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June 30, 2008 MD&A

PHARMENG INTERNATIONAL INC.
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE QUARTER ENDED JUNE 30, 2008

The following is a discussion of the consolidated financial condition and results of operations of PharmEng International Inc. (“PII” or “the Company” or “PharmEng”) for the quarter ended June 30,
2008. This discussion and analysis should be read in conjunction with the Company’s annual audited consolidated financial statements and accompanying notes for the year ended December 31, 2007. The unaudited consolidated financial statements for the quarter ended June 30, 2008 have been prepared by
management in accordance with Canadian generally accepted accounting principles (“GAAP”). All references to dollars are in Canadian funds unless otherwise indicated.

PharmEng has on its balance sheet secured loans totalling $19,000,000. At June 30, 2008 the Company is in breach of certain financial loan covenants in respect of the credit facilities including equity coverage, EBITDA and borrowing base requirements.

The lenders have provided forbearance from proceeding on this breach of covenants.PharmEng and its financial advisors are currently engaged in discussions with various parties regarding additional capital financing. There can be no assurance that any agreement will result from these discussions or that any transaction will be completed. Although the Company has suffered from significant losses and has a negative working capital, it is of the opinion it can meet its financial obligation and continue to pursue its business strategy because of the rebuilding activities of the first six months of 2008, the expected cash flow from the restructured operations and management’s plan.

The Company initiated a significant restructuring program to adjust its cost structure and continued the integration of the Arnprior Manufacturing operation with its new facility in Cape Breton, Nova Scotia.

The unprofitable Perth operation has been closed. These measures are intended to generate additional revenue or similar revenue with lower costs.

Additional information about PII can be found at the Company’s website at www.pharmeng.com and on
SEDAR at www.sedar.com .
This MD&A is dated as of August 29, 2008 and contains discussion of material events up to and
including that date.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The following discussion and analysis contains forward-looking statements which reflects management’s
expectations regarding the Company’s future growth, results of operations, performance, and business
prospects and opportunities. Although the forward-looking statements reflects management’s current
assumptions based upon information currently available to management and based upon what
management believes to be reasonable assumptions, the Company cannot be certain that actual results
will be consistent with these forward looking statements. Forward-looking statements involve significant
known and unknown risks, assumptions and uncertainties that may cause the Company’s actual results,
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performance, prospects, and opportunities in future periods to differ materially from those expressed or
implied by such forward looking statements. These risks and uncertainties include, among other things,
market demand for the Company’s products and services; dependence on key clients; the ability to
identify and secure new contracts; regulatory matters, including compliance with pharmaceutical
regulations; management of expanded operations; international operations risks; currency risks;
competition; product liability claims; integration of new operations; financing risks; and interest rate
risks. Although the company has attempted to identify important risks and factors that could cause actual
results to differ materially from those described in the forward-looking statements, there may be other
factors and risks that may cause results not to be as anticipated, estimated or intended. There can be no
assurance that forward-looking statements will prove to be accurate, as actual results may differ
materially form those anticipated in such statements. Certain factors that may impact operations are also
discussed. Such comments will be affected by, and may involve, known and unknown risks and
uncertainties that may cause the actual results of the Company to be materially different from those
expressed or implied. Accordingly, readers should not place undue reliance on forward-looking
statements. These forward looking statements are made as of the date of this MD&A and, except as
required by law, the Company assumes no obligation to update or revise them to reflect new events or
circumstances.
CORPORATE OVERVIEW
PharmEng International Inc. (the “Company”) is a publicly listed company, trading on the TSX Venture
Exchange (the “TSXV”), with a ticker symbol “PII”. Headquartered in Toronto, Canada, the Company
wholly-owns PharmEng USA, Inc. (“PUSA”), PharmEng China Inc., PharmEng Taiwan Inc., and
PharmEng Technology Inc. (“PTI”), which in turn wholly owns Keata Pharma Inc. (“Keata”). PharmEng
is engaged in two rapidly growing businesses: a contract pharmaceutical manufacturing business, Keata,
serving primarily North American pharmaceutical customers, and a broad-based pharmaceutical
consulting business, PTI, that serves the pharmaceutical, biotechnology and medical device industries in
North America and internationally.
Through Keata, the Company provides contract manufacturing services in drug formulation,
manufacturing scale up, and commercial production of both solid and liquid pharmaceuticals. Keata
operates through two pharmaceutical manufacturing facilities - the newly constructed Nova Scotia facility
located in Sydney, Nova Scotia (46,400 sq. ft.) and the newly acquired Ontario facility located in
Arnprior, just outside of Ottawa, Ontario (85,000 sq. ft.).
In these two facilities, Keata provides high quality services under current Good Manufacturing Practices
(“cGMP”) in the following areas:
• Clinical supplies production and logistics management
• Formulation and process development
• Contract manufacturing of solid and liquid finished dosage pharmaceuticals, over-the-counter and
nutraceutical products
• Analytical method development, validation and contract analytical laboratory services, including
full stability program management
• Advanced fluid bed granulation technology
PTI is recognized as a respected consulting practice in the pharmaceutical, biotechnology and medical
device sectors, and is emerging as a leader with its complete service offerings to assist clients in the rapid
commercialization of new products, from strategic planning to process scale up. PTI’s consulting
services include regulatory audits and compliance, project management, engineering, quality systems
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development and audits, GMP (Good Manufacturing Practice) audits, SOP (Standard Operating
Procedures) development, process validation, calibration, medical device investigative testing (clinical
trials), medical device product licenses and establishment licenses, mandatory problem reporting and
certified training in the medical device, pharmaceutical and biotechnology fields. PTI is also active in
delivering the Biotechnology and Pharmaceutical Technology Certificate Program in partnership with
universities in Canada and abroad by providing course materials and instructors.
STRATEGY AND OUTLOOK
PharmEng’s vision is to be a leader and preferred supplier to the pharmaceutical sector, offering a fully
integrated suite of high-quality consulting services and commercial manufacturing, from strategic
planning and process scale up to final production.
PharmEng’s strategy is to provide strategic benefits and advantages to its clients through access to
comprehensive quality products and services. This strategy includes:
• Building the contract manufacturing business through internal growth and acquisition.
• Maximizing Keata’s competitive advantage in marketing and technical transfer capability
resulting from the synergy between the consulting and manufacturing arms of PharmEng, so as to
minimize costs, reduce time requirements, deal with regulatory issues, and provide a one stop
shopping approach to new product location or transfer to a Keata facility.
• Continuing development and expansion of an established core consulting business providing
business development synergies, engineering, validation, regulatory affairs and regulatory
compliance solutions in the pharmaceutical and biotechnology sectors.
• Continuing the growth in core competencies that permit the rapid commercialization of science
and research: from strategic planning and formulation development to process scale-up and
contract manufacturing. Particular focus is intended on production of clinical trial batches at the
new Nova Scotia Plant, which has been designed in part to efficiently handle such projects.
• Strengthening international operations to ensure PharmEng can provide worldwide regulatory,
compliance and quality assurance to our clients wishing to export their products into global
markets.
• Expanding operations in Asia to improve the sourcing of Active Pharmaceutical Ingredients
(API’s) at reduced costs, both for our own manufacturing operations and for non-competing third
party customers, while targeting partnership/acquisition opportunities by providing a full range of
services for companies in Asia wanting to access the North American and European markets.
• Continuing to provide certification training programs in collaboration with Canada’s education
institutions to pharmaceutical and biotechnology professionals.
The pursuit of this vision led the Company to a major acquisition of a Pfizer manufacturing facility
located in Arnprior, Ontario. This acquisition was completed December 31, 2007
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OVERVIEW OF THE PHARMACEUTICAL INDUSTRY
The global pharmaceutical industry comprises global, regional and national pharmaceutical manufactures,
developers, distributors, biotechnology companies, and speciality companies in drug formulation, testing,
clinical trials, engineering, and compliance.
There is a trend by major pharmaceutical companies towards outsourcing of drug development,
commercial manufacturing, and consulting services to meet growing demand and bring products to
market quickly. In addition, the growth of biotechnology companies, generic drug companies, and
nutraceutical companies, whose principal focus is on efficient product development as opposed to
incurring considerable investment for non-recurring resources and manufacturing.
PharmEng management believes that growth in pharmaceutical industry outsourcing will continue to
grow and will be driven by the following factors;