**YM
        BIOSCIENCES INC.**
 
 **ANNUAL
        INFORMATION FORM**
 
 **YEAR
        ENDED JUNE 30, 2005**
  
 **September
        8, 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
                  53LEGAL
                      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.
  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, namel y
        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 connec tion
        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 2,777,778 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 accu mulated
        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;
  -
            13
            -
 (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.
  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.
  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.
  -
            17
            -
 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;
  -
            26
            -
 (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;
  (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
                    thetreatment
                    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**
  **TGFA
        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
 
 (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 Common
                Shares
              
              Percentage
                  of Common SharesOutstanding
              
              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
  
  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 a former Chairman of the Accounting
        Standards Oversight Council of Canada, a former 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.
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            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.
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            53
            -
 **AUDIT
        FEES**
  During
        the years ended June 30, 2004 and 2005, the following fees were billed to
        the
        Corporation by its external auditors:
 **Fees
                            Incurred****Service**
                        
                        
                        **2005**
                        
                        
                        **2004**Audit-
                            Fees
                        
                        $
                        385,000
                        
                        $
                        193,000Audit-Related
                            Fees
                        
                        
                        Nil
                        
                        
                        NilTax
                            Fees
                        
                        $
                        12,000
                        
                        $
                        35,100All
                            Other Fees
                        
                        
                        Nil
                        
                        
                        Nil**Total
                            Fees**
                        
                        **$**
                        **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;
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            55
            -
 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.
  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
 
 -
            56
            -
  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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            57
            -
 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.
  **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.
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            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.
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