma, a serious health issue affecting all age groups. Patients with severe asthma live in fear of potential exacerbations which remain highly prevalent even with today’s most advanced therapies. These exacerbations are concerning because of their associated mortality burden and because of the increased risk of side effects from the chronic use of systemic corticosteroids at high dose. Furthermore, there is growing evidence highlighting the lack of symptom control currently achieved in asthma. Globally, 39% of asthma patients remain uncontrolled, despite available dual LABA/ICS medications, primarily due to low adherence, treatment misuse and poor inhaler technique. There is an urgent need to add effective maintenance treatment options to address symptoms as well as asthma related long-term complications and mortality more efficiently (Source: Buhl R et al. Respiratory Medicine 2020).

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VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

SELECTED FINANCIAL DATA

The following table sets forth financial information relating to the periods indicated and should be read in conjunction with the January 31, 2021 unaudited interim condensed consolidated financial statements.

Consolidated Statements of Loss

Consolidated Statements of Loss
Q1-21 Q1-20 $ $	Change
	$1 %2
Gross Product Revenues 2,133 1,920 Adjustments/Deductions 272 236 Net Product Revenues 1,861 1,684 Gross to net sales ratio 87% 88%	213 11%
	36 15%
	177 11%
	-1%
Cost of Sales 1,476 1,362 Gross Margin 385 322 Gross Margin % 21% 19%	114 8%
	63 20%
	2%
Expenses S&M 828 620 G&A 1,029 780 SBC 105 34
	208 34%
	249 31%
	71 208%
Total operating expenses 1,962 1,434	528 37%
Operating Loss (1,577) (1,112) Other expenses / (income) Financial expense 193 64 Other income (44) (68)	(465) 42%
	129 202%
	24 -35%
Total other expenses 149 (4)	153 3625%
Net loss for the period (1,726) (1,108)	(618) 56%
Other comprehensive loss Exchange differences on translating foreign operations 5 (2) Total comprehensive loss (1,721) (1,110)
	6 -600%
	(611) 55%
Loss per share Basic and diluted (0.03) (0.02)
	(0.01) 50%
Weighted average number of shares outstanding 64,528,834 61,455,033	3,073,801 5%

1. A positive variance represents a positive impact to net income and a negative variance represents a negative impact to net income

2. Percentage change is presented in relative values

Q1-21 vs Q1-20

• Gross Revenues • Gross revenues represent sales of products based on Valeo’s listed price prior to taking into consideration any recurrent and non-recurrent price adjustments or other deductions. (See “Management’s Responsibility for Financial Reporting” – “Non-IFRS Financial Measures”)

• Valeo’s gross revenues are derived from the commercialization of 2 groups of products. The first group is comprised of “branded” prescription/OTC products such as Onstryv® and Redesca® which contribute strong gross profit margins but, except for M-Eslon, require important S&M support. The second group includes our hospital-injectable products which require nominal S&M and contribute variable margins depending on the licensing terms. In Q1-21, Valeo launched Hesperco[TM] , a branded OTC product that will be detailed to retailers or sold through Amazon and our transactional website.

• Following the sale of our commercial portfolio in 2014, we have spent great efforts to re-build our product portfolio. Since FY-19, our portfolio of commercial products has been expanding rapidly with product launches sequentially impacting on our gross revenues and financial performance. We still have several products at various stages of pre-launch and regulatory development. We expect most of these products to start contributing to our revenues over the coming year.

• Our gross revenues are indicative of gross sales volume prior to taking into account various adjustments and deductions. (See comments re Sales Adjustments & Deductions below)

• Our Q1-21 results are showing the impact of new commercial stage products contributing to our gross revenues as compared to the prior year period. During the last portion of FY-20, we successively launched Ametop[TM] , Yondelis, and Ethacrynate Sodium in the US.

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VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

	• Gross revenues for Q1-21 increased by 11% at $2,133 compared to $1,920. The $213 positive variance results from QoQ Onstryv revenue growth, as well as new products revenues from Ametop, Yondelis, and Sodium Ethacrynate in the US. • Our YoY results also included a negative contribution for our hospital specialty products which contributed $0.1 million less in Q1-21 as compared to Q1-20. Sales of hospital-based product in Q1-20 were positively impacted bya temporary product shortage experienced bycompetitors.
Sales Adjustments/ other Deductions (“SADs”) and Gross to Net Ratio	• Sales adjustments and other deductions (SADs) to gross product revenues are either applicable to all products (early payment cash discounts, product returns), or represent specific deductions that impact individual product on a recurrent or non-recurrent basis. As an example – some of our products are subject to provincial PLAs or price adjustments while others not. For that reason, the mix of product sales will greatly influence our gross to net ratio and ultimately our profitability. • See (“Management’s Responsibility for Financial Reporting” – “Non-IFRS Financial Measures”) for Gross to Net sales ratio definition. Gross to net sales ratio is a key metric that enables management to assess the Corporation’s sales performance including the profitability of our license and supply arrangements. • Gross to net ratio will vary from quarter to quarter but on average we expect our gross to net sales ratio to vary between 88-90% ofgross revenues. The items impacting gross to net ratios are detailed above.
	• Due to the sales mix for the period, SADs for Q1-21 were slightly higher than historical levels at 13%, compared to 12% forQ1-20.
Net Product Revenues	• Same as for gross revenues, our net revenues are trending upwards due to sequential addition of new products. Net revenues also reflect the impact of recurrent and non-recurrent SADs.
	• Net revenues in Q1-21 were up by 11% compared to Q1-20 at $1,861 compared to $1,684. The increase in net revenues was due to the contribution of new products launched in the later part of FY-20 as well as the higher contribution from Onstryv sales. • Same for our gross revenues, our QoQ results also included a negative contribution for our hospital specialty products as well as a slightlyhigher level of SADs for thequarter.
Cost of Sales (COGS)	• Cost of Sales varies depending on the mix of products sold and includes the supply or manufacturing price for products sold, royalties on sales as well as amortization of product rights. (See Balance Sheet highlights for commentaries on Intangible Assets). • Direct Cost of Sales as a % of gross revenues varies significantly from product to product. Branded products or products owned by Valeo will have lower COGS % than hospital-based products we commercialize for our partners. Historically, the bulk of our product sales was derived from M-Eslon which is a low margin (high COGS) product for us. As the contribution of M-Eslon to our overall revenues decreases over time from the addition of new more profitable products, we expect our COGS ratio to range between 40-60% in the future. • The impact of the amortization ofproduct rights was$63 inQ1-21 compared to$50 forQ1-20.
Gross Margin $ and Gross Margin %	• As we launch new products and the commercial performance of our “Branded” product portfolio improves, we are set to see a significant expansion of our gross margin which will translate into a direct impact on our overall profitability. See comments above regarding current and projected COGS ratios per products which will drive our gross margins performance going forward. • Due to the addition of revenues from Yondelis®and Ametop as well as the QoQ growth in Onstryv sales, our gross margin ratio for Q1-21 improved slightly compared to Q1-20 at 21% vs 19%. The 2% increase in gross margin ratio combined with the 11% increase in net sales contributed to a 20% increase in our gross margin for Q1-21 at$385 compared to$322 forQ1-20.
S&M expenses	• As indicated earlier, Valeo commercializes Branded products that require S&M support, as well as hospital injectable products and M-Eslon, which require limited S&M commitments. Because S&M staff costs represents the bulk of the S&M expenses, those expenses will increase as we expand our sales force to support the launch of more Brandedproducts. S&M expenses shouldgrow in line with our revenues.
	• S&M expenses were up by 34% in Q1-21 as compared to Q1-20 representing a $208 increase. The 34% increase was due to the addition of the Redesca® salesforce and related hiring fees for a combined impact of $0.2 million. • Following the HC approval of Redesca® in December 2020, Valeo accelerated its hiring initiatives in order to take full advantage of the market opportunities. 11 highly experienced sales representatives joined Valeo in the early part of calendar 2021. Most of the hiringtookplace inQ1-21,with some additional hiringin early Q2-21.
G&A expenses	• Valeo’s G&A expenses consist primarily of staff costs for our non-S&M management team. This includes staff costs for administration, finance and accounting, business development, legal, regulatory, quality control, pharmaco-vigilance, supply chain, as well as IR expenses which can fluctuate significantly between quarters and depending on the IR initiatives implemented. • IR spending during Q1-21 increased significantly over Q1-20 and represented a negative $0.2 million impact. • Addition to Head Office personnel such as the addition of a new president and several support staff to support the anticipatedgrowthyin FY-21 and beyond contributed to a $0.1 million increase.

8

VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

• SBC expenses represent the costs relating to the issuance of stock options to new staff and board members and the vesting of same over time.

• SBC expenses • SBC expenses were $105 in Q1-21 compared to $34 in Q1-20. The increase was due to the hiring of a new president and COO.

• • Financial expenses reflect the capital structure of the Corporation and include costs for issuing interest bearing debentures in lieu of issuing shares to finance our operations. The financial expenses also capture the costs for

• Financial using our operating line of credit, as well as supplier financing, other financial charges and bank fees.

• expenses • Our financial expenses rose between Q1-20 and Q1-21 representing a 202% increase. The increase results from the 2 debenture financings secured in Q2-20 and Q4-20 for $2.2M and $1.7M respectively.

• • Nominal variations between the periods. The Corporation continues to provide back-office, accounting,

• Other income regulatory and other consulting services as a means of leveraging its staff’s expertise.

• • Our net loss for Q1-21 increased by 56% compared to Q1-20 at $1,726 compared to $1,108. • The $618 increase was due to the respective increase in S&M, SG&A, SBC and financial expenses which were

• Net loss for the only partly offset by the increase of our gross margins. period • S&M, and G&A increases were required to position Valeo for a solid revenue growth in FY-21. Valeo added the required commercial and support staff to capitalize on market opportunities for Redesca® and accelerate the growth of new products such as Yondelis®and Hesperco.

EBITDA(L) Reconciliation

(See “Management’s Responsibility for Financial Reporting” – “Non-IFRS Financial Measures”)

The following table provides a reconciliation of net loss to EBITDA(L) for Q1-21 as compared to Q1-20.

Q1-21 Q1-20	Change
	$1 _%2 _
Net Loss (1,726) (1,108) Adjustments Interest Expense 166 58 Depreciation 27 25 Amortization 116 78	(618) 56%
	108 186%
	2 8%
	38 49%
EBITDA Loss (1,417) (947)	(470) 50%
Other Adjustments Share-Based Compensation 105 34 Recruitment Costs – new product launch 125 - Other warrants/ options costs 81 22 Impairment of intangible assets 3 -
	71 208%
	125 100%
	59 268%
	3 0%
Adjusted EBITDA Loss (1,103) (891)	(212) 23%

1. A positive variance represents a positive impact to net income and a negative variance represents a negative impact to net income 2. Percentage change is presented in relative values

Q1-21 vs Q1-20

• Management believes that our EBITDA (Loss) performance is more indicative of the commercial progress achieved by the Corporation as it eliminates the financial costs associated with our financial structure and the amortization of prior investments in our product portfolio such as license fees and regulatory filings. (See “Management’s Responsibility for Financial Reporting” – “Non-IFRS Financial Measures”)

• EBITDA loss increased in Q1-21 compared to Q1-20. See “Net loss” section.

EBITDA (Loss)

• Considering the significant impact of SBC expenses as well as non-recurrent items such as the cost of non-cash instruments to support IR initiatives, as well as the significant one-time hiring cost related to the implementation of the Redesca® salesforce, we believe that our Adjusted EBITDA is a better indicator of our performance and progress compared to prior periods – See below.

• Our EBITDA loss for Q1-21 increased 50% compared to Q1-20. The $470 increase over the 2 periods is mainly explained by the respective increases in S&M, SG&A, and SBC expenses.

9

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

VALEO PHARMA INC.

• (See “Management’s Responsibility for Financial Reporting” – “Non-IFRS Financial Measures”)

• Our Adjusted EBITDA (Loss) increased by $211 between Q1-20 and Q1-21 at $1,103 compared to $891. The 23% increase can be attributed to respective increase in S&M and G&A expenses which are required to position the

• Adjusted Corporation for growth in FY-21 and beyond.

• EBITDA (L)

• We anticipate Redesca® to be successfully launched in Q2-21 as well as further contribution from new products launched during FY-20. These factors should provide increased margins that will serve to cover the costs of our increasing commercial structure and therefore help drive a sequential improvement of our profitability.

Consolidated Balance Sheet Highlights

Consolidated Balance Sheet Highlights
As at, 31-Jan-21 31-Oct-20	Change
	$1 _%2 _
Cash and liquidities 717 2,836 Trade and other receivables 906 1,220 Inventory 1,249 881 Intangible assets 4,954 4,948 Total assets 9,173 10,963	(2,119) -75%
	(314) -26%
	368 42%
	6 0%
	(1,790) -16%
Trade accounts payable 2,546 3,394 Total current liabilities 3,262 4,278 Convertible debentures 1,528 1,504 Non-Convertible debentures 1,493 1,463 Total liabilities 6,904 7,894 Share capital 15,885 15,024 Warrants 1,279 1,333 Contributed surplus 1,725 1,611 Deficit (16,203) (14,477)	(848) -25%
	(1,016) -24%
	24 2%
	30 2%
	(990) -13%
	861 6%
	(54) -4%
	114 7%
	(1,726) 12%

1. A positive variance represents a positive impact to the balance sheet and a negative variance represents a negative impact to the balance sheet 2. Percentage change is presented in relative values

3.

3.
	Q1-21 vs YE-20
Cash and liquidities	• Our cash balance stood at $717 at the end of Q1-21 as compared to $2,836 at YE-20 representing a 75% decrease.
Trade and other receivables	• Trade and other receivables have decreased between Q1-20 and YE-20 representing a $314 reduction or 26% despite the 10% increase in net product revenues. The 26% decrease is partly due to the timing of revenues during the respective periods as well as the 20% drop in net revenues between Q4-20 and Q1-21. The first quarter of our fiscal year which covers the Christmas and New Year period is always impacted by theyear-end slow-down of Canadian retailers’ operations.
Inventory	• The inventory will fluctuate between periods to reflect sales of products and the addition of new supplies required to support existing products or future product launches. Typical shelf life for pharmaceutical products is 18-36 months and for that reason, product requirements for new product launches can often last more than one year and will tend to negatively impact short term cash flows and working capital requirements. • The 42% increase between YE-20 and Q1-21 results from the increase in inventory to support our new commercialproducts such as AmetopGel,Yondelis,Hesperco and Sodium Ethacrynate for the US market.
Intangibles assets	• Intangible assets represent investments made in order to build our product pipeline. For assets owned by Valeo, such as Sodium Ethacrynate and Hesperco, intangible assets include formulation, R&D costs, regulatory and filings expenses. For other products acquired through licensing activities, intangible assets include costs to acquire product rights, regulatory fees and expenses as well as expenses to improve market access for these products. • Intangible assets are amortized using the straight-line method, over the remaining useful life of the asset (or license) starting when the product is ready for commercialization – typically when Valeo receives marketing approval and its first commercial product lot. • Intangible assets are tested annually for impairments as per IFRS Standards (IAS 38) to ensure that the recoverable value of each assets exceeds its book-value. • There was nominal variation of our intangible assets during Q1-21 as compared to YE-20.

10

VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

	• Amortization of deferred charges has increased over the recent periods and were offset by further investment to support regulatoryfilings.
Total assets	• Total assets decreased by 17% between YE-20 and Q1-21. The $1,790 decrease results mainly from the use of cash to fund operations and workingcapital requirements(See “Liquidities and Capital Resources”).
Accounts payables	• Our accounts payables have decreased by $848 between YE-20 and Q1-21 representing a 25% decrease. • Included in our trade payables at the end of Q4-20 is the $650 license fee due to Zambon which payment has been made earlyin FY-21.
Total current liabilities	• Our total current liabilities have decreased by $1,016 between YE-20 and Q1-21 reflecting the reduction in accountspayable described above as well as a reduction in accruals.
Convertible debentures	• The Corporation issued a total of $2,178 of convertible debentures during FY-20 (Gross proceeds). The net amount included deductions for the fair value allocation to the conversion option attached to the debentures as well as unamortized transactions costs. • The$24 increase between YE-20 andQ1-21 represents interest accrued.
Non-Convertible debentures	• During Q4-20, the Corporation secured $1,700 worth of non-convertible debentures to fund its operations as well as working capital requirements to support the launch of new products. The net amount of $1,493 at the end of Q1-21 includes deductions for the fair value allocation to the warrants attached to the debentures as well as unamortized transaction costs. • The$30 increase between YE-20 andQ1-21 represents interest accrued.
Total liabilities	• Our total liabilities have decreased by $990 between YE-20 and Q1-21 reflecting mainly the reduction in accountspayable and accruals described above.
Share Capital	• The variance reflects the exercise of stock options, broker’s compensation options, warrants and shares issued as compensation to a consultant.
Warrants	• The variance reflects warrants issued upon exercise of broker’s compensation options, less the fair value of warrants converted.
Contributed Surplus	• $114 increase relates to compensation options and stock-based compensation charged during Q1-21 as well as the cost for issuingoptions in exchange for IR services.
Deficit	• Increase reflects theperformance of the Corporation duringtheperiod – Statement of Loss

SELECTED QUARTERLY FINANCIAL INFORMATION

	Q1-21 Q4-20 Q3-20 Q2-20	Q1-20 Q4-19 Q3-19 Q2-19
Gross Revenues Adjustments/Deductions Net Revenues Gross to net sales ratio	2,133 2,501 1,972 2,322	1,920 1,644 2,831 1,618 236 388 262 637 1,684 1,256 2,569 981 88% 77% 91% 61%
	272 286 482 241
	1,861 2,215 1,490 2,081
	87% 89% 76% 90%
Cost of Sales Gross Margin Gross Margin % to net sales	1,476 1,778 1,363 1,586	1,362 1,115 1,689 863 322 141 880 118 19% 11% 34% 12%
	385 437 127 495
	21% 20% 9% 24%
Expenses Sales and Marketing General and Administrative Share Based Compensation Profit Sharing		620 708 335 441 780 771 548 775 34 97 111 84 - - - -
	828 475 513 516
	1,029 773 839 721
	105 232 162 42
	- (9) 23 3
Total operatingexpenses	1,962 1,471 1,537 1,282	1,434 1,576 994 1,300
Operating loss Other expenses /(income) Financial expense Other income	(1,577) (1,034) (1,410) (787)	(1,112) (1,434) (114) (1,182) 64 10 42 31 (68) (51) (64) (73)
	193 176 249 128
	(44) (34) (44) (53)
Total other expenses	149 142 205 75	(4) (41) (22) (42)
Net loss for theperiod	(1,726) (1,176) (1,615) (862)	(1,108) (1,394) (92) (1,140)
EBITDA (Loss) Adjusted EBITDA (Loss)	(1,417) (880) (1,271) (640) (1,103) (486) (705) (598)	(1,006) (1,303) (37) (1,098) (973) (1,206) 74 (1,014)

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VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

Notes	Valuable information
Gross revenues	• Despite the launch of several new products in the later part of FY-20, our total revenues in Q1-21 have decreased by 15% compared to Q4-20. This QoQ reduction is mainly due to the calendar year end slowdown of commercial activities in the sector. Over the 8 quarters, our gross revenues are still tending up due to the continued expansion of our commercial portfolio and the market share gains of products launched over prior periods. • Looking ahead into the balance of FY-21, Redesca® (HC approval secured in Q1-21) as well as Amikacin are expected to be launch ion Q2-21. The impact of Redesca® alone is expected to more than double our quarterly revenues byYE-21.
Adjustments and Deductions to sales (SADs) & Gross to net sales ratio	• As indicated in the Q1-21 QoQ analysis, the SADs were in line with historical levels. SADs vary from quarter to quarter and the review of the last 8 quarters shows the impact of non-recurrent adjustments on our net sales. In Q2-19 our gross revenues were impacted by the large amount of product returns that took place when we stopped selling Synacthen due to a global shortage of the product. In Q3-20, the results were impacted by $145 worth of Onstryv® returns that were linked to a one-time contractual arrangement with a retailer and significant price adjustments on M-Eslon and Sodium Ethacrynate. Going forward we target gross to net ratios to trend in the 88- 90% range.
Total Net Revenues	• After netting the SADs from our gross sales, our net sales in Q1-21 were down 16% compared to the prior Q4-20 quarter as a result of the year-end cyclical slowdown impacting all the pharmaceutical sector. • Total net revenues in Q3-19 were impacted by the strong pipeline-fill associated with the successful launch of Onstryv®.
Cost of Sales and Gross Margin	• Fluctuates with total revenues as well as the mix of product sold. • Except for M-Eslon, most of our products are expected to generate sales margins of 50-80%. With continued progress from Onstryv®, and other products in our commercial pipeline, we expect the relative proportion of M- Eslon sales to total sales to represent less than 25% a year from now, as compared to the majority of our revenues for the last quarter. This should drive our gross margin % up from the current levels. • In Q3-19, our margins increased over prior quarters due to the launch of Onstryv and the strong pipeline fill. • Cost of Sales also includes amortization of product rights previously capitalized as intangible assets. Such amortization starts upon the launch of the respective products. Amortization for the Onstryv® license fees stated inQ3-19 and currentlyrepresents$50perquarter. Amortization of the Yondelis® license fees started inQ4-20.
S&M expenses	• S&M expenses have increased by 75% in Q1-21 compared to the prior quarter. As mentioned earlier, the addition of 11 new reps and the increase S&M activities to support the launch of new products impacted our S&M expenses. • Since Q3-19 S&M expenses reflected the addition of a sales team to support the launch of Onstryv®, as well as incremental promotion for our expanding product pipeline. • Our salesforce can support several new products, and this should facilitate an improvement of our net results followingthe addition of new brandedproducts. Also,VPIproducts require nominal S&M support.
G&A expenses	• Other than IR expenses, G&A expenses represent mainly rent, legal expenses and salaries. While our G&A expenses had remained stable over prior periods, the new staff costs and increase in IR activities have led to a 33% in our G&A in Q1-21 as compared to Q4-20. Going forward, the Corporation’s administrative infrastructure can support significantgrowth with nominal staff additions.
SBC expenses	• Represents the costs of issuing stock options. Fluctuation between quarters is due to the hiring of staff and addition of Board members as well as the vesting associated with issued options. The issuance of a large number of options to staff in Q3-20 impacted the SBC expenses for that quarter and the vesting of a large number of outstandingoptions has increased SBC expenses inQ4-20.
Profit Sharing	• Starting Q2-20 the Corporation started accruing and paying amounts under profit-sharing arrangements. Such arrangements are meant to reduce the transfer price to be paid by Valeo and have the licensee and licensor share the commercial success of theproducts.
Financial expenses	• Our financial expenses fluctuate between quarters depending on the level of short term and long-term borrowing required to fund our operations. • The addition of convertible debentures in February and March 2020, as well as the non-convertible debentures in July 2020 has led to a sequential quarterly increase in our financial expense since the start of FY-20. Q3-20 Financial expenses also included increased use of our operating line of credit and arrangements with a few suppliers. • The financial expenses in Q4-19 were relatively low following the closing of a $3.1 million public offering prior to the end of the preceding quarter. Concurrent to the public offering outstanding loans and long-term loans were converted into units,and therefore eliminatingan interest-bearingliabilities.
Other (Income) expenses	• Fluctuates between periods based on the level of services rendered. The Corporation continues to provide back- office,regulatoryand other consultingservices as a mean of leveragingits staff’s expertise.
Net loss	• Our net loss in Q1-21 was 47% higher than the prior quarter due to lower revenues explained by the cyclical year- end dropin the sector % as well as the respective increase in S&M,G&A expenses.

12

VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

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• We believe that in order to eliminate the impact of our debentures and several non-cash items, that the EBITDA (L) and Adjusted EBITDA(L) metrics to be more representative of our quarterly performance. (See EBITDA (L) and Adjusted EBITDA (L) below.)

• Except for Q3-19 when our results were impacted by the successful launch of Onstryv®, our quarterly net loss has been relatively stable during the previous reported periods despite the addition of staff and expenses to support the Corporation’s growth initiatives.

• We expect our net loss to reduce significantly over the coming quarters as we start experiencing revenues growth from the launch of new products and secure incremental market share for products already on the market.

• EBITDA Loss (See “Management’s Responsibility for Financial Reporting” – “Non-IFRS Financial Measures”) eliminates the impact of the CDU, ITC and other financings which reflect the Corporation’s financing strategy adopted to attract the required capital to fund its operations.

• Over the last 4 quarters our EBITDA results have been impacted by SBC expenses linked mainly to Covid-19 staff

• EBITDA (L) retention measures as well as new hires. • Similar to our net operating loss, over the last year our EBITDA loss has also been impacted by staff additions and associated expenses required to support the launch of new products.

• • We expect new products, including Hesperco and Redesca® (planned launch in FY-21) to have transformational impact on our profitability.

• • Our Adjusted EBITDA (L) is a much better indicator of our progress over the last year. • Prior to the last quarter where results have been impacted by new S&M and G&A expenses required to prepare the Corporation for growth, our Adjusted EBITDA loss had been trending towards profitability prior to being.

• Adjusted • Similar to our net loss and EBITDA (L), our Adjusted EBITDA performance will trend upward over the coming EBITDA (L) quarters as new products contribute to our revenues and gross margins. Most of the new products recently added and to be added in the coming year (except for Redesca®) will require nominal SG&A. We expect a large portion of the additional gross margins to translate into incremental net margins, hence contributing to reduce/eliminate our Adjusted EBITDA loss.

LIQUIDITIES AND CAPITAL RESOURCES

For the period ended 31-Jan-21 31-Jan-20	Change
	$1 _%2 _
Operating Activities Net loss from operations (1,726) (1,108) Other Items not affecting cash 427 208 Changes in non-cash working capital (1,397) (656)
	(618) 56%
	219 105%
	(741) 113%
Cash used in operations (2,696) (1,556)	(1,140) 73%
Investing activities Cash used byinvestingactivities (116) (185)
	69 -37%
Financing Activities Cashprovided byfinancingactivities 713 1,407
	(694) -49%
Decrease in cash (2,099) (335) Foreign exchange gain on cash (20) (1) Cash, beginning of the period 2,836 335 Cash, end of period 717 -	(1,765) 526%
	(19) 1900%
	2,501 747%
	717 0%

1. A positive variance represents a positive impact to the cash flow and a negative variance represents a negative impact to the cash flow

2. Percentage change is presented in relative values

Q1-21 vs Q1-20

• Cash used in • Cash used in operations represents cash flows from operations, excluding income and expenses not affecting operations cash. • Cash used in operations was $2,696 in Q1-21 compared to $1,556 in Q1-20. The $1,140 increase came from a $618 increase in net loss and $741 increase in non-cash working capital, which were partially offset by the increase in items not affecting cash for $219.

• • Items not affecting cash increased were due to the increased depreciation and amortization of intangible assets. The increase in non-cash working capital resulted mainly from the $847 decrease in accounts payable following the payment of the $650 license fee to Zambon.

• Cash used in • Cash used by investing activities to acquire intangible assets during the period was $116 in Q1-21 as compared investing activities to $185 for Q1-20. Valeo carries many initiatives aimed at increasing the value of its licensed product portfolio,

13

VALEO PHARMA INC.

Management’s Discussion and Analysis for the first quarter ended January 31, 2021

	including 1) activities related to several product filings and interaction with HC, 2) in-licensing activities, as well as 3) activities for securing the listing and reimbursement of its approved products. We expect those activities to varyfromquarter toquarter but to continue over the next fewyears.
Cash provided by financing activities	• During Q1-21, financing activities provided cash of $713 compared to $1,407 in Q1-20. $736 worth of warrants and options were exercised during Q1-21. During Q1-20, the Corporation secured $1,407 net cash from advances/commitments into the debenture financingclosed inQ2-20.

Liquidity and Capital Resources

Going Concern

This MD&A have been prepared on a going-concern basis, which implies that the Corporation will continue realizing its assets and discharging liabilities in the normal course of business for the foreseeable future. As reflected in the annual audited financial statements, the Corporation is in the process of ramping up its activities and has not yet achieved profitability. During the quarter ended on January 31, 2021, the Corporation incurred a net loss of $1,108, used cash in operations of $1,556 and had a working capital deficiency of $4,064 at the end of the period. This raises significant doubt about the Corporation’s ability to continue as a going concern.

Accordingly, the ability of the Corporation to realize the carrying value of its assets and continue operations as a going concern is dependent upon its ability to obtain additional financing and ultimately on generating future profitable operations. Subsequent to the end of Q1-21, management was successful in raising additional capital to mitigate the working capital deficiency ( see Subsequent Events ). Management anticipates that the commercialization of new products will provide incremental cash flow that could contribute to working capital requirements. There are no assurances that any of these initiatives will be successful. Factors within and outside the Corporation’s control could have a significant bearing on its ability to obtain additional financing or on the generation of additional revenues.

These quarterly consolidated financial statements do not include any adjustments related to the carrying values and classifications of assets and liabilities that would be necessary should the Corporation be unable to continue as a going concern.

Liquidities

As at, 31-Jan-21 31-Oct-20	Change
	$1 _%2 _
Cash 717 2,836 Trade and other receivables 906 1,220 Inventory 1,249 881 Trade accounts payables 2,546 3,394 Working Capital 349 1,132	(2,119) -75%
	(314) -26%
	368 42%
	(848) -25%
	(783) -69%

1. A positive variance represents a positive impact and a negative variance represents a negative impact to the balance sheet items

2. Percentage change is presented in relative values

Following a series of successful financing in FY-20 we have secured additional capital to strengthen our balance sheet and cash position. Our working capital surplus stood at $349 as compared to $1,132 as at YE-20. The proceeds from the various financings secured in FY-20 have been used to reduce our trade payables and provide liquidities to support working capital requirements necessary to support the launch of new products and fund the corporation until it generates positive cash flows from operations.

Entering into in-licensing agreements with pharmaceutical companies necessitates the payment of up-front amounts, milestone payments as well as all the costs normally associated with preparing for the launch of a pharmaceutical product. Going forward, Valeo intends to fund these in-licensing agreements with a combination of cash, cash from operations, equity provided by current and new shareholders, as well as convertible or non-convertible debt if required.

As funding requirements to acquire product rights vary widely depending upon the nature and potential of the product and the in-licensing agreement, the Corporation intends to seek funding on a project-by-project basis. Funding requirements for products under discussion vary from $ nil to $10 million. The Corporation anticipates that the commencement of additional product distribution agreements and other revenue contracts will provide significant incremental cash flow that will contribute to working capital requirements.

Also, the Corporation’s recent initiatives related to product acquisition rights and regulatory filings have and will continue to drive a series of product launches over the coming quarters that will contribute meaningful incremental operating cash flows. In addition to the launch of Onstryv® and other products in FY-19, the Corporation has launched Ametop, Yondelis® and Sodium Ethacrynate via a US distributor in FY-20. Valeo plans to launch more products in FY-21, including Hesperco (launched in Q1-21) as well as Amikacin and Redesca® in the first half of FY-21. Redesca® is expected to materially impact both the Corporation’s revenues and gross margins, and consequently help the Corporation reach profitability over the coming periods.

14