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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934

For the month of: August, 2007

Commission File Number: 000-50393

NEUROCHEM INC.

275 Armand-Frappier Boulevard

Laval, Québec

H7V 4A7

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40 F.
Form 20-F o Form 40-F þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes o No þ

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes o No þ

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g-3 under the Securities Exchange Act of 1934.

Yes o No þ

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):

SIGNATURES:

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	NEUROCHEM INC.
August 16, 2007
	By:	/s/ David Skinner
		David Skinner, Vice President,
		General Counsel and Corporate Secretary

we are Neurochem

Quarterly Report

[visual]

Second quarter ended June 30, 2007

Message to Shareholders 3

Message to Shareholders

I am pleased to report on our activities during the second quarter of 2007. To date, we have been working towards our primary goals of getting new drugs to market for the benefit of patients and creating value for our shareholders, while continuing to manage our financial resources responsibly.

Both of our two primary product candidates, tramiprosate (ALZHEMED™), for the treatment of Alzheimer’s disease (AD), and eprodisate (KIACTA™), targeting Amyloid A (AA) amyloidosis, represent hope in the treatment of serious unmet medical needs. In fact, our product candidate for AD, tramiprosate (ALZHEMED™), is at the forefront of a potential new class of drugs defined as disease modifiers. Furthermore, if approved, eprodisate (KIACTA™) would be the first specific drug for the treatment of AA amyloidosis.

FDA Action on Eprodisate (KIACTA™)

Let us begin by reviewing eprodisate (KIACTA™) for the treatment of AA amyloidosis, the illness for which Neurochem has been pioneering this product candidate. This is a very serious disease for which there is currently no specific treatment available.

We have completed a Phase II/III clinical trial with eprodisate (KIACTA™), which showed benefit of the product candidate, particularly on kidney function, though not at the level of the pre-specified p-value of 0.01. The trial further showed that eprodisate (KIACTA™) has a benign safety profile. Since the trial’s conclusion, Neurochem has filed for marketing approval for eprodisate (KIACTA™) for the treatment of AA amyloidosis in the United States and Europe. The Company has been working closely with the agencies to conclude the review process.

In July, Neurochem received a second approvable letter in relation to the New Drug Application for eprodisate (KIACTA™) from the United States Food and Drug Administration (FDA). In this letter, the FDA indicated that the Phase II/III clinical trial provided some evidence of the effectiveness of eprodisate (KIACTA™) in the treatment of the renal manifestations of amyloidosis. It also indicated that an additional efficacy trial with a target p-value of 0.05 — with support from the FDA with regards to its design — will be required. However, the FDA has stated that additional submissions filed by Neurochem as part of its complete response could persuade the agency to eliminate the requirement for an additional trial. As per the FDA’s recommendation, Neurochem will provide, as part of its complete response, a safety update and additional information including evidence of efficacy for eprodisate (KIACTA™) to the FDA. The Company expects to file this information within the next two months.

European Regulatory Review of Eprodisate (KIACTA™)

Marketing authorization reviews for eprodisate (KIACTA™) in Europe are also ongoing. Many exchanges between the Company and European regulators continue and the Company expects decisions on its applications later this year.

4 Message to Shareholders

The Company is also pleased to report that the results of the Phase II/III clinical trial for eprodisate (KIACTA™) were published last June in the New England Journal of Medicine.

As of July 2007, 65 patients around the world were still participating in the extension of the Phase II/III study in 16 clinical centers, with some of these patients receiving eprodisate (KIACTA™) for more than five years now.

To conclude on eprodisate (KIACTA™), Neurochem remains committed to the advancement of this product candidate and hopes to receive approval for its marketing authorization applications soon.

North American Trial for Tramiprosate (ALZHEMED™)

Now let us turn to tramiprosate (ALZHEMED™) for the treatment of AD.

Neurochem was pleased to announce in July that the FDA designated tramiprosate (ALZHEMED™) as a Fast Track Product for the treatment of AD. This designation indicates that the FDA views AD as a life-threatening, unmet medical need and that tramiprosate (ALZHEMED™) has the potential to address this need. We remain hopeful this designation will facilitate the advancement of our Alzheimer’s program.

Current treatments available for dementia, particularly of the AD type, include symptomatic drugs geared at modulating the levels of neurotransmitters in the brain principally to help improve memory. These products are often referred to as memory enhancers. Conversely, Neurochem’s product candidate, tramiprosate (ALZHEMED™), was designed to target the disease and its pathophysiology as it binds to amyloid, which is thought to be considered central to AD. As a result, Neurochem designed its Phase III clinical trials differently to be able to measure the potential of tramiprosate (ALZHEMED™) to slow or stop the progression of the disease.

Our North American Phase III study was completed on schedule in early 2007. As previously reported, some preliminary descriptive data from the trial shows numerical differences in favour of tramiprosate (ALZHEMED™) on ADAS-cog¹ and CDR-SB². It also shows differences between groups on the primary disease modification endpoint as measured by magnetic resonance imaging (MRI). However, no statistical significance can yet be assigned to these numerical differences since, as reported previously, we were advised by our external team of statisticians that the statistical model does not fit the data. Work to adjust the statistical model to allow us to be in a position to produce reliable results has been ongoing since April, and the Company has made progress at adjusting this model, particularly for the MRI endpoint.

Our current strategy is to obtain advice from the regulatory authorities and set up an expanded Advisory Board to review the results and to assist the Company in advancing its Alzheimer’s program. The announcement of the top-line results from the North American trial will depend on the counsel of our advisors and a meeting with the FDA scheduled for August.

Message to Shareholders 5

European Trial for Tramiprosate (ALZHEMED™)

In Europe, patient screening activities stopped this month as the Company surpassed the original patient enrolment objective of 930 patients with mild-to-moderate AD. However, patient recruitment could be resumed and the European Phase III trial modified by merely filing an amendment.

Neurochem is currently inundated with requests from patients, caregivers, nurses and physicians for continued access to tramiprosate (ALZHEMED™). To that effect, we, and we understand the FDA as well, are receiving numerous letters, phone calls and e-mails. Neurochem is agreeable to offering tramiprosate (ALZHEMED™) to the patients completing the tramiprosate (ALZHEMED™) trials, and is considering various options. Before taking any decision, however, Neurochem requires feedback from the regulators such as the FDA, as the regulatory environment will influence the decision on this important matter. When making our decision, we must also weigh the heavy financial burden that continuing to make tramiprosate (ALZHEMED™) available would have on the Company.

Looking forward

We remain committed to the eprodisate (KIACTA™) and tramiprosate (ALZHEMED™) programs, and with our employees, we strongly believe we can achieve great things. The delays we have faced recently have been disappointing, but the perspectives of what can be accomplished for patients and the Company are encouraging.

On behalf of our employees and Board of Directors, I thank you for your support.

Dr. Francesco Bellini
Chairman, President and Chief Executive Officer
August 9, 2007


1		Alzheimer’s Disease Assessment Scale, cognitive subpart (ADAS-cog). The ADAS-cog is a 70- point scale designed to measure, with the use of questionnaires, the progression and the severity of cognitive decline as seen in AD.

2		Dementia Rating — sum of boxes rating scale (CDR-SB), a measure of global performance.

6 Management’s Discussion and Analysis

Management’s Discussion and Analysis for the
Three and Six-Month Periods Ended June 30, 2007

Neurochem Inc. (Neurochem or the Company) is a biopharmaceutical company focused on the development and commercialization of innovative therapeutics to address critical unmet medical needs. Its pipeline of innovative oral product candidates primarily targets neurological disorders.

The following discussion and analysis should be read in conjunction with the Company’s unaudited consolidated financial statements for the six-month period ended June 30, 2007, as well as the Company’s audited consolidated financial statements for the year ended December 31, 2006, which have been prepared in accordance with Canadian generally accepted accounting principles (GAAP). For discussion regarding related-party transactions, contractual obligations, disclosure controls and procedures, internal control over financial reporting, critical accounting policies and estimates, recent accounting pronouncements, and risks and uncertainties, refer to the Annual Report and the Annual Information Form for the year ended December 31, 2006, which are available on SEDAR at www.sedar.com or on EDGAR at www.sec.gov. All dollar figures are Canadian dollars, unless specified otherwise.

Results of operations

For the three-month period ended June 30, 2007, the net loss amounted to $33,830,000 ($0.83 per share), compared to $20,374,000 ($0.53 per share) for the corresponding period in the previous year. For the six-month period ended June 30, 2007, the net loss amounted to $58,448,000 ($1.47 per share), compared to $37,508,000 ($0.97 per share) for the same period last year.

The net loss for the periods ended June 30, 2007 includes a non-cash charge under Canadian GAAP of $11,651,000 relating to the US$40 million 5% senior subordinated convertible notes which were converted into common shares during the current quarter at US$9 per share.

Revenue from collaboration agreement amounted to $340,000 for the current quarter ($777,000 for the six-month period), compared to $608,000 for the same period in the previous year ($1,215,000 for the six-month period). This revenue is earned under the agreement with Centocor, Inc. (Centocor) in respect of eprodisate (KIACTA™), an oral investigational product candidate for the treatment of Amyloid A (AA) amyloidosis. Revenue recognized is in respect of the non-refundable upfront payment received from Centocor, which is being amortized over the estimated period through to the anticipated regulatory approval date of the investigational product candidate. The estimated period is subject to change based on additional information that the Company may receive periodically. The other portion of the upfront payment received from Centocor (US$6,000,000) has been classified as deferred revenue and is not being amortized as earned revenue given that it is potentially refundable. In the event that the Company receives an approval letter issued by the U.S. Food and Drug Administration (FDA), the amount would no longer be refundable and would be amortized as earned revenue. In July 2007, the Company received a second approvable letter from the FDA for eprodisate (KIACTA™) for the treatment of AA amyloidosis. In this action letter, the FDA indicated that an additional efficacy trial will be necessary before the FDA could approve the investigational product candidate. The approvable letter states that additional submissions, filed by Neurochem as part of its complete response to this approvable letter, may address issues raised in this letter. The FDA has indicated that additional submissions could persuade the agency to eliminate the requirement for an additional trial. The FDA also asked for additional information, including further pharmacokinetic studies, and again acknowledged that a QT clinical study should be submitted as part of a Phase IV (post-approval) commitment. The Company expects to file a complete response to this second approvable letter in the near future. Neurochem is also seeking marketing approval for eprodisate (KIACTA™) for the treatment of AA amyloidosis in the European Union, Switzerland and Canada. In September 2006, the European Medicines Agency (EMEA) confirmed that it had commenced a regulatory review of eprodisate (KIACTA™). The Marketing Authorization Application is being reviewed under the EMEA’s centralized procedure. An authorization from the EMEA would apply to all 27 European Union member states, as well as Norway and Iceland.

Management’s Discussion and Analysis 7

Reimbursable costs revenue amounted to $144,000 for the current quarter ($294,000 for the six-month period), compared to $205,000 for the same period in the previous year ($435,000 for the six-month period) and consists of costs reimbursable by Centocor in respect of eprodisate (KIACTA™)-related activities. The Company earns no margin on these reimbursable costs.

Research and development expenses, before research tax credits and grants, amounted to $16,115,000 for the current quarter ($35,827,000 for the six-month period), compared to $14,342,000 for the same period in the previous year ($28,068,000 for the six-month period). The increase is due to expenses incurred in relation to the development of tramiprosate (ALZHEMED™) primarily in respect of the ongoing Phase III clinical trial in Europe and the North American open-label extension of the Phase III study, as well as the conduct of a QT cardiac status Phase I study. Tramiprosate (ALZHEMED™) is the Company’s investigational product candidate for the treatment of Alzheimer’s disease (AD). Tramiprosate (ALZHEMED™) completed its 18-month North American Phase III clinical trial during the first quarter of 2007 and the Company announced in April 2007 that the database had been locked. Neurochem has been advised by its external team of statisticians (the statisticians) that adjustment to the initial statistical model, as set out in the statistical plan, would be necessary to provide accurate results. The procedure to arrive at a reliable model involves a detailed analysis of potential confounding factors such as the effect of concomitant medications, baseline characteristics of the study population or differences in clinical sites. The statisticians have indicated that they have made progress adjusting the statistical model, reaching an acceptable level of validity for the disease modification endpoint, as measured by magnetic resonance imaging (MRI). In July 2007, the FDA designated tramiprosate (ALZHEMED™) as a Fast Track Product for the treatment of AD. Under the FDA Modernization Act of 1997, the Fast Track designation program is intended to facilitate the development and expedite review of drugs developed for the treatment of serious or life-threatening conditions and that demonstrate the potential to address an unmet medical need for such a condition. The Company is meeting the FDA in August to discuss the tramiprosate (ALZHEMED™) Phase III program and present an update on the work accomplished to date on the North American Phase III clinical trial. Neurochem will also seek the FDA’s feedback and validation of the next steps that would be acceptable to the agency, especially with respect to the statistical models. The Company expects the results to be available in 2007. The North American Phase III clinical trial included 1,052 patients at 67 clinical centers across the U.S. and Canada. All patients who completed the North American Phase III clinical trial were eligible to receive tramiprosate (ALZHEMED™) in an open-label extension of the Phase III study. The European Phase III clinical trial on tramiprosate (ALZHEMED™) was launched in September 2005. This study also has a duration of 18 months and the trial is being conducted at approximately 70 clinical centers in ten European countries. As of June 30, 2007, 939 patients were randomized in the European clinical trial. Patient screening activities will stop in August 2007 as Neurochem has exceeded its original patient enrolment objectives. However, in light of the information and experience gained from the North American Phase III clinical trial, Neurochem is presently considering modifications that would need to be made to the design of the European trial. Both Phase III clinical trials are multicentre, randomized, double-blind, placebo-controlled, three-armed, parallel-designed trials. For the six-month period ended June 30, 2007, research and development expenses also included costs incurred to support the North American Phase III clinical trial for tramiprosate (ALZHEMED™), the ongoing open-label extension of the eprodisate (KIACTA™) Phase II/III study, as well as ongoing drug discovery programs.

Research tax credits and grants amounted to $541,000 this quarter ($1,134,000 for the six-month period), compared to $494,000 for the corresponding period in the previous year ($1,029,000 for the six-month period). Research tax credits represent refundable tax credits earned under the Quebec Scientific Research and Experimental Development Program for expenditures incurred in Quebec.

General and administrative expenses totaled $3,464,000 for the current quarter ($7,518,000 for the six-month period), compared to $3,366,000 for the same quarter in the previous year ($6,808,000 for the six-month period). These costs are incurred to support the overall activities of the Company.

Arbitral award amounted to nil for the current quarter and six-month period compared to $2,089,000 for the quarter and six-month period ended June 30, 2006. This expense relates to the dispute with Immtech Pharmaceuticals, Inc. (formerly known as Immtech International, Inc. (Immtech)), which came to a conclusion in January 2007 when Immtech, the University of North Carolina at Chapel Hill (UNC), and Georgia State

8 Management’s Discussion and Analysis

University Research Foundation, Inc. filed with the Federal District Court for the Southern District of New York, U.S.A. a Notice of Voluntary Dismissal. The plaintiffs voluntarily dismissed their complaint against Neurochem in the Federal District Court without any payment, license, business agreement, concession or compromise by Neurochem. The dispute concerned an agreement entered into between Immtech and Neurochem in April 2002 under which Neurochem had the right to apply its proprietary anti-amyloid technology to test certain compounds to be provided by Immtech.

Reimbursable costs amounted to $144,000 for the current quarter ($294,000 for the six-month period), compared to $205,000 for the same period in the previous year ($435,000 for the six-month period), and consist of costs incurred on behalf of Centocor in respect of eprodisate (KIACTA™)-related activities and reimbursable by Centocor.

Stock-based compensation amounted to $1,025,000 for the current quarter ($2,106,000 for the six-month period), compared to $1,016,000 for the corresponding quarter in the previous year ($1,932,000 for the six-month period). This expense relates to stock options and stock-based incentives, whereby compensation cost in relation to stock options is measured at fair value at the date of grant and is expensed over the award’s vesting period.

Depreciation, amortization and patent cost write-off amounted to $395,000 for the current quarter ($802,000 for the six-month period), compared to $409,000 for the same quarter in the previous year ($902,000 for the six-month period). The decrease in the six-month period is mainly attributable to certain patent costs of $106,000 written off during the first quarter of 2006.

Interest income amounted to $1,057,000 for the current quarter ($1,775,000 for the six-month period), compared to $580,000 for the same quarter in the previous year ($1,223,000 for the six-month period). The increase is mainly attributable to higher average cash balances and higher interest rates during the current periods, compared to the same periods in the previous year.

Accretion expense amounted to $13,712,000 for the current quarter ($14,885,000 for the six-month period), and mainly represents the imputed interest under GAAP on the US$42,085,000 aggregate principal amount of 6% convertible senior notes issued in November 2006, as well as on the US$40,000,000 6% senior convertible notes (Senior Notes) and US$40,000,000 5% senior subordinated convertible notes (Junior Notes) issued in May 2007. The Company accretes the carrying values of the convertible notes to their face value through a charge to earnings over their expected lives of 60 months, 54 months and one month, respectively. Of the total accretion expense recorded in the quarter and six-month period ended June 30, 2007, $11,838,000 relates to accretion expense on the Junior Notes, which were fully converted during the second quarter of 2007.

Change in fair value of derivative-related asset amounted to a loss of $2,122,000 for the current periods and represents the variation in the fair value of the embedded derivatives included in the aggregate US$80,000,000 Senior and Junior Notes issued in May 2007.

Foreign exchange gain amounted to $581,000 for the current quarter (gain of $702,000 for the six-month period), compared to a loss of $524,000 for the same quarter in the previous year (loss of $570,000 for the six-month period). Foreign exchange gains or losses arise on the movement in foreign exchange rates related to the Company’s net monetary assets held in foreign currencies, primarily U.S. dollars.

Other income amounted to $530,000 for the current quarter ($814,000 for the six-month period), compared to $308,000 for the same quarter in the previous year ($593,000 for the six-month period). Other income consists of non-operating revenue, primarily sub-lease revenue.

Share of loss in a company subject to significant influence amounted to nil for the current quarter ($372,000 for the six-month period), compared to $891,000 for the corresponding quarter in the previous year ($1,707,000 for the six-month period). Non-controlling interest amounted to nil for the current quarter ($123,000 for the six-month period), compared to $296,000 for the corresponding quarter in the previous year ($558,000 for the six-month period). These items result from the consolidation of the Company’s interest in a holding company (Innodia Holding) that owns shares of Innodia Inc., for which Neurochem is the primary beneficiary. The share of loss recorded in the current year has reduced the Company’s long-term investment in Innodia Holding to nil. Innodia Inc. is a private, development-stage company engaged in developing novel drugs for the treatment of type 2 diabetes and underlying diseases.

Management’s Discussion and Analysis 9

Related-party transactions
(In thousands of Canadian dollars)


	Three-month periods				Six-month periods
	ended June 30,				ended June 30,
	2007		2006		2007		2006
	$		$		$		$
Management services expense		625		614		1,249		1,227
Sub-lease revenue		200		239		440		479

Please refer to note 7 of the unaudited Consolidated Financial Statements for the six-month period ended June 30, 2007, for details and additional related-party transactions.

Quarterly results (unaudited)

(In thousands of Canadian dollars, except per share data)


						Net loss per share
						Basic
Quarter	Revenue		Net loss			and diluted
	$		$			$
Year ended December 31, 2007
Second		484		(33,830	)		(0.83	)
First		587		(24,618	)		(0.63	)

Year ended December 31, 2006
Fourth		770		(19,359	)		(0.50	)
Third		777		(18,520	)		(0.48	)
Second		813		(20,374	)		(0.53	)
First		837		(17,134	)		(0.45	)

Year ended December 31, 2005
Fourth		837		(15,628	)		(0.42	)
Third		920		(21,074	)		(0.58	)

The increase in quarterly losses year over year is primarily due to additional investments in research and development as the Company advances its product candidates through clinical trials. The increase in the current quarter net loss is also due to accretion expense recorded on the convertible notes issued in November 2006 and May 2007. The decrease in the 2006 third quarter net loss compared to the same period in the previous year is mainly attributable to a reduction in legal fees incurred by the Company with regards to the dispute with Immtech.

Liquidity and capital resources

As at June 30, 2007, the Company had available cash, cash equivalents and marketable securities of $90,873,000, compared to $56,821,000 at December 31, 2006. The increase is primarily due to proceeds received from the issue of convertible notes in May 2007 and is partially offset by funds used in operating activities.

On May 2, 2007, the Company issued US$80,000,000 aggregate principal amount of convertible notes, consisting of US$40,000,000 6% senior convertible notes due in 2027 and US$40,000,000 5% senior subordinated convertible notes due in 2012. The 6% senior convertible notes have an initial conversion price equal to the lesser of US$12.68 or the 5-day weighted average trading price of the common shares preceding any conversion, subject to adjustments in certain circumstances. The Company will pay interest on the 6% senior convertible notes until maturity on May 2, 2027, subject to earlier repurchase, redemption or conversion. The 5% senior subordinated convertible notes were subject to mandatory conversion into

10 Management’s Discussion and Analysis

common shares under certain circumstances. In connection with this transaction, the Company issued warrants to purchase an aggregate of 2,250,645 common shares until May 2, 2012, at an initial purchase price of US$12.68 per share, subject to adjustments in certain circumstances. During the quarter ended June 30, 2007, US$10,500,000 of the 6% senior convertible notes were converted into 1,653,859 common shares and the totality of the 5% senior subordinated convertible notes were converted into 4,444,449 common shares.

Subsequent to June 30, 2007, an additional US$25,000,000 6% senior convertible notes were converted into common shares at an average price of US$6.3044. The Company issued 3,965,462 common shares in connection with these conversions.

In August 2006, the Company entered into a securities purchase agreement in respect of an equity line of credit facility (ELOC) with Cityplatz Limited (Cityplatz), that provides the Company up to US$60,000,000 of funds in return for the issuance of common shares at a discount of 3.0% to market price at the time of draw downs over term, less a placement fee equal to 2.4% of gross proceeds payable to the placement agent, Rodman & Renshaw, LLC. The ELOC established by the securities purchase agreement will terminate on February 9, 2009. The ELOC shall also terminate if (i) the Company’s common shares are de-listed from NASDAQ unless the common shares are listed at such time on another trading market specified in the agreement and such de-listing is in connection with a subsequent listing on another trading market specified in the agreement, (ii) the Company is subject to a change of control transaction or (iii) the Company suffers a material adverse effect which cannot be cured prior to the next drawdown notice. The Company may terminate the securities purchase agreement (i) if Cityplatz fails to fund a properly notified drawdown within five trading days of the end of the applicable settlement period or (ii) after it has drawn down at least US$25,000,000 under the ELOC. Either party may also terminate the securities purchase agreement if the volume-weighted average price of the Company’s common shares is below US$5 for more than 30 consecutive trading days, as adjusted. As at June 30, 2007, the Company had not drawn any funds under the ELOC.

As at June 30, 2007, the Company’s workforce comprised 184 employees. During the year ended December 31, 2006 and the first quarter of 2007, the Company increased its workforce in anticipation of commercialization and completion of clinical programs. During the second quarter of 2007, the workforce was reduced due to delays encountered in the product candidate development programs.

As at July 31, 2007, the Company had 44,880,641 common shares outstanding, 220,000 common shares issuable to the Chief Executive Officer upon the achievement of specified performance targets, 2,744,176 options granted under the stock option plan, 7,051,137 shares potentially issuable under the convertible notes and 2,250,645 warrants outstanding, for a total of 57,146,599 common shares, on a fully diluted basis.

The Company believes that its available cash and short-term investments, expected interest income, potential funding from partnerships, research collaborations and licensing agreements, potential proceeds from the equity line of credit facility, research tax credits, grants, and access to capital markets should be sufficient to finance the Company’s operations and capital needs during the ensuing year. However, in light of the uncertainties associated with the regulatory approval process, clinical trial results, and the Company’s ability to secure additional licensing, partnership and/or other agreements, further financing may be required to support the Company’s operations in the future.

Effective July 1, 2007, the Company adopted the U.S. dollar as its functional and reporting currency, as a result of a significant portion of its revenue, expenses, assets, liabilities and financing is now denominated in U.S. dollars.

Consolidated Financial Statements (unaudited) 11

Consolidated Balance Sheets
(Unaudited)
June 30, 2007 and December 31, 2006 (in thousands of Canadian dollars, unless otherwise noted) (in accordance with Canadian GAAP)

June 30,

December 31,

2007

2006

(U.S.$-

(Cdn$)

(Cdn$)

note 1)

Assets

Current assets:

Cash and cash equivalents

85,457

90,873

14,168

Marketable securities

—

42,653

Restricted cash (note 3)

6,000

6,380

6,992

Sales taxes and other receivables

1,051

1,117

1,216

Research tax credits receivable

2,565

2,728

1,082

Prepaid expenses

2,681

2,851

2,901

97,754

103,949

69,012

Restricted cash

602

640

640

Deferred financing fees (note 2)

—

1,789

Long-term prepaid expenses

647

688

919

Long-term investment

—

372

Property and equipment

4,318

4,592

4,559

Patents

5,845

6,215

5,920

109,166

116,084

83,211

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable

3,505

3,727

4,374

Accrued liabilities

11,472

12,199

11,461

Deferred revenue

7,563

8,042

8,819

Deferred gain on sale of property

1,339

1,424

1,424

23,879

25,392

26,078

Deferred gain on sale of property

16,572

17,622

18,334

Long-term accrued liabilities

1,089

1,158

740

Convertible notes (note 4)

50,332

53,522

39,214

91,872

97,694

84,366

Non-controlling interest

679

722

845

Shareholders’ equity:

Share capital (note 5)

299,835

318,838

270,923

Equity portion of convertible notes

17,548

18,660

9,740

Additional paid-in capital

18,196

19,349

13,946

Warrants (note 4)

17,576

18,690

—

Deficit

(336,540

)

(357,869

)

(296,609

)

16,615

17,668

(2,000

)

109,166

116,084

83,211

See accompanying notes to unaudited consolidated financial statements.

12 Consolidated Financial Statements (unaudited)

Consolidated Statements of Operations
(Unaudited)
Periods ended June 30, 2007 and 2006
(in thousands of Canadian dollars, except per share data, unless otherwise noted) (in accordance with Canadian GAAP)


	Three months ended									Six months ended
	June 30,									June 30,
	2007			2007			2006			2007			2007			2006

	(U.S.$-			(Cdn$)			(Cdn$)			(U.S.$-			(Cdn$)			(Cdn$)
	note 1)									note 1)
Revenues:
Collaboration agreement (note 3)		320			340			608			731			777			1,215
Reimbursable costs		135			144			205			276			294			435

		455			484			813			1,007			1,071			1,650


Expenses:
Research and development		15,155			16,115			14,342			33,692			35,827			28,068
Research tax credits and grants		(509	)		(541	)		(494	)		(1,066	)		(1,134	)		(1,029	)

		14,646			15,574			13,848			32,626			34,693			27,039
General and administrative		3,258			3,464			3,366			7,070			7,518			6,808
Arbitral award		—			—			2,089			—			—			2,089
Reimbursable costs		135			144			205			276			294			435
Stock-based compensation (note 6)		964			1,025			1,016			1,980			2,106			1,932
Depreciation of property and equipment		263			280			317			531			565			620
Amortization and patent cost write-off		108			115			92			223			237			282
Interest and bank charges		43			46			23			132			141			50

		19,417			20,648			20,956			42,838			45,554			39,255


Net loss before undernoted items		(18,962	)		(20,164	)		(20,143	)		(41,831	)		(44,483	)		(37,605	)


Interest income		994			1,057			580			1,669			1,775			1,223
Accretion expense (note 4)		(12,895	)		(13,712	)		—			(13,998	)		(14,885	)		—
Change in fair value of derivative — related asset		(1,996	)		(2,122	)		—			(1,996	)		(2,122	)		—
Foreign exchange gain (loss)		546			581			(524	)		660			702			(570	)
Other income		498			530			308			765			814			593
Share of loss in a company subject to significant influence		—			—			(891	)		(350	)		(372	)		(1,707	)
Non-controlling interest		—			—			296			116			123			558

		(12,853	)		(13,666	)		(231	)		(13,134	)		(13,965	)		97


Net loss		(31,815	)		(33,830	)		(20,374	)		(54,965	)		(58,448	)		(37,508	)


Net loss per share:
Basic and diluted		(0.78	)		(0.83	)		(0.53	)		(1.38	)		(1.47	)		(0.97	)


Weighted average number of shares outstanding					40,586,251			38,792,486						39,750,174			38,475,059

See accompanying notes to unaudited consolidated financial statements.

Consolidated Financial Statements (unaudited) 13

Consolidated Statements of Shareholders’ Equity
(Unaudited)
Period ended June 30, 2007 (in thousands of Canadian dollars, unless otherwise noted) (in accordance with Canadian GAAP)


					Equity
					portion of			Additional
	Share capital				convertible			paid-in
	Number		Dollars		notes			capital			Warrants		Deficit			Total

			$		$			$			$		$			$
Balance, December 31, 2006		38,722,022		270,923		9,740			13,946			—		(296,609	)		(2,000	)
Adjustment to reflect change in accounting policy for financial instruments (note 2)		—		—		—			—			—		(181	)		(181	)

Equity portion of convertible notes		—		—		12,364			—			—		—			12,364

Warrants issued in connection with the May 2007 convertible notes issuance		—		—		—			—			18,690		—			18,690

Exercise of stock options:
For cash		57,311		422		—			—			—		—			422
Ascribed value from additional paid-in capital		—		263		—			(263	)		—		—			—
Issued on conversion of 6% senior convertible notes due in 2027 (note 4(b))		1,653,859		6,212		(3,175	)		3,175			—		—			6,212
Issued on conversion of 5% junior convertible notes due in 2012 (note 4(b))		4,444,449		41,018		(269	)		269			—		—			41,018

Stock-based compensation		—		—		—			2,222			—		—			2,222

Net loss		—		—		—			—			—		(58,448	)		(58,448	)

Share issue costs		—		—		—			—			—		(2,631	)		(2,631	)


Balance, June 30, 2007		44,877,641		318,838		18,660			19,349			18,690		(357,869	)		17,668

See accompanying notes to unaudited consolidated financial statements.

14 Consolidated Financial Statements (unaudited)

Consolidated Statements of Cash Flows
(Unaudited)
Periods ended June 30, 2007 and 2006 (in thousands of Canadian dollars, unless otherwise noted) (in accordance with Canadian GAAP)


	Three months ended									Six months ended
	June 30,									June 30,
	2007			2007			2006			2007			2007			2006

	(U.S.$-			(Cdn$)			(Cdn$)			(U.S.$-			(Cdn$)			(Cdn$)
	note 1)									note 1)
Cash flows from operating activities:
Net loss		(31,815	)		(33,830	)		(20,374	)		(54,965	)		(58,448	)		(37,508	)
Adjustments for:
Depreciation, amortization and patent cost write-off		371			395			409			754			802			902
Unrealized foreign exchange (gain) loss		(2,824	)		(3,003	)		810			(3,382	)		(3,597	)		898
Stock-based compensation		964			1,025			1,016			1,980			2,106			1,932
Share of loss in a company subject to significant influence		—			—			891			350			372			1,707
Non-controlling interest		—			—			(296	)		(116	)		(123	)		(558	)
Accretion expense		12,895			13,712			—			13,998			14,885			—
Change in fair value of derivative — related asset		1,996			2,122			—			1,996			2,122			—
Amortization of gain on sale leaseback		(335	)		(356	)		(356	)		(670	)		(712	)		(713	)
Changes in operating assets and liabilities:
Sales taxes and other receivables		(344	)		(366	)		(443	)		93			99			(580	)
Research tax credits receivable		(539	)		(573	)		(491	)		(1,548	)		(1,646	)		(1,011	)
Prepaid expenses		702			746			(589	)		47			50			(657	)
Long-term prepaid expenses		143			152			227			217			231			382
Deferred revenue		(320	)		(340	)		(608	)		(731	)		(777	)		(1,215	)
Accounts payable and accrued liabilities		(4,412	)		(4,692	)		3,270			(1,429	)		(1,521	)		2,008

		(23,518	)		(25,008	)		(16,534	)		(43,406	)		(46,157	)		(34,413	)


Cash flows from financing activities:
Proceeds from issue of share capital		—			—			55			397			422			9,497
Proceeds from convertible notes		77,386			82,290			—			77,386			82,290			—

		77,386			82,290			55			77,783			82,712			9,497

Cash flows from investing activities:
Additions to property and equipment		(72	)		(77	)		(434	)		(434	)		(461	)		(502	)
Additions to patents		(333	)		(354	)		(253	)		(700	)		(744	)		(1,489	)
Proceeds from marketable securities		6,572			6,988			17,384			40,111			42,653			63,709
Additions to long-term investment		—			—			—			—			—			(1,660	)

		6,167			6,557			16,697			38,977			41,448			60,058

Consolidated Financial Statements (unaudited) 15

Consolidated Statements of Cash Flows (continued)
(Unaudited)
Periods ended June 30, 2007 and 2006 (in thousands of Canadian dollars, unless otherwise noted) (in accordance with Canadian GAAP)

Three months ended

Six months ended

June 30,

2007

2006

2007

2006

(U.S.$-

(Cdn$)

(Cdn$)

(U.S.$-

(Cdn$)

(Cdn$)

note 1)

Net increase in cash and cash equivalents

60,035

63,839

218

73,354

78,003

35,142

Cash and cash equivalents, beginning of period

26,784

28,482

42,211

13,324

14,168

7,382

Effect of unrealized foreign exchange on cash and cash equivalents

(1,362

)

(1,448

)

(498

)

(1,221

)

(1,298

)

(593

)

Cash and cash equivalents, end of period

85,457

90,873

41,931

85,457

90,873

41,931

Supplemental disclosure to cash flow statements (note 8).

See accompanying notes to unaudited consolidated financial statements.

16 Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements
(Unaudited)
Periods ended June 30, 2007 and 2006 (amounts in thousands of Canadian dollars, except per share data, unless otherwise noted)

1. Basis of presentation:

The consolidated financial statements include the accounts of Neurochem Inc. and its subsidiaries (Neurochem or the Company). These consolidated financial statements have been prepared by management in accordance with Canadian generally accepted accounting principles (GAAP). The unaudited consolidated balance sheet as at June 30, 2007, the unaudited consolidated statements of operations and cash flows for the periods ended June 30, 2007, and 2006 and the unaudited consolidated statement of shareholders’ equity for the period ended June 30, 2007, reflect all of the adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. The results of operations for any quarter are not necessarily indicative of the results for the full year. The interim consolidated financial statements follow the same accounting policies and methods of their application as described in note 2 of the annual consolidated financial statements for the year ended December 31, 2006, except as described in note 2 below. The interim consolidated financial statements do not include all disclosures required for annual consolidated financial statements and should be read in conjunction with the annual consolidated financial statements as at and for the year ended December 31, 2006.

Translation of convenience:

Up to June 30, 2007, the Company’s functional currency was the Canadian dollar. As a convenience to certain readers, the Company also presents the interim consolidated financial statements in U.S. dollars using the convenience translation method whereby all Canadian dollar amounts are converted into U.S. dollars at the noon exchange rate quoted by the Bank of Canada at June 30, 2007, which was 0.9404 U.S. dollar per Canadian dollar. The information in U.S. dollars is presented only for the convenience of some readers and, thus, has limited usefulness. This translation should not be viewed as a representation that the Canadian dollar amounts in the financial statements actually represent such U.S. dollar amounts or could be or would have been converted into U.S. dollars at the rate indicated.

Change in functional and reporting currency:

2. Changes in accounting policies:

On January 1, 2007, the Company adopted the following new accounting standards issued by the Canadian Institute of Chartered Accountants (CICA).

a) Comprehensive income:

Section 1530, Comprehensive Income, introduces a new financial statement which shows the change in equity of an enterprise during a period from transactions and other events arising from non-owner sources. As there are no adjustments, the Company has not recognized any adjustments through comprehensive income for the six-month period ended June 30, 2007.

b) Financial instruments — recognition and measurement:

Section 3855, Financial Instruments — Recognition and Measurement and Section 3861, Financial Instruments — Disclosure and Presentation, establish standards for recognition and presentation of financial instruments on the balance sheet and the measurement of financial instruments according to prescribed classifications. The Company is required to designate its financial instruments into one of five categories, which determine the manner of evaluation of each instrument and the presentation of related gains and losses. Depending on the financial instruments’ classifications, changes in subsequent measurements are recognized in net income or comprehensive income.

Consolidated Financial Statements (unaudited) 17

2. Changes in accounting policies (continued):

The Company has designated its financial instruments as follows:

•		Cash and cash equivalents, marketable securities and restricted cash are classified as “Financial Assets Available for Sale”. These financial assets are marked-to-market through comprehensive income at each period end.

•		Other receivables are classified as “Loans and Receivables”. Accounts payable, accrued liabilities and convertible notes are classified as “Other Financial Liabilities”. After their initial fair value measurement, they are measured at amortized cost using the effective interest rate method. For the Company, the measured amount generally corresponds to cost.

The new standards require derivative instruments to be recorded as either assets or liabilities measured at their fair value unless exempted from derivative treatment as a normal purchase and sale. Certain derivatives embedded in other contracts must also be measured at fair value. Embedded derivatives are required to be separated from the host contract and accounted for as a derivative financial instrument if the embedded derivative and host contract are not closely related, and the combined contract is not held for trading or designated at fair value. The change in accounting policy related to embedded derivatives resulted in an increase of $181 to the opening deficit at the date of adoption. As of June 30, 2007, the fair value of the embedded derivative liability is $194 and is included in “accrued liabilities” on the consolidated balance sheet. During the six-month period, the change in fair value of the embedded derivative liability of $59 was recorded in the consolidated statement of operations.

As a result of adopting Section 3855, deferred financing costs of $1,789 as at January 1, 2007, relating to convertible notes, have been reclassified from deferred financing fees to convertible notes on the consolidated balance sheet. These costs are being amortized using the effective interest method over the life of the related debt.

c) Equity:

Section 3251, Equity, describes standards for the presentation of equity and changes in equity for the reporting period as a result of the application of Section 1530, Comprehensive Income. This standard did not have an impact on the Company’s consolidated financial statements for the six-month period ended June 30, 2007.

d) Hedges:

Section 3865, Hedges, specifies the criteria under which hedge accounting may be applied, how hedge accounting should be performed under permitted hedging strategies and the required disclosures. This standard did not have an impact on the Company’s consolidated financial statements for the six-month period ended June 30, 2007.

3. Collaboration agreement:

The Company recognized $340 and $777 (2006 — $608 and $1,215, respectively) of revenue for the three-month and six-month periods ended June 30, 2007, under a collaboration agreement entered into in December 2004, representing the amortization of the non-refundable upfront payment over the remaining estimated period through to the anticipated regulatory approval date of the related investigational product candidate.

As required under the terms of the collaboration agreement, the Company has secured, through a bank, a letter of credit in the amount of $6,380 (US$6,000) in connection with the potentially refundable upfront payment received under the collaboration agreement. The Company has classified an equivalent amount of cash as “restricted cash” on the consolidated balance sheet to reflect the collateralization of the amount of the letter of credit.

18 Consolidated Financial Statements (unaudited)

4. Convertible notes:

Convertible notes consist of the following:


	June 30,			December 31,
	2007			2006

	$			$
6% Senior convertible notes due in 2026 (a)		34,870			39,214
6% Senior convertible notes due in 2027 (b)		18,726			—
Derivative — related asset (b)		(74	)		—

		53,522			39,214

(a)

Changes in the 6% Senior convertible notes due in 2026 for the six-month period ended June 30, 2007 are as follows:


	$
Balance, December 31, 2006		39,214
Adjustment to reflect change in accounting policy for financial instruments (note 2)		(1,789	)
Accretion expense		2,298
Interest paid/payable		(1,423	)
Foreign exchange gain		(3,430	)

Balance, June 30, 2007		34,870

(b)

On May 2, 2007, the Company issued US$80,000 aggregate principal amount of convertible notes, consisting of US$40,000 6% senior convertible notes due in 2027 (the Senior Notes) and US$40,000 5% senior subordinated convertible notes due in 2012 (the Junior Notes). The Senior Notes have an initial conversion price equal to the lesser of US$12.68 or the 5-day weighted average trading price of the common shares preceding any conversion subject to adjustments in certain circumstances. The Senior Notes are convertible at the option of the holder at anytime after three days notice. The conversion price is the average trading price of the Company’s trading price for the period preceding the conversion, subject to a ceiling of US$12.68 and a floor of US$6.00. The conversion price may be fixed, subject to shareholders approval, for the period from October 15, 2009 to November 15, 2009. After November 1, 2011, the Senior Notes may be redeemed by the holders if the Company fails to maintain a specified net cash position. The Company will pay interest on the Senior Notes until maturity on May 2, 2027, subject to earlier repurchase, redemption or conversion. The Junior Notes were subject to mandatory conversion into common shares under certain circumstances. In connection with this transaction, the Company issued warrants to purchase an aggregate of 2,250,645 common shares of Neurochem until May 2, 2012 at an initial purchase price of US$12.68 per share, subject to adjustments in certain circumstances.

Consolidated Financial Statements (unaudited) 19

4. Convertible notes (continued):

(b)		In accordance with Canadian GAAP, the Senior Notes and the Junior Notes are accounted for as a compound financial instrument and are presented in their component parts of debt and equity. The Company initially allocated the proceeds from the Senior Notes and the Junior Notes between its liability and equity components using the residual value method. The Senior Notes proceeds, net of issue costs of $2,276 (US$2,069), were allocated as follows: $26,046 (US$23,492) to debt, $12,095 (US$10,909) to Equity portion of the convertible notes, $6,549 (US$5,907) to warrants and $2,635 (US$2,377) to derivative-related asset. The Junior Notes proceeds, net of issue costs of $2,967 (US$2,697), were allocated as follows: $30,770 (US$27,753) to debt, $269 (US$243) to Equity portion of the convertible notes, $10,569 (US$9,533) to warrants and $251 (US$226) to derivative-related asset. Issue costs of $2,631 (US$2,373) in relation to equity instruments were charged to the deficit. The fair value of the embedded derivatives was determined using the Binomial model and the fair value of the warrants was determined based on the Black-Scholes pricing model. The models used in the valuation of the components of the convertible notes contain certain subjective assumptions, changes of which may cause significant variation in the estimated fair value of the debt and equity components of the convertible notes.

		The Company accretes the carrying value of the Senior Notes and Junior Notes to their face values through a charge to earnings over their expected lives, which are 54 months for the Senior Notes and 1 month for the Junior Notes.

		During the quarter ended June 30, 2007, US$10,500 of the Senior Notes were converted into 1,653,859 common shares and the totality of the Junior Notes was converted into 4,444,449 common shares.

		Subsequent to June 30, 2007, an additional US$25,000 Senior Notes were converted into common shares at an average price of US$6.3044 per share. The Company issued 3,965,462 common shares in connection with these conversions.

		Changes in the Senior Notes, Junior Notes and derivative-related asset for the quarter ended June 30, 2007 were as follows:


							Derivative -
	Senior Notes			Junior Notes			related asset

	$			$			$
Balance as at December 31, 2006 and March 31, 2007		—			—			—
Notes issuance as at May 2, 2007		26,046			30,770			(2,886	)
Accretion expense		749			11,838			—
Interest paid/payable		(377	)		(187	)		—
Conversion by note holders		(6,639	)		(41,261	)		643
Change in fair value		—			—			2,063
Foreign exchange loss (gain)		(1,053	)		(1,160	)		106

Balance as at June 30, 2007		18,726			—			(74	)

20 Consolidated Financial Statements (unaudited)

5. Share capital:

(a) Stock option plan:

Changes in outstanding options issued under the stock option plan for the year ended December 31, 2006 and the six-month period ended June 30, 2007 were as follows:


				Weighted
				average
	Number			exercise price

				$
Options outstanding, December 31, 2005		2,309,958			16.78
Granted		402,000			16.53
Exercised		(100,943	)		4.25
Cancelled or expired		(33,519	)		20.84


Options outstanding, December 31, 2006		2,577,496			17.17
Granted		236,333			14.43
Exercised		(57,311	)		7.37
Cancelled or expired		(9,342	)		13.74


Options outstanding, June 30, 2007		2,747,176			17.15

(b) Earnings per share:

The impact of stock options and convertible notes is anti-dilutive because the Company incurred losses in 2007 and 2006. All outstanding options and convertible notes included in this computation could potentially be dilutive in the future. At June 30, 2007, 1,896,607 (2006 — 1,688,941) options were not considered in the computation of the diluted weighted average number of shares outstanding, since the exercise price of these options was higher than the average market price. Included in the basic weighted average number of shares outstanding are 140,000 common shares to be issued to the Chief Executive Officer upon formal notification. See note 5 (c).

(c) Agreement to issue shares:

The agreement with the Chief Executive Officer, effective December 1, 2004, to issue to him up to 220,000 common shares upon the execution of the agreement and upon achievement of specified performance targets, was approved by regulatory authorities and shareholders in 2005. Stock-based compensation in relation to 140,000 common shares to be issued to the Chief Executive Officer in connection with his execution and achievement of certain specified targets has been recorded to date. The shares will be issued by the Company upon formal notification by the Chief Executive Officer.

(d) Equity line of credit:

On August 9, 2006, the Company entered into a securities purchase agreement in respect of an equity line of credit facility. The facility will terminate February 9, 2009 and provides the Company with access to financing of up to US$60,000 in return for the issuance of common shares at a discount of 3.0% to market price at the time of drawdown less a placement fee equal to 2.4% of gross proceeds payable to the placement agent. Under the agreement, the Company is committed to draw down at least US$25,000 over the term of the facility. Drawdown requests are subject to the terms and conditions as specified in the agreement. As of June 30, 2007, the Company had not drawn any funds under the equity line of credit.

Consolidated Financial Statements (unaudited) 21

5. Share capital (continued):

(e) Deferred share unit plan:

On February 15, 2007, the Company adopted a deferred share unit (DSU) plan for certain designated employees (the Designated Employees Plan), as well as a DSU plan for members of the Board of Directors (the Board Plan). The Designated Employees Plan permits employees to elect to take all or any portion of their annual bonus in the form of DSUs rather than in cash, while the Board Plan permits members of the Board of Directors to elect to take all of their annual retainer and/or all of their meeting attendance fees as DSUs rather than in cash. The number and price of DSUs are determined by the five-day volume weighted average trading price of the Company’s common shares, as provided for under the respective plans. The DSUs are redeemable only upon the participant’s retirement, death, resignation or termination.

During the six-month period ended June 30, 2007, the Company granted 26,567 DSUs having a weighted average fair value per unit of $11.26. For DSUs, compensation cost is measured based on the market price of the Company’s shares from the date of grant through to the settlement date. The offsetting liability is marked-to-market. Any changes in the market value of the Company’s shares through to the settlement date results in a change to the measure of compensation cost for those awards and is recorded in the consolidated statement of operations. At June 30, 2007, the Company had a liability of $183 with respect to issued DSUs.

6. Stock-based compensation:

In the three-month and six-month periods ended June 30, 2007, the Company recorded total stock-based compensation (excluding compensation under the deferred share unit plan) of $1,141 and $2,222 (2006 — $1,016 and $1,932, respectively) related to stock options granted after July 1, 2002.

The weighted average fair value of each option is estimated on the effective date of the grant using the Black-Scholes pricing model with the following assumptions:


	June 30,			June 30,
	2007			2006

Risk-free interest rate		4.10	%		4.18	%
Expected volatility		58	%		60	%
Expected life in years		7			7
Expected dividend yield	nil			nil

The following table summarizes the weighted average grant-date fair value per share for options granted during the six-month periods ended June 30, 2007 and 2006:


			Weighted average
	Number of		grant-date
	options		fair value

			$
Six-month periods ended:
June 30, 2007		236,333		8.85
June 30, 2006		402,000		10.46

Dividend yield was excluded from the calculation, since it is the present policy of the Company to retain all earnings to finance operations and future growth.

22 Consolidated Financial Statements (unaudited)

7. Related party transactions:

In the three-month and six-month periods ended June 30, 2007, the Company incurred fees of $625 and $1,249 (2006 — $614 and $1,227, respectively) under the terms of a management services agreement entered into in March 2003, as amended in October 2003 and again in December 2004, with Picchio International Inc., a company related to a shareholder, director and officer. During the six-month period ended June 30, 2007, the Company paid $1,000 of performance-based fees which were recorded in accrued liabilities at December 31, 2006. The Company recorded an additional $500 of performance-based fees in the six-month period ended June 30, 2007.

In 2005, the Company entered into a lease agreement with a company in which Picchio Pharma has an equity interest. In the three-month and six-month periods ended June 30, 2007, rental revenue under the agreement amounted to $200 and $440 (2006 — $239 and $479, respectively), and is included in “other income” on the consolidated statements of operations.

On February 1, 2006, the Company entered into an assignment agreement with Parteq Research and Development Innovations (Parteq) (Assignment Agreement) which terminated an amyloid license agreement. This amyloid license agreement granted the Company an exclusive worldwide license under certain intellectual property (Amyloid Intellectual Property.) Pursuant to the Assignment Agreement, Parteq agreed and assigned the Amyloid Intellectual Property to the Company for consideration, comprising an upfront payment of $200 and various deferred payment amounts, which are approximately equal to the payments provided for in the amyloid license agreement. The Assignment Agreement also provides for annual technology payments, deferred milestone payments and deferred graduated payments based on gross revenues to be generated from commercialized products, which approximate the payments included in the amyloid license agreement.

In March 2006, the Company invested an additional amount of $1,660 in a holding company that owns shares of Innodia Inc, a company in which Picchio Pharma has an equity interest.

The transactions were recorded at the exchange amount, which is the consideration established by and agreed to by the parties.

Consolidated Financial Statements (unaudited) 23

8. Statements of cash flows — supplementary disclosure:

(a) Cash and cash equivalents:

Cash and cash equivalents consist of cash balances with banks and short-term investments:


	June 30,		December 31,
	2007		2006

	$		$
Cash balances with banks		1,656		2,370
Short-term investments yielding interest between 4.30% and 5.33% (December 31, 2006: 4.32% to 5.31%)		89,217		11,798

		90,873		14,168

(b) Interest:


	Three months				Six months
	ended June 30,				ended June 30,
	2007		2006		2007		2006

	$		$		$		$
Cash paid in the period for:
Interest		1,708		—		1,770		—

(c) Non-cash transactions:


	June 30,		December 31,
	2007		2006

	$		$
Additions to property and equipment and patent costs included in accounts payable and accrued liabilities at the end of the period		312		387

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Certain statements in this document, other than statements of fact that are independently verifiable at the date hereof, may constitute forward-looking statements. Such statements, based as they are on the current expectations of management, inherently involve numerous risks and uncertainties, known and unknown, many of which are beyond Neurochem’s control. The risks include but are not limited to: the impact of general economic conditions, general conditions in the pharmaceutical industry, changes in the regulatory environment in the jurisdictions in which Neurochem does business, stock market volatility, fluctuations in costs, changes to the competitive environment due to consolidation, that actual results may vary once the final quality-controlled verification of data and analyses has been completed, as well as other risks disclosed in public filings of Neurochem. Consequently, actual future results may differ materially from the anticipated results expressed in the forward-looking statements. The reader should not place undue reliance, if any, on the forward-looking statements included in this document. These statements speak only as of the date made and Neurochem is under no obligation and disavows any intention to update or revise such statements as a result of any event, circumstances or otherwise.

Neurochem is not responsible for the content of any external, entirely independent web site identified in this quarterly report, and specifically excludes any liability for any damages or injury arising from the reader’s access to or use of that content. These addresses are provided merely as a convenience to the readers of Neurochem’s quarterly. Neurochem’s inclusion of these addresses does not imply any endorsement of the material on these sites, nor, unless otherwise expressly disclosed, any sponsorship, affiliation or association with its owner, operator or sponsor. Furthermore, Neurochem’s inclusion of these addresses does not imply Neurochem’s authorization to use any trade name, trademark, logo, legal or official seal or copyrighted symbol that may be reflected in the identified site.

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Driven to enhance people’s lives.

Corporate profile. Neurochem is a dynamic, highly energized biopharmaceutical company focused on the development and commercialization of innovative therapeutics to address critical, unmet medical needs. Its pipeline of innovative oral product candidates primarily targets neurological disorders. With promising candidates for AA amyloidosis and Alzheimer’s disease advancing towards commercialization, Neurochem is coming of age — poised to take its place among the leaders of the global biopharmaceutical industry.

NEUROCHEM INC. 275 Armand-Frappier Blvd. Laval, Quebec, Canada H7V 4A7 Telephone: (450) 680-4500 Toll-Free: 1 877 680-4500 Fax: (450) 680-4501 E-mail: info@neurochem.com

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