**YM
      BIOSCIENCES INC.**





**AMENDED
      ANNUAL INFORMATION FORM**





**YEAR
      ENDED JUNE 30, 2005**

















**September
      8, 2005**







*EXPLANATORY
        NOTE: This Annual Information Form has been amended to incorporate by reference
        the previously filed business acquisition report dated June 28, 2005 in respect
        of the acquisition of DELEX Therapeutics Inc. on May 2,
        2005.*


**YM
      BIOSCIENCES INC.**





**ANNUAL
      INFORMATION FORM**





**TABLE
      OF CONTENTS**


DOCUMENTS
                  INCORPORATED BY REFERENCE
              
              
              2GLOSSARY
                  OF TERMS AND PROPER NAMES
              
              
              3FORWARD
                  LOOKING STATEMENTS
              
              
              7CORPORATE
                  STRUCTURE
              
              
              7GENERAL
                  DEVELOPMENT OF THE BUSINESS
              
              
              8NARRATIVE
                  DESCRIPTION OF THE BUSINESS (the “Business”)
              
              
              10DIVIDENDS
              
              
              47CAPITAL
                  STRUCTURE
              
              
              47COMMON
                  SHARES
              
              
              47MARKET
                  FOR SECURITIES
              
              
              48DIRECTORS
                  AND OFFICERS
              
              
              48AUDIT
                  FEES
              
              
              54LEGAL
                  PROCEEDINGS
              
              
              54TRANSFER
                  AGENT AND REGISTRAR
              
              
              54MATERIAL
                  CONTRACTS
              
              
              54ADDITIONAL
                  INFORMATION
              
              
              55


**DOCUMENTS
      INCORPORATED BY REFERENCE** ****




YM
      BioSciences’ “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations” (the “MD&A”) and the audited consolidated balance
      sheets as at June 30, 2005 and June 30, 2004, and the audited consolidated
      statements of earnings and retained earnings and changes in financial position
      for each of the years in the three year period ended June 30, 2005 (the
“Financial Statements”) previously filed.




The
      MD&A and the Financial Statements, in their entirety, are incorporated by
      reference in, and form part of, this Annual Information Form. The previously
      filed business acquisition report dated June 28, 2005 in respect of the
      acquisition of Delex Therapeutics Inc. on May 2, 2005 is also incorporated
      by
      reference in, and forms part of, this Annual Information Form.




All
      of
      the documents referred to above have been filed via SEDAR (System for Electronic
      Document Analysis and Retrieval) and are available to the public at SEDAR’s
      website, *www.sedar.com* .
      Further
      information may also be found on the Corporation’s website *www.ymbiosciences.com* .




-2-


**GLOSSARY
      OF TERMS AND PROPER NAMES** ****




This
      glossary contains general terms used in the discussion of the biopharmaceutical
      industry, as well as specific technical terms used in the descriptions of our
      technology and business.




Abgenix
      -
      Abegnix Incorporated




Active
      Immunotherapy - Deliberate stimulation of the patient's own immune response
      through administration of antigens with or without immunological adjuvants.
      Therapeutic cancer vaccines are considered Active Specific Immunotherapy agents
      because the body is stimulated to make its own antibodies specific for the
      tumor
      cells




Adjuvant
      - Substance added to a vaccine to enhance its immunogenicity (i.e. its ability
      to stimulate an immune response)




Affinity
      - Binding strength of an antibody to a target




Amgen
      -
      Amgen Incorporated




Antisense
      Drug - Short spans of nucleic acid (DNA or RNA) used to disrupt the expression
      of disease related genetic code




Aphton
      -
      Aphton Corporation




ASCO
      -
      The American Society of Clinical Oncology




AZ/AstraZeneca
      - AstraZeneca PLC




Autocrine
      - Used herein to describe a hormonal pathway characterized by the production
      of
      a biologically active substance by a cell; the substance then binds to receptors
      on that same cell to initiate a cellular response




Autocrine
      loop - A self-sustaining process built on a self-feeding positive feedback
      cycle. Refers to the ability of a substance to act on the same cell that
      produced it




BMS
      -
      Bristol Myers Squibb Company




Cancer
      Vaccine - Vaccines or candidate vaccines designed to treat cancer, using pure
      or
      extracted tumor-specific antigens or using the patient's own whole tumor cells
      as the source of antigens - see “Active Immunotherapy”




CBQ
      -
      Centro de Bioactivos Quimicos (Center for Bioactive Chemicals), Santa Clara,
      Cuba




cDNA
      -
      Cloned copies of mRNA - the essential messenger element of the genes in the
      DNA
      that help in the coding of proteins




cGMP
      -
      current good manufacturing practices, as mandated from time to time by Health
      Canada and the FDA




CTA
      -
      Clinical Trial Application - an application made for Health Canada, the Canadian
      health regulatory authority for clinical trial




Chemopotentiator
      - A substance that enhances the activity of a chemotherapy agent




Chimeric
      - A chimeric antibody consists mainly of human protein, but the portion of
      the
      antibody that binds to the target is still mouse protein




CIM
      -
      Centro de Inmunologia Molecular (Center for Molecular Immunology), Havana,
      Cuba




-3-




CIMAB
      - a
      Cuban company responsible for commercializing products developed at CIM




Cisplatin
      - Approved chemotherapeutic agent




c-myc
      -
      Cellular gene involved in proliferation, commonly deregulated in cancer




CTA
      -
      Clinical Trial Application - previously known as an Investigational New Drug
      application which must be filed and accepted by the regulatory agency of Health
      Canada before each phase of human clinical trials may begin




Cyclophosphamide
      - Approved chemotherapeutic agent




Cytoprotective
      - Having the capacity to protect cells




Cytostatic
      - Having capacity to arrest the growth of cells




Cytotoxic
      - Having capacity to kill cells




Cytotoxic
      T cell response - Killing the tumor cell by activated tumor-specific T cells




DELEX
      -
      DELEX Therapeutics Inc.




Doxorubicin
      - Approved chemotherapeutic agent




E.
      coli -
      A common bacterial strain often used as a host for recombinant protein
      production




Eli
      Lilly
      - Eli Lilly and Company




EMEA
      -
      The Europe Agency for the Evaluation of Medicinal Products - the European health
      regulatory authority




Epidermal
      Growth Factor - A growth factor known to be involved in regulation of epithelial
      cell growth




Epithelial
      - Derived from epithelium which is the layer of cells forming the epidermis
      of
      the skin and the surface layer of the serous and mucous membranes




Estramustine
      - An approved chemotherapeutic agent




Extracellular
      domain (ECD) - The portion of a cell surface protein located outside the cell




5-FU
      -
      See Fluorouracil




Fluorouracil
      (5-Fluorouracil, 5-FU) - Approved chemotherapeutic agent




Fusion
      protein - Two or more proteins genetically engineered to be produced as a single
      protein




Genentech
      - Genentech Incorporated




Genmab
      -
      Genmab A/S




Genta
      -
      Genta Incorporated




Glioma
      -
      A form of brain cancer involving the malignant transformation of a glial cell




GMP
      -
      good manufacturing practices, i.e. guidelines established by the governments
      of
      various countries, including Canada and the United States, to be used as a
      standard in accordance with the World Health Organization's Certification Scheme
      on the quality of pharmaceutical products




-4-




GnRH
      -
      Gonadotrophin Releasing Hormone; controlling the circulating levels of the
      sex
      hormones




HER-1
      positive tumors - Tumors expressing/producing the EGF receptor




Hormone-refractory
      - Term used to indicate that a tumor is no longer responsive to hormone therapy




Humanized
      - The process whereby an antibody derived from murine cells is altered to
      resemble a human antibody. Humanized antibodies are less likely to cause
      allergic reactions when given to humans but retain the biological activity
      of
      the original murine form




ImClone
      -
      ImClone Systems Incorporated




IND
      -
      Investigational New Drug application which must be filed and accepted by the
      FDA
      before each phase of human clinical trials may begin




Irinotecan
      - An approved chemotherapeutic agent




In
      vivo -
      In the living body or organism. A test performed on a living organism




ISIS
      -
      ISIS Pharmaceuticals




KFDA
      -
      Korea Food and Drug Administration - the Korean health regulatory
      authority




Ligand
      -
      Used herein to describe a protein or peptide that binds to a particular receptor




Lorus
      -
      Lorus Therapeutics Inc.




Merck
      -
      Merck KGaA




Metastatic
      - A term used to describe a cancer where tumor cells have migrated from the
      primary tumor to a secondary site (e.g. from prostate to bone)




Mitoxantrone
      - An approved chemotherapy agent




Monoclonal
      antibody (“MAb”) - Antibodies of exceptional purity and specificity derived from
      hybridoma cells (cells which are fused cells, generally MAb produced in mice,
      that secrete MAbs)




Murine
      -
      Derived from mouse cells




NCE
      - A
      new chemical entity




NCIC
      -
      The National Cancer Institute of Canada




Neoplastic
      - New and abnormal growth of tissue (neoplasm), which may be benign or
      cancerous




NSCLC
      -
      Non Small Cell Lung Cancer




OFAC
      - US
      Department of the Treasury Office of Foreign Asset & Control




Oncogene
      - A gene that induces or promotes uncontrolled cell growth




Oncoscience
      - Oncoscience AG




Orange
      Book - A reference to the Hatch/Waxman Act




-5-




Orphan
      Drug - A drug aimed at treating a condition with an incidence of less than
      200,000 per year in the United States (often given a seven year market
      exclusivity by the FDA




OSI
      - OSI
      Pharmaceuticals, Inc.




Overall
      Survival - For patients who have died, overall survival was calculated in months
      from the day of randomization to date of death. Otherwise, survival was censored
      at the last day the patient is known alive




P64k
      -
      Outer membrane protein of N. meningitides




Passive
      Immunotherapy - Immunologically active material transferred into the patient
      as
      a passive recipient. Monoclonal antibodies are considered Passive Immunotherapy
      since antibodies are generated outside the body and given to the patient




pGp
      -
      P-Glycoprotein. A pumping mechanism that removes noxious substances from the
      cell




pGp
      inhibitor - Inhibitor of the activity of P-Glycoprotein




P.
      haemolytica - A bacterium causing respiratory disease in cattle and sheep




Phosphorylation
      - Addition/donation of a phosphate group to a particular amino acid which can
      lead to tumor growth




Prednisone
      - An approved standard anti-inflammatory




Resection
      - The process of tumor removal




Roche
      -
      F.Hoffmann-LaRoche Ltd.




TAP
      - TAP
      Pharmaceuticals




Taxol
      -
      An approved chemotherapeutic agent




Taxotere
      - An approved chemotherapeutic agent




TGFα -
      Transforming growth factor alpha




Th
      1 - T
      helper cell type 1 (generally involved in stimulating a cell-mediated immune
      response)




Therapeutic
      vaccine - An approach to the treatment of cancer utilizing “active
      immunotherapy”




Titers
      -
      Term used to express levels of circulating antibodies




Tyrosine
      kinase - An enzyme that catalyzes the phosphorylation of tyrosine residues
      in
      proteins with nucleotides as phosphate donors




Upregulation
      - Increased production of an RNA transcript or a protein by a cell




Vinyl
      furan - A chemical polymer




Yttrium
      90 - A radioisotope used in the treatment of disease




-6-




**FORWARD
      LOOKING STATEMENTS**




Statements
      contained herein that are not based on historical fact, including without
      limitation statements containing the words "believes," "may," “likely,” "plans,"
      "will," "estimate," "continue," "anticipates," "intends," "expects" and similar
      expressions, constitute "forward-looking statements" within the meaning of
      the
      US Private Securities Litigation Reform Act of 1995. Such forward-looking
      statements involve known and unknown risks, uncertainties and other factors
      that
      may cause the actual results, events or developments to be materially different
      from any future results, events or developments expressed or implied by such
      forward-looking statements. Such factors include, without limitation, changing
      market conditions, our ability to obtain patent protection and protect our
      intellectual property rights, commercialization limitations imposed by
      intellectual property rights owned or controlled by third parties, intellectual
      property liability rights and liability claims asserted against us, the
      successful and timely completion of clinical studies, the impact of competitive
      products and pricing, new product development, uncertainties related to the
      regulatory approval process, product development delays, our ability to attract
      and retain business partners and key personnel, future levels of government
      funding, our ability to obtain the capital required for research, operations
      and
      marketing and other risks detailed from time-to-time in the Corporation’s
      ongoing quarterly filings, annual information forms and annual reports. We
      undertake no obligation to publicly update or revise any forward-looking
      statements, whether as a result of new information, future events or otherwise.
      In light of these risks, uncertainties and assumptions, the forward-looking
      events discussed in this annual information form might not occur.




Unless
      otherwise indicated, or the context requires otherwise, the information
      appearing in this annual information form is stated as at June 30, 2005 and
      references in this annual information form to “$” or “dollars” are to Canadian
      dollars. Information contained on our website is not part of this annual
      information form.




**CORPORATE
      STRUCTURE**




YM
      BioSciences Inc. (“YM BioSciences” or “YM” or the “Corporation”) was
      incorporated under the laws of the Province of Ontario on August 17, 1994.
      On
      February 7, 2001 the Corporation changed its name to YM BioSciences Inc. and
      on
      December 11, 2001 was continued into the Province of Nova Scotia under the
      Nova
      Scotia Companies Act.




The
      head
      office and principal place of business of the Corporation is 5045 Orbitor Drive,
      Building 11, Suite 400, Mississauga, Ontario, L4W 4Y4. The registered head
      office of YM BioSciences is 1959 Upper Water Street, Suite 800, Halifax, Nova
      Scotia, B3J 2X2




**ORGANIZATIONAL
      STRUCTURE**




The
      Corporation currently has three material subsidiaries, shown in the following
      diagram:












-7-




CIMYM
      is
      80% owned by the Corporation and 20% owned by CIMAB. It is a Canadian operating
      subsidiary incorporated under the laws of Ontario.




CIMYM
      (Barbados) 80% owned by the Corporation and 20% owned by CIMAB. It is an
      international marketing subsidiary incorporated under the laws of
      Barbados.




DELEX
      is
      100% owned by the Corporation. On May 2, 2005, the Corporation acquired all
      of
      the issued and outstanding shares of capital stock of DELEX. YM issued to the
      DELEX shareholders common shares of YM in consideration for their DELEX shares
      and additional shares of YM in consideration for working capital in DELEX.
      See
“General Development of the Business” for more details regarding the
      acquisition. DELEX is now a Canadian operating subsidiary of YM incorporated
      under the laws of Ontario.




Unless
      otherwise noted, “YM BioSciences”, “YM”, and the “Corporation” includes YM
      BioSciences Inc. and its subsidiaries.




**GENERAL
      DEVELOPMENT OF THE BUSINESS**




The
      Corporation was founded in 1994 to acquire rights to develop drug products.
      The
      Corporation is principally focused on products for the treatment of patients
      with cancer.




In
      1995,
      the Corporation secured our first drug licenses and our initial financing.
      The
      Corporation initially licensed a range of drug products at various stages of
      assessment and development, including certain of the Corporation's current
      anti-cancer products. In 1998, the Corporation decided to concentrate on
      anti-cancer products. The Corporation has used funds raised in our initial
      financing and subsequent financings in 1997, 1999, 2000, 2002, 2003 and 2004
      to
      advance certain of our licensed drug products through clinical trials in Canada,
      the United States and Europe, and to expand our portfolio initially of
      anti-cancer products by licensing additional drug and cancer-related products
      in
      later stages of development. In addition, the Corporation has licensed certain
      drug products that were in pre-clinical. See “Narrative Description of the
      Business - Products in Clinical Development” and “- Products in Pre-Clinical
      Development”.




The
      Corporation has four product candidates currently in the clinical stage of
      development:




o
      TESMILIFENE is a small molecule chemopotentiator that has been clinically
      demonstrated to augment the anti-tumor activity of the cytotoxic drug families
      of anthracyclines and taxanes and preclinically of other families of
      chemotherapy. In a Phase III trial the drug was used in combination with
      doxorubicin and demonstrated a greater than 50% increase in survival in women
      with metastatic and recurrent breast cancer compared with the patients treated
      with doxorubicin alone.




o
      NIMOTUZUMAB (previously known as TheraCIM hR3), a humanized monoclonal antibody,
      targeting the protein known as Epidermal Growth Factor Receptor ("EGFr"), is
      designed to treat epithelial cancers and to be administered prior to,
      simultaneously with, or subsequent to, chemotherapy and radiotherapy. In various
      Phase II trials, the drug has doubled the reported complete response rate to
      radiation in head-and-neck tumors and demonstrated clinical benefit in adult
      and
      pediatric glioma. The drug has been approved for sale in the People’s Republic
      of China, Argentina and Columbia for nasopharangeal cancer in the first case
      and
      for head and neck cancer in the latter two.




-8-




o
      AeroLEFTM, a proprietary formulation of both free and liposome-encapsulated
      fentanyl administered by pulmonary inhalation, is being developed for the
      treatment of severe and moderate acute pain and cancer pain. AeroLEFTM has been
      developed to provide both rapid onset and extended relief while recognizing
      the
      need for interpersonal variability as well as inter-episode variability in
      the
      amount of drug needed. The drug has completed a Phase IIa trial and cleared
      for
      initiatiation of a randomized Phase IIb trial.




o
      NORELIN TM is a
      therapeutic vaccine designed to stimulate the production of antibodies against
      GnRH in patients, resulting in reduced production of hormones that may cause
      or
      contribute to the growth of certain sex-hormone dependent cancers. It has
      completed a Phase I/II safety and immunogenicity trial in hormone-sensitive
      prostate cancer suggesting that the approach may be better tolerated than
      currently available therapies.




o
      RADIOTHERACIM is a radiolabelled humanized MAb, targeting the EGFr, that
      completed a pilot trial for the treatment of brain cancers. In published results
      from that clinical study in patients with glioma the product appeared to
      increase survival compared with historical results with standard radiation
      therapy. No additional clinical trials are planned at this time.




The
      Corporation also has interests in therapeutic cancer vaccines in the
      pre-clinical stage of development, namely TGFα Cancer Vaccine and HER-1 Cancer
      Vaccine. The Corporation's license for the TGFα Vaccine and the HER-1
      Vaccine is suspended under the terms of the out-licensing agreement in July
      2004
      between the Corporation, our subsidiary CIMYM, Inc., a Barbados corporation
      ("CIMYM (Barbados)"), CIMAB and Tarcanta Inc. and Tarcanta, Ltd. (collectively,
      "Tarcanta"), two
      wholly-owned subsidiaries of California-based CancerVax Corporation
      ("CancerVax") relating to Tarcanta licensing TGFα and HER-1 from CIMAB. In
      connection with the out-licensing agreement, CancerVax has announced that it
      has
      received a license from the Office
      of
      Foreign Asset Control of the United States Department of Treasury ("OFAC" or
      "Treasury") authorizing Tarcanta to enter into the transactions with CIMAB
      and
      the Corporation. See "Business - Licensing Arrangements - Out-Licensing".




On
      May 2,
      2005, the Corporation acquired DELEX Therapeutics Inc. (“DELEX”), a private
      clinical stage company developing inhalation-delivered products to treat severe
      or moderate pain including cancer pain. DELEX’s lead product is
      AeroLEF TM ,
      a
      proprietary formulation of opioids for the treatment of acute and breakthrough
      pain that has completed preliminary efficacy trials and is positioned to undergo
      further Phase II efficacy trials in 2005.




Through
      this acquisition, DELEX became a wholly-owned subsidiary of the Corporation.
      Prior to the acquisition, DELEX’s principal shareholders, in addition to its
      founders and management, were New Generation Biotech (Equity) Fund, a fund
      managed by Genesys Capital Partners, BDC Venture Capital, a corporation owned
      by
      the Business Development Bank of Canada, and the Eastern Technology Seed
      Investment Fund Limited Partnership. In consideration for their shares and
      the
      accompanying working capital in DELEX, YM BioSciences issued to the DELEX
      shareholders 1,587,302 common shares upon closing of the transaction. In
      addition, the Corporation issued 4,603,174 to be held in escrow for the benefit
      of DELEX shareholders. Of the escrowed common shares an aggregate of 1,825,396
      will be released in four tranches of approximately 456,349 common shares each
      of
      two in November 2005, May 2006, and November 2006, and May 2007 following
      closing and up to 2,777,779 common shares in escrow will be released only if
      specific milestones are achieved, including the receipt of an IND for the
      planned Phase IIb trial, the conclusion of a strategic partnership for further
      development and commercialization of the product, and upon the initiation of
      Phase III trials. On receipt of US regulatory approval, if any, for
      AeroLEF TM or any
      product using DELEX’s technology, the Corporation will make an additional
      payment to the DELEX shareholders of $4.75 million in cash and/or common shares
      at the Corporation’s option.




In
      addition to the above consideration, DELEX employees were granted an aggregate
      of 437,000 **** stock
      options under the Corporation’s stock option plan.




There
      is
      no indication of any public takeover offers by third parties in respect of
      the
      YM's shares or by YM in respect of other companies' shares which have occurred
      during the last and current financial year.




-9-




**NARRATIVE
      DESCRIPTION OF THE BUSINESS (the “Business”)**




The
      Corporation is a biopharmaceutical company engaged in the development of
      products primarily for the treatment of patients with cancer. YM generally
      in-licenses substances designed for anti-cancer use in order to advance them
      along the regulatory and clinical pathways toward commercial approval. The
      Corporation's licenses generally cover the major market countries of the
      developed world (including Canada, the United States, Japan and Europe) or
      are
      world-wide. The Corporation uses our expertise to manage and perform what we
      believe are the most critical aspects of the drug development process which
      include the design and conduct of clinical trials, the development and execution
      of strategies for the protection and maintenance of intellectual property rights
      and the interaction with drug regulatory authorities internationally. YM
      concentrates on drug development and does not engage in drug discovery, avoiding
      the significant investment of time and capital that is generally required before
      a compound is identified as appropriate forclinical trials. YM has in-licensed
      certain preclinical products which have been related to its clinical programs.
      YM both conducts and out-sources clinical trials and out-sources the manufacture
      of clinical materials to third parties.




The
      Corporation's current portfolio of products in clinical development includes
      three anti-cancer agents (a small molecule, a vaccine and a monoclonal antibody)
      in a number of formulations currently targeting nine different tumors and/or
      stages of cancer as well as a proprietary inhalation delivery system for
      fentanyl to treat acute pain including cancer pain. The Corporation also has
      a
      financial interest in two additional anti-cancer immunotherapies in pre-clinical
      development. The Corporation intends to license the rights to manufacture and
      market our drug products to other pharmaceutical companies in exchange for
      license fees and royalty payments and to continue to seek other in-licensing
      opportunities in pursuing our business strategy. The Corporation does not
      currently intend to manufacture or market products although we may, if the
      opportunity is available on terms that are considered attractive, participate
      in
      ownership of manufacturing facilities or retain marketing or co-development
      rights to specific products.




**RISK
      FACTORS**




**Risks
      Related To Our Business**




WE
      ARE IN
      THE EARLY STAGES OF DEVELOPMENT AND, AS A RESULT, ARE UNABLE TO PREDICT WHETHER
      WE WILL BE ABLE TO PROFITABLY COMMERCIALIZE OUR PRODUCTS.




The
      Corporation was founded in 1994 and none of the products, licensed or owned,
      have received regulatory approval for sale in any of the Corporation’s licensed
      territories. Accordingly, the Corporation has not generated any revenues from
      the commercialization of our products. A significant commitment of resources
      to
      conduct clinical trials and additional development will be required to
      commercialize most of the products. There can be no assurance that the products
      will meet applicable regulatory standards, be capable of being produced in
      commercial quantities at reasonable cost or be successfully marketed, or that
      the investment made by the Corporation in the commercialization of the products
      will be recovered through sales, license fees or related royalties.




WE
      HAVE A
      LACK OF REVENUES AND A HISTORY OF LOSSES AND, THEREFORE, ARE UNABLE TO PREDICT
      THE EXTENT OF ANY FUTURE LOSSES OR WHEN WE WILL BECOME PROFITABLE.




Up
      to
      June 30, 2005, the Corporation recognized approximately $748,000 from the
      out-licensing of
      our
      licensed products TGFα and HER-1 from Tarcanta and tesmilifene from Shin Poong.
      Since incorporation and up to June 30 ,
      2005,
      YM has an accumulated deficit of $60.8 million. The Corporation expects
      expenditures and the accumulated deficit to increase as we proceed with our
      commercialization programs until such time as any sales, license fees and
      royalty payments generate sufficient revenues to fund our continuing operations.




WE
      ARE
      DEPENDENT ON OTHERS FOR THE MANUFACTURE, DEVELOPMENT AND SALE OF OUR PRODUCTS.
      IF WE ARE UNABLE TO ESTABLISH OR MANAGE COLLABORATIONS IN THE FUTURE, THERE
      COULD BE A DELAY IN THE MANUFACTURE, DEVELOPMENT AND SALE OF OUR PRODUCTS.




-10-




We
      do not
      conduct any of our own basic research. Basic research on a particular product
      licensed to us or acquired by us is conducted by other biopharmaceutical
      companies, scientific and academic institutions and hospitals, or scientists
      affiliated with those institutions. Once the basic research is complete, the
      Corporation generally enters into license agreements to in-license the right
      to
      develop and market the products. The Corporation has negotiated certain
      in-licensing agreements with: the University of Manitoba, CancerCare Manitoba,
      Vincent Research and Consulting, CIMAB, Biostar Inc., the Veterinary Infectious
      Disease Organization ("VIDO") (a division of the University of Saskatchewan),
      the University of Saskatchewan, and DELEX technology was developed at Dalhousie
      University. See "Business - Licensing Arrangements - In-Licensing".




The
      Corporation enters into arrangements with, and is dependent on others with,
      respect to the manufacture, development and sale of our in-licensed products.
      Product development includes, but is not limited to, pre-clinical testing,
      clinical testing, regulatory approvals and the development of additional
      regulatory and marketing information. The Corporation's ability to successfully
      develop and commercialize our in-licensed or acquired products is dependent
      on
      our ability to make arrangements with others on commercially acceptable terms.
      The product development process may be delayed or terminated if the Corporation
      cannot secure or maintain such arrangements. The Corporation does not have
      long-term, material, third-party manufacture, formulation or supply agreements,
      except with respect to two of the Corporation's licensed products (TheraCIM
      and
      RadioTheraCIM) which are expected to be manufactured by CIMAB or a related
      party, subject to certain terms and conditions of the licensing agreements
      between the Corporation and CIMAB. The Corporation has entered into an agreement
      with Pharm-Olam International, Ltd. ("POI") in connection with clinical testing
      of tesmilifene.




The
      Corporation expects to enter into out-licensing agreements with others with
      respect to manufacturing and marketing our products. The Corporation may retain
      co-development and marketing rights if management deems it appropriate to do
      so.
      At this time, the Corporation has entered into four out-licensing agreements.




The
      Corporation entered into the first out-licensing agreement through our
      subsidiary, CIMYM Inc., an Ontario corporation ("CIMYM"). On November 12, 2003,
      CIMYM out-licensed the rights for TheraCIM in most of Europe to Oncoscience
      AG
      (“Oncoscience”) of Germany. Under the terms of the agreement, CIMYM is entitled
      to receive up to US$30 million as a share of any amounts received by Oncoscience
      in relation to the development or sublicensing of the product and as a royalty
      on initial net sales. After CIMYM has received US$30 million, CIMYM continues
      to
      receive royalties on net sales but at a lesser percentage.




The
      Corporation and CIMYM (Barbados) entered into the second out-licensing
      agreem ent
      with
      Tarcanta and CIMAB relating to Tarcanta licensing TGFα and HER-1 from CIMAB.
      CancerVax has announced that it has received a license from Treasury authorizing
      Tarcanta to enter into the transactions with CIMAB and the Corporation. On
      July
      13, 2004, the
      Corporation, CIMYM (Barbados), CIMAB and Tarcanta entered into a License,
      Development, Manufacturing and Supply Agreement. By the terms of this agreement
      with Tarcanta, the 2001 CIMYM License has been suspended until such time, if
      at
      all, there is a default under the agreement with Tarcanta. Under the terms
      of
      the new agreement and in consideration for the suspension of the 2001 CIMYM
      License, the Corporation is entitled to receive an aggregate payment of
      $1,000,000 which is payable in four equal installments, the final payment due
      December 31, 2005. In addition, under the new agreement the Corporation may
      receive 35% of an aggregate of $16,350,000 in milestone payments to be paid
      by
      Tarcanta upon the successful completion of certain research and development
      activities. The Corporation has no continuing involvement in these research
      and
      development activities and has no future obligations under the development
      plan
      established by the out-licensing arrangement between CIMAB and Tarcanta.
      Finally, the Corporation retains an interest in the revenues from the
      manufacture and marketing of the drugs or from their sub-licensing. See
      "Business - Licensing Arrangements - Out-Licensing" and see "Business -
      Licensing Arrangements - In-Licensing - Licenses for TheraC IM,
      RadioTheraCIM, TGFα and HER-1".




The
      Corporation entered into an out-licensing agreement with Kuhnil Pharmaceutical
      Company (“Kuhnil”) of Seoul, Korea to expand the development program for
      nimotuzumab (TheraCIM-hR3), its monoclonal antibody against the EGF receptor,
      for specific population of patients with non-small cell lung cancer (NSCLC).
      Kuhnil will join the Joint Development Team, already comprised of YM,
      Oncoscience and CIMAB management, to oversee the development of nimotuzumab.
      Kuhnil will fund Korean development costs and provide an undisclosed amount
      of
      up-front, milestone and royalty payments. In addition, Kuhnil will launch
      bridging studies in the local population as required by the Korean health
      regulatory authority, KFDA, in order to support all indications currently under
      study by CIMYM and Oncoscience to permit them to be launched in Korea and other
      Asian countries. In Europe, Oncoscience is currently awaiting advice from EMEA
      for two pivotal trials with nimotuzumab in glioma where the drug is currently
      undergoing a phase II monotherapy trial in pancreatic cancer.




-11-




The
      Corporation entered into an agreement with Shin Poong Pharmaceutical Company
      (“Shin Poong”) of Seoul, Korea to expand the development program for its lead
      drug, tesmilifene, into gastric cancer. The two companies will form a Joint
      Development Team to oversee the development of tesmilifene in gastric cancer.
      Shin Poong will fully fund development costs and provide an undisclosed amount
      of up-front, milestone and royalty payments. In addition, Shin Poong will launch
      a bridging study in the local population in calendar 2005 in order to allow
      the
      breast cancer indication currently under study by YM to be launched in Korea
      and
      other Asian countries. Shin Poong recently completed recruitment for a gastric
      cancer study with its proprietary taxane drug, Padexol®.




There
      can
      be no assurance that the Corporation will be successful in maintaining our
      relationships with research institutions or others or in negotiating additional
      in-licensing or out-licensing agreements on terms acceptable to the Corporation
      or that any such arrangements will be successful. In addition, there can be
      no
      assurance that the arrangements between the Corporation and others will prevent
      other parties from entering into arrangements with such entities for the
      development or commercialization of similar products or that the parties with
      whom the Corporation has such arrangements will not be pursuing alternative
      technologies or developing products either on their own or in collaboration
      with
      others, including the Corporation's competitors. If the Corporation does not
      establish sufficient in-licensing and out-licensing arrangements, we could
      encounter delays in product introductions or could find that the development,
      manufacture or sale of our licensed products could be materially adversely
      affected.




WE
      HAVE
      NO EXPERIENCE IN COMMERCIAL MANUFACTURING OF OUR PRODUCTS AND MAY ENCOUNTER
      PROBLEMS OR DELAYS IN MAKING ARRANGEMENTS FOR PRODUCTS TO BE COMMERCIALLY
      MANUFACTURED, WHICH COULD RESULT IN DELAYED DEVELOPMENT, REGULATORY APPROVAL
      AND
      MARKETING.




The
      Corporation has not commercially launched any of its licensed or owned products
      and has no commercial manufacturing experience. To be successful, the products
      must be manufactured in commercial quantities in compliance with regulatory
      requirements and at acceptable costs. The Corporation does not have and does
      not
      intend to acquire facilities for the production of the products although we
      may
      invest in the ownership of production facilities if appropriate opportunities
      are available.




Two
      of
      the Corporation's licensed products (namely, TheraCIM and RadioTheraCIM) are
      currently manufactured at commercial scale, but in small quantities for testing,
      by the relevant licensor (namely, CIMAB) or a related party, subject to certain
      terms and conditions of the licensing agreements between the Corporation and
      CIMAB. Currently these expectations are being met. There can be no assurance,
      however, that such entities will be able to develop adequate manufacturing
      capabilities for additional commercial scale quantities in a commercially
      reasonable manner.




Three
      other products of the Corporation which are currently manufactured, and finished
      and filled, in small quantities for testing, by third parties are tesmilifene
      and Norelin TM which
      are licensed and AeroLEF TM which is
      owned by the Corporation. The manufacturing process for these products is such
      that the Corporation expects that commercial quantities can be manufactured.
      If
      current suppliers cannot manufacture commercial quantities or the Corporation
      otherwise experiences a problem with current suppliers, it will be necessary
      for
      the Corporation to obtain these products from new suppliers. The Corporation
      does not have supply agreements with the third party suppliers of tesmilifene,
      Norelin TM or
      AeroLEF TM ,
      but
      such suppliers have produced quantities for the Corporation, or in the case
      of
      AeroLEF TM for
      DELEX, to specification on purchase order. The Corporation expects that we
      could
      find new suppliers, if necessary. There can be no assurance, however, that
      the
      Corporation or our licensors will be able to reach satisfactory arrangements
      with our current suppliers or, if necessary, new suppliers or that such
      arrangements will be successful.




All
      manufacturing facilities must comply with applicable regulations in their
      jurisdiction or where products are to be sold. In addition, production of the
      licensed and owned products may require raw materials for which the sources
      and
      amount of supply are limited. An inability to obtain adequate supplies of such
      raw materials could significantly delay the development, regulatory approval
      and
      marketing of the Corporation's licensed and owned products.




-12-




WE
      ARE
      DEPENDENT ON DEVICES FROM THIRD PARTIES IN ORDER TO SUCCESSFULLY COMMERCIALIZE
      AEROLEF TM




Device
      use will be an important element for successful commercialization of
      AeroLEF TM  in
      both
      the inpatient and outpatient settings.




We
      have
      selected the AeroEclipse(R) inhalation device for our Phase II clinical studies
      for the inpatient indications for AeroLEF TM and
      anticipate using the AeroEclipse(R) for our planned Phase III clinical studies
      for the inpatient market opportunity. Material changes to the AeroEclipse(R)
      device by the manufacturer, Trudell Medical, or a decision to change to an
      alternative inhalation device would likely delay the initiation of Phase III
      clinical trials. A change of devices after the initiation of Phase III studies,
      however, would require additional clinical trials bridging studies and could
      significantly delay the commercialization of AeroLEF TM .
      Currently DELEX purchases the AeroEclipse(R) and it does not have a defined
      supply agreement.




While
      inpatient use of AeroLEF TM , in
      the
      hospital or hospice setting,  may
      be
      achieved with existing equipment such as the AeroEclipse(R), outpatient use
      will
      require a portable nebulization device. Several devices currently exist and
      are
      available for use with approved respiratory agents (bronchodilators,
      antibiotics, steroids). The Company has an active development program to
      evaluate and identify the best devices for use with AeroLEF TM and
      other pipeline products. Although the Company would prefer to access these
      devices on an arms-length basis from the manufacturer, it will explore the
      benefits of a strategic partnership that could provide for custom adaptations
      to
      optimize product delivery, lower prices or other benefits.




THE
      DRUG
      ENFORCEMENT ADMINISTRATION (“DEA”) LIMITS THE AVAILABILITY OF THE ACTIVE
      INGREDIENTS IN CERTAIN OF OUR CURRENT DRUG CANDIDATES AND, AS A RESULT, OUR
      QUOTA MAY NOT BE SUFFICIENT TO COMPLETE CLINICAL TRIALS, OR TO MEET COMMERCIAL
      DEMAND OR MAY RESULT IN CLINICAL DELAYS.




The
      DEA
      regulates chemical compounds as Schedule I, II, III, IV and V substances, with
      Schedule I substances considered to present the highest risk of substance abuse
      and Schedule V substances the lowest risk. Certain active ingredients in
      AeroLEF TM ,
      such as
      fentanyl, are listed by the DEA as Schedule II under the Controlled Substances
      Act of 1970. Consequently, their manufacture, research, shipment, storage,
      sale
      and use are subject to a high degree of oversight and regulation. For example,
      all Schedule II drug prescriptions must be signed by a physician, physically
      presented to a pharmacist and may not be refilled without a new prescription.
      Further, the amount of Schedule II substances we can obtain for clinical trials
      and commercial distribution is limited by the DEA and our quota may not be
      sufficient to complete clinical trials or meet commercial demand. There is
      a
      risk that DEA regulations may interfere with the supply of the drugs used in
      our
      clinical trials, and, in the future, our ability to produce and distribute
      our
      products in the volume needed to meet commercial demand.




WE
      ARE
      DEPENDENT ON LICENSES FROM THIRD PARTIES AND THE MAINTENANCE OF LICENSES IS
      NECESSARY FOR OUR SUCCESS.




We
      have
      obtained our rights to the licensed products under license agreements from
      various third party licensors as follows:




(a)
            License
                Agreement between CIMYM Inc. and CIMAB SA, January 24, 2001 with
                respect
                toTGFα
                and HER-1, which agreement has been suspended in accordance with
                the terms
                of the Tarcanta out-licensing agreement (See "Business - Licensing
                Agreements - Out-Licensing");




(b)
            License
                Agreement between YM BioSciences Inc. (formerly known as York Medical
                Inc.), University of Manitoba and The Manitoba Cancer Treatment and
                Research Foundation, carrying on its undertaking as Cancercare Manitoba,
                dated November 2, 2000 with respect to tesmilifene;




(c)
            License
                Agreement between YM BioSciences Inc. (formerly known as York Medical
                Inc.) and Biostar Inc. dated October 11, 2000 with respect to
                NorelinTM;
                and




(d)
            License
                Agreement, as amended between YM BioSciences Inc. (formerly known
                as
                Yorkton Medical Inc.) and CIMAB SA, dated May 3, 1995 with respect
                to
                TheraCIM and RadioTheraCIM.




-13-


The
      above
      listed license agreements are more fully described under the heading "Business
      Overview - Licensing Arrangements - In-Licensing". The Corporation owns
      AeroLEF TM and
      therefore is not subject to a license in respect of it.




The
      Corporation is dependent upon the licenses for our rights to the licensed
      products and commercialization of the licensed products. While the Corporation
      believes we are in compliance with our obligations under the licenses, certain
      licenses may be terminated or converted to non-exclusive licenses by the
      licensors if there is a breach of the terms of the licenses. There can be no
      assurance that the licenses are enforceable or will not be terminated or
      converted. The termination or conversion of the licenses or the inability of
      the
      Corporation to enforce our rights under the licenses would have a material
      adverse effect on the Corporation as the Corporation would not have products
      to
      develop. To the extent that management considers a particular license to be
      material to the undertaking of the Corporation, the Corporation has entered
      into
      a signed license agreement for that license. Terms of certain remaining licenses
      are to be determined at a later date. The in-license agreements to which the
      Corporation is currently a party require the Corporation to maintain and defend
      the patent rights that we in-license against third parties.




Although
      the Corporation's current in-licenses are governed by the laws of Saskatchewan,
      Manitoba, Ontario and Canada, and Barbados, the enforcement of certain of them
      may necessitate pursuing legal proceedings and obtaining orders in other
      jurisdictions, including the United States and the Republic of Cuba. There
      can
      be no assurance that a court judgment or order obtained in one jurisdiction
      will
      be enforceable in another. In international venture undertakings it is standard
      practice to attorn to a neutral jurisdiction to seek remedy for unresolved
      commercial disputes. These arrangements are usually negotiated as part of the
      original business agreement. In the case of the out-license agreements by the
      Corporation, the parties have agreed that the proper laws of the contracts
      are
      variously, Ontario or Canada and England.




One
      of
      our products is licensed from a developing state. As is the case in many
      developing states, the commercial legal environment in Cuba is in a formative
      stage and may be subject to greater political risk. It is possible that the
      Corporation may not be able to enforce our legal rights in Cuba or against
      Cuban
      entities to the same extent as it would in a country with a more developed
      commercial and legal system. Termination of the Corporation's license
      arrangements or difficulties in enforcement of such arrangements could have
      a
      material adverse effect on the Corporation's ability to continue development
      of
      our licensed products.




As
      described under "Business of the Corporation - Licensing Arrangements", the
      Corporation has a number of license agreements with CIMAB. CIMAB is an
      institution of the Government of Cuba that purportedly operates at arms-length
      from the state bureaucracy with regard to its business, scientific and
      administrative decision-making. It is akin to a "crown corporation" in Canada.
      CIMAB's management is purportedly both autonomous and responsible for the
      success of their business decisions. Despite the fact that CIMAB's management
      is
      purportedly both autonomous and responsible for business decisions and that
      the
      license agreements with the Corporation declare Ontario as proper law, because
      of the fact that CIMAB is a state-owned entity, the Corporation will not be
      able
      to force CIMAB to comply with any judgment if CIMAB or the Government of Cuba
      refuses to comply.




WE
      HAVE
      ADVANCED FUNDS TO OUR JOINT VENTURE SUBSIDIARIES WHICH WE ARE ONLY ENTITLED
      TO
      RECOVER WHEN THE JOINT VENTURE'S NET INCOME EXCEEDS THE AMOUNT OF CUMULATIVE
      ADVANCES.




YM
      and
      CIMAB entered into a funding agreement with CIMYM in November 1995 (the "Funding
      Agreement") in connection with the 1995 CIMYM License. The Funding Agreement
      provides that YM will arrange for the appropriate studies and clinical trials
      for the licensed products held by CIMYM and will fund the cost of such studies
      and trials provided that doing so would not be commercially or scientifically
      unreasonable. Accordingly, YM makes the final determination as to whether or
      not
      a clinical trial expense is justified with respect to any given product.




-14-




CIMYM
      (Barbados) was incorporated in Barbados in May 1996 to market the licensed
      products under the 1995 CIMYM License outside of Canada. YM provides funding
      to
      CIMYM (Barbados) under similar terms and conditions as funding to CIMYM, except
      that while CIMYM has a payable outstanding for the amounts advanced by YM to
      CIMYM, CIMYM (Barbados) has issued redeemable preferred shares to YM for the
      amounts advanced to CIMYM (Barbados).




YM
      is
      entitled to be reimbursed for all funds we provide pursuant to the Funding
      Agreement out of revenue generated from the exploitation of the CIMYM License,
      subject to the successful development of the licensed products and adequate
      generation of revenue. There can be no assurance, however, that the Corporation
      will be able to recover the advances, as the Corporation is not entitled to
      recover such advances unless and until the joint venture's net income exceeds
      the amount of the cumulative advances.




As
      at
      June 30, 2005, YM has advanced $26.7 million **** to
      CIMYM
      and CIMYM (Barbados), collectively. Accordingly, the Corporation has set up
      a
      reserve in full against the other joint venture partners share of the advances.
      All advances have been expensed and, therefore, any reimbursement of such
      advances would be considered to be income by the Corporation.




WE
      ARE
      RELIANT ON LICENSORS FOR RESEARCH ON NEW PRODUCTS.




The
      Corporation does not conduct our own basic research with respect to the
      identification of new products. Instead, the Corporation relies upon research
      and development work conducted by others as a primary source for new products.
      While the Corporation expects that we will be able to continue to identify
      licensable products or research suitable for licensing and commercialization
      by
      the Corporation, there can be no assurance that this will occur.




WE
      CONDUCT OUR BUSINESS INTERNATIONALLY AND ARE SUBJECT TO LAWS AND REGULATIONS
      OF
      SEVERAL COUNTRIES WHICH MAY AFFECT OUR ABILITY TO ACCESS REGULATORY AGENCIES
      AND
      MAY AFFECT THE ENFORCEABILITY AND VALUE OF OUR LICENSES.




The
      Corporation has conducted clinical trials in more than 20 countries including
      Canada, the United Kingdom, India, Russia and the United States and intends
      to,
      and may, conduct future clinical trials in these and other jurisdictions. There
      can be no assurance that any sovereign government, including Canada's, will
      not
      establish laws or regulations that will be deleterious to the interests of
      the
      Corporation. There is no assurance that the Corporation, as a foreign
      corporation, will continue to have access to the regulatory agencies in any
      jurisdiction where we might want to conduct clinical trials or obtain final
      regulatory approval, and there can be no assurance that the Corporation will
      be
      able to enforce our licenses in foreign jurisdictions. Governments have, from
      time to time, established foreign exchange controls which could have a material
      adverse effect on the Corporation and our financial condition, since such
      controls may limit the Corporation's ability to flow funds into a country to
      meet our obligations under in-licensing agreements and to flow funds out of
      a
      country which the Corporation may be entitled to, in the form of royalty and
      milestone payments, under out-licensing agreements. In addition, the value
      of
      the Corporation's licenses will depend upon no punitive or prohibitive
      legislation in respect of biological materials.




WE
      ALSO
      CONDUCT OUR BUSINESS INTERNATIONALLY IN THAT WE CURRENTLY LICENSE PRODUCTS
      AND
      TECHNOLOGIES FROM SOURCES IN CANADA AND CUBA. WE HAVE PREVIOUSLY, AND INTEND
      TO,
      AND MAY, LICENSE PRODUCTS FROM SOURCES IN OTHER JURISDICTIONS.




The
      Corporation has licensed products, namely TheraCIM and RadioTheraCIM, from
      an
      academic institute in Cuba, namely CIM. The United States has maintained an
      embargo against Cuba, administered by Treasury. The laws and regulations
      establishing the embargo have been amended from time to time, most recently
      by
      the passage of the Cuban Liberty and Democratic Solidarity Act (the
      "Helms-Burton Bill"). The embargo applies to almost all transactions involving
      Cuba or Cuban enterprises, and it bars from such transactions any US persons
      unless such persons obtain specific licenses from Treasury authorizing their
      participation in the transactions. There is Canadian legislation (the Foreign
      Extraterritorial Measures Act) which provides generally that judgments against
      Canadian companies under the Helms-Burton Bill will not be enforced in Canada.
      The US embargo could have the effect of limiting the Corporation's access to
      US
      capital, US finance, US customers and US suppliers. In particular, the
      Corporation's products licensed from Cuban sources, noted above, are likely
      to
      be prohibited from sale in the United States unless Treasury issues a license
      or
      the embargo is lifted.




-15-




The
      Corporation's licensed rights to the TGFα Vaccine and the HER-1 Vaccine are
      suspended under the terms of the out-licensing agreement between the
      Corporation, CIMYM (Barbados), CIMAB and Tarcanta relating to Tarcanta licensing
      TGFα and HER-1 from CIMAB. In connection with the out-licensing agreement,
      CancerVax has announced that it has received a license from Treasury authorizing
      Tarcanta to enter into the transactions with CIMAB and the Corporation. See
      "Business - Licensing Arrangements - Out-Licensing" and see "Business -
      Licensing Arrangements - In-Licensing - Licenses for TheraCIM, RadioTheraCIM,
      TGFα and HER-1".




The
      Helms-Burton Bill authorizes private lawsuits for damages against anyone who
      "traffics" in property confiscated, without compensation, by the Government
      of
      Cuba from persons who at the time were, or have since become, nationals of
      the
      United States. The Corporation does not own any real property in Cuba and,
      to
      the best of the Corporation's knowledge, and based upon the advice of the Cuban
      government, none of the properties of the scientific centers of the licensors
      from where the licensed products were developed and are or may be manufactured
      was confiscated by the Government of Cuba from persons who at the time were,
      or
      have since become, nationals of the United States. However, there can be no
      assurance that the Corporation's understanding in this regard is correct. The
      Corporation does not intend to traffic in confiscated property.




**Risks
      Related To Our Financial Results And Need For Financing**




WE
      MAY BE
      A "PASSIVE FOREIGN INVESTMENT COMPANY" WHICH COULD RESULT IN ADVERSE US TAX
      CONSEQUENCES FOR US INVESTORS.




The
      Corporation may be deemed to be a "Passive Foreign Investment Company" ("PFIC").
      A PFIC is a non-US corporation that meets an income test and/or an asset test.
      The income test is met if 75% or more of a corporation's gross income is
      "passive income" (generally, dividends, interest, rents, royalties, and gains
      from the disposition of assets producing passive income) in any taxable year.
      The asset test is met if at least 50% of the average value of a corporation's
      assets produce, or are held for the production of, passive income. Based on
      our
      current income, assets and activities, the Corporation may be a PFIC. See
      "United States Federal Income Tax Considerations - US Holders". As a result,
      a
      US Holder of the Corporation's common shares could be subject to increased
      tax
      liability, possibly including an interest charge, upon the sale or other
      disposition of the US Holder's common shares or upon the receipt of "excess
      distributions".




WE
      MAY
      NOT BE ABLE TO OBTAIN NECESSARY FUNDING FROM SALES OR LICENSE FEES OR ROYALTIES
      AND, AS A RESULT, MAY NEED TO TRY TO OBTAIN FUTURE CAPITAL THROUGH THE PUBLIC
      MARKET OR PRIVATE FINANCING WHICH MAY NOT BE AVAILABLE ON ACCEPTABLE TERMS.




The
      Corporation may require additional funding for the commercialization of our
      products, licensed and owned, and we will require additional funds if new
      products are licensed or acquired and put into development. The amount of
      additional funding required depends on the status of each project or new
      opportunity at any given time. The Corporation's business strategy is to
      in-license rights to promising drug products, further develop those products
      by
      progressing the products toward regulatory approval by conducting and managing
      clinical trials, and finally to out-license rights to manufacture and/or market
      resulting drug products to other pharmaceutical firms in exchange for royalties
      and license fees. Due to the in- and out-licensing arrangements and the
      Corporation's dependence on others for the manufacture, development and sale
      of
      our in-licensed products, the Corporation does not have consistent monthly
      or
      quarterly expenditures and cannot determine the amount and timing of required
      additional funding with any certainty. As at June 30, 2005 the Corporation
      had
      cash and short-term deposits totaling $30,568,845 and payables of $3,825,615.
      Management expects that the current cash reserves will be sufficient to fund
      the
      Corporation's development program beyond the fiscal year ending June 30, 2006.




-16-




The
      Corporation assesses our additional funding needs on a project-by-project basis
      from time-to-time. To the extent that the Corporation is unable to fund our
      expenditures from sales, license fees and royalties, it may be necessary to
      reconsider the continuation of existing projects or entering into new projects,
      or require the Corporation to access either the public markets or private
      financings whenever conditions permit. In addition, the Corporation has no
      established bank financing arrangements and there can be no assurance that
      the
      Corporation will be able to establish such arrangements on satisfactory terms.
      Such financing, if required and completed, may have a dilutive effect on the
      holders of our common shares. There is no assurance that such financing will
      be
      available if required, or that it will be available on favorable terms.




OUR
      OPERATING RESULTS AND STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY.




The
      trading price of the Corporation's common shares, as with many emerging
      biopharmaceutical companies, is likely to be highly volatile. Factors such
      as
      the efficacy of the Corporation's products or the products of the Corporation's
      competitors, announcements of technological innovations by the Corporation
      or
      our competitors, governmental regulations, developments in patents or other
      proprietary rights of the Corporation, our licensors or our competitors,
      litigation, fluctuations in the Corporation's operating results, the Corporation
      being thinly capitalized, market conditions for biopharmaceutical stocks and
      general market and economic conditions could have a significant impact on the
      future trading price of the common shares. In addition, the Corporation's common
      shares are highly volatile since it may take years before any of our licensed
      products will receive final regulatory approval to be marketed in Canada, the
      United States or other territories.




THERE
      IS
      NO ASSURANCE THAT AN ACTIVE TRADING MARKET IN OUR SHARES IN THE US WILL BE
      SUSTAINED.




Since
      September 30, 2004, our common shares have been listed for trading on the
      American Stock Exchange. However, there can be no assurance that an active
      trading market in our shares in the US will be sustained. Similarly, there
      can
      be no assurance that an active trading market in our shares on the TSX or AIM
      will be sustained.




**Risks
      Related To Our Industry**




IF
      OUR
      PRE-CLINICAL AND CLINICAL TESTING OF DRUG PRODUCTS DO NOT PRODUCE SUCCESSFUL
      RESULTS, WE WILL NOT BE ABLE TO COMMERCIALIZE OUR PRODUCTS.




Each
      of
      the Corporation's products, licensed or owned, must be subjected to additional
      pre-clinical and/or clinical testing in order to demonstrate the safety and
      efficacy of the Corporation's products in humans. The Corporation's ability
      to
      commercialize our products will depend on the success of currently ongoing
      pre-clinical and clinical trials and subsequent pre-clinical and clinical trials
      that have not yet begun.




The
      Corporation is not able to predict the results of pre-clinical and clinical
      testing of drug products, including the Corporation's products. It is not
      possible to predict, based on studies or testing in laboratory conditions or
      in
      animals, whether a drug product will prove to be safe or effective in humans.




In
      addition, success in one stage of testing is not necessarily an indication
      that
      the particular drug product will succeed in later stages of testing and
      development. There can be no assurance that the pre-clinical or clinical testing
      of the Corporation's products will yield satisfactory results that will enable
      the Corporation to progress toward commercialization of such products.
      Unsatisfactory results may cause material adverse affects on the Corporation's
      business, financial condition or results of operations as it could result in
      the
      Corporation having to reduce or abandon future testing or commercialization
      of
      particular drug products.




-17-




IF
      OUR
      COMPETITORS DEVELOP AND MAINTAIN THEIR TECHNOLOGICAL CAPABILITIES BETTER THAN
      THE CORPORATION, WE MAY NOT BE ABLE TO REMAIN COMPETITIVE IF DEFICIENCIES IN
      OUR
      TECHNOLOGICAL CAPABILITIES DELAY PRE-CLINICAL AND CLINICAL TRIALS OF OUR
      PRODUCTS.




The
      Corporation's success depends in part on developing and maintaining a
      competitive position in the development and commercialization of our products,
      licensed or owned, and technological capabilities in our areas of expertise.
      The
      biotechnology and pharmaceutical industries are subject to rapid and substantial
      technological change. While the Corporation will seek to expand our
      technological capabilities in order to remain competitive, there can be no
      assurance that developments by others will not render the Corporation's products
      non-competitive or that the Corporation or our licensors will be able to keep
      pace with technological developments. Competitors have developed technologies
      that could be the basis for competitive products. Some of those products may
      have an entirely different approach or means of accomplishing the desired
      therapeutic effect than the Corporation's products and may be more effective
      or
      less costly than the Corporation's products. In addition, other forms of medical
      treatment may offer competition to the products. The Corporation's technological
      capabilities and competitiveness and the success of the Corporation's
      competitors and their products and technologies, could have a material adverse
      impact on the future pre-clinical and clinical trials of the Corporation's
      products, including the Corporation's ability to obtain the necessary regulatory
      approvals for the conduct of such clinical trials.




IF
      OUR
      COMPETITORS DEVELOP AND MARKET PRODUCTS THAT ARE MORE EFFECTIVE THAN OUR
      EXISTING PRODUCT CANDIDATES OR ANY PRODUCTS THAT WE MAY DEVELOP, OR OBTAIN
      MARKETING APPROVAL BEFORE WE DO, OUR PRODUCTS MAY BE RENDERED OBSOLETE OR
      UNCOMPETITIVE.




Technological
      competition from pharmaceutical companies, biotechnology companies and
      universities is intense and is expected to increase. Many competitors and
      potential competitors of the Corporation have substantially greater product
      development capabilities and financial, scientific, marketing and human
      resources than the Corporation. The Corporation's future success depends in
      part
      on our ability to maintain a competitive position, including our ability to
      further progress our products, licensed or owned, through the necessary
      pre-clinical and clinical trials towards regulatory approval for sale and
      commercialization. Other companies may succeed in commercializing products
      earlier than the Corporation is able to commercialize our products or in
      developing products that are more effective than our products. The Corporation
      considers its main competitors to be: Genentech, Inc. ("Genentech"), Lorus
      Therapeutics Inc., ISIS Pharmaceuticals and Eli Lilly and Company with respect
      to tesmilifene; Aphton Corporation ("Aphton"), TAP Pharmaceuticals and
      AstraZeneca PLC ("AstraZeneca") with respect to Norelin TM ;
      and
      Abgenix Inc. ("Abgenix"), Amgen Inc. ("Amgen"), Genmab A/S ("Genmab"), ImClone
      Systems Inc. ("ImClone"), Bristol-Myers Squibb Company ("BMS"), Merck KGaA
      ("Merck"), OSI Pharmaceuticals, Inc. ("OSI"), F.Hoffmann-LaRoche Ltd. ("Roche"),
      Genentech and AstraZeneca with respect to TheraCIM and RadioTheraCIM. The main
      competitors for the AeroLEF TM product
      are Cephalon, Inc. (“Cephalon”), Endo Pharmaceuticals Holdings Inc. (“Endo”),
      LAB International Inc. (“LAB”), Alexza Molecular Delivery Corporation
      (“Alexza”), Aradigm Corporation (“Aradigm”), Barr Pharmaceuticals, Inc.
      (“Barr”), CeNeS Pharmaceuticals plc (“CeNeS”) and Alza Corporation
      (“Alza”).




While
      the
      Corporation will seek to expand our technological capabilities in order to
      remain competitive, there can be no assurance that research and development
      by
      others will not render our products obsolete or uncompetitive or result in
      treatments or cures superior to our products, or that our products will be
      preferred to any existing or newly developed technologies.




WE
      ARE
      SUBJECT TO EXTENSIVE GOVERNMENT REGULATION THAT INCREASES THE COST AND
      UNCERTAINTY ASSOCIATED WITH GAINING FINAL REGULATORY APPROVAL OF OUR PRODUCT
      CANDIDATES.




Securing
      final regulatory approval for the manufacture and sale of human therapeutic
      products in Canada and the Corporation's other territories, including the United
      States, is a long and costly process that is controlled by that particular
      territory's national regulatory agency. The national regulatory agency in Canada
      is Health Canada ("Health Canada"), and in the United States it is the United
      States Health and Human Services Food and Drug Administration ("FDA"). See
      "Regulatory Approvals" for a description of approval processes in Canada and
      the
      United Sates. Other national regulatory agencies have similar regulatory
      approval processes, but each national regulatory agency has its own approval
      processes. Approval in either Canada or the United States does not assure
      approval by other national regulatory agencies, although often test results
      from
      one country may be used in applications for regulatory approval in another
      country.




-18-




Prior
      to
      obtaining final regulatory approval to market a drug product, every national
      regulatory agency has a variety of statutes and regulations which govern the
      principal development activities. These laws require controlled research and
      testing of products, government review and approval of a submission containing
      pre-clinical and clinical data establishing the safety and efficacy of the
      product for each use sought, approval of manufacturing facilities including
      adherence to GMP during production and storage, and control of marketing
      activities, including advertising and labeling.




None
      of
      the Corporation's products have been completely developed or tested and,
      therefore, we are not yet in a position to seek final regulatory approval to
      market any of our products, licensed or owned. To date we have obtained various
      regulatory approvals to develop and test our products. Currently the Corporation
      is conducting an international Phase III trial of tesmilifene in metastatic
      and
      recurrent breast cancer in 700 patients. The Corporation has received regulatory
      approvals for the tesmilifene study in several countries, including Canada
      and
      the United States, and approval is pending in a few other countries. In
      addition, TheraCIM has been approved for testing in Canada and Europe and has
      been designated an orphan drug in Europe and by the FDA in the United States.
      Finally, DELEX has conducted Phase I and II trials in Canada of
      AeroLEF TM .
      See
      "Products in Clinical Development".




Two
      of
      the Corporation's products, namely TheraCIM and RadioTheraCIM which are being
      developed in Canada and Europe are also being separately developed or tested
      in
      Cuba. Cuba is among several nations which have been identified by the US
      Department of State as being a state sponsoring terrorism and as such the US
      Government has put in place certain anti-terrorism controls against Cuba.
      Although as of the date of this filing such anti-terrorism controls have not
      had
      any adverse affect on the operations of the Corporation, because of the
      anti-terrorism controls and the Helms-Burton Bill there is no assurance that
      the
      Corporation will be able to successfully complete clinical testing in the United
      States and obtain final regulatory approval or a license from OFAC in order
      to
      successfully commercialize our Cuban sourced products in that jurisdiction.
      There can be no assurance that the licensed products will be successfully
      commercialized. The process of completing clinical testing and obtaining final
      regulatory and other US government approvals to market the licensed products
      is
      likely to take a number of years for most of the licensed products and require
      the expenditure of substantial resources. Any failure to obtain, or a delay
      in
      obtaining, such approvals could adversely affect the Corporation's ability
      to
      develop the product and delay commercialization of the product. Further, there
      can be no assurance that the Corporation's licensed products will prove to
      be
      safe and effective in clinical trials under the standards of the regulations
      in
      the Corporation's territories or receive applicable regulatory approvals from
      applicable regulatory bodies.




CHANGES
      IN GOVERNMENT REGULATIONS ALTHOUGH BEYOND OUR CONTROL COULD HAVE AN ADVERSE
      EFFECT ON OUR BUSINESS.




The
      Corporation has, or has had, licenses with, or clinical trials at, various
      academic organizations, hospitals and companies in Canada, Cuba, Italy, the
      United States and the United Kingdom and numerous other countries and depends
      upon the validity of our licenses and access to the data for the timely
      completion of clinical research in those jurisdictions. Any changes in the
      drug
      development regulatory environment or shifts in political attitudes of a
      government are beyond the control of the Corporation and may adversely affect
      our business.




Two
      of
      the Corporation's products, namely TheraCIM and RadioTheraCIM which are being
      developed in Canada and Europe are also being separately developed or tested
      in
      Cuba. Cuba is among several nations which have been identified by the US
      Department of State as being a state sponsoring terrorism and as such the US
      Government has put in place certain anti-terrorism controls against Cuba.
      Although as of the date of this filing such anti-terrorism controls have not
      had
      any adverse affect on the operations of the Corporation, because of the
      anti-terrorism controls and the Helms-Burton Bill there is no assurance that
      the
      Corporation will be able to successfully complete our clinical testing and
      obtain final regulatory approval in order to successfully commercialize our
      Cuban sourced products.




The
      business of the Corporation may also be affected in varying degrees by such
      factors as government regulations with respect to intellectual property,
      regulation or export controls. Such changes remain beyond the control of the
      Corporation and the effect of any such changes cannot be predicted.




These
      factors could have a material adverse effect on the Corporation's ability to
      further develop our licensed products.





-19-




**Risks
      Related To Intellectual Property And Litigation**




OUR
      SUCCESS DEPENDS UPON OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY AND OUR
      PROPRIETARY TECHNOLOGY.




The
      Corporation's success will depend, in part, on the ability of the Corporation
      and our licensors to obtain patents, maintain trade secrets protection, and
      operate without infringing on the proprietary rights of third parties or having
      third parties circumvent the Corporation's rights. Certain licensors and the
      institutions that they represent, and in certain cases, the Corporation on
      behalf of the licensors and the institutions that they represent, have filed
      and
      are actively pursuing certain applications for Canadian and foreign patents.
      The
      patent position of pharmaceutical and biotechnology firms is uncertain and
      involves complex legal and financial questions for which, in some cases,
      important legal principles are largely unresolved. There can be no assurance
      that the patent applications made in respect of the licensed products will
      result in the issuance of patents, that the term of a patent will be extendable
      after it expires in due course, that the licensors or the institutions that
      they
      represent will develop additional proprietary products that are patentable,
      that
      any patent issued to the licensors or the Corporation will provide the
      Corporation with any competitive advantages, that the patents of others will
      not
      impede the ability of the Corporation to do business or that third parties
      will
      not be able to circumvent the patents obtained in respect of the licensed
      products. The cost to the Corporation of obtaining and maintaining patents
      is
      high. Furthermore, there can be no assurance that others will not independently
      develop similar products which duplicate any of the licensed products, or,
      if
      patents are issued, design around the patent for the product. There can be
      no
      assurance that processes or products of the Corporation's licensors or the
      Corporation do not or will not infringe upon the patents of third parties,
      or
      that the scope of patents issued to the Corporation's licensors or the
      Corporation will successfully prevent third parties from developing similar
      and
      competitive products.




Much
      of
      the Corporation's know-how and technology may not be patentable, though they
      may
      constitute trade secrets. There can be no assurance, however, that the
      Corporation will be able to meaningfully protect our trade secrets. To help
      protect our rights, the Corporation requires employees, consultants, advisors
      and collaborators to enter into confidentiality agreements. There can be no
      assurance that these agreements will provide meaningful protection for the
      Corporation's trade secrets, know-how or other proprietary information in the
      event of any unauthorized use or disclosure.




Further,
      the Corporation's business may be materially adversely affected by competitors
      who independently develop competing technologies, especially if no patents
      or
      only narrow patents are obtained by the Corporation in respect of our licensed
      products.




The
      Corporation maintains patents in connection with tesmilifene,
      Norelin TM ,
      TheraCIM and AeroLEF TM .
      The
      following is a description of the Corporation's key current and pending patents
      in connection with these drug products.




**TESMILIFENE**




YM
      is the
      exclusive licensee to patents and patent applications from the University of
      Manitoba for tesmilifene. Patents that claim the use of tesmilifene in
      combination with chemotherapeutic agents have issued in the United States,
      Europe, Japan, Canada and Australia. US patent 5,859,065 broadly claims the
      use
      of tesmilifene and structurally related analogs in combination with any
      chemotherapeutic for the treatment of any cancer. Although the twenty-year
      term
      of this patent expires in December 2010, YM plans to take full advantage of
      patent terms extensions of up to five additional years granted under the Patent
      Term Restoration Act in the United States. Other issued patents US 6,284,799
      and
      US 5,747,543 expire in 2014 and 2015 respectively.




In
      addition to these granted patents, YM is also exclusively licensed to patent
      applications relevant to the current clinical development program. Patent
      applications, based upon WO 03/039526 and WO 03/037318, have been nationalized
      not only in the United States, Western Europe, and Japan but also in emerging
      markets, including China, India, Asia, and Eastern Europe. These international
      patent applications claim the use of tesmilifene in patient subpopulations
      that
      benefit from the chemopotentiating and cytoprotective properties of the drug.
      Patents resulting from these patent filings will expire in November
      2022.




-20-




In
      addition to patent protection, YM intends to rely upon the available term of
      data exclusivity in the US and other countries for an NCE. Furthermore, full
      advantage will be taken of the Orange Book provisions in the United States
      and
      equivalent provision in Canada and other countries, as a means for delaying
      generic competition.




**NORELIN** **TM** ****




YM
      has a
      license to human therapeutic applications of this GnRH vaccine based on a
      leukotoxin-derived but non-leukotoxic carrier protein, to which multimeric
      units
      of GnRH are coupled at each flank. By eliciting an antibody response to GnRH,
      Norelin TM is
      designed to block GnRH from reaching its receptors in the pituitary gland.




The
      Norelin TM patent
      estate is extensive, and includes four key US patents covering various aspects
      of Norelin TM as a
      composition of matter, the carrier component of the Norelin TM vaccine,
      as well as production of Norelin TM as a
      recombinant product. A key US patent is US 5,837,268, which covers the
      particular Norelin TM sequence, its formulation as a vaccine, and its end-use, and subject to any
      term
      restoration, will expire in 2012. Other key US patents are US 5,422,110; US
      5,708,155; and US 5,837,268. All of the key patents are owned by the University
      of Saskatchewan and licensed to YM, through Biostar (See "Licensing
      Arrangements").




In
      addition, YM has more recently applied for our own patents covering the
      Norelin TM formulation and dosing regimen that was the subject of our clinical trials.
      Patents resulting from these applications will not expire until 2024.




The
      Corporation is aware of US patent #6,303,123 owned by Aphton relating to the
      use
      of GnRH immunogenic conjugates to treat GnRH-dependent diseases, including
      prostatic hypertrophy, and is developing a strategy for addressing this patent
      should it prove relevant to the Corporation's commercial activities with
      Norelin TM .




There
      can
      be no assurance that litigation or other proceedings will not be commenced
      seeking to challenge patent protection or patent applications of the
      Corporation's licensors, or that any such challenges will not be successful.
      The
      cost of litigation to uphold the validity and prevent infringement of patents
      related to the Corporation's licensed drug products may be significant. In
      addition, it is possible that others may claim rights in YM's licensed drug
      products, patents or patent applications. These other persons could bring legal
      actions against the Corporation, our licensors or our customers or licensees
      claiming damages and seeking to enjoin them from using, manufacturing and
      marketing the affected products or processes. If any such action were
      successful, in addition to any potential liability for damages, the Corporation
      could be required to obtain a license in order to continue to develop, use,
      license or market the affected product or process. There can be no assurance
      that the Corporation would prevail in any such action or that any required
      license would be made available or, if available, would be available on
      acceptable terms.




**THERACIM**




CIMYM
      is
      the exclusive licensee for particular territories including the United States
      under a patent estate that includes composition of matter coverage for
      Nimotuzumab, and further includes coverage for TheraCIM-based formulations
      and
      end-uses in the treatment of EGFR-dependent cancers. The composition of matter
      patents are granted in the United States, in Europe, are allowable in Japan,
      and
      are pending in Canada.




CIMYM's
      key US patent, US 5,891,996 expires in November 2015, and term extensions of
      up
      to five years may be available under the Patent Term Restoration Act. The same
      term and extension apply also to the key European patent, EP 712863.




The
      Corporation is aware of US patent #5,770,195 granted to Genentech, Inc.
      ("Genentech"), for the anti-cancer use of EGFr MAbs in combination with a
      cytotoxic agent. The Corporation is also aware of US patents granted to others
      in this field. In April 2001 Rorer International (Overseas) ("Rorer") was issued
      the US patent #6,217,866 which includes claims to any antibody targeting the
      EGFr administered with any anti-neoplastic agent. A counterpart patent has
      been
      granted in Europe. The Corporation has filed an opposition to the grant of
      the
      European patent. The Corporation believes that the Rorer patents are licensed
      to
      ImClone. Management is aware that inventorship of the Rorer patent is currently
      being challenged. In the event that the challenge is successful , management
      believes we will be able to obtain licenses under such patents on commercially
      reasonable terms, though there can be no assurance thereof. In addition, the
      Corporation is aware of a separate series of national patent applications filed
      by ImClone, and represented by EP1080113, claiming the anti-cancer use of
      radiation in combination with any inhibitor of any receptor tyrosine kinase
      that
      is involved in the genesis of tumors. ImClone is also reported to have filed
      a
      PCT application covering the use of EGFr MAbs to treat patients having tumors
      that do not respond to treatment with conventional therapies. The Corporation
      is
      also challenging ImClone's claims in respect of the radiation-related patent
      applications by having filed additional prior art at the relevant national
      patent offices. The outcome of these challenges cannot be predicted, and there
      can be no assurance that the Corporation will succeed in challenging the
      validity or scope of patent claims by ImClone or any other patent applicant.




-21-




The
      manufacturing of TheraCIM may fall within the scope of process patents owned
      by
      Protein Design Labs Inc., Genentech, and the Medical Research Council of the
      United Kingdom. Management is aware that some of these process patents are
      currently being challenged by companies other than YM. In the event any of
      the
      applicable process patents are upheld, management believes we will be able
      to
      obtain licenses under such patents on commercially reasonable terms, though
      there can be no assurance thereof.




There
      may
      also be risks related to TheraCIM and the Corporation's other licenses for
      drug
      products originating from Cuba, namely RadioTheraCIM, TGFα
      Vaccine and HER-1 Cancer Vaccine. Cuba is a socialist country and, under the
      current patent law, ownership of the inventions of the Cuban inventors for
      which
      patent applications have been filed rests with the State. The material license
      agreements for the
      Corporation's Cuban sourced products are as follows:




(a)
            License
                Agreement between CIMYM Inc. and CIMAB SA, January 24, 2001 with
                respect
                to TGFα and HER-1, which agreement has been suspended in accordance with
                the terms of the Tarcanta out-licensing agreement
                (See "Business - Licensing Agreements - Out-Licensing"); and




(b)
            License
                Agreement between YM BioSciences Inc. (formerly known as Yorkton
                Medical
                Inc.) and CIMAB SA, dated May 3, 1995, as amended,****with
                respect to TheraCIM and RadioTheraCIM.




The
      above
      listed license agreements are more fully described under the heading "Business
      Overview - Licensing Arrangements - In-Licensing".




**AEROLEF** **TM**




The
      AeroLEF TM product
      is described in four patent families. DELEX owns key patents, expiring in 2014,
      claiming a method of administering systemic analgesia by inhaling free and
      liposome-encapsulated opiod analgesic. North American coverage includes a
      reissued US patent and a pending application in Canada. DELEX owns two US
      applications with counterpart PCT applications, expiring in 2024, claiming
      the
      formulation for use in a method comprised of continuously inhaling the
      formulation to deposit at least one rapid-onset opiod and one sustained-effect
      opiod in the lungs. A pending PCT application entitled “Stable Compositions”
claims the liposomal composition and other physical characteristics.




The
      Corporation is aware of US patents owned by Phares Pharmaceutical Research
      NV
      related to liposome compositions. These patents expire in 2008 and are not
      expected to hamper the Corporation’s commercial activities.




THE
      CORPORATION'S POTENTIAL INVOLVEMENT IN INTELLECTUAL PROPERTY LITIGATION COULD
      NEGATIVELY AFFECT THE CORPORATION'S BUSINESS.




The
      Corporation's future success and competitive position depend in part upon the
      Corporation's ability to maintain our intellectual property portfolio. There
      can
      be no assurance that any patents will be issued on any existing or future patent
      applications. Even if such patents are issued, there can be no assurance that
      any patents issued to or licensed to the Corporation will not be challenged.
      The
      Corporation's ability to establish and maintain a competitive position may
      be
      achieved in part by prosecuting claims against others who the Corporation
      believes are infringing the Corporation's rights and by defending claims brought
      by others who believe that we are infringing their rights. In addition,
      enforcement of the Corporation's patents in foreign jurisdictions will depend
      on
      the legal procedures in those jurisdictions. Even if such claims are found
      to be
      invalid, the Corporation's involvement in intellectual property litigation
      could
      have a material adverse effect on our ability to out-license any products that
      are the subject of such litigation. In addition, the Corporation's involvement
      in intellectual property litigation could result in significant expense to
      it,
      which could materially adversely affect the use or licensing of related
      intellectual property and divert the efforts of the Corporation's valuable
      technical and management personnel from their principal responsibilities,
      whether or not such litigation is resolved in the Corporation's favor.




-22-




PRODUCT
      LIABILITY CLAIMS ARE AN INHERENT RISK OF OUR BUSINESS, AND IF OUR CLINICAL
      TRIAL
      AND PRODUCT LIABILITY INSURANCE PROVE INADEQUATE, PRODUCT LIABILITY CLAIMS
      MAY
      HARM OUR BUSINESS.




Human
      therapeutic products involve an inherent risk of product liability claims and
      associated adverse publicity. The Corporation currently maintains clinical
      trial
      liability insurance with an ultimate net loss value of up to $5 million per
      claim and a policy aggregate of $10 million. The Corporation currently has
      no
      other product liability insurance and there can be no assurance that we will
      be
      able to obtain or maintain product liability insurance on acceptable terms
      or
      with adequate coverage against potential liabilities. Such insurance is
      expensive, difficult to obtain and may not be available in the future on
      acceptable terms, or at all. An inability to obtain sufficient insurance
      coverage on reasonable terms or to otherwise protect against potential product
      liability claims could have a material adverse effect on the Corporation by
      preventing or inhibiting the commercialization of our products, licensed and
      owned, if a product is withdrawn or a product liability claim is brought against
      the Corporation.




**Risks
      Related to Being A Canadian Entity For Foreign Investors**




AS
      WE ARE
      A CANADIAN COMPANY, THERE MAY BE LIMITATIONS ON THE ENFORCEMENT OF CERTAIN
      CIVIL
      LIABILITIES AND JUDGMENTS OBTAINED IN THE UNITED STATES AGAINST US.




The
      Corporation is incorporated under the laws of the province of Nova Scotia,
      Canada, and our assets are located outside of the United States. Many of the
      Corporation's directors and officers and certain of the experts named elsewhere
      in this annual information form are residents of Canada. All or a substantial
      portion of our assets and the assets of these persons are located outside of
      the
      United States. As a result, it may be difficult for shareholders to enforce
      a US
      judgment in Canada or other non-US jurisdictions or to succeed in a lawsuit
      in a
      non-US jurisdiction based only on violations of US securities laws.




THE
      CORPORATION IS GOVERNED BY THE CORPORATE LAWS IN NOVA SCOTIA, CANADA, WHICH
      IN
      SOME CASES HAVE A DIFFERENT EFFECT ON SHAREHOLDERS THAN THE CORPORATE LAWS
      IN
      DELAWARE, UNITED STATES.




The
      material differences between the Nova Scotia Companies Act (“NSCA”) as compared
      to the Delaware General Corporation Law (“DGCL”) which may be of most interest
      to shareholders include the following: (i) for material corporate transactions
      (such as amalgamations, other extraordinary corporate transactions, amendments
      to the memorandum of association and amendments to the articles of association)
      the NSCA generally requires three-quarter majority vote by shareholders which
      in
      most instances requires a confirmatory resolution by a majority of the
      shareholders (and, in addition, especially where the holders a class of shares
      is being affected differently from others, approval will be required by holders
      of two-thirds of the shares of such class voting in a meeting called for the
      purpose), whereas DGCL generally only requires a majority vote of shareholders
      for similar material corporate transactions; (ii) quorum for shareholders
      meetings is not prescribed under the NSCA and is only 5% under the Corporation's
      articles of association, whereas under DGCL quorum is when the holders of a
      majority of the shares entitled to vote are present; and (iii) the Corporation's
      articles of association require a special resolution and the Corporations
      Miscellaneous Provisions Act (Nova Scotia) requires three-quarters of all
      shareholders entitled to vote to pass a resolution for one or more directors
      to
      be removed, whereas DGCL only requires the affirmative vote of a majority of
      the
      shareholders.




-23-




**BUSINESS
      OVERVIEW**




**OVERVIEW**




The
      Corporation is a biopharmaceutical company engaged in the development of
      products primarily for the treatment of patients with cancer. YM generally
      in-licenses substances designed for anti-cancer use in order to advance them
      along the regulatory and clinical pathways toward commercial approval. The
      Corporation's licenses generally cover the major market countries of the
      developed world (including Canada, the United States, Japan and Europe) or
      are
      world-wide. The Corporation uses our expertise to manage and perform what we
      believe are the most critical aspects of the drug development process which
      include the design and conduct of clinical trials, the development and execution
      of strategies for the protection and maintenance of intellectual property rights
      and the interaction with drug regulatory authorities internationally. YM
      concentrates on drug development and does not engage in drug discovery, avoiding
      the significant investment of time and capital that is generally required before
      a compound is identified clinical trials. YM has in-licensed certain preclinical
      products which have been related to its clinical programs. YM both conducts
      and
      out-sources clinical trials and out-sources the manufacture of clinical
      materials to third parties.




The
      Corporation's current portfolio of products in clinical development includes
      three anti-cancer agents (a small molecule, a vaccine and a monoclonal antibody)
      in a number of formulations currently targeting nine different tumors and/or
      stages of cancer as well as a proprietary inhalation delivery system for
      fentanyl to treat acute pain incluing cancer pain. The Corporation also has
      a
      financial interest in two additional anti-cancer immunotherapies in pre-clinical
      development. The Corporation intends to license the rights to manufacture and
      market our drug products to other pharmaceutical companies in exchange for
      license fees and royalty payments and to continue to seek other in-licensing
      opportunities in pursuing our business strategy. The Corporation does not
      currently intend to manufacture or market products although we may, if the
      opportunity is available on terms that are considered attractive, participate
      in
      ownership of manufacturing facilities or retain marketing or co-development
      rights to specific products.




**BUSINESS
      STRATEGY**




The
      Corporation is principally focused on development of products for the treatment
      of cancer or cancer-related conditions. YM's strategy is to license rights
      to
      promising products, further develop those products by conducting and managing
      clinical research and trials and progressing the products toward regulatory
      approval, and sub-license or out-license rights to manufacture and/or market
      resulting drug products to other pharmaceutical firms in exchange for royalties
      and license fees. The Corporation seeks to use our product development
      capabilities to bridge discoveries and research from scientific/academic
      institutions or other biopharmaceutical companies, on the one hand, with
      commercial manufacturing and marketing of biopharmaceutical products, on the
      other hand.




The
      main
      elements of the Corporation's business strategy are described below:




***Identification
      of Product Candidates:.*** The
      Corporation directly performs scientific evaluation and market assessment of
      biopharmaceutical products and research developed by scientific/academic
      institutions and other biopharmaceutical companies. As part of this process,
      the
      Corporation evaluates the related scientific research and pre-clinical and
      clinical research, if any, and the intellectual property rights in such products
      and research, with a view to determining the therapeutic and commercial
      potential of the applicable product candidates.




***In-Licensing:*** Upon
      identifying a promising biopharmaceutical product, the Corporation seeks to
      negotiate a license to the rights for the product from the holder of those
      rights, the developer or researcher. The terms of such licenses vary, but
      generally the Corporation's goal is to secure licenses that permit us to engage
      in further development, clinical trials, intellectual property protection (on
      behalf of the licensor or otherwise) and further licensing of manufacturing
      and
      marketing rights to any resulting products. This process of securing license
      rights to products is commonly known as "in-licensing".




-24-




***Further
      Development:*** Upon
      in-licensing a cancer-related product, the Corporation's strategy is to apply
      our skills and expertise to progress the products toward regulatory approval
      and
      commercial production and sale in major markets. These activities include
      implementing intellectual property protection and registration strategies,
      performing or having performed for it, pre-clinical research and testing, the
      formulating or reformulating of drug products, making regulatory submissions,
      performing or managing clinical trials in target jurisdictions, and undertaking
      or managing the collection, collation and interpretation of clinical and field
      data and the submission of such data to the relevant regulatory authorities
      in
      compliance with applicable protocols and standards.




***Out-Licensing:*** The
      Corporation generally plans to further license manufacturing and marketing
      rights to our licensed products to other pharmaceutical firms. This is commonly
      known as "out-licensing". Under the Corporation's business model, licensees
      would be expected, to the extent necessary, to participate in the remaining
      clinical development required to obtain final regulatory approval for the
      product. The Corporation expects that out-licensing would result in a
      pharmaceutical company or other licensee marketing or manufacturing the product
      in return for licensing fees in addition to royalties on any sales of the
      product. Management believes this model is consistent with current biotechnology
      and pharmaceutical industry licensing practices. In addition, although
      out-licensing is a primary strategy of the Corporation, the Corporation may
      retain co-development or marketing rights to particular products or territories.
      To date, the Corporation has out-licensed one of our products in certain
      European countries, our two anti-cancer pre-clinical products to two
      wholly-owned subsidiaries of a United States corporation and one of our products
      in South Korea. See "Business - Licensing Arrangements - Out-Licensing".




The
      Corporation actively searches for new product opportunities using the
      relationships of our management and advisory team and continuous monitoring
      of
      the academic and biotechnology environment in cancer treatment developments.
      The
      Corporation's staff analyses and evaluates opportunities and continuously
      reviews them. In addition, the Corporation has existing rights of first refusal
      in certain of our existing license agreements for certain additional products
      and extensions to existing products. The Corporation intends to seek other
      in-licensing opportunities in pursuing our business strategy.




**CANCER
      AND CANCER THERAPEUTIC MARKET**




According
      to Millennium Research Group, Inc. (June 2001) it was estimated that worldwide
      10.1 million people are diagnosed with some type of cancer annually and in
      North
      America there were approximately 1.1 million new cases in 2000. The Millennium
      Research Group, Inc. projects that the incidence of new cases is likely to
      increase by 0.27% per year between 2000 and 2005. According to the American
      Cancer Society, in the United States cancer is the second leading cause of
      disease-related death, behind cardiovascular disease which it is predicted
      to
      surpass in the next few years. The principal reasons for this projection appear
      to be the aging population in more developed countries, environmental issues
      related to industrial development, and improvements in the treatment of
      cardiovascular disease. North America, Europe and Japan are the principal
      markets for cancer therapies because of the established healthcare and payor
      systems.




The
      principal types of cancer in the United States, accounting for approximately
      55%
      of the incidence of all cancers, based on management's analysis, are prostate
      (17%), breast (16%), lung (13%) and colorectal (8%). These four types of cancer
      are also responsible for the highest combined mortality, accounting for
      approximately 50% of all cancer deaths in the United States. Bladder, ovarian,
      brain and oral cancer, as well as lymphoma, leukemia and melanoma account for
      the majority of the balance of cancer deaths. The incidence of a particular
      cancer varies greatly between continents, principally because of diet and habit.




Surgery,
      radiation and chemotherapy remain the principal effective treatments for cancer.
      Although there is an ongoing debate about the value of chemotherapeutics with
      regards to prolongation of life, their palliative value has resulted in
      significant improvements in quality of life for cancer sufferers. In addition,
      although the reason is not clearly understood, current cancer drugs are
      effective in only a subpopulation of individuals with the same disease.
      Notwithstanding this, revenues in the global oncology market were reported
      to be
      approximately US$20 billion in 2003 (see
      http://www.bioscorpio.com/dmhc1926.htm), and are expected to increase to over
      US$45 billion by 2011. The use of cancer therapies is forecast to increase
      as
      diagnostic methods improve (as already demonstrated in prostate cancer) and,
      particularly, as more effective treatments are developed.




-25-




Numerous
      new approaches to cancer are currently in clinical trials. As targets become
      validated and technologies improve, research is beginning to yield therapeutic
      approaches that appear to be more effective than existing ones. Monoclonal
      antibodies were first described in 1978, and are now beginning to yield
      commercially viable therapeutic products, such as Rituxan(R), the first
      monoclonal treatment for cancer, approved by the FDA in 1998. The Corporation
      is
      aware of only five naked monoclonal antibodies approved in the United States
      for
      the treatment of cancer, Rituxan(R), Campath(R), Herceptin(R), Avastin(R) and
      Erbitux(R) although many more are in development. A second approach to cancer
      treatment, therapeutic cancer vaccines, has been under development for many
      years, and the first such vaccine, Melacine(R), was approved in 1999 in Canada.




The
      Corporation is also developing a novel formulation of the opiod, fentanyl,
      for
      the treatment of severe and moderate pain, including cancer pain. In the United
      States cancer pain is suffered by more than 1.5 million patients. We are aware
      of numerous other companies that are pursuing approaches to the delivery of
      fentanyl including Cephalon, Inc. (“Cephalon”), Endo Pharmaceuticals Holdings
      Inc. (“Endo”), LAB International Inc. (“LAB”), Alexza Molecular Delivery
      Corporation (“Alexza”), Aradigm Corporation (“Aradigm”), Barr Pharmaceuticals,
      Inc. (“Barr”), CeNeS Pharmaceuticals plc (“CeNeS”) and Alza Corporation
      (“Alza”).




**PRODUCTS
      IN CLINICAL DEVELOPMENT**




The
      Corporation’s current portfolio of products in clinical development includes
      three anti-cancer agents (a small molecule, a vaccine and a monoclonal antibody)
      in a number of formulations targeting eight different tumors and/or stages
      of
      cancer as well as product for the treatment of pain, including cancer pain
      (AeroLEF TM ).
      The
      Corporation has also out-licensed two additional anti-cancer immunotherapies
      in
      pre-clinical development. A number of the Coporation’s products involve newer
      approaches to the treatment of cancer and include two formulations of a
      monoclonal antibody, TheraCIM and RadioTheraCIM, and an anti-cancer therapeutic
      vaccine, Norelin TM ,
      currently in clinical development as well as two anti-cancer therapeutic
      v accines,
      HER-1 and TGFα, in preclinical development. The Corporation's lead product,
      tesmilifene, is a chemical that has
      been
      clinically reported to enhance the activity of certain known chemotherapeutics.
      The Corporation's drug products target some of the most common cancer
      indications, including breast, prostate (early-stage as well as metastatic
      disease), and non-small cell lung cancer. YM is also pursuing several smaller
      cancer indications including head-and-neck cancer, brain cancers and certain
      indications with orphan drug designations. The Corporation expects, based on
      clinical trials done to date, to develop all of our clinical stage candidates
      beyond their respective initial indications.




**TESMILIFENE**




**BACKGROUND:**




Tesmilifene
      is a small molecule anti-cancer drug with multiple modes of action that appears
      to enhance the activity of traditional chemotherapy agents. Its chemical
      designation is N,N-diethyl-2-[4-(phenylmethyl)phenoxy]ethanamine hydrochloride.
      It has demonstrated synergistic effects with anthracyclines in late-stage
      clinical trials and with taxanes, 5-FU vinca alkaloids and platins in
      earlier-stage clinical and pre-clinical studies.




**CLINICAL
      EXPERIENCE AND DEVELOPMENT PLANS:**




Tesmilifene
      has been administered to more than 650 cancer patients and demonstrated to
      be
      well tolerated. The product has been approved by either or both of the FDA
      and
      Health Canada for use in numerous clinical trials including:




(a)
            Phase
                I/II study of tesmilifene alone and in combination with doxorubicin
                in
                patients with metastatic and recurrent breast cancer;




(b)
            Phase
                I/II study of tesmilifene in combination with various anti-neoplastic
                agents;




(c)
            Phase
                I/ II study of tesmilifene in combination with cyclophosphamide in
                patients with hormone-refractory prostate cancer;




(d)
            Phase
                II trial of tesmilifene plus doxorubicin in patients with metastatic
                and
                recurrent breast cancer;




(e)
            Phase
                II pilot study of mitoxantrone/prednisone plus tesmilifene in patients
                with symptomatic hormone-refractory metastatic prostate cancer;




-26-


(f)
            Phase
                II combination study of tesmilifene with doxorubicin and taxol in
                advanced
                breast cancer;




(g)
            Randomized
                Phase III trial of tesmilifene plus doxorubicin in patients with
                metastatic and recurrent breast cancer;




(h)
            Phase
                II combination study of tesmilifene with various taxanes in first-line
                metastatic and recurrent breast cancer; and




(i)
            Randomized
                Phase III trial of tesmilifene plus epirubicin and cyclophosphamide
                in
                patients with metastatic and recurrent breast cancer.




In
      October, 2003 the FDA provided clearance to the Corporation to initiate a Phase
      III trial, patient events design and endpoints of which were subject to a
      positive review by the FDA in March, 2003 under a process known as Special
      Protocol Assessment ("SPA"). An SPA is intended to provide official evaluation
      of, and agreement with, a protocol and endpoints to form the basis of a new
      drug
      application. In November, 2003 the Corporation received approval, from the
      FDA
      to apply an "adaptive design" to the pivotal trial for which the SPA had
      approved the protocol. This adaptive design, which in the case of YM's pivotal
      trial provides for "sequential analysis", permits the independent Data Safety
      Monitoring Board ("DSMB") to review the status of the patients in the trial
      and
      to conclude, at any point during the trial, whether the trial should be stopped
      because of sufficient evidence of the effect of tesmilifene; continued for
      the
      purpose of increasing the numbers of the patients in the trial; or stopped
      because of the absence of any effect (futility) of the drug in patients with
      metastatic and recurrent breast cancer. This sequential analysis can be applied
      at any point during the trial. The FDA has advised the Corporation that the
      first interim analysis of the data generated under this process that it is
      prepared to review to satisfy its requirements for approval may take place
      only
      after 192 patient events (deaths) have occurred in the patient population of
      the
      trial. Sequential analysis differs significantly from the classical trial design
      which requires enrollment of the full number of patients contemplated in the
      original protocol prior to which no review of the patients may take place except
      with a considerable statistical penalty being paid by the sponsor for the trial
      results. Under a sequential analysis a positive outcome would permit shortened
      time to approval, and thus to market.




The
      Corporation has initiated the above-mentioned international Phase III trial
      of
      tesmilifene in metastatic and recurrent breast cancer in 700 patients. The
      FDA
      has agreed that the trial may be stopped after 192 events have been recorded
      provided that certain results have been achieved, as determined by the DSMB.




In
      March
      2004, the Corporation entered into a Clinical Research Services Agreement with
      Pharm-Olam International (“POI”), a clinical research organization ("CRO"), to
      conduct this Phase III trial internationally. POI in turn is contracting with
      others to perform services and to recruit and treat patients. The contract
      with
      POI is payable over the next few years and payments due are dependent on the
      number of patients recruited, number of countries trials are conducted in,
      the
      length of time over which particular clinical trials are to be conducted and
      the
      time for completion of all Phase III clinical trials. The Corporation is liable
      for certain payment of clinical services costs, data management costs and pass
      through costs. The agreement will terminate after POI has completed all services
      thereunder, if the parties mutually consent, or may be terminated by either
      party in the event of certain defaults by the other party. In the event the
      Corporation terminates the agreement without cause and prior to the study under
      the agreement being completed, then the Corporation must pay POI a termination
      fee of 10% of the remaining compensation, if any is still owed for clinical
      services costs and data management costs under the agreement at the time of
      the
      termination.




In
      January 2005, the Corporation and Shin Poong Pharmaceutical Company of Seoul,
      Korea (“Shin Poong”) formed a joint development team to oversee the expansion of
      the development program for tesmilifene into gastric cancer. Shin Poong will
      fully fund development costs and will provide up-front, milestone and royalty
      payments. In addition, Shin Poong expects to launch a bridging study in the
      local population in order to allow the breast cancer indication currently under
      study by the Corporation to be launched in Korea and other Asian countries.




-27-




In
      May
      2005, the Corporation, through a subsidiary, partnered with Kuhnil to expand
      the
      development program for TheraCIM-hR3, its monoclonal antibody against the EGF
      receptor, for a specific population of patients with non-small cell lung
      cancer.




The
      SouthWest Oncology Group, a US National Cancer Institute-supported cancer
      clinical trials cooperative group, advised the Corporation that it proposes
      to
      undertake a randomized Phase III trial in which tesmilifene is expected to
      be
      combined with mitoxantrone (Novantrone(R))/prednisone and compared to results
      in
      patients to be treated with taxotere/estramustine/calcitriol for advanced,
      metastatic, hormone-refractory prostate cancer.




The
      Corporation completed a US/Canadian Phase II trial of tesmilifene in 29 patients
      in combination with mitoxantrone (Novantrone(R))/prednisone for the treatment
      of
      metastatic, hormone-refractory prostate cancer. Preliminary results from this
      trial were presented at the annual meeting of the American Society of Clinical
      Oncology ("ASCO") in May 2002. Those data demonstrated an objective reduction
      in
      pain in 75% of patients receiving tesmilifene/mitoxantrone/prednisone compared
      with 29% in previous studies who received mitoxantrone/prednisone alone and
      a
      decrease in PSA in 59% of patients compared with 33% in previous studies.
      Objective pain reduction is measured using a specific pain-related questionnaire
      and by discontinuance or reduction of treatment with analgesics.




The
      National Cancer Institute of Canada ("NCIC") and BMS, the then-licensee of
      tesmilifene, designed and conducted a global, open-label, randomized Phase
      III
      study of tesmilifene/doxorubicin versus doxorubicin alone in metastatic and
      recurrent breast cancer with tumor response and progression-free-survival as
      primary endpoints and overall survival as a secondary endpoint. A planned
      interim analysis failed to demonstrate improvement in tumor response and
      progression-free-survival and BMS terminated all clinical development. However,
      the 305 patients then enrolled in the study were followed by NCIC for analysis
      of the secondary endpoint, overall survival.




At
      the
      2001 ASCO meeting, approximately two years after the decision by BMS to
      terminate development, the NCIC reported that an increase in overall survival
      of
      greater than 50% was seen in those patients who had received the
      tesmilifene/doxorubicin combination compared with patients receiving doxorubicin
      alone (23.6 months vs. 15.6 months; p<0.03, as adjusted). Results of the
      trial have been published in a major oncology journal.




**MANUFACTURING:**




Tesmilifene
      is a small molecule that is inexpensive and simple to manufacture through a
      two-step chemical process. The tesmilifene active drug substance is currently
      manufactured at Fabbrica Italiana Sintetici in Italy and is formulated into
      final drug product by Chesapeake Biological Laboratories Inc. in the United
      States. The Corporation understands that both of these suppliers operate
      facilities meeting GMP standards. The Corporation does not have supply
      agreements with these suppliers, but both have produced quantities for the
      Corporation to specification on a purchase order basis. The Corporation has
      not
      at this time engaged in detailed discussions regarding commercial scale
      manufacturing of tesmilifene, however, the Corporation believes that numerous
      pharmaceutical chemical manufacturers worldwide would be able to manufacture
      this compound at commercial scale.




**INTELLECTUAL
      PROPERTY:**




Aspects
      of tesmilifene, including its anti-cancer uses, are the subject of patents
      that
      have issued in the United States, Europe, Japan, Canada and Australia.
      Tesmilifene's cytoprotective end-use is the subject of other patents granted
      or
      pending in major markets. In addition, the drug's use in combination with
      anti-cancer agents to enhance the survival of cancer patients is the subject
      of
      patent filings in the US and many other major and minor markets. The Corporation
      has obtained our rights to such patents principally under a license agreement
      with University of Manitoba and CancerCare Manitoba and also by assignment
      from
      our consultant, Vincent Research & Consulting Inc. See "Business - Licensing
      Arrangements".




-28-




The
      scope
      of patent coverage and the patent term differ by country. In the United States,
      the Corporation relies on three layers of basic patent protection. A key patent
      among these is US 5,859,065, having claims relating to the use of tesmilifene
      and certain structurally related analogs in combination with any
      chemotherapeutic for the treatment of any cancer. The twenty year term of this
      patent expires in December 2010, but extensions of up to five additional years
      may be available under the Patent Term Restoration Act in the United States.
      We
      intend to take full advantage of the available term extension. In addition,
      in
      the United States, the Corporation is licensed under two granted patents with
      related coverage, namely, US 6,284,799 expiring February 2014 and US 5,747,543
      expiring May 2015.




In
      addition to being licensed under these granted patents, YM is also licensed
      under numerous pending patents relevant to our clinical development program.
      These include national filings based on WO03/039526 and WO03/037318. This series
      of patent applications is focused on the survival advantage demonstrated
      following analysis of the phase III tesmilifene trial, and relates to a
      selection of patient subpopulations that will most benefit from the
      chemopotentiating and cytoprotective properties of tesmilifene. Patents
      resulting from these patent filings will expire in November 2022 in the United
      States and most other major markets.




The
      tesmilifene patent estate licensed to YM includes still other patents pending
      for particular chemotherapeutic/tesmilifene combination therapies adapted for
      improved efficacy in the treatment of breast and prostate cancers, among others.




In
      addition to patents, YM intends to rely on the available term of data
      exclusivity in the US and other countries, given that we believe tesmilifene
      qualifies as an NCE. Furthermore, full advantage will be taken of the Orange
      Book provisions in the United States and equivalent provisions in Canada and
      other countries, as a means for delaying generic competition.




**COMPETITIVE
      POSITION:**




The
      primary competition for tesmilifene is other enhancers of standard
      chemotherapies and possibly the market reduction for those chemotherapies from
      the introduction of new drugs for tesmilifene's target conditions. Competition
      appears to be principally from antisense drugs and pGp inhibitors.




Avastin
      from Genentech is being developed as an inhibitor of vascular endothelial growth
      factor (VEGF) and its activity, while a different approach, could be competitive
      with tesmilifene.




Antisense
      drugs (including Genasense from Genta Incorporated, GTI 2501 from Lorus
      Therapeutics Inc. and ISIS 2503 from ISIS Pharmaceuticals) have the potential
      to
      become competitive for tesmilifene as chemopotentiators.




To
      the
      knowledge of the Corporation only one pGp inhibitor, Zosuquidar-LY335979 from
      Eli Lilly and Company, continues in clinical development.




The
      development of new drugs for metastatic and recurrent breast cancer could reduce
      the size of the market for currently used chemotherapeutics which tesmilifene
      is
      demonstrated to enhance. To the knowledge of the Corporation there are more
      than
      300 studies in breast cancer currently underway.




**THERACIM
      AND RADIOTHERACIM**




**BACKGROUND:**




TheraCIM,
      targeting the EGFr, is a humanized MAb. The EGFr is present at high
      concentrations on the surface of many cancer cells and it is postulated that
      the
      binding of ligands to this receptor is important in the continuing growth of
      cancer cells. TheraCIM appears to block this binding resulting in the potential
      for inhibition of cell growth or, possibly, cell destruction by the immune
      system. Improved tumor responses have been reported when EGFr targeting MAbs
      are
      combined with other anti-cancer treatments.




-29-




The
      Corporation's EGFr MAb is being developed in the following formulations:


TheraCIM
              Naked
                  Antibody
              Administered
                  in combination with conventional
                  radiation therapy.RadioTheraCIM
              Radiolabelled
                  Antibody
              For
                  local injection directly into tumor resection
                  cavities, such as in the treatment
                  of brain
                  cancers.




The
      discussion below on Manufacturing and Competitive Position refers to TheraCIM.




**CLINICAL
      EXPERIENCE - THERACIM:**




In
      October 2000, the Corporation initiated a Phase II clinical trial of TheraCIM
      in
      patients with locally advanced head-and-neck cancer completed in the first
      quarter of 2003. Twenty-four fully evaluable patients were recruited in five
      sites across Canada. The side effects seen to date in this study appear to
      be
      less severe than those previously noted with the current standard-of-care,
      chemoradiation, with no apparent loss of effectiveness of the combination
      therapy. TheraCIM appears to sensitize tumors to the degree that patients
      receiving the antibody appear to have in excess of twice the response rate
      to
      radiation than that reported for patients receiving radiation alone.




A
      previous Phase I/II trial for which recruitment was completed in the third
      quarter of calendar 2002 and conducted by the Corporation's licensor, CIMAB,
      resulted in 24 fully evaluable patients receiving TheraCIM with radiation.
      This
      trial demonstrated a significant benefit compared to radiation alone (greater
      than 60% complete response compared to approximately 30% complete response
      expected from radiation alone). Results of the trial have been published in
      a
      major oncology journal.




In
      July
      2001, YM received approval from Health Canada, to initiate a Phase I/II study
      of
      Nimotuzumab in conjunction with radiotherapy in patients with brain cancer
      resulting from metastases from non-small-cell lung cancer. YM has postponed
      implementing this trial while we evaluate the results of trials of competitive
      approaches to treatment of this condition.




In
      June
      2004, the Corporation was advised that Oncosicence, the Corporation’s licensee,
      has enrolled the first patient in a 47-patient rolling Phase I/II trial in
      pediatric glioma, a form of brain cancer. In November 2004, the Corporation
      was
      advised that Oncoscience initiated thePhase I/II trial in Europe in patients
      with metastatic pancreatic cancer.




The
      Corporation has also been advised that recruitment for a randomized Phase III,
      84 patient study in head-and-neck cancer with TherCIM together with radiation
      being conducted by the Corporation’s licensor. A CIMAB-sponsored single-arm
      Phase II glioma study of the drug with radiation is also ongoing.




In
      August
      2004, TheraCIM was designated an orphan drug by the European Medicines Agency
      for the Evaluation of Medical Products (EMEA) in Europe and in November 2004
      by
      the FDA in the United States.




In
      December 2004, preliminary results were released from a randomized Phase II
      pivotal trial assessing the efficacy and safety of TheraCIM h-R3 (nimotuzumab),
      combined with radiation compared to radiation alone in locally advanced Stage
      3-4, nasopharyngeal carcinoma, a subject of head-and-neck cancer. Of the 130
      patients in the intent-to-treat analysis, those in the combination arm were
      reported to have a 90.6% Complete Response compared to 51.5% in the
      radiation-alone group. “Complete Response” is defined as the elimination of
      tumour at the primary site, locoregional lymph nodes and distant metastases.
      The
      study was conducted by the Corporation’s licensor, CIMAB and Biotech
      Pharmaceuticals Limited, CIMAB’s joint-venture partner in China. We are advised
      that the product was approved for sale in China in April 2005.




-30-




In
      January 2005, Oncoscience announced that the Phase II trial in children with
      brain cancer (glioma) utilizing the EGF receptor monoclonal antibody (h-R3)
      as a
      monotherapy achieved its clinical endpoint and that six of 17 evaluable patients
      (35.3%) enjoyed clinical benefit. Data from that trial were presented at the
      European High-Grade Glioma Meeting in February 2005. Oncoscience is proposing
      to
      conduct a new study which will be a randomized Phase III trial comparing
      radiation to radiation plus h-R3 as a first-line therapy following surgery
      in
      children with pontine glioma. Oncoscience advised that the trial is expected
      to
      enroll approximately 50 patients which it plans to initiate following regulatory
      approval. Oncoscience anticipates regulatory approval for pivotal trial in
      glioma in adults which is expected to enroll between 110 and 150 patients and
      be
      initiated in the fourth quarter of 2005 if regulatory approval is
      received.




In
      March
      2005, the FDA approved the use of TheraCIM h-R3 as a monotherapy in the
      treatment of a child with advanced glioma under an IND. The application to
      the
      FDA which resulted in the issuance of the IND to the investigator was prompted
      by the release of data from the Phase II monotherapy trial sponsored by
      Oncoscience in pediatric glioma presented in Europe in February 2005.




In
      May
      2005, data were presented at the 2005 Annual Meeting of the American Society
      of
      Clinical Oncology (ASCO) on 24 evaluable adult patients treated with antibody
      in
      conjunction with radiation for high-grade malignant glioma. Complete response
      was achieved by 16.7%, partial response by 20.8%, 66.8% achieved disease
      stabilization for a total 87.5% objective response rate.




**CLINICAL
      EXPERIENCE - RADIOTHERACIM:**




In
      May
      2003, data were presented at ASCO, the American Society of Clinical Oncology's
      annual meeting, of an investigator-led trial utilizing an Yttrium-90-labeled
      version of TheraCIM in 45 patients, post-excision, with glioma. It was concluded
      that this method is feasible and warrants further study. Since the trial is
      physician-sponsored, neither the Corporation nor CIMAB, the supplier of the
      RadioTheraCIM, control the conduct of the trial. There are no additional trials
      in planning for this approval.




**MANUFACTURING:**




Currently,
      CIMAB, supplies TheraCIM and RadioTheraCIM in quantities sufficient to
      facilitate the clinical development of these products. It is expected that
      CIMAB
      will manufacture and supply, or will contract for the manufacture and supply
      of
      commercial quantities of TheraCIM and RadioTheraCIM in accordance with the
      current licensing agreements at such time and stage of product development
      as
      commercial quantities of these products are required. There is a risk that
      CIMAB
      may experience difficulties obtaining or producing commercially viable
      quantities of these products. Product from CIMAB's manufacturing plant has
      been
      approved for use in a clinical trial in Canada and Europe. The plant operates
      according to GMP principles and its cGMP compliance status has been reviewed
      on
      behalf of the Corporation by industry experts. However, the facility has not
      been validated by a non-Cuban regulatory agency and the Corporation recognizes
      that the manufacturing facility has to continue to meet GMP standards in order
      to supply product for commercial use. Consequently, in 1999, the Corporation
      entered into a collaboration with the Biotechnology Research Institute ("BRI")
      of the National Research Council of Canada in order to fund the development
      of a
      manufacturing process to produce clinical grade material on a commercial scale.
      This collaboration yielded promising results, and CIMAB’s scale-up process was
      accepted by Health Canada for commercial scale manufacturing process which
      is
      now required to provide data required to satisfy applicable regulatory
      requirements.




The
      Corporation's license agreement for TheraCIM contemplates manufacturing of
      the
      product by CIMAB or a supplier contracted by CIMAB. Should CIMAB agree to
      alternative manufacturing arrangements, such as a sub-licensee of CIMYM
      manufacturing the product, the loss of manufacturing benefits to CIMAB may
      be
      reflected in a lower license fee and royalty payable to CIMYM than if
      manufacturing remains with CIMAB. See "Business - Licensing Arrangements".




-31-




**MARKETING:**




TheraCIM
      and RadioTheraCIM are licensed by the Corporation from a Cuban source, CIMAB,
      and as such are likely to be prohibited from sale in the United States unless
      OFAC issues a license or the US embargo against Cuba is lifted.




**INTELLECTUAL
      PROPERTY:**




Aspects
      of TheraCIM, including claims to the antibody and its formulation, are the
      subject of patents that have issued in the United States and Canada and a patent
      application that has been granted in Europe. In addition, the combination of
      any
      EGF-based passive immunization (such as TheraCIM) together with any EGF-based
      active immunization is the subject of Patent Cooperation Treaty ("PCT") and
      United States patent applications. CIMYM is the exclusive licensee under a
      patent estate that includes composition of matter coverage for Nimotuzumab,
      and
      further includes coverage for TheraCIM-based formulations and end-uses in the
      treatment of EGFr-dependent cancers. The composition of matter patents are
      granted in the United States, in Europe, are allowable in Japan, and are pending
      in Canada. The Corporation has obtained our rights to such patents under a
      license agreement with CIMAB, the company responsible for the commercialization
      of products developed at CIM and CBQ. See "Business - Licensing Arrangements".




CIMYM's
      key US patent, US 5,891,996 expires in November 2015, and term extensions of
      up
      to five years may be available under the Patent Term Restoration Act. The same
      term and extension apply also to the key European patent, EP 712863.




The
      Corporation is aware of US patent #5,770,195 granted to Genentech, for the
      anti-cancer use of EGFr MAbs in combination with a cytotoxic agent. The
      Corporation is also aware of US patents granted to others in this field. In
      April 2001, Rorer International (Overseas) ("Rorer") was issued the US patent
      #6,217,866 which includes claims to any antibody targeting the EGFr administered
      with any anti-neoplastic agent. A counterpart patent has been granted in Europe.
      The Corporation has filed an opposition to the grant of the European patent.
      The
      Corporation believes that the Rorer patents are licensed to ImClone. In
      addition, the Corporation is aware of a separate series of national patent
      applications filed by ImClone, and represented by EP1080113, claiming the
      anti-cancer use of radiation in combination with any inhibitor of any receptor
      tyrosine kinase that is involved in the genesis of tumors. ImClone is also
      reported to have filed a PCT application covering the use of EGFr MAbs to treat
      patients having tumors that do not respond to treatment with conventional
      therapies. The Corporation is also challenging ImClone's claims in respect
      of
      the radiation-related patent applications by filing additional prior art at
      the
      relevant national patent offices. The outcome of these challenges cannot be
      predicted, and there can be no assurance that the Corporation will succeed
      in
      challenging the validity or scope of patent claims by ImClone or any other
      patent applicant. The Corporation has not incurred material expenses in
      connection with the challenges to ImClone's radiation-related patent
      application. See "Risk Factors - Patents and Proprietary Rights".




The
      manufacturing of TheraCIM may fall within the scope of process patents owned
      by
      Protein Design Labs Inc., Genentech, and the Medical Research Council of the
      United Kingdom. Management is aware that some of these process patents are
      currently being challenged by companies other than YM. In the event any of
      the
      applicable process patents are upheld, management believes we will be able
      to
      obtain licenses under such patents on commercially reasonable terms, though
      there can be no assurance thereof.




**COMPETITIVE
      POSITION:**




To
      the
      knowledge of the Corporation, other companies that are involved in the
      development of monoclonal antibody cancer therapeutics directly related to
      the
      Corporation's efforts include Abgenix/Amgen, Genmab, ImClone/BMS, and Merck.




The
      Corporation understands that OSI, in concert with Genentech and Roche, and
      AstraZeneca, have small molecules designed to target the tyrosine kinase domains
      of EGF receptors. The Corporation understands that Iressa(R), from AstraZeneca,
      has been approved in thirty-five countries, including Japan and the United
      States for third line monotherapy of NSCLC. OSI reported that it has positive
      survival data in a Phase III monotherapy study in treatment refractory
      NSCLC.




-32-




OSI's
      product, Tarceva TM ,
      is
      reported to be in co-development with Roche and Genentech and is reported to
      be
      in numerous trials in various indications including Phase III registration
      studies. Tarceva TM has been
      approved in the United States for NSCLC. See "- Competition".




Erbitux(R),
      developed by ImClone/BMS and Merck, is approved in the United States, Canada,
      Germany, Austria and Switzerland for metastatic colorectal cancer in combination
      with irinotecan in irinotecan-refractory patients. Management understands that
      Erbitux(R) is under review by other regulatory agencies including EMEA, the
      European regulatory agency.




**NORELIN** **TM** ****




**BACKGROUND:**




Originally
      developed by Biostar Inc. ("Biostar"), Norelin TM is an
      active specific immunotherapy agent that harnesses the immune system to block
      the activity of the master hormone GnRH, which controls the production of both
      male and female sex hormones. These hormones bind to receptors in malignant
      cancer cells and promote the growth and spread of cancer. By eliciting an
      antibody response to GnRH, Norelin TM is
      designed to block GnRH from reaching its receptors in the pituitary gland,
      intending to reduce the amount of sex hormones in circulation and is expected
      to
      reduce their effect on tumor growth. Norelin TM consists
      of an adjuvant combined with the immunogen, the drug substance IPS-21, a
      proprietary carrier protein that is a non-toxic fragment of P. haemolytica,
      flanked by eight copies of GnRH on both ends. Extensive testing by Biostar
      of
      IPS-21 and product formulations was carried out in numerous domestic and
      laboratory species, using a range of adjuvants and doses. In pre-clinical
      testing, Norelin TM has been
      effective in inducing an antibody response to GnRH, which in turn reduced sex
      hormones to sterilization levels in the pre-clinical animal models assessed.
      In
      addition, a significant anti-tumor effect has been demonstrated in several
      animal models.




**CLINICAL
      EXPERIENCE:**




In
      2002,
      YM obtained a ”No Objection” for a CTA for Norelin TM and a
      safety and immunogenicity study in patients with hormone-sensitive prostate
      cancer was initiated in the third quarter of calendar 2002. Hormone-dependent
      prostate cancer is characterized by elevated levels of testosterone, which
      fuels
      tumor growth, and elevated levels of PSA. The disease is currently managed
      by
      lowering the testosterone and PSA with pharmaceuticals or surgery. The trial
      enrolled patients in two stages. In the first stage (results reported in June
      of
      2003), 12 patients were enrolled and treated with the Corporation proprietary
      formulation of Norelin TM and were
      followed for 90 days. In the second stage, four patients were enrolled starting
      in mid-2004 and followed for 180 days before determining whether or not they
      responded. YM originally planned to enroll a total of 12 patients in the second
      stage, but voluntarily terminated enrollment of the trial when delays in trial
      implementation resulted in clinical supplies of the drug exceeding stability
      time-limits. The drug substance demonstrated excellent stability for four years,
      more than sufficient to consider it commercializable.




Patients
      from the first stage whose testosterone dropped significantly at 90 days were
      advanced into a long-term booster program. Seven of the 12 enrolled patients
      developed anti-GnRH antibodies and two went on to achieve castrate levels of
      testosterone by day 120. Those two patients received booster doses for
      approximately two years and are in long-term follow-up. They remain at
      castration levels with normalized PSA and have not demonstrated any sign of
      disease progression at >2.5 years as at June 30, 2005.




Three
      patients from the first stage and three patients from the second stage received
      at least five doses of the vaccine and these patients were followed for 120
      days. All responded to the vaccine, developing antibodies and achieving
      testosterone suppression. Three of these patients achieved complete reduction
      of
      testosterone to castration levels.




-33-




Adverse
      events reported included injection site pain in 8/16 (50%) patients, hot flashes
      3/16 (19%), nausea 2/16 (13%), decreased libido 1/16 (6%) and headache 1/16
      (6%). There was no testosterone flare and no bone pain or worsening of symptoms
      reported.




The
      data
      are sufficiently compelling to warrant further clinical investigation which
      will
      require the manufacture of additional drug product. The evaluation of the costs
      of manufacturing are currently underway.




**MANUFACTURING:**




Unlike
      MAbs, Norelin TM can be
      produced in a bacterial host such as E. coli. Numerous production facilities
      are
      available in North America and elsewhere. The Corporation does not have a supply
      agreement with any particular supplier, but this drug has been produced in
      suitable quantities for the Corporation to specification on a purchase order
      basis. The drug substance was manufactured by Diosynth Inc., located in North
      Carolina, US, and the current drug product has been manufactured under cGMP
      conditions by the University of Iowa's Pharmaceutical Services Division, located
      in Iowa, US The Corporation is aware of US patent #6,303,123 owned by Aphton
      relating to the use of GnRH immunogenic conjugates to treat GnRH-dependent
      diseases, including prostatic hypertrophy, and is developing a strategy for
      addressing this patent should it prove relevant to the Corporation's commercial
      activities with Norelin TM .




**INTELLECTUAL
      PROPERTY:**




Aspects
      of Norelin TM ,
      including claims to the fusion protein, its synthesis and its formulation,
      are
      the subject of patents that have issued in the United States, and patent
      applications are pending in a number of other major markets. The
      Norelin TM patent
      estate is extensive, and includes four key US patents covering various aspects
      of Norelin TM as a
      composition of matter, the carrier component of the Norelin TM vaccine,
      as well as production of Norelin TM as a
      recombinant product. A key US patent is US 5,837,268, which covers the
      particular Norelin TM sequence, its formulation as a vaccine, and its end-use, and subject to any
      term
      restoration, will expire in 2012.




The
      Corporation has obtained our rights to such patents under a license agreement
      with Biostar. See "Business - Licensing Arrangements".




**COMPETITIVE
      POSITION:**




Although
      the Corporation is aware of numerous products in development for prostate
      cancer, the Corporation is aware of only three competing products in the GnRH
      vaccine field. Of the four products in development (including the Corporation's
      product), to the knowledge of the Corporation, a product by Aphton appears
      to be
      the most advanced, having reportedly completed Phase
      I
      testing and having reportedly commenced Phase II testing .
      The
      Corporation believes that the competitive vaccines are based on chemical
      synthesis and/or classical conjugation techniques, unlike Norelin TM which is
      produced in a bacterial host. As a result, the Corporation believes those
      competitive vaccines are complex mixtures of proteins that would be expected
      to
      be more difficult and expensive to produce than Norelin TM .




These
      vaccine products will seek to compete with existing treatments. Two existing
      products designed to induce chemical castration in the treatment of prostate
      cancer have been approved for marketing and have been in use for a number of
      years. These products, Lupron by TAP Pharmaceuticals and Zoladex by AstraZeneca,
      have a strong market presence.




-34-




**AEROLEF** **TM**




**BACKGROUND:**




AeroLEF TM is a
      proprietary formulation of fentanyl, an opioid analgesic, that is administered
      by inhalation and permits self-titration by patients. The development of
      AeroLEF TM as a
      combination of pulmonarily-delivered free and liposomal dosage form takes
      advantage of (1) the lung’s large absorptive surface and thin barrier to
      absorption to permit rapid transport of the free fentanyl fraction (loading
      dose) into the systemic circulation and (2) the capacity of liposomes to
      function as reservoirs for the regulated release over time of the encapsulated
      fentanyl. AeroLEF TM is being
      developed to provide both rapid and extended opiod analgesic levels for patients
      with severe and moderate acute pain and cancer pain.




**CLINICAL
      EXPERIENCE:**




The
      clinical experience with AeroLEF TM includes
      two Phase I studies with healthy volunteers and one Phase II acute pain study
      in
      post-surgical patients carried out in Canada under IND submissions approved
      by
      Health Canada.




In
      the
      first Phase I study, both single and multi-dose regimens of AeroLEF TM dosing
      with nebulization resulted in therapeutic plasma concentrations detected during
      the dosing session and peak plasma fentanyl concentrations recorded at
      approximately the end of the 10-15 minute dosing session. Similar mean peak
      plasma fentanyl concentrations of 2.53 and 2.23 ng/ml were observed in the
      single dose and multi-dose arms, respectively. The mean plasma concentration
      of
      fentanyl was maintained within the target therapeutic range (0.5-2.0 ng/ml)
      for
      just over four hours in the AeroLEF TM treatments groups. By comparison, in the intravenous fentanyl arm of the study,
      the mean peak plasma fentanyl concentration was 2.80 ng/ml at about 5 minutes
      but the duration above 0.5 ng/ml was only until one hour
      post-dosing.




In
      a
      second Phase I study involving healthy volunteer subjects, multiple doses (up
      to
      4 doses) of AeroLEF TM were
      administered with various commercially available nebulizer devices. The most
      favourable pharmacokinetic-pharmacodynamic profile was achieved following
      delivery of AeroLEF TM with the
      breath-actuated AeroEclipse® nebulizer from Trudell Medical. Based on these
      results, the AeroEclipse® device was selected for delivery of
      AeroLEF TM in the
      Phase II study.




The
      preliminary results of a Phase II acute pain study using AeroLEF TM as the
      primary postoperative analgesic were reported at the annual meeting of the
      American Society of Anesthesiologists in October 2004. The study involved a
      unique “dose-to-effective-analgesia” following patient-controlled administration
      of AeroLEF TM as the
      primary analgesic treatment in adult patients experiencing severe and moderate
      pain following elective knee surgery. This Phase II study demonstrated that
      95%
      of patients successfully achieved analgesia via self-titration with
      AeroLEF TM as the
      primary medication. Eighteen (18) subjects rapidly achieved perceptible
      analgesia soon after commencing nebulization (median 2.7 min) and continued
      self-titration to a median time to effective/adequate analgesia of 17
      minutes.




**MANUFACTURING:**




The
      AeroLEF TM manufacturing process involves a two-step, controlled process that produces
      liposomal formulations with the target particle size and the target ratio of
      free and encapsulated fentanyl. AeroLEF TM clinical
      product supply for the two Phase I studies and the Phase II study was contracted
      to OctoPlus b.v., based in the Netherlands. During 2004, the manufacturing
      process was transferred to Dalton Pharma Services of Toronto, Ontario for
      production of AeroLEF TM to
      support future clinical trials and development activities. As
      AeroLEF TM advances
      to Phase III trials, the Company plans to engage a second contract manufacturer
      in the United States to provide pivotal trial materials and commercial supply.
      Fentanyl, the active pharmaceutical ingredient in the AeroLEF TM formulation, is commercially available from various vendors licensed to
      synthesize and market the controlled substance.




-35-




**INTELLECTUAL
      PROPERTY:**




The
      AeroLEF TM product
      is described in four patent families. DELEX owns key patents, expiring in 2014,
      claiming a method of administering systemic analgesia by inhaling free and
      liposome-encapsulated opiod analgesic. North American coverage includes a
      reissued US patent and a pending application in Canada. DELEX owns two US
      applications with counterpart PCT applications, expiring in 2024, claiming
      the
      formulation for use in a method comprised of continuously inhaling the
      formulation to deposit at least one rapid-onset opiod and one sustained-effect
      opiod in the lungs. A pending PCT application entitled “Stable Compositions”
claims the liposomal composition and other physical characteristics.




The
      corporation is aware of US patents owned by Phares Pharmaceutical Research
      NV
      related to liposome compositions. These patents expire in 2008 and are not
      expected to hamper the Corporation’s commercial activities.




**COMPETITIVE
      POSITION:**




The
      opioid analgesic market which includes products based on morphine, fentanyl,
      oxycodone, or hydromorphone is currently dominated by several pharmaceuticals
      companies such as Johnson & Johnson Inc., Abbott Laboratories, Baxter
      International Inc., AstraZeneca PLC, Purdue Pharma L.P., Cephalon, Inc., Endo
      Pharmaceutical Holdings Inc., and Organon International. The fentanyl segment
      of
      the opioid analgesic market includes three approved routes of
      administration:




(a)
            intravenous
                administration of fentanyl citrate available as generic products
                from
                various suppliers




(b)
            transdermal
                administration via the Duragesic® patch




(c)
            transmucosal
                administration via the Actiq®
lollipop




Several
      competitors are developing non-invasive alternatives for enhanced delivery
      of
      fentanyl, including Alza Corporation (IONSYS for transdermal delivery), Cephalon
      (Oravescent Fentanyl for transmucosal delivery), Endo (Rapinyl for sublingual
      delivery), Aradigm (pulmonary delivery), Alexza (pulmonary delivery) and LAB
      (pulmonary delivery). All the competitors, to our knowledge, will deliver fixed
      dosage forms of the drug.




**PRODUCTS
      IN PRE-CLINICAL DEVELOPMENT**




**TGF** **α
      CANCER VACCINE**




**BACKGROUND:**




Human
      epidermal growth factors and their receptors are known to play an important
      role
      in both normal cell proliferation and in neoplastic growth. The EGFr is
      overexpressed in many human epithelial malignancies, including breast, bladder,
      ovarian, colon, lung, brain and esophageal cancer. In some tumors, EGFr
      overexpression is an indicator of a poor clinical prognosis. There are a number
      of ligands (proteins or peptides produced in the human body) that can bind
      to
      the EGFr and are postulated to promote cancer growth. These include EGF, TGFα,
      amphiregulin, heparin-binding EGF-like growth factor and betacellulin.




**RATIONALE:**




The
      most
      common ligand for the EGFr in human tissues is TGFα, which is often
      overexpressed in human epithelial malignancies. With this ligand, the EGFr
      forms
      a well-defined autocrine loop and there are numerous reports demonstrating
      the
      influence of the TGFα/EGFr system in human tumors. Increased production in the
      body of either EGFr or TGFα have been identified as early events in the
      progression of head-and-neck cancers. The autocrine loop EGFr/TGFα has also been
      found to be important for the growth of human renal carcinoma cells.
      Furthermore, studies with both brain tumor cell lines and primary tumor tissues
      suggest that the TGFα and the EGFr function as an important autocrine loop in
      supporting proliferation of brain tumors. The relationship between TGFα and
      oncogenes is also established. One example is the relationship between TGFα and
      the oncogene c-myc. Overexpression of these genes is demonstrated in human
      cancers, suggesting that their interaction may be a critical step in malignant
      growth. Taken as a whole, these studies suggest that overexpression of EGFr
      and
      its ligand TGFα is frequent in human tumors.




-36-




**INTELLECTUAL
      PROPERTY:**




Aspects
      of the TGFα Vaccine, including claims for vaccines containing TGFα, are the
      subject of patent applications that have been filed in all major markets
      including the United States. The TGFα Vaccine would also fall under the scope of
      the passive/active immunization claims described in connection
      with TheraCIM, above. The Corporation has obtained our rights to such patent
      applications under a license agreement with CIMAB. See "Business - Licensing
      Arrangements".




**CURRENT
      STATUS:**




A
      TGFα/P64k fusion protein has been produced in E. coli and semi-purified.
      Immunized mice have mounted an anti-TGFα antibody response. A murine tumor model
      depending on TGFα expression for in vivo growth is currently under development.




**HER-1
      BASED CANCER VACCINE**




**BACKGROUND:**




As
      described above, the EGF/EGFr system is an attractive target for cancer therapy.
      The EGFr is overexpressed in many malignant tumors of epithelial origin, which
      include breast, bladder, ovarian, colon, lung, brain and esophageal cancer.
      EGFr
      expression in human breast tumors has been correlated with a poor prognosis.
      Furthermore it has been demonstrated that expression of EGFr in breast tumor
      metastases is frequently elevated compared to the primary tumor, which suggests
      the involvement of EGFr in the metastatic process, though there can be no
      assurance thereof.




Although
      several MAbs against the EGFr, both naked and those associated with drugs,
      toxins or radioisotopes, are being evaluated for cancer immunotherapy, active
      specific immunotherapy with the EGFr itself has not, to the knowledge of the
      Corporation, been tested.




**RATIONALE:**




The
      HER-1
      Vaccine project is aimed at developing a cancer vaccine composed of the
      extracellular domain of the human EGFr, presented in a Th1-pattern-inducing
      vehicle. An antibody response would block the interaction between EGFr and
      its
      ligands, provoking a cytostatic effect, but tumor shrinkage could also be
      induced by a cytotoxic T cell ("CTL") response.




**INTELLECTUAL
      PROPERTY:**




Aspects
      of the HER-1 Vaccine, including claims for vaccines containing HER-1, are the
      subject of patent applications that have been filed in the major markets
      including the United States. The HER-1 Vaccine would also fall under the scope
      of the passive/active immunization claims described in connection with TheraCIM,
      above. The Corporation has obtained our rights to such patent applications
      under
      a license agreement with CIMAB. See "Business - Licensing Arrangements".




The
      Corporation's license for the HER-1 Based Cancer Vaccine is suspended under
      the
      terms of the out-licensing agreement between the Corporation, CIMYM (Barbados),
      CIMAB and Tarcanta relating to Tarcanta licensing TGFα
and
      HER-1 from CIMAB. In connection with the out-licensing agreement, CancerVax
      has
      announced that it has received a license from Treasury authorizing Tarcanta
      to
      enter into the transactions with CIMAB and the Corporation. See "Business -
      Licensing Arrangements - Out-Licensing" and see "Business - Licensing
      Arrangements - In-Licensing - Licenses for TheraCIM, RadioTheraCIM, TGFα and
      HER-1".




-37-




**CURRENT
      STATUS:**




In
      the
      product, the cDNAs encoding the extra-cellular domain ("ECD") of the human
      and
      murine EGFr have been cloned into expression vectors, and stable cell lines
      secreting these ECDs appear to have been established. Mice were immunized with
      the ECD of the murine EGFr in different immunogenic preparations. Specific
      T
      cell proliferation and antibody titers above 1/1000 were obtained without severe
      toxicity. Pre-clinical tumor challenge experiments are ongoing.




The
      Corporation's license for the TGFα
      Cancer Vaccine and the HER-1 Based Cancer Vaccine is suspended under the terms
      of the out-licensing agreement between the Corporation, CIMYM (Barbados), CIMAB
      and Tarcanta relating to Tarcanta licensing TGFα and HER-1 from CIMAB. Under the
      terms of th e
      new
      agreement and in consideration for the suspension of the 2001 CIMYM License,
      the
      Corporation is entitled to receive an aggregate payment of $1,000,000 which
      is
      payable in four equal installments, the final payment due December 31, 2005.
      In
      addition, under the new agreement the Corporation may receive 35% of an
      aggregate of $16,350,000 in milestone payments. Finally, the Corporation retains
      an interest in the revenues from the manufacture and marketing of the drugs
      or
      from their sub-licensing. In connection with the out-licensing agreement,
      CancerVax has announced that it has received a license from Treasury authorizing
      Tarcanta to enter into the transactions with CIMAB and the Corporation. See
      "Business - Licensing Arrangements - Out-Licensing" and see "Business -
      Licensing Arrangements - In-Licensing - Licenses for TheraCIM, RadioTheraCIM, TGFα
and
      HER-1".




**COMPETITION**




The
      biopharmaceutical industry is intensely competitive. Many companies, including
      other biopharmaceutical companies and biotechnology companies, are actively
      engaged in activities similar to those of the Corporation, including research
      and development of drugs for the treatment of cancer. More specifically,
      competitors for the development of new therapeutic products to treat cancer
      also
      focus on MAb-based cancer therapeutics, cancer vaccines and other approaches
      that are based on both active and passive immunotherapies and small molecule
      discovery and development. A 2001 survey by the Pharmaceutical Research and
      Manufacturers of America ("PhRMA") listed 399 new treatments for cancer that
      are
      currently being tested by researchers.




To
      the
      knowledge of the Corporation, other companies that are involved in the
      development of monoclonal antibody cancer therapeutics directly related to
      the
      Corporation's efforts include Abgenix/Amgen, Genmab, ImClone/BMS, and Merck.
      The
      Corporation understands that OSI in concert with Genentech and Roche and
      AstraZeneca has small molecules designed to target the tyrosine kinase domains
      of EGF receptors. Iressa(R) has been approved in twenty countries, including
      Japan and the United States for third line monotherapy of NSCLC. OSI reported
      that is has positive survival data in a phase III monotherapy study in treatment
      refractory NSCLC. Tarceva TM has been
      approved in the United States for NSCLC. Erbitux(R) is approved in United
      States, Austria, Canada, Germany and Switzerland for metastatic colorectal
      in
      combination with irinotecan in irinotecan-refractory patients. Erbitux(R) is
      under review by other regulatory agencies including EMEA the European regulatory
      agency.




Several
      competitors are developing non-invasive alternatives for enhanced delivery
      of
      fentanyl, including Alza Corporation (IONSYS for transdermal delivery), Cephalon
      (Oravescent Fentanyl for transmucosal delivery), Endo (Rapinyl for sublingual
      delivery), Aradigm (pulmonary delivery), Alexza (pulmonary delivery) and LAB
      (pulmonary delivery).




The
      Corporation expects to encounter significant competition for the pharmaceutical
      products we are developing and plan to develop in future. Many of the
      Corporation's competitors have substantially greater financial and other
      resources, larger research and development capabilities and more extensive
      marketing and manufacturing organizations than the Corporation. In addition,
      some such companies have considerable experience in pre-clinical testing,
      clinical trials and other regulatory approval procedures. There are also
      academic institutions, governmental agencies and other research organizations
      which are conducting research in areas in which the Corporation is working
      and
      they may also market commercial products, either on their own or through
      collaborative efforts. If any of these competitors were to complete clinical
      trials, obtain required regulatory approvals and commence commercial sales
      of
      their products before the Corporation they may achieve a significant competitive
      advantage.




-38-




**CLINICAL,
      PRE-CLINICAL AND BASIC RESEARCH**




The
      Corporation, designs, funds and manages clinical and some pre-clinical research,
      and may support, but does not conduct, basic research. The Corporation manages
      the development of products that we in-license through our own team of clinical,
      regulatory, licensing and business development executives and through a number
      of research and medical collaborations. The Corporation is responsible for
      filing applications with the relevant authorities for regulatory approval for
      clinical trials and conducts, or has conducted on our behalf, clinical trials
      to
      progress products in development toward regulatory approval and possible
      out-licensing for commercial sale. The Corporation's current licenses generally
      provide that the Corporation will conduct, or cause to be conducted, the tests
      and clinical studies necessary to progress products in development toward
      regulatory approval with a view to obtaining the approval for sale of the
      licensed drug from appropriate regulatory authorities. The Corporation has
      received regulatory approvals for clinical trials in a number of countries,
      including in Canada, the United States, the United Kingdom, Europe and South
      Africa from Phase I through Phase III. Some basic research is conducted at
      the
      facilities of the Corporation's licensors, and the Corporation pays for certain
      amounts of this research.




**LICENSING
      ARRANGEMENTS**




**IN-LICENSING**




**LICENSE
      FOR TESMILIFENE**




In
      November 2000, YM was granted an exclusive worldwide license by the University
      of Manitoba and The Manitoba Cancer Treatment and Research Foundation (now
      CancerCare Manitoba) (the "Original Licensor") for all products and formulations
      of tesmilifene pursuant to which the Corporation undertook the responsibility
      for the clinical development of the product and its commercialization.




The
      Corporation must pay to the Original Licensor a specified minority percentage
      of
      revenues received from sub-licensing the product, after our recovery of certain
      specified development and attributed overhead costs. If the Corporation
      manufactures and sells tesmilifene itself rather than through sub-licensing,
      the
      Corporation must pay a specified lesser minority percentage of net sales, after
      our recovery of certain specified development and attributed overhead costs,
      to
      the Original Licensor. Management believes these royalties are consistent with
      general industry practice for similar arrangements. No royalties have been
      paid
      to date, and future royalties cannot be quantified because they are dependent
      on
      net sales, net royalties and net revenues which have not yet materialized.
      There
      can be no assurance as to if or when the Corporation may sell the licensed
      product nor enter into sub-licensing arrangements for the product. Under the
      terms of this license agreement, the Corporation has paid US$300,000 over the
      years 2000, 2001 and 2002 for sponsored research. The Corporation must make
      reasonable efforts to ensure that the licensed product is efficiently marketed
      and distributed by November 2005. The Corporation may sub-license the product.
      This license agreement shall be in force as long as any patents thereunder
      are
      valid, or until such time as the license agreement is terminated by either
      party
      because of a default by the other party, by either party if the other party
      enters into liquidation or reorganization proceedings or receivership or
      bankruptcy, or by YM on 90 days written notice if there are no sub-licensees.
      In
      2003, the Corporation acquired certain additional patent rights for the use
      of
      tesmilifene from Vincent Research and Consulting in exchange for a small share
      of YM's future royalty revenues. Management of YM does not consider the
      agreement with Vincent Research and Consulting to be material to YM as of the
      date hereof.




**LICENSE
      FOR NORELIN** **TM** ****




In
      October 2000, YM secured the exclusive, sub-licensable, worldwide license to
      the
      human therapeutic rights to Norelin TM from
      Biostar. The license is non-exclusive with respect to diagnostic applications
      for P. haemolytica antibodies and excludes applications related to infectious
      diseases. Pursuant to the license, the Corporation paid 75,000 of our common
      shares and 37,500 warrants were granted to purchase our common shares. The
      warrants granted to Biostar were granted at a price of US$9.00 per common share
      and expired on October 11, 2004. Finally, pursuant to the license, the
      Corporation is required to pay Biostar an amount equal to the lesser of (a)
      either two or four percent (depending on the nature of the product) of net
      sales, and (b) 10 percent of any sub-licensing revenue received by the
      Corporation. No such royalty payments have been paid to date, and future
      royalties cannot be quantified because they are dependent on net sales and
      sub-licensing arrangements which have not yet materialized. There can be no
      assurance as to if or when the Corporation may have net sales or enter into
      sub-licensing arrangements for the licensed products. This license agreement
      shall be in force as long as any patents thereunder are valid, or until such
      time as the license agreement is terminated by either party because of a default
      by the other party, by either party if the other party enters into liquidation
      or reorganization proceedings or receivership or bankruptcy, or by YM on 90
      days
      written notice if there are no sub-licensees. Notwithstanding the foregoing,
      any
      sub-license will be terminated upon the termination of the underlying license
      between Biostar and the University of Saskatchewan. YM has been advised that
      certain rights to technology under the license depend on patents and patent
      applications, the prosecution and maintenance of which are funded by third
      parties pursuant to agreements with the Veterinary Infectious Disease
      Organization ("VIDO"), a division of the University of Saskatchewan. If such
      parties purport to abandon any such applications or patents, VIDO has the
      obligation to provide Biostar with the opportunity to fund the prosecution
      and
      maintenance of such applications and patents, if VIDO chooses not to do so
      itself. Similarly, Biostar has the obligation to provide YM with the opportunity
      to fund the prosecution and maintenance of such applications and patents, if
      Biostar chooses not to do so itself.




-39-




**LICENSES
      FOR THERACIM, RADIOTHERACIM, TGFΑ AND HER-1.**




(i)
      The
      1995 CIMYM License




In
      May
      1995, YM acquired an exclusive, sub-licensable license (as amended, the "1995
      CIMYM License") from CIMAB, acting on behalf of CIM, to products for passive
      immunotherapy of cancer directed toward EGF and EGFr as targets, including
      hR3,
      a humanized MAb targeting the EGFr. CIMAB is the company responsible for the
      commercialization of products developed at CIM. The 1995 CIMYM License is in
      respect of Europe, Canada, the United States, Japan, Australia, Taiwan,
      Singapore, Thailand, Hong Kong, South Korea, Malaysia, Indonesia and the
      Philippines. As a term of the 1995 CIMYM License, YM has a right of first
      refusal with respect to licensing any other products derived from the EGF and
      EGFr programs of CIMAB except its anti-EGFr monoclonal antibody for psoriasis
      in
      Europe.




Pursuant
      to the 1995 CIMYM License, in 1995 the Corporation incorporated CIMYM and
      assigned the 1995 CIMYM License to CIMYM. Pursuant to the terms of the 1995
      CIMYM License, CIMAB acquired a 20% interest in CIMYM as partial consideration
      for the 1995 CIMYM License. In addition to that 20% equity interest in CIMYM,
      CIMAB is entitled to receive 10% of net revenues received by CIMYM. In addition,
      YM and CIMYM, pursuant to the terms of the 1995 CIMYM License, paid US$2,750,000
      for certain product development costs for TheraCIM and US$330,000 for certain
      product development costs for RadioTheraCIM.




The
      terms
      of the 1995 CIMYM License provide for CIMYM to conduct or cause to be conducted
      pre-clinical and clinical trials to evaluate the licensed products and to work
      with CIMAB to select sites, develop protocols and instruct investigators for
      pre-clinical and clinical trials. CIMYM is to decide after the end of each
      stage
      of trials whether to proceed with further development or to terminate the 1995
      CIMYM License with respect to that product. In addition, the 1995 CIMYM License
      provides that, where commercially reasonable, CIMYM shall file applications
      for
      regulatory approval to market the licensed products in the applicable territory.
      Pursuant to the 1995 CIMYM License, CIMAB has the right, subject to certain
      terms and conditions, to supply the related drug substances (i.e., TheraCIM
      and
      RadioTheraCIM) for commercial sale. CIMAB shall sell the product manufactured
      by
      it in Cuba to CIMYM at 85% of the sales price that CIMYM sets for the sale
      of
      the product to sub-licensees, thereby entitling CIMYM to the 15% difference.
      CIMYM shall use its best efforts to obtain a sub-license agreement in which
      CIMAB retains the right to manufacture the product. YM will be responsible
      for
      any failure of CIMYM to fulfill its obligations under the 1995 CIMYM License.
      This license agreement shall be in force as long as any patents thereunder
      are
      valid, or until such time as the license agreement is terminated by either
      party
      because of a default by the other party, or by CIMYM with written notice within
      90 days after the end of a stage of pre-clinical trials or after each stage
      of
      clinical trials.




In
      connection with the 1995 CIMYM License, CIMYM entered into an international
      sales, marketing, manufacturing and administrative agreement with CIMYM
      (Barbados) pursuant to which CIMYM (Barbados) acquired the rights to market
      TheraCIM outside Canada (see "Arrangements with Subsidiaries"). CIMAB owns
      a
      corresponding 20% interest in CIMYM (Barbados).




-40-




(ii)
      The
      2001 CIMYM License




In
      2001,
      CIMYM (Barbados) acquired an exclusive, sub-licensable license (the "2001 CIMYM
      License") from CIMAB to two active immunotherapy products described as HER-1
      Vaccine and TGFα
      Vaccine. CIMAB has the right to consent to any sub-licensee, such consent not
      to
      be unreasonably withheld. The 2001 CIMYM License is in respect of Europe,
      Canada, the United States, Japan, Australia, New Zealand, Taiwan, Singapore,
      Thailand, Hong Kong ,
      South
      Korea, Malaysia, Indonesia and the Philippines. Under the 2001 CIMYM License,
      CIMYM (Barbados) has a right of first refusal with respect to licensing all
      other products derived from the EGF active immunotherapy program of CIM.




The
      terms
      of the 2001 CIMYM License provide for CIMYM (Barbados) to conduct or cause
      to be
      conducted pre-clinical and clinical trials to evaluate the licensed products,
      and to work with CIMAB to select sites, develop protocols and instruct
      investigators for pre-clinical and clinical trials. CIMYM (Barbados) is to
      decide after the end of each stage of trials whether to proceed with further
      development or to terminate the 2001 CIMYM License with respect to that product.
      In addition, the 2001 CIMYM License provides that, where commercially
      reasonable, CIMYM (Barbados) shall file applications for regulatory approval
      to
      market the licensed products in the applicable territory. Pursuant to the 2001
      CIMYM License, subject to certain terms and conditions, CIMAB has the right
      to
      supply the
      related drug substance (i.e., TGFα and HER-1) for commercial sale, unless
      sub-licensees require manufacturing rights. CIMAB shall sell the product
      manufactured by it in Cuba to CIMYM (Barbados) at either 90%, if there are
      no
      positive net revenues, or 100%
      of
      the best available price for the manufacture, supply and delivery of such
      product in Havana, Cuba.




If
      the
      Corporation elects to proceed with the license, the Corporation would be
      expected to make milestone and research and development payments, the amount
      of
      such payments to be negotiated between the Corporation and CIMAB. On signing
      of
      the 2001 CIMYM License, CIMYM (Barbados) paid CIMAB US$125,000 for product
      develop costs.




The
      terms
      of the 2001 CIMYM License have been suspended pursuant to a License,
      Development, Manufacturing and Supply agreement entered into by the Corporation
      and its subsidiary, CIMYM (Barbados), Tarcanta and CIMAB on July 13, 2004.
      By
      the terms of this agreement with Tarcanta, the 2001 CIMYM License has been
      suspended until such time, if at all, there is a default under the agreement
      with Tarcanta. See "Business - Licensing Arrangements - Out-Licensing".




As
      at
      September 30, 2004 YM has advanced US$24 million to CIMYM and CIMYM (Barbados),
      collectively, for the licensing and development of the products licensed by
      CIMYM. Under the terms of the 1995 and 2001 CIMYM Licenses, YM was given the
      right to recover all funds advanced to CIMYM and CIMYM (Barbados), collectively,
      from either CIMYM and CIMYM (Barbados). To the extent that the net revenues
      of
      CIMYM are less than or equal to the advanced amounts, YM is only permitted
      to
      recover such advances from 30% of the net revenues. At this time none of the
      advances have been repaid. There have been no revenues to date.




In
      connection with each of the 1995 CIMYM License and the 2001 CIMYM License,
      it is
      expected that, notwithstanding that CIMAB owns 20% of the voting securities
      of
      each of CIMYM and CIMYM (Barbados), it could, based on the terms of the relevant
      license, receive approximately 40% of the overall economic return from
      commercialization of the related drug products. This could occur, for example,
      if CIMAB manufactures the licensed product.




**AEROLEF** **TM**




The
      DELEX
      technology that constitutes the platform known as Rose-DS, or where
      AeroLEF TM is
      based, is owned not licensed.




**OUT-LICENSING**




The
      Corporation generally plans to out-license our licensed drugs to pharmaceutical
      companies for manufacturing and marketing under license, although we may retain
      co-development or marketing rights if management considers it appropriate to
      do
      so. Under the Corporation's business model, licensees would be expected, to
      the
      extent necessary, to participate in the remaining clinical development required
      to obtain final regulatory approval for the product. The Corporation expects
      that out-licensing would result in a pharmaceutical company or other licensee
      marketing or manufacturing the product in return for licensing fees and
      royalties on the sale of the product. Management believes this model is
      consistent with current biotechnology and pharmaceutical industry licensing
      practices.




-41-




The
      Corporation's objectives in seeking to out-license products include:




o
      obtaining long term revenue streams from royalty payments on the sale of the
      products;




o
      providing access to the resources and experience of large pharmaceutical
      companies;




o
      obtaining up-front payments for product sub-licensing rights; and




o
      minimizing development expenditures through cost sharing programmes (especially
      late-stage clinical trials and regulatory approval applications).




The
      Corporation believes that out-licensing arrangements could be attractive to
      pharmaceutical corporations because they would provide the prospective partner
      with access to new products without the initial research risk or earlier
      clinical development costs. Since partners are expected to be sought only at
      the
      later stages of a product's development, the Corporation anticipates that
      prospective licensees would view the Corporation's products as having a reduced
      risk of failure to achieve regulatory approval.




YM
      does
      not intend to develop our own manufacturing, marketing or distribution
      programmes although we may wish to participate in ownership of manufacturing
      facilities if appropriate opportunities become available. The Corporation
      intends to remain principally focused on the identification, further development
      and commercialization of in-licensed products.




**THERACIM:**




On
      November 12, 2003, the Corporation's subsidiary, CIMYM, licensed the rights
      for
      TheraCIM (known as “Theraloc” in Europe) in most of Europe to Oncoscience of
      Germany. Under the terms of the agreement, CIMYM is entitled to receive up
      to
      US$30 million as a share of any amounts received by Oncoscience in relation
      to
      development or sublicensing of the product and as a royalty on initial net
      sales. After CIMYM has received US$30 million, CIMYM continues to receives
      royalties on net sales but at a lesser percentage. Oncoscience has agreed to
      use
      diligent and reasonable efforts to develop and commercially exploit TheraCIM
      in
      the licensed territory. No amounts or royalties have been received as of the
      date hereof by CIMYM from Oncoscience, since no sublicensing fees or net sales
      amounts have been received by Oncoscience. This license agreement may be
      terminated by either party in the event of specified breaches and insolvency
      events, if a Phase II trial of TheraCIM has not commenced in Europe within
      two
      years of licensing, or if certain regulatory approvals for marketing TheraCIM
      in
      Europe have not been obtained within five years. In addition, Oncoscience may
      terminate the agreement at any time on 90 days notice.




**TGFΑ
      CANCER VACCINE AND HER-1 BASED CANCER VACCINE:**




On
      July
      13, 2004, the Corporation and its subsidiary, CIMYM (Barbados), have entered
      into a License, Development, Manufacturing and Supply Agreement with Tarcanta,
      two wholly-owned subsidiaries of Cancer Vax,
      and
      CIMAB relating to Tarcanta licensing TGFα and HER-1 from CIMAB. CancerVax has
      announced that it has received a license from OFAC authorizing Tarcanta to
      enter
      into the transactions with CIMAB and the Corporation. By the terms of this
      agreement wi th
      Tarcanta, the 2001 CIMYM License has been suspended until such time, if at
      all,
      there is a default under the agreement with Tarcanta. Under the terms of the
      new
      agreement and in consideration for the suspension of the 2001 CIMYM License,
      the
      Corporation is entitled to receive an aggregate payment of $1,000,000 which
      is
      payable in four equal installments, the final payment due December 31, 2005.
      In
      addition, under the new agreement the Corporation may receive 35% of an
      aggregate of $16,350,000 in milestone payments to be paid by Tarcanta upon
      the
      successful completion of certain research and development activities. The
      Corporation has no continuing involvement in these research and development
      activities and has no future obligations under the development plan established
      by the out-licensing arrangement between CIMAB and Tarcanta. Finally, the
      Corporation retains an interest in the revenues from the manufacture and
      marketing of the drugs or from their sub-licensing. Tarcanta has agreed to
      undertake further clinical development of the licensed drugs, and acquired
      an
      exclusive license to market and sell the products in North America, Europe
      and
      certain other jurisdictions. This agreement is terminable by a party in certain
      circumstances including in the event of specified breaches and insolvency
      events. CIMAB has the right to terminate if reasonable efforts are not made
      to
      file submissions for clinical trials for the licensed products, or if the first
      regulatory approval for marketing the licensed products is not received within
      12 years. In addition, Tarcanta may terminate the agreement at any time on
      180
      days notice. In the event of early termination, the 2001 CIMYM License would
      be
      reinstated.




-42-




**TESMILIFENE**




In
      January 2005, the Corporation licensed the rights to tesmilifene to Shin Poong
      Pharmaceutical Company of Seoul, Korea (“Shin Poong”). They formed a joint
      development team to oversee the expansion of the development program for
      tesmilifene into gastric cancer. Shin Poong will fully fund development costs
      and will provide up-front, milestone and royalty payments. In addition, Shin
      Poong expects to launch a bridging study in the local population in order to
      allow the breast cancer indication currently under study by the Corporation
      to
      be launched in South Korea.




**THERACIM-HR3**




In
      May
      2005, the Corporation licensed the rights to TheraCIM-hR3 to Kuhnil. They formed
      a joint development team to oversee the expansion of the development program
      for
      TheraCIM-hR3 (nimotuzumab), its monoclonal antibody against the EGF receptor,
      for a specific population of patients with non-small cell lung cancer. Kuhnil
      will fully fund development costs and will provide up-front, milestone and
      royalty payments.




**REGULATORY
      APPROVAL**




Securing
      final regulatory approval for the manufacture and sale of human therapeutic
      products in Canada and the Corporation's other territories, including the United
      States, is a long and costly process that is controlled by that particular
      territory's national regulatory agency. The national regulatory agency in Canada
      is Health Canada, and in the United States it is the FDA. Other national
      regulatory agencies have similar regulatory approval processes, but each
      national regulatory agency has its own approval processes. Approval in either
      Canada or the United States does not assure approval by other national
      regulatory agencies, although often test results from one country may be used
      in
      applications for regulatory approval in another country.




Prior
      to
      obtaining final regulatory approval to market a drug product, every national
      regulatory agency has a variety of statutes and regulations which govern the
      principal development activities. These laws require controlled research and
      testing of products, government review and approval of a submission containing
      pre-clinical and clinical data establishing the safety and efficacy of the
      product for each use sought, approval of manufacturing facilities including
      adherence to GMP during production and storage, and control of marketing
      activities, including advertising and labeling.




None
      of
      the Corporation's products has been completely developed or tested and,
      therefore, we are not yet in a position to seek final regulatory approval to
      market any of our in-licensed products. To date we have obtained various
      regulatory approvals to develop and test our in-licensed products. Currently
      the
      Corporation is conducting an international Phase III trial of tesmilifene in
      metastatic and recurrent breast cancer in 700 patients. The Corporation has
      received regulatory approvals for the tesmilifene study in several countries,
      including Canada and the United States, and approval is pending in a few other
      countries. In addition, TheraCIM has been designated an orphan drug in Europe
      and by the FDA in the United States. See "Products in Clinical Development".




-43-




**CANADIAN
      APPROVAL PROCESS**




The
      manufacture, distribution and consumption of medical products, drugs and
      equipment is regulated by a variety of industry-specific statutes and
      regulations in Canada and the countries to which YM has rights for the licensed
      products. Drugs sold in Canada are regulated by the Food and Drugs Act (Canada)
      and the regulations made under that Act.




Even
      though a drug, medical product or device may be approved for use in another
      jurisdiction, it may not be sold in Canada until approved by Health Canada.
      Outside Canada, the regulatory approval process for the manufacture and sale
      of
      pharmaceuticals varies from country to country and the time required may be
      longer or shorter than that required by Health Canada.




The
      Food
      and Drug Regulations require licensing of manufacturing facilities, carefully
      controlled research and testing of products, governmental review and approval
      of
      test results prior to marketing of therapeutic products, and adherence to GMP,
      as defined by each licensing jurisdiction, during production.




The
      principal activities which must be completed prior to obtaining approval for
      marketing of a therapeutic drug product are essentially the same in Canada
      as in
      most major markets of the world and are as follows:




o
      Pre-clinical Animal Studies. Pre-clinical studies are conducted in animals
      to
      test pharmacology and toxicology and to do formulation work based on in vivo
      results.




o
      Phase I
      Clinical Trials. Phase I clinical trials consist of testing a product in a
      small
      number of humans for its safety (toxicity), dose tolerance and pharmacokinetic
      properties.




o
      Phase
      II Clinical Trials. Phase II clinical trials usually involve a larger patient
      population than is required for Phase I trials and are conducted to evaluate
      the
      efficacy of a product in patients having the disease or medical condition for
      which the product is indicated. These trials also serve to further identify
      side
      effects and risks in a larger group of patients.




o
      Phase
      III Clinical Trials. Phase III clinical trials involve conducting tests in
      an
      expanded patient population at geographically dispersed test sites (multi-center
      trials) in a controlled and/or uncontrolled environment to gather information
      about clinical safety and efficacy. These trials also generate information
      from
      which the overall benefit-risk relationship of the drug can be determined and
      provide a basis for drug labeling.




Two
      key
      factors influencing the progression of clinical trials are the rate at which
      patients can be recruited into clinical trials and whether effective treatments
      are currently available for the disease the drug is intended to treat. Patient
      recruitment is largely dependent upon the incidence and severity of the disease
      and the alternative treatments available, as well as alternate research studies.




A
      Clinical Trial Application must be filed and accepted by either the Therapeutic
      Products Directorate ("TPD") or the Biologics and Genetic Therapies Directorate
      ("BGTD") of Health Canada before each phase of human clinical trials may begin.
      The CTA application must contain specified information including the results
      of
      the pre-clinical or clinical tests completed at the time of the CTA application.
      In addition, since the method of manufacture may affect the efficacy and safety
      of a drug, information on chemistry and manufacturing methods must be presented.
      Health Canada conducts inspections to determine compliance with GMP. Good
      manufacturing practices and quality control procedures must be in place.




Upon
      completion of all clinical studies, the results are submitted to the TPD or
      BGTD
      as part of a New Drug Submission ("NDS"). A notice of compliance ("NOC") which
      permits marketing of the product typically takes between 12 and 24 months from
      the date a NDS is submitted.




Even
      after marketing approval has been obtained, further studies may be required
      to
      provide additional data on safety and efficacy in order to gain approval for
      the
      use of a drug as a treatment for clinical indications other than those for
      which
      the product was initially tested. Also, Health Canada conducts post-market
      surveillance programmes to monitor a product's side effects. Results of
      post-marketing programmes may limit or expand the further marketing of products.
      A serious safety or efficacy problem involving an approved drug or medical
      device may result in Health Canada action requiring withdrawal of the product
      from the market.




-44-




**UNITED
      STATES APPROVAL PROCESS**




In
      the
      United States, the FDA, a federal government agency, is responsible for the
      drug
      approval process. The FDA's mission is to ensure that all medications on the
      market are safe and are effective. The FDA's approval process examines potential
      drugs; only those that meet strict requirements are approved.




The
      drug
      approval process begins with the discovery of a potential drug. Pharmaceutical
      companies then test the drug extensively. A description of the different stages
      in the drug approval process in the US follows.




Stage
      1:
      Preclinical Research




After
      an
      experimental drug is discovered, research is conducted to help determine its
      potential for treating or curing an illness. This is called preclinical
      research. Animal studies are conducted to determine if there are any harmful
      effects of the drug and to help understand how the drug works. Information
      from
      these experiments is submitted to the FDA in an Investigational New Drug
      Application. The FDA reviews information in an IND Application and decides
      if
      the drug is safe to study in humans.




Stage
      2:
      Clinical Research




In
      Stage
      2, the experimental drug is studied in humans. The studies are known as clinical
      trials. Clinical trials are carefully designed and controlled experiments in
      which the experimental drug is administered to patients to test its safety
      and
      to determine the effectiveness of an experimental drug. The four general phases
      of clinical research are described below.




Phase
      I
      clinical studies are generally conducted with healthy volunteers who are not
      taking other medicines; patients with the illness that the drug will treat
      are
      not tested at this stage. Ultimately, Phase I studies demonstrate how an
      experimental drug affects the body of a healthy individual. Phase I consists
      of
      a series of small studies consisting of "tens" of volunteers. Tests are done
      on
      each volunteer throughout the study to see how the person's body processes,
      responds to, and is affected by the drug. Low doses and high doses of the drug
      are usually studied, resulting in the determination of the safe dosage range
      in
      volunteers by the end of Phase I. This information will determine whether the
      drug proceeds to Phase II.




Phase
      II
      clinical studies are conducted in order to determine how an experimental drug
      affects people who have the disease to be treated. Phase II usually consists
      of
      a limited number of studies that help determine the drug's short-term safety,
      side effects, and general effectiveness. The studies in Phase II are often
      controlled investigations, involving comparison between the experimental drug
      and a placebo, or between the experimental drug and an existing drug.
      Information gathered in Phase II studies will determine whether the drug
      proceeds to Phase III.




Phase
      III
      studies consists of numerous clinical trials that are used to more fully
      investigate the nature of the drug. These trials differ from Phase II trials
      because a larger number of patients are studied (sometimes in the thousands)
      and
      because the studies are usually of longer duration. As well, Phase III studies
      can include patients who have more than one illness and are taking medications
      in addition to the experimental drug used in the study. Therefore, the patients
      in Phase III studies more closely reflect the general population. The
      information from Phase III forms the basis for most of the drug's initial
      labeling, which will guide physicians on how to use the drug.




Phase
      IV
      studies are conducted after a drug is approved. Companies often conduct Phase
      IV
      studies to more fully understand how their drug compares to other drugs. Also,
      the FDA may require additional studies after the drug is approved. FDA-required
      Phase IV studies often investigate the drug in specific types of patients that
      may not have been included in the Phase III studies. FDA-required Phase IV
      studies can also involve very large numbers of patients to further assess the
      drug's safety.




-45-




Stage
      3:
      FDA Review and Approval




Following
      Phase III, the pharmaceutical company prepares reports of all studies conducted
      on the drug and submits the reports to the FDA in a New Drug Application
      ("NDA"). The FDA reviews the information in the NDA to determine if the drug
      is
      safe and effective for its intended use. Occasionally, the FDA will ask experts
      for their opinion of the drug; this occurs at advisory committee meetings.
      If
      the FDA determines that the drug is safe and effective, the drug will be
      approved.




Stage
      4:
      Marketing




After
      the
      FDA has approved the experimental drug, the pharmaceutical company can make
      it
      available to physicians and their patients. A company may also continue to
      conduct research to discover new uses for the drug. Each time a new use for
      a
      drug is discovered, the drug is once again subject to the entire FDA approval
      process before it an be marketed for that purpose.




**ARRANGEMENTS
      WITH SUBSIDIARIES**




YM
      and
      CIMAB entered into that certain Funding Agreement with CIMYM in November 1995
      in
      connection with the 1995 CIMYM License. The Funding Agreement provides that
      YM
      will arrange for the appropriate studies and clinical trials for the licensed
      products held by CIMYM and will fund the cost of such studies and trials
      provided that doing so would not be commercially or scientifically unreasonable.
      Accordingly, YM makes the final determination as to whether or not a clinical
      trial expense is justified with respect to any given product. YM is entitled
      to
      be reimbursed for all funds we provide pursuant to the Funding Agreement out
      of
      revenue generated from the exploitation of the relevant license, subject to
      the
      successful development of the licensed products and adequate generation of
      revenue.




YM
      and
      CIMAB, contemporaneously with the assignment of the 1995 CIMYM License, entered
      into a joint-venture shareholders agreement (the "Shareholders Agreement")
      with
      CIMYM relating to its operation. Pursuant to the Shareholders Agreement, CIMYM
      is required to include nominees of CIMAB both as board members and as members
      of
      operating management. The Shareholder Agreement provides that: (i) issued and
      outstanding shares of CIMYM may not be sold or transferred without the consent
      of both YM and CIMAB; (ii) the issue of additional shares of CIMYM shall first
      be offered to each of YM and CIMAB in proportion to their holdings, and
      thereafter, with the consent of both YM and CIMAB, to any other person; and
      (iii) the boards of directors of CIMYM will consist of five directors, three
      of
      whom are nominees of YM and two of whom are nominees of CIMAB. All material
      and
      out-of-the-ordinary-course-of-business contracts of CIMYM, including those
      relating to the borrowing of money, issuing guarantees, entering into non
      arm's-length agreements, paying dividends and pledging of property, must be
      approved by four-fifths of the Board of directors.




CIMYM
      (Barbados) was incorporated in Barbados in May 1996 to market the licensed
      products under the 1995 CIMYM License outside of Canada. YM and CIMAB have
      entered into a joint-venture shareholder agreement (the "Barbados Shareholders
      Agreement") with CIMYM (Barbados) relating to its operation. The terms of the
      Barbados Shareholders Agreement are consistent with the Shareholders Agreements,
      except that the boards of directors of CIMYM (Barbados) consists of a majority
      of directors nominated by YM. Material and
      out-of-the-ordinary-course-of-business contracts and approval for the strategic
      marketing plan and annual budget must be approved by a vote of the majority
      of
      directors, including the affirmative vote of at least one nominee of YM and
      one
      nominee of CIMAB. YM provides funding to CIMYM (Barbados) under similar terms
      and conditions as funding to CIMYM. All earnings of CIMYM (Barbados) are to
      be
      paid annually to the shareholders as dividends unless a change in such policy
      is
      approved by a majority of the directors, including one nominee of each of YM
      and
      CIMAB.




Pursuant
      to international sales, marketing, manufacturing and administrative agreements
      dated as of July 4, 1996, CIMYM sub-licensed certain of its respective rights
      to
      the licensed product under the 1995 CIMYM License to CIMYM (Barbados) in
      exchange for certain royalty payments.




Under
      the
      current arrangements, CIMYM (Barbados) will arrange for the out-licensing of
      the
      licensed products in all relevant territories except Canada. CIMYM remains
      responsible for all elements of commercializing the licensed products within
      Canada, and for the cost of commercializing the licensed products outside of
      Canada up to the point of out-licensing.




-46-




**PROPERTY,
      PLANTS AND EQUIPMENT**




**FACILITIES**




The
      Corporation currently occupies 5,800 square feet of space in Mississauga,
      Ontario pursuant to a sub-lease agreement dated July 31, 1997 (the "Sub-Lease")
      and a lease amending and extension agreement dated February 1, 2003 (the "Lease
      Amending Agreement"), such Lease Amending Agreement extended the initial terms
      of the Sub-Lease for a term of five years commencing on February 1, 2003 and
      expiring on January 31, 2008. The average annual costs, including operating
      expenses, are approximately $120,000.




DELEX
      occupies 7,200 square feet of space at 6535 Millcreek Drive in Mississauga
      Ontario pursuant to a lease amending and extension agreement dated March 1,
      2005
      and expiring on the last day of February 2006. Annual rent is $45,000 under
      this
      lease.




There
      are
      no environmental issues associated with the facilities and the Corporation
      currently has no plans to construct, expand or improve the facilities.




**EQUIPMENT
      AND OTHER PROPERTY**




As
      at
      June 30, 2005, the Corporation owned tangible fixed assets with a book value
      of
      approximately $227,000, consisting primarily of office and lab equipment.




**EMPLOYEES**




As
      of
      June 30, 2005, the Corporation employed 14 permanent employees. Each of the
      employees are located at the Corporation's head office. Other than
      administrative staff, the employees conduct the Corporation's licensing and
      product development activities. As a result of the acquisition of DELEX, there
      are 13 additional employees.




**DIVIDENDS**




The
      Corporation has not paid any dividends since its incorporation. The Corporation
      will consider paying dividends in future as its operational circumstances may
      permit having regard to, among other things, the Corporation’s earnings, cash
      flow and financial requirements. It is the current policy of the board of
      directors to retain all earnings to finance the Corporation’s business plan.




**CAPITAL
      STRUCTURE**




The
      authorized share capital of the Corporation consists of 500,000,000 common
      shares without nominal or par value, 500,000,000 Class A non-voting common
      shares without nominal or par value, 500,000,000 Class A preferred shares
      without nominal or par value and 500,000,000 Class B preferred shares, issuable
      in series, without nominal or par value. As at June 30, 2005, there were
      41,362,066 common shares, no Class A non-voting common shares and no preferred
      shares outstanding.




**COMMON
      SHARES** ****




All
      of
      the common shares rank equally as to voting rights, participation in a
      distribution of the assets of the Corporation on a liquidation, dissolution
      or
      winding-up of the Corporation and the entitlement to dividends. The holders
      of
      the common shares are entitled to receive notice of all meetings of shareholders
      and to attend and vote the common shares at the meetings. Each common share
      carries with it the right to one vote.




In
      the
      event of the liquidation, dissolution or winding-up of the Corporation, the
      holders of the common shares will be entitled, subject to the rights,
      privileges, restrictions and conditions attaching to any other class of shares
      of the Corporation, to receive, on a pro rata basis, share for share, with
      the
      Class A non-voting common shares, all of the remaining property of the
      Corporation. There are no pre-emptive or conversion rights and no provisions
      for
      redemption, retraction, purchase for cancellation or surrender or sinking or
      purchase funds.




-47-




**MARKET
      FOR SECURITIES**




The
      Corporation has been listed on the Toronto Stock Exchange (“TSX”) and the
      Alternative Investment Market (“AIM”) operated by the London Stock Exchange
      since June 11, 2002. Initially, the Corporation listed our Class B Preferred
      Shares, Series 1. On June 12, 2003, the Class B Preferred Shares, Series 1,
      were
      automatically converted on a one-for-one basis into the common shares, which
      became listed on the TSX and the AIM on that date.




The
      Corporation's common shares have traded on the TSX since June 12, 2003 under
      the
      symbol “YM”, were admitted to trading on the AIM on June 12, 2003 under the
      symbol “YMBA” and have been traded on the American Stock and Options Exchange
      (“AMEX”) since October 1, 2004 under the symbol “YMI”.




**DIRECTORS
      AND OFFICERS**




Name
            Position
            Period
                ServedDavid
                G.P. Allan
              Toronto,
                Canada
            Chairman,
                Chief Executive Officer and Director
            Since
                1994Thomas
                I.A. Allen(1)(2)(3)
              Toronto,
                Canada
            Director
            Since
                1996Mark
                Entwistle(3)
              Ottawa,
                Canada
            Director
            Since
                1997John
                Friedman(3)
              New
                York, USA
            Director
            Since
                2004Henry
                Friesen(1)
              Winnipeg,
                Manitoba
            Director
            Since
                2001Paul
                M. Keane
              Mississauga,
                Ontario
            Officer
            Since
                1996Vincent
                Salvatori
              Victoria,
                British Columbia
            Officer
            Since
                2002Len
                Vernon
              Nobleton,
                Ontario
            Officer
            Since
                1997Julius
                Vida(2)
              Greenwich,
                USA
            Director
            Since
                2001Gilbert
                Wenzel
              Zurich,
                Switzerland
            Director
            Since
                2001Tryon
                M. Williams(1)(2)
              London,
                England
            Director
            Since
                1995




(1)
            Member
                of Audit Committee.


(2)
            Member
                of Corporate Governance and Nominating
                Committee.


(3)
            Member
                of Compensation Committee.





-48-




**SHARE
      OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS**




The
      following table sets out details of our shares and options that are directly
      or
      indirectly held by directors and executive officers as at June 30, 2005, based
      on 41,362,066 common shares issued and outstanding on such date.




Name
            Number
                of
              CommonShares
            Percentage
                of
              Common
                Shares
              Outstanding
            Common
                Shares
              Held
                Under
              Option
            Exercise
                Price
            Expiration
                DateDavid
                G.P. Allan
            669,659
            1.6%
            703,250
            $1.75
                - $4.50
            2007
                - 2015Thomas
                I.A. Allen
            —
            —
            113,160
            $1.75 -
                $4.50
            2007
                - 2015Mark
                Entwistle
            —
            —
            88,160
            $1.75
                - $4.50
            2007
                - 2015John
                Friedman
            —
            —
            57,500
            $2.10
                - $3.15
            2014
                - 2015Henry
                Friesen
            —
            —
            88,160
            $1.75
                - $4.50
            2011
                - 2015Paul
                M. Keane
            —
            —
            224,000
            $1.75
                - $4.50
            2007
                - 2015Diana
                Pliura
            —
            —
            265,000
            $3.15
            2015Vincent
                Salvatori
            —
            —
            85,000
            $1.75
                - $3.15
            2008
                - 2015Len
                Vernon
            —
            —
            190,000
            $1.75
                - $4.50
            2008
                - 2015Julius
                Vida
            —
            —
            83,160
            $1.75
                - $4.50
            2011
                - 2015Gilbert
                Wenzel
            —
            —
            83,160
            $1.75
                - $4.50
            2011
                - 2015Tryon
                M. Williams
            20,100
            *
            128,098
            $1.75
                - $4.50
            2007
                - 2015


*
            Less
                than one percent




As
      of the
      date of hereof, the
      directors and senior officers of YM BioSciences as a group beneficially owned
      or
      controlled, directly or indirectly, 689,759 common
      shares of the Corporation, representing approximately 1.7% of the issued and
      outstanding voting shares of the Corporation.




**DAVID
      G.P. ALLAN - CHAIRMAN, CHIEF EXECUTIVE OFFICER AND DIRECTOR**




Mr.
      Allan
      has been Chief Executive Officer of the Corporation since April 1998 and
      Chairman of the Board of directors of the Corporation since August 1994. In
      1992
      Mr. Allan created the Knowledge-Based Industries Group for a Canadian investment
      bank where he was Executive Director until 1998. Mr. Allan is a former governor
      of The Toronto Stock Exchange, a former member of the Canadian Healthcare
      Licensing Association and of the Awards Selection Committee for the Networks
      of
      Centres of Excellence in Canada.




**THOMAS
      I.A. ALLEN, Q.C., F.C.I.ARB - DIRECTOR**




Mr.
      Allen
      was called to the Bar in Ontario and began practicing law in 1965 concentrating
      on securities law and corporate law. He was a member of senior management of
      Gordon Capital Corporation, and its merchant bank, Gordon Investment
      Corporation, from mid 1989 until early 1994. Mr. Allen was counsel to Davies,
      Ward & Beck from 1994 until 1996 when he joined the Toronto office of the
      law firm Ogilvy Renault. Mr. Allen is Chairman of the Accounting Standards
      Oversight Council of Canada, a member of the Advisory Board of the Office of
      the
      Superintendent of Financial Institutions of Canada and a director of Bema Gold
      Corporation, Mundoro Mining Inc., GEAC Computer Corporation, Unisphere Waste
      Conversion Inc., and Middlefield Bancorp Limited. Mr Allen has been a director
      of the Corporation since December 1996.




-49-




**MARK
      ENTWISTLE, M.A. - DIRECTOR**




Prior
      to
      founding his own consulting practice in 1997 in international trade, political
      business intelligence and strategic communications, Mr. Entwistle was an
      Ambassador for Canada in the Caribbean from 1993 to 1997. Mr. Entwistle was
      previously a career diplomat with the Canadian Department of Foreign Affairs
      and
      International Trade in a variety of embassy positions from 1982 to 1997, and
      served as Press Secretary and Director of Communications to the Prime Minister
      of Canada from 1991-1993. He is a Fellow of the Canadian Defence and Foreign
      Affairs Institute. Mr. Entwistle has been a director of the Corporation since
      October 1997.




**JOHN
      FRIEDMAN - DIRECTOR**




Mr.
      Friedman launched the Easton Capital Group (“Easton”) in 1993, with Easton
      Capital Corporation. In 1999, Easton Hunt Capital Partners was added to the
      Group. Prior to Easton, Mr. Friedman was a founder of Atrium Capital
      Corporation, which he helped manage from 1991-1993, and also the founder and
      Managing General Partner of Security Pacific Capital Investors from 1989 through
      1991. Security Pacific Capital Investors was a $200-million private equity
      fund
      geared towards expansion financings and recapitalizations. Prior to joining
      Security Pacific, Mr. Friedman was a Managing Director and Partner at E.M.
      Warburg, Pincus & Co., Inc., where he spent eight and a half years from
      1981-1989. Prior thereto, he worked at Shearson Loeb Rhoades and was an attorney
      with Sullivan and Cromwell from 1978 through 1980. He holds a JD degree from
      Yale Law School and a BA degree from Yale College. Mr. Friedman currently serves
      on the Boards of Conor Medsystems, Renovis, Acorda Therapeutics, Comverse
      Technology, Trellis Bioscience, YM BioSciences Inc., Assistive Technology,
      and
      ModelWire, Inc., and is on the President's Council at the Cold Spring Harbor
      Laboratory. Mr. Friedman has been a director of the Corporation since April
      2004.




**HENRY
      FRIESEN, O.C., M.D., F.R.S.C. - DIRECTOR**




Dr.
      Friesen was most recently Chair, Genome Canada from 2000 until July 2005, a
      $600
      million budget non-profit organization that supports national genomics to
      benefit Canadian science and industry. From 1991 to 2000 Dr. Friesen was
      President of the Medical Research Council of Canada and was instrumental in
      transforming it into the Canadian Institute of Health Research, an organization
      with an annual budget of over $650 million per year dedicated to supporting
      Canadian researchers as well as industry participants. Dr. Friesen is noted
      for
      his discoveries about the human hormone prolactin and as Head of the Department
      of Physiology and Professor of Medicine at the University of Manitoba. Dr.
      Friesen is a Fellow of the Royal Society of Canada, a Companion of the Order
      of
      Canada and also sits on the Board of directors of Sanofi Pasteur Canada and
      Spectral Diagnostics Inc. Dr. Friesen has been a director of the Corporation
      since November 2001.




**PAUL
      M. KEANE, M.D., F.R.C.P.C., F.A.C.P., F.R.C. PATH - DIRECTOR, MEDICAL AFFAIRS**




Dr.
      Keane
      has been an officer of the Corporation since January 1996. Dr. Keane was
      Director of Clinical Research at Miles Canada Inc. (now Bayer Canada) from
      1989
      to 1995, prior to which he was Professor of Medicine at University of Calgary
      and Professor of Pathology at McMaster University. Dr. Keane has authored
      numerous scientific publications in peer review journals, has acted as a
      reviewer of research proposals for the Medical Research Council of Canada and
      has acted in an editorial capacity for a number of scientific journals.




**VINCENT
      SALVATORI, PH.D. - EXECUTIVE VICE PRESIDENT**




Dr.
      Salvatori has been an officer of the Corporation since December 2002. Dr.
      Salvatori is an experienced drug development executive with an accomplished
      background in the pharmaceutical and biotechnology industry. He has more than
      20
      years of experience in all aspects of drug development, corporate operations
      and
      external collaborations. Dr. Salvatori most recently held the position of Senior
      Vice President of Clinical Operations for Bioniche Life Sciences Inc. from
      May
      1998 to July 2002. He was previously at StressGen Biotechnologies Corporation
      from January 1995 to April 1998 where he held the positions of Chief Operating
      Officer and Vice President of Research and Development, subsequently appointed
      to Senior Vice President. In this capacity, Dr. Salvatori was responsible for
      corporate operations, strategic management and clinical/regulatory development.
      Prior to joining StressGen, Dr. Salvatori was the Senior Director of Program
      Management at QLT PhotoTherapeutics Inc. from June 1990 to December 1994 and
      held various positions at Boehringer Ingelheim (Canada) Ltd. from April 1982
      to
      June 1990.




-50-




**LEN
      VERNON, B.SC., C.A. - DIRECTOR, FINANCE AND ADMINISTRATION**




Mr.
      Vernon earned a B.Sc. in 1968 and was awarded his C.A. in 1972 with Clarkson
      Gordon & Co. (now Ernst & Young llp ).
      He has
      held senior financial positions with a number of organizations both public
      and
      private. Prior to joining YM as an officer in July 1997, Mr. Vernon was an
      independent consultant working with senior management in a variety of
      industries. Prior to 1992 he was Vice-president, Finance and Administration
      of
      Unitel Inc. (now Allstream Inc.) a major Canadian telecommunications company.




**JULIUS
      VIDA, PH.D., M.B.A. - DIRECTOR**




Dr.
      Vida
      has been the President of Vida International Pharmaceutical Consultants, a
      consulting firm advising pharmaceutical and biotechnology companies, since
      1993.
      Previously Dr. Vida was Director of Licensing and subsequently Vice President,
      Business Development, Licensing and Strategic Planning at Bristol-Myers Squibb,
      from 1975 to 1993. Dr. Vida is a director of a number of biotechnology firms
      including Medarex, Inc., Orphan Medical, Inc., ALS, Inc., FibroGen, Inc.,
      OsteoScreen, Inc., Spectrum Pharmaceuticals Inc., Albachem, LTD. (UK) and SWITCH
      Biotech AG, Inc. Dr. Vida has been a director of the Corporation since September
      2001.




**GILBERT
      WENZEL, PH.D. - DIRECTOR**




Dr.
      Wenzel is currently President and Chief Executive Officer of Quisisana AG,
      a
      business development firm focused on pharmaceuticals. Prior to founding
      Quisisana in January 2003, Dr. Wenzel joined Novartis Group, a global
      pharmaceutical manufacturer, in November 2000 where he served as Head of
      Strategic Planning and a Member of its Executive Committee until January 2003.
      Prior to joining Novartis in November 2000, Dr. Wenzel spent 15 years with
      McKinsey & Co., an international management consulting firm, and was a
      member of the European Leadership Group of its Pharma/Healthcare Sector and
      of
      the European New Venture Initiative. From 1981 to 1985, Dr. Wenzel was at
      Hoechst AG in Germany and developed global strategies for generics and
      over-the-counter medicines. Dr. Wenzel has been a director of the Corporation
      since March 2001.




**TRYON
      M. WILLIAMS, B.SC. (MATH) - DIRECTOR**




Mr.
      Williams is the Chairman, CEO and director of CellStop Systems, Inc., an
      automobile electronics manufacturer, and Chief Executive Officer and director
      of
      Bingo.com, Inc., an internet technology company. Since 1993, Mr. Williams has
      been Adjunct Professor, Sauder School of Business, The University of British
      Columbia. Mr. Williams is also a director of Infowave Software, Inc. and several
      other private corporations. Mr. Williams has been a director of the Corporation
      since November 1995.




**CLINICAL
      AND SCIENTIFIC ADVISORY BOARD**




The
      Corporation maintains a Clinical and Scientific Advisory Board (“CSAB”) composed
      of internationally recognized clinicians and scientists. Management meets with
      members of the CSAB periodically to review operational aspects of the
      Corporation's clinical and scientific programme and make recommendations with
      regard to the perceived trends and direction of medical and biopharmaceutical
      technologies and the industry generally. Each member of the CSAB has signed
      a
      confidentiality agreement with the Corporation. CSAB members receive honoraria
      paid by the Corporation of varying amounts per year. The current composition
      of
      the CSAB is as follows:




-51-




**LORNE
      J. BRANDES, B.SC., M.D., C.R.C.P.C.**




Professor,
      Departments of Medicine and Pharmacology/Therapeutics, University of Manitoba,
      Winnipeg, Manitoba, Canada; Section of Hematology/Oncology, CancerCare Manitoba,
      Winnipeg, Manitoba, Canada. Dr. Brandes has been an advisor since November
      2000.




**ROBERT
      S. KERBEL, PH.D.**




Professor
      of Medical Biophysics, University of Toronto, Toronto, Ontario, Canada; Canada
      Research Chair in Molecular Medicine; Director, Molecular and Cell Biology
      Research, Sunnybrook and Women's College Health Science Centre, Toronto,
      Ontario, Canada. Dr. Kerbel has been an advisor since April 1999.




**AGUSTIN
      LAGE DAVILA M.D. PH.D.**




Director,
      Centro de Inmunologia Molecular, Havana, Cuba; Professor of Medicine, University
      of Havana. Dr. Davila was a director of the Corporation until his resignation
      on
      May 28, 2002 at which time he became an advisor.




**RAYMOND
      M. REILLY, PH.D.**




Associate
      Professor, Departments of Medical Imaging and Pharmaceutical Sciences,
      University of Toronto, Toronto, Ontario, Canada; Associate Scientist, Department
      of Medical Imaging, University Health Network, Toronto, Ontario, Canada. Dr.
      Reilly was an advisor since December 1998.




**NICLAS
      STIERNHOLM, PH.D.**




Chief
      Executive Officer, Trillium Therapeutics Inc., Toronto, Ontario, Canada. Dr.
      Stiernholm was an executive vice-president of the Corporation until he resigned
      in December 2002 at which time he became an advisor.




**MARK
      VINCENT, M.D., M.R.C.P., F.R.C.P.C. - CHAIR**




Associate
      Professor, Department of Oncology, University of Western Ontario, London,
      Ontario, Canada; Staff Medical Oncologist, London Regional Cancer Centre,
      London, Ontario, Canada. Dr. Vincent has been an advisor since October 1998.




**DANIEL
      D. VON HOFF, M.D., F.A.C.P.**




Professor
      of Medicine, University of Arizona and Executive Vice President, Translational
      Genomics Research Institute and Director, Translational Drug Development
      Program, Tucson, Arizona, United States. Dr. Von Hoff has been an advisor since
      July 2001.




**BOARD
      PRACTICES**




The
      directors of the Corporation are elected and retired in rotation. The Board
      of
      Directors is divided into three equal classes (Class I, Class II and Class
      III)
      with the term of office of the directors of one class expiring each year. Each
      director holds office for a term ending on the date of the third annual general
      meeting of our shareholders following the annual general meeting of shareholders
      at which he was elected or until he resigns or is removed from office in
      accordance with the Corporation's memorandum of association and articles of
      association. For the purposes of implementing this structure, the current Class
      I directors will hold office until the 2005 annual general meeting of our
      shareholders, the current Class II directors will hold office until the 2006
      annual general shareholders meeting and the current Class III directors will
      hold office until the 2007 annual general shareholders meeting. Messrs. Friedman
      and Vida are Class I directors; Messrs. Entwhile, Friesen and Wenzel are Class
      II directors; and Messrs. Allen, Allan and Williams are Class III
      directors.




-52-




No
      director has a service contract with us. Each director has formally consented
      to
      serve as a director and signed a confidentially agreement with us.




From
      time
      to time the Board appoints, and empowers, committees to carry out specific
      functions on behalf of the Board. The following describes the current committees
      of the Board and their members:




**AUDIT
      COMMITTEE**




The
      members of the Corporation's Audit Committee are Thomas I.A. Allen, Henry
      Friesen, and Tryon M. Williams.




The
      principal functions of the Audit Committee are to appoint, compensate and
      oversee the external auditors; to review and approve annual and quarterly
      financial statements and all legally required continuous and public disclosure
      documents containing financial information about the Corporation before they
      are
      submitted to the Board of Directors for approval; to review and approve the
      adequacy of internal accounting controls and the quality of financial reporting
      procedures and systems; to examine the presentation and impact of key financial
      and other significant risks that may be material to the Corporation's financial
      reporting; and to review and approve the nature and scope of the annual audit
      and review the results of the external auditor's examination. The Audit
      Committee reports its findings with respect to such matters to the Board of
      Directors.




**CORPORATE
      GOVERNANCE AND NOMINATING COMMITTEE**




The
      members of the Corporation's Corporate Governance and Nominating Committee
      are
      Thomas I.A. Allen, Julius Vida and Tryon M. Williams.




The
      mandate of the Corporation's Corporate Governance and Nominating Committee
      is to
      develop and monitor the Corporation's system of corporate governance in the
      context of the Toronto Stock Exchange Report on Corporate Governance, and the
      rules and regulations promulgated by the Ontario Securities Commission and
      the
      Securities and Exchange Commission, including reviewing the mandate of the
      Board
      of Directors and its committees; periodically reviewing and evaluating the
      performance of all directors, committees and the Board as a whole; selecting
      new
      candidates for Board memberships, making recommendations to the Board and
      ensuring that appropriate orientation and education programmes are available
      for
      new Board members; establishing procedures to ensure that the Board may meet
      independent of Management and reviewing annually the membership and chairs
      of
      all committees. All members of this Committee are unrelated and non-executive
      directors of the Corporation.




**COMPENSATION
      COMMITTEE**




The
      members of the Corporation's Compensation Committee are Thomas I.A. Allen,
      John
      Friedman and Mark Entwistle.




The
      mandate of the Compensation Committee is to establish and monitor the
      Corporation's policies for attracting, retaining, developing and motivating
      senior employees. The compensation policies are designed to support the
      Corporation's strategic objectives, ensure that incentive programmes are
      designed to motivate senior managers to achieve or exceed corporate objectives
      and to enhance shareholder value and to ensure that there is reasonable
      consistency in the application of the compensation policies. The Corporation's
      responsibilities include reviewing annually the performance of the Chief
      Executive Officer (or more frequently if deemed necessary by the Compensation
      Committee), setting the Chief Executive Officer's compensation and, in
      consultation with the Chief Executive Officer, establishing his personal
      objectives, reviewing the performance and approving the compensation of
      executive officers of the Corporation on the recommendation of the Chief
      Executive Officer, establishing incentive compensation programmes and monitoring
      their effectiveness and developing and documenting the compensation policy
      and
      philosophy of the Corporation for approval by the Board of Directors. All
      members of this Committee are unrelated and non-executive directors of the
      Corporation.




-53-




**AUDIT
      FEES**




During
      the years ended June 30, 2004 and 2005, the Corporation paid the following
      fees
      to its external auditors:




**Service**
            **Fees
                Incurred****2005**
            **2004**Audit-
                Fees
            $385,000
            $193,000Audit-Related
                Fees
            Nil
            NilTax
                Fees
            $12,000
            $35,100All
                Other Fees
            Nil
            Nil**Total
                Fees Paid**
            **$397,000**
            **$228,100**




Tax
      fees
      consist of fees for tax compliance services and tax advisory
      services.





The
      Audit
      Committee follows policy and procedure guidelines prescribed from time to time
      by the US Securities Exchange Commission in connection with the pre-approval
      of
      non-audit services.




**LEGAL
      PROCEEDINGS**




The
      Corporation is not a party to any material pending legal or arbitration
      proceedings and is not aware of any material contemplated legal proceedings
      to
      which we may be a party except for a claim by a minor shareholder of DELEX
      Therapeutics Inc..




**TRANSFER
      AGENT AND REGISTRAR**




The
      registrar and transfer agent for the Corporation's common shares in Canada
      is
      CIBC Mellon Trust Company at its principal offices in Toronto, Canada and in
      the
      United States is Mellon Investor Services LLC at its principal offices in
      Ridgefield Park, New Jersey.




**MATERIAL
      CONTRACTS**




Except
      for contracts entered into in the ordinary course of business, the only material
      contracts which the Corporation entered into prior to the date hereof as
      follows:




(a)
            2005
                Amended and Restated Stock Option Plan. See “Share Ownership of Directors
                and Executive Officers - Stock Option
                Plan”.




(b)
            Merger
                Agreement dated as of April 12, 2005 among YM, 2069044 Ontario Limited
                (“2069044”), being a wholly-owned subsidiary of YM, DELEX, the Business
                Development Bank of Canada, New Generation Biotech (Equity) Fund
                Inc., and
                Eastern Technology Seed Investment Fund Limited Partnership, pursuant
                to
                which YM acquired DELEX. See “General Development of the
                Business”.




(c)
            Debt
                Assignment Agreements each dated as of May 2, 2005 between YM and
                each of
                the Business Development Bank of Canada, New Generation Biotech (Equity)
                Fund Inc., and Eastern Technology Seed Investment Fund Limited
                Partnership, pursuant to which YM acquired the outstanding debt of
                DELEX
                in connection with purchase of DELEX. See “General Development of the
                Business”.




(d)
            Escrow
                Agreement dated as of May 2, 2005 among YM, the Business Development
                Bank
                of Canada, New Generation Biotech (Equity) Fund Inc., Eastern Technology
                Seed Investment Fund Limited Partnership and Equity Transfer Services
                Inc., pursuant to which certain common shares of YM are held in escrow
                for
                the benefit of the former DELEX shareholders to be released in tranches
                over time and upon completion of certain milestones. See “General
                Development of the Business”.




-54-




(e)
            Clinical
                Research Services Agreement between YM and Pharm-Olam International,
                Ltd.
                (“POI”), dated March 10, 2004. The Corporation has contracted with POI
                to
                do a Phase III clinical trial with tesmilifene in metastatic and
                recurrent
                breast cancer. POI in turn is contracting with others to perform
                services
                and to recruit and treat patients. The contract with POI is payable
                over
                the next few years depending on the recruitment of patients.




(f)
            Lease
                Amending and Extension Agreement between 1411029 Ontario Limited
                and YM
                BioSciences Inc. dated January 15, 2003. See “Property, Plants and
                Equipment - Facilities”.




(g)
            Development
                and License Agreement between CIMYM Inc., CIMAB SA and Oncoscience
                AG,
                dated November 5, 2003. See “Business - Licensing Arrangements -
                Out-Licensing - TheraCIM”.




(h)
            Licensing
                Bonus Pool Plan dated March 31, 2004. See “Compensation - Licensing Bonus
                Pool”.




(i)
            License,
                Development, Manufacturing and Supply Agreement between YM BioSciences
                Inc., CIMYM, Inc., Tarcanta, Inc., Tarcanta, Ltd. and CIMAB dated
                July 13,
                2004. “Business - Licensing Arrangements - Out-Licensing”.




(j)
            Clinical
                Research Services Agreement between YM and POI dated December 2004
                relating to a pharmacokinetics clinical trial of tesmilifene with
                an
                anthracycline, involving 30 patients at two sites, at an expected
                cost of
                £194,527 ($448,000). Either party may cancel the contract with 30
                days'
                notice; in which case, the Corporation would pay for the cost to
                date plus
                a penalty equal to 10% of the remainder of the contract price.




(k)
            Clinical
                Research Services Agreement between YM and POI dated June 2005 relating
                to
                a pharmacokinetics clinical trial of tesmilifene with a taxane, involving
                30 patients at two sites, at an expected cost of £344,000 ($756,000).
                Either party may cancel the contract with 30 days' notice; in which
                case,
                the Corporation would pay for the cost to date plus a penalty equal
                to 10%
                of the remainder of the contract price.




In
      the
      ordinary course of our business, the Corporation enters into licenses for
      products which we develop, however, because of the immateriality of such
      licenses to the Corporation, they are not referenced here. The licenses for
      these products are more fully described in this annual information form under
      the heading “Business Overview - Licensing Arrangements”.




**ADDITIONAL
      INFORMATION**




Additional
      information, including directors’ remuneration and indebtedness, principal
      holders of the Corporation’s securities, options to purchase securities and
      interests of insiders in material transactions, if any, is contained in the
      Corporation’s information circular for its most recent annual meeting of
      shareholders that involved the election of directors and that additional
      financial information is provided in the Corporation’s comparative financial
      statements for its most recently completed year.




When
      securities of the Corporation are in the course of distribution pursuant to
      a
      short form prospectus, or when a preliminary short form prospectus has been
      filed in respect of the Corporation’s securities, the Corporation will provide
      the following documents to any person or company upon request to the Corporate
      Secretary of the Corporation:




1.
              a
                  copy of this Annual Information Form, together with a copy of any
                  document
                  or the pertinent pages of any document incorporated by reference
                  in this
                  Annual Information Form;




2.
            a
                copy of the Financial Statements of the Corporation, together with
                the
                accompanying auditors’ report as well as copies of any subsequent interim
                financial statements that the Corporation has
                filed;




3.
            a
                copy of the Corporation’s information circular in respect of its most
                recent annual meeting of shareholders that involved the election
                of
                directors or one copy of annual filing prepared in stead of that
                information circular, as appropriate; and




4.
            a
                copy of any other document that is incorporated by reference into
                the
                preliminary short form prospectus or the short form
                prospectus.




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At
      any
      other time, a copy of the documents referred to in subsections 1, 2, 3 and
      4
      above may be obtained from the Corporate Secretary of the Corporation, however,
      a reasonable fee may be charged if the request is made by a person or company
      who is not an a shareholder of the Corporation.




All
      requests for the above-mentioned documents must be addressed to:




YM
      BioSciences Inc.


5045
      Orbitor Drive


Building
      11, Suite 400


Mississauga,
      Ontario


L4W
      4Y4





Attention:  Secretary


Telephone: (905)
      629-9761


Fax: (905)
      629-4959


e-mail: ir@ymbiosciences.com


Web
      Page: www.
      ymbiosciences.com




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Schedule
      “A”





**YM
      BIOSCIENCES INC.**





**AUDIT
      COMMITTEE MANDATE**





**1.**  **General**





The
      board
      of directors (the “Board”) of YM BioSciences Inc. (the “Corporation”) has
      delegated the responsibilities, authorities and duties described below to the
      audit committee (the “Audit Committee”). For the purpose of these terms of
      reference, the term “Corporation” shall include the Corporation and its
      subsidiaries.




The
      Audit
      Committee shall be directly responsible for overseeing the accounting and
      financial reporting processes of the Corporation and audits of the financial
      statements of the Corporation, and the Audit Committee shall be directly
      responsible for the appointment, compensation, and oversight of the work of
      any
      registered external auditor employed by the Corporation (including resolution
      of
      disagreements between management of the Corporation and the external auditor
      regarding financial reporting) for the purpose of preparing or issuing an audit
      report or related work. In so doing, the Audit Committee will comply with all
      applicable Canadian and United States securities laws, rules and guidelines,
      any
      applicable stock exchange requirements or guidelines and any other applicable
      regulatory rules.




**2.**  **Members**





The
      Audit
      Committee shall be composed of a minimum of three members. Members of the Audit
      Committee shall be appointed by the Board. Each member shall serve until such
      member’s successor is appointed, unless that member resigns or is removed by the
      Board or otherwise ceases to be a director of the Corporation. The Board shall
      fill any vacancy if the membership of the Committee is less than three
      directors. The Chair of the Committee may be designated by the Board or, if
      it
      does not do so, the members of the Committee may elect a Chair by vote of a
      majority of the full Committee membership.




All
      members of the Audit Committee must satisfy the independence, financial literacy
      and experience requirements of applicable Canadian and United States securities
      laws, rules and guidelines, any applicable stock exchange requirements or
      guidelines and any other applicable regulatory rules. In
      particular:




(a)
            each
                member shall be “independent” and “financially literate” within the
                meaning of Multilateral Instrument 52-110 “Audit
                Committees”;




(b)
            at
                least one member must be “financially sophisticated” under the rules of
                the American Stock Exchange; and




(c)
            at
                least one member must be an “audit committee financial expert” within the
                meaning of that term under the United States Securities Exchange
                Act of
                1934, as amended, and the rules adopted by the United States Securities
                and Exchange Commission thereunder.




**3.**  **Meetings**





The
      Audit
      Committee shall meet at least quarterly at such times and at such locations
      as
      the Chair of the Audit Committee shall determine, provided that meetings shall
      be scheduled so as to permit the timely review of the Corporation’s quarterly
      and annual financial statements and related management discussion and analysis.
      The external auditor or any two members of the Audit Committee may also request
      a meeting of the Audit Committee. The Chair of the Audit Committee shall hold
      in
      camera sessions of the Audit Committee, without management present, at every
      meeting.




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The
      Audit
      Committee shall submit the minutes of all meetings to the Board, and when
      requested to, shall discuss the matters discussed at each Audit Committee
      meeting with the Board. NTD: Confirm how much procedural detail to
      include.




**4.**  **Committee
      Charter**





The
      Audit
      Committee shall have a written charter that sets out its mandate and
      responsibilities and the Audit Committee shall review and reassess the adequacy
      of such charter at least annually or otherwise, as it deems appropriate, and
      propose recommended changes to the Board.




**5.**  **Duties
      of the Audit Committee:**





The
      Audit
      Committee shall have the following duties:




***Financial
      Information and Reporting***





1.
            The
                Audit Committee shall review with management and the external auditor,
                and
                recommend to the Board for approval, the annual and interim financial
                statements of the Corporation and related financial reporting, including
                management’s discussion and analysis and earnings press
                releases.




2.
            The
                Audit Committee shall review with management and the external auditor,
                and
                recommend to the Board for approval, any financial statements of
                the
                Corporation which have not previously been approved by the Board
                and which
                are to be included in a prospectus or other public disclosure document
                of
                the Corporation.




3.
            The
                Audit Committee shall consider and be satisfied that adequate policies
                and
                procedures are in place for the review of the Corporation’s disclosure of
                financial information extracted or derived from the Corporation’s
                financial statements (other than disclosure referred to in clause
                (a)(i)
                above), and periodically assess the adequacy of such
                procedures.




***Internal
      Controls***





4.
            The
                Audit Committee shall review, as appropriate, the Corporation’s internal
                system of audit controls and the results of internal
                audits.




5.
            The
                Audit Committee shall establish procedures for the receipt, retention
                and
                treatment of any complaint regarding accounting, internal accounting
                controls or auditing matters; and the confidential, anonymous submissions
                by employees of concerns regarding questionable accounting or auditing
                matters.




***External
      Auditors***





6.
            The
                Audit Committee shall be directly responsible for overseeing the
                work of
                the external auditor engaged for the purpose of preparing or issuing
                an
                auditor’s report or performing other audit, review or attest services for
                the Corporation, including the resolution of disagreements between
                management and the external auditor regarding financial
                reporting.




7.
            The
                external auditor shall report directly to the Audit Committee and
                the
                Audit Committee should have a clear understanding with the external
                auditor that such external auditor must maintain an open and transparent
                relationship with the Audit Committee, and that the ultimate
                accountability of the external auditor is to the shareholders of
                the
                Corporation.




8.
            The
                Audit Committee shall recommend to the Board the external auditor
                to be
                nominated for the purpose of preparing or issuing an auditor’s report or
                performing other audit, review or attest services for the Corporation;
                and
                the compensation of the external
                auditor.




-58-




9.
            The
                Audit Committee will ensure the rotation of partners on the audit
                engagement team of the external auditor in accordance with applicable
                law.




10.
            The
                Audit Committee shall meet with the external auditor, as the Audit
                Committee may deem appropriate, to consider any matter which the
                Audit
                Committee or external auditor believes should be brought to the attention
                of the Board or the shareholders of the
                Corporation.




11.
            The
                Audit Committee shall meet with the external auditor, as the Audit
                Committee may deem appropriate, to review and discuss a report from
                the
                external auditor at least quarterly
                regarding:




(a)
            all
                critical accounting policies and practices to be
                used




(b)
            all
                alternative treatments within generally accepted accounting principles
                for
                policies and practices related to material items that have been discussed
                with management, including the ramifications of the use of such
                alternative disclosures and treatments, and the treatment preferred
                by the
                external auditor, and




(c)
            other
                material written communications between the external auditor and
                management, such as any management letter or schedule of unadjusted
                differences.




***Pre
      Approval of Non-Audit Services***





12.
            The
                Audit Committee shall pre-approve all non-audit services to be provided
                to
                the Corporation or its subsidiary entities by the Corporation’s external
                auditor.




***Complaints
      procedure***





13.
            The
                Audit Committee shall establish procedures for the receipt, retention
                and
                treatment of complaints received by the Corporation regarding accounting,
                internal accounting controls, or auditing matters; and the confidential,
                anonymous submission by employees of the Corporation of concerns
                regarding
                questionable accounting or auditing
                matters.




14.
            The
                Audit Committee shall review and approve the Corporation’s hiring policies
                regarding partners, employees and former partners and employees of
                the
                present and former external auditor of the
                Corporation.




***Reporting***





15.
            The
                Audit Committee shall report regularly to the Board about any issues
                that
                arise with respect to the quality or integrity of the Corporation’s
                financial statements, the Corporation’s compliance with legal or
                regulatory requirements, the performance and independence of the
                external
                auditor, or the internal audit
                function.




**6.**  **Authority
      to engage independent counsel and advisors**





The
      Audit
      Committee has the authority to engage independent counsel and other advisors
      as
      it determines necessary to carry out its duties, to set and pay the compensation
      for any advisors employed by the audit committee, and to communicate directly
      with the internal and external auditors.




The
      Corporation shall provide appropriate funding, as determined by the Audit
      Committee, in its capacity as a committee of the board of directors, for payment
      of compensation (a) to the external auditors employed by the issuer for the
      purpose of rendering or issuing an audit report, and (b) to any advisers
      employed by the Audit Committee.




-59-