Exhibit
      99.2




**MANAGEMENT’S
        DISCUSSION AND ANALYSIS**
 **For
        the year-ended June 30, 2007**
 
 The
        following Management’s Discussion and Analysis of Financial Condition and
        Results of Operations (“MD&A”) should be read in conjunction with the
        consolidated financial statements for the years ended June 30, 2007, 2006,
        2005,
        and the notes thereto.
 
 The
        financial statements have been prepared by management in accordance with
        accounting principles generally accepted in Canada (Canadian GAAP). These
        accounting principles differ in certain respects from United States GAAP.
        The
        differences, as they affect our consolidated financial statements, are set
        out
        in Note 16 to the audited consolidated financial statements for the fiscal
        year-ended June 30, 2007. All amounts presented are in Canadian dollars unless
        otherwise stated.
 
 **FORWARD-LOOKING
        STATEMENTS**
 
 This
        MD&A contains or incorporates by reference forward-looking statements. All
        statements other than statements of historical fact included or incorporated
        by
        reference and that address activities, events or developments that we expect
        or
        anticipate may or will occur in the future are forward-looking statements.
        While
        any forward-looking statements, and any assumptions upon which they are based,
        are made in good faith and reflect our current judgment regarding the direction
        of our business, actual results may vary, sometimes materially, from any
        estimates, predictions, projections, assumptions or other suggestions of
        future
        performance herein. Undue reliance should not be placed on these forward-looking
        statements, which are based upon our assumptions and are subject to known
        and
        unknown risks and uncertainties and other factors, including those discussed
        under "Risk and Uncertainties" in this MD&A, some of which are beyond our
        control, which may cause actual results, levels of activity and achievements
        to
        differ materially from those estimated or projected and expressed in or implied
        by such statements. We undertake no obligation to update publicly or revise
        any
        forward-looking statements contained herein, and such statements are expressly
        qualified by this cautionary statement. See "Risk and
        Uncertainties".
 
 **OVERVIEW
        OF BUSINESS**
 
 YM
        BioSciences Inc. (the “Company”) is a development stage company engaged in the
        licensing and commercialization of drug products and technologies from original
        research. The Company evaluates drug projects, technologies, and products
        and
        the prospective markets for them and obtains, as appropriate, a license for
        the
        further development and marketing of the products.
 
 The
        Company expends money on the evaluation, licensing and further development
        of
        certain drug products and on providing licensing, marketing, clinical
        development and regulatory affairs skills, patent advice and funding to
        facilitate the introduction of the licensed products into the principal
        pharmaceutical markets. This involves taking the products researched and
        developed by others and progressing them through the clinical and regulatory
        processes in Canada and elsewhere in order to achieve regulatory approval
        for
        their sale in the markets to which the Company has rights.
 
 The
        Company will incur expenditures either directly or pursuant to agreements
        with
        certain partners, on behalf of joint ventures. These will include: costs
        associated with the conduct of clinical trials; the collection and collation
        of
        data; the organizing of data and market information for each product; the
        development and production of non-confidential and confidential dossiers
        on each
        licensed product and the marketing of the information contained in the dossiers
        to prospective commercialization partners; and the negotiation and completion
        of
        out-licensing arrangements for the licensed products.
 
 The
        Company does not have its own manufacturing facilities but it may participate
        in
        ownership of manufacturing facilities and the marketing of the products if
        appropriate opportunities are available.
 
 1
 **SELECTED
        ANNUAL FINANCIAL INFORMATION**
 
 Year
                  ended June 30,2007
              
              
              2006
              
              
              2005Out-licensing
                  revenue
              
              $
              4,407,890
              
              
              $
              1,151,135
              
              
              $
              748,020Interest
                  income
              
              
              3,229,255
              
              
              
              1,397,558
              
              
              
              703,873Expenses:General
                  and administrative
              
              
              6,978,336
              
              
              
              7,951,470
              
              
              
              6,314,357Licensing
                  and product development
              
              
              28,758,469
              
              
              
              20,188,577
              
              
              
              10,981,950Impairment
              
              
              1,829,538
              
              
              
              -
              
              
              
              -Loss
                  for the period
              
              
              31,730,240
              
              
              
              25,814,607
              
              
              
              15,859,295Deficit,
                  beginning of period,
              
              
              86,566,501
              
              
              
              60,751,894
              
              
              
              44,319,267Deficit,
                  end of period
              
              $
              118,296,741
              
              
              $
              86,566,501
              
              
              $
              60,751,894Basic
                  and diluted loss per common share
              
              $
              0.57
              
              
              $
              0.59
              
              
              $
              0.47Total
                  Assets
              
              $
              81,739,800
              
              
              $
              100,048,060
              
              
              $
              38,199,891
 
 
 **RESULTS
        OF OPERATIONS**
 
 **Fiscal
        Year Ended June 30, 2007 Compared to Fiscal Year Ended June 30,
        2006**
 
 ***Out-licensing
        Revenue***
 Revenue
        from out-licensing has increased by $3.257M in fiscal 2007 compared to fiscal
        2006 as a result of two out-licensing agreements entered into during the
        year.
        The most significant agreement, signed with Daiichi Pharmaceutical Co., Ltd.,
        a
        subsidiary of Daiichi Sankyo Co., Ltd. (“Daiichi”) in July 2006, licensed the
        commercial rights for Nimotuzumab for the Japanese market and included a
        non-refundable up-front payment from Daiichi to the Company of $16.227M.
        This
        initial license fee has been recorded as deferred revenue and is being
        recognized over the estimated period of required collaboration of four
        years.
 
 ***Interest
        Income***
 Interest
        income for fiscal 2007 has increased by $1.832M compared to fiscal 2006.
        This
        can be attributed to the significant increase in cash which resulted from
        the
        prospectus-based offering in February 2006, the acquisition of Eximias
        Pharmaceutical Corporation (Eximias) in May 2006, and the licensing payment
        from
        Daiichi pursuant to the agreement signed in July 2006.
 
 ***Licensing
        and Product Development Expenses***
 Licensing
        and product development expenses have increased by $8.569M from $20.189M
        in
        fiscal 2006 to $28.758M in fiscal 2007. The change is mainly caused by employee
        compensation, amortization, tesmilifene, nimotuzumab, AeroLEF*TM*, and an
        impairment charge, as explained below*.*
 
 Employee
        compensation relating to licensing and product development has increased
        by
        $5.192M for the year ended June 30, 2007 compared to fiscal 2006. The increase
        is partly attributed to salaries and bonuses related to employees who joined
        YM
        as part of the Eximias acquisition in May 2006. Also, during the year the
        Company incurred expenses with respect to the departure of certain U.S.
        executives in February 2007.
 
 2
 Total
        amortization with respect to intangible assets increased by $644K to $1.913M
        in
        fiscal 2007 compared to $1.269M in fiscal 2006.
 
 *Tesmilifene*
 Costs
        related to development activities for tesmilifene for fiscal 2007 decreased
        by
        $3.821M to $7.508M in fiscal 2007 compared to $11.329M in fiscal 2006. On
        January 30, 2007, the Company terminated the Phase III trial based on the
        advice
        of the independent Data Safety Monitoring Board. Since then, costs for
        tesmilifene mainly pertain to closing down the trial and the settlement of
        holdback amounts from the original contract for the trial.
 
 *Nimotuzumab*
 Costs
        associated with development activities for Nimotuzumab increased by $1.167M
        to
        $5.943M compared to $4.776M in fiscal 2006. This is a result of commissions
        and
        consulting fees associated with obtaining the licensing agreement with Daiichi
        and additional costs relating to pre-clinical and clinical studies being
        conducted in fiscal 2007 compared to fiscal 2006.
 
 *AeroLEFTM*
 Costs
        associated with development activities for AeroLEF*TM* decreased by
        $1.205M to $2.910M in fiscal 2007 compared to $4.115M in fiscal 2006. This
        is
        mainly due to decreased costs related to the Phase II trial in acute
        pain.
 
 *Impairment
        of Intangible Asset*
 On
        February 1, 2007 the Company recorded an impairment for the unamortized portion
        of the workforce intangible asset that was acquired in the Eximias acquisition
        on May 9, 2006. After the termination of the Phase III DEC trial in metastatic
        breast cancer, management re-evaluated the workforce intangible and determined
        it to be impaired because it is no longer a probable future economic benefit.
        This resulted in a write-down of $1.830M, the net book value of the asset
        on the
        day of impairment.
 
 
 ***General
        and Administrative Expenses***
 General
        and administrative expenses have decreased by approximately $973K to $6.978M
        in
        fiscal 2007 compared to $7.951M in fiscal 2006. This is mainly due to a decrease
        in stock based compensation expense of $872K.
 
 **Fiscal
        Year Ended June 30, 2006 Compared to Fiscal Year Ended June 30,
        2005**
 
 ***Out-Licensing
        Revenue***
 Revenue
        increased by $403K in 2006 compared to 2005 due to an August 2005 agreement
        with
        Kuhnil Pharmaceutical Co., Ltd. to which the Company licensed the commercial
        rights for nimotuzumab for the South Korean market and a January 2006 agreement
        with Innogene Kalbiotech Private Limited to which the Company licensed the
        commercial rights for nimotuzumab for several countries in Asia and
        Africa.
 
 ***Interest
        Income***
 Interest
        income in fiscal 2006 has increased by $694K due to the significant increase
        in
        the amount invested in short-tem deposits with approximately $42.623M in
        net
        proceeds generated from the Company’s February 2006 share issuance and from
        $38.037M cash obtained through the Eximias acquisition in May 2006.
  ***Licensing
        and Product Development Expenses***
 Licensing
        and product development expenses increased by $9.207M from $10.982M for the
        year
        ended June 30, 2005 to $20.189M for the year ended June 30, 2006 primarily
        due
        to the rapid progression of the tesmilifene Phase III clinical trial and
        the
        inclusion of costs associated with the development of the AeroLEFTM technology
        for treatment of pain which was acquired in May 2005. Costs related to the
        tesmilifene Phase III clinical trial in patients with metastatic and recurrent
        breast cancer for the year totaled approximately $8.581M compared to $7.242M
        during fiscal 2005, an increase of $1.339M.
  In
        addition, costs associated with manufacturing of tesmilifene and preclinical
        work for the year ended June 30, 2006 increased by $1.063M from approximately
        $1.684M for fiscal 2005 to $2.747M in fiscal 2006. The costs related to the
        development of AeroLEFTM technology for the year ended June 30, 2006 totaled
        $4.115M, mainly for toxicology studies and other work related to a Phase
        II
        clinical trial which is currently underway, and approximately $1.025M of
        amortization in DELEX technology for the year.
 
 3
 In
        August 2005, 396,825 common shares were released from escrow related to the
        acquisition of DELEX on the completion of the first milestone event.
        Accordingly, the current fair value at the time of release of $1.464M was
        allocated to acquired technology and credited to common shares.
 
 ***General
        and Administrative Expenses***
 General
        and administrative expenses for fiscal 2006 increased $1.637M compared to
        the
        prior year. This resulted primarily from an increase in stock-based compensation
        expense of $1.309M from $1.279M for the year ended June 30, 2005 to $2.588M
        for
        the year-ended June 30, 2006 and the inclusion of Eximias operating expenses
        for
        two months.
 
 **Fiscal
        Year Ended June 30, 2005 Compared To Fiscal Year Ended June 30,
        2004**
 
 ***Out-Licensing
        Revenue***
 YM
        incurred licensing revenue for the first time since inception during fiscal
        2005. Revenue from out-licensing came from the July 2004 agreement signed
        with
        Tarcanta Inc. (a subsidiary of Cancervax Corporation) with respect to products
        relating to HER-1 and TGFa and from a January 2005 agreement with Shin Poong
        Pharmaceutical Co., Ltd. to which the Corporation licensed the commercial
        rights
        for tesmilifene for the South Korean market.
 
 ***Interest
        Income***
 Interest
        income in fiscal 2005 was higher than in the prior year due mainly to higher
        average cash balances in fiscal 2005 as a result of financing
        activities.
 
 ***Licensing
        and Product Development Expenses***
 Licensing
        and product development expenses increased from 2004 due to the progression
        of
        the tesmilifene Phase III clinical trial, increased out-licensing activity,
        and
        the inclusion of DELEX results for two months. Costs related to the Phase
        III
        clinical trial in patients with metastatic and recurrent breast cancer totaled
        about $7.250M in 2005, an increase of approximately $4.000M over 2004. Other
        costs related to tesmilifene increased by approximately $1,400,000 in 2005
        over
        the prior year. DELEX was acquired on May 2, 2005 and the costs incurred
        since
        that date to June 30, 2005 of approximately $550K have been included; they
        relate to the development of the AeroLEFTM technology for treatment of pain. The
        increased activity associated with out-licensing represented an increase
        in
        expenses over 2004 of approximately $400K.
 
 ***General
        and Administrative Expenses***
 General
        and administrative expenses increased in 2005 over 2004 due to higher
        stock-based compensation expense
        ($1.685M versus $510K last year), increased investor-related expenses
        (approximately $670K
        over last year) and the cost of obtaining and maintaining a listing on AMEX
        (approximately $600K).
        The Corporation’s stock began trading on AMEX on October 1, 2004.
 
 **SUMMARY
        OF QUARTERLY RESULTS**
 
 **Revenue**
              
              
              **Net
                  Loss**
              
              
              **Basic
                  and**
                **diluted
                  loss**
                **per**
                **Common
                  Share**June
                  30, 2007
              
              $
              1,899,229
              
              
              $
              4,749,837
              
              
              $
              0.08March
                  31, 2007
              
              $
              1,175,533
              
              
              $
              8,929,074
              
              
              $
              0.16December
                  31, 2006
              
              $
              1,997,799
              
              
              $
              8,352,471
              
              
              $
              0.15September
                  30, 2006
              
              $
              1,755,410
              
              
              $
              9,698,858
              
              
              $
              0.17June
                  30, 2006
              
              $
              1,072,000
              
              
              $
              8,581,990
              
              
              $
              0.16March
                  31, 2006
              
              $
              684,456
              
              
              $
              5,772,479
              
              
              $
              0.13December
                  31, 2005
              
              $
              549,230
              
              
              $
              5,536,292
              
              
              $
              0.14September
                  30, 2005
              
              $
              243,007
              
              
              $
              5,923,846
              
              
              $
              0.15
  
 4
 Revenue
        has increased steadily over the last eight quarters as a result of new
        out-licensing agreements with third parties and interest earned from increased
        cash and short-term investments resulting from the prospectus-based offering
        in
        February 2006, the acquisition of Eximias Pharmaceutical Corporation (Eximias)
        in May 2006, and the licensing payment from Daiichi pursuant to the agreement
        signed in July 2006. Development activity also increased until the termination
        of the Phase III DEC trial in metastatic breast cancer on January 30,
        2007
 
 **Fourth
        Quarter - Three Month Period Ended June 30, 2007 Compared To The Three-Month
        Period** **Ended
        June 30, 2006.**
 
 ***Out-licensing
        Revenue***
 Out-licensing
        revenue for the quarter ended June 30, 2007 was $1.176M compared to $185K
        in the
        same quarter in the prior year as a result of two out-licensing agreements
        entered into during the year. The most significant agreement, signed with
        Daiichi Pharmaceutical Co., Ltd. in July 2006, licensed the commercial rights
        for Nimotuzumab for the Japanese market and included a non-refundable up-front
        payment from Daiichi to the Company of $16.227M. This initial license fee
        has
        been recorded as deferred revenue and is being recognized over the estimated
        period of collaboration required.
 
 ***Interest
        Income***
 Interest
        income is down by $164K to $724K for the last three months ended June 30,
        2007
        compared to $887K in the same period in the prior year. This is due to a
        lower
        average cash balance in this quarter compared to the same quarter last year
        as
        the Company draws on its cash balance for its operations.
 
 
 ***Licensing
        and Product Development Expenses***
 Licensing
        and product development expenses have decreased by $820K for the fourth quarter
        ended June 30, 2007 compared to the same period last year primarily
        due  to the decrease in costs associated with the development of
        Tesmilifene after its failure in the third quarter of fiscal
        2007.  Costs related to tesmilifene for the three months ended June
        30, 2007 totaled approximately $781K, approximately $1,817M less than the
        comparable period last year.  Costs associated with development
        activities for AeroLEFTM decreased by $1.655M to $1.033M in the fourth quarter of
        2007 compared to $2.688M in the same quarter of 2006. This is mainly due
        to
        decreased costs related to the Phase II trial in acute
        pain.  Nimotuzumab expenses for the last quarter of fiscal 2007 have
        also decreased when compared to expenditures for the same quarter of fiscal
        2006.  The decrease, totaling $1,213M, is attributable to clinical
        trials that were underway in the forth quarter of 2006 that were completed
        prior
        to the fourth quarter of 2007.
 
 ***General
        and Administrative Expenses***
 General
        and administrative expenses for the fourth quarter of fiscal 2007 were $1.425M,
        a decrease of $1. 968M from $3.393M for the same quarter in the prior year.
        This
        is mainly due to a decrease in stock compensation expense of $1.100M. This
        decrease is attributable to the fact that there was a large option grant
        to all
        employees in the fourth quarter of fiscal 2006, one third of which was vested
        and therefore expensed immediately whereas there have been no option grants
        in
        the fourth quarter of 2007.
 
 **LIQUIDITY
        AND CAPITAL RESOURCES**
 
 Since
        inception, the Company has financed the evaluation, licensing, and further
        development of its products principally through equity issuances. Since the
        Company does not have net earnings from its operations, the Company's long-term
        liquidity depends on its ability to out-license its products or to access
        the
        capital markets, and both of which will depend substantially on results of
        the
        product development programs.
 
 The
        Company's cash requirements will be affected by the progress of its clinical
        trials, the development of its regulatory submissions, the achievement of
        commercialization agreements, the costs associated with obtaining and protecting
        the patents for the licensed products, and the availability of funding for
        part
        of the process from investors and prospective commercialization
        partners.
 
 5
 The
        financial statements have been prepared on a going-concern basis which assumes
        that the Company will continue in operation for the foreseeable future and
        accordingly, will be able to realize on its assets and discharge its liabilities
        in the normal course of operations.  The Company’s ability to continue
        as a going concern has always been dependent on obtaining additional investment
        capital and the achievement of profitable operations.  There can be no
        assurance that the Company will be successful in increasing revenue or raising
        additional investment capital to generate sufficient cash flows to continue
        as a
        going concern.  The financial statements do not reflect the
        adjustments that might be necessary to the carrying amount of reported assets,
        liabilities and revenue and expenses and the balance sheet classification
        used
        if the Company were unable to continue operation in accordance with this
        assumption.
 
 On
        February 16, 2006, pursuant to a prospectus filed with the Ontario Securities
        Commission, the Company issued 9,436,471 shares at a price of $4.91 (US$4.25)
        for total gross proceeds of $46.305M (US$40.105M).    Net
        proceeds after costs amounted to approximately $42.623M. The Company intends
        to
        use the net proceeds to fund drug development activities not related to Cuban
        originated products or for general corporate purposes not related to the
        Cuban
        licensed products and technologies. The Company’s Cuban originated products and
        technologies are all related to nimotuzumab. As at June 30, 2007, the remaining
        restricted proceeds were approximately $8.130M and unrestricted cash and
        short-term deposits totaled approximately $67.442M.
 
 On
        May 9, 2006, with the acquisition of Eximias, the Company obtained approximately
        $34.5M in cash and an experienced workforce in exchange for approximately
        5.6
        million common shares. Of the total purchase price paid, $3.3M comprised
        of
        474,657 common shares valued at $3.0M and $300K in cash was held in escrow
        for
        one year, until May 9, 2007, to satisfy any claims arising out of the
        representations and warranties made by Eximias in the transaction. On January
        30, 2007 the Company recorded an impairment for the unamortized portion of
        the
        workforce intangible asset that was acquired in the Eximias acquisition on
        May
        9, 2006. After the termination of the Phase III DEC trial in metastatic breast
        cancer, management re-evaluated the workforce intangible and concluded that
        there is no longer a foreseeable future benefit.
 
 As
        at June 30, 2007 the Company had cash and cash equivalents and short-term
        deposits totaling $75.572M and payables and accrued liabilities totaling
        $3.273M
        compared to $88.341M and $3.718M respectively at June 30, 2006.
 
 Taking
        into consideration the restricted and unrestricted cash and short-term deposits,
        management believes that the cash and short-term deposits at June 30, 2007
        are
        sufficient to support the Company’s activities beyond the next 12
        months.
 
 **COMMITMENTS
        AND OFF-BALANCE SHEET ARRANGEMENTS**
 
 The
        Company fully consolidates a joint venture in which it is considered the
        primary
        beneficiary; as such, the Company has expensed 100% of the cost of operations
        and cash flows of this entity.
 
 In
        addition, the Company is party to certain licensing agreements that require
        the
        Company to pay a proportion of any fees that the Company may receive from
        sublicensees in the future.  As of June 30, 2007 no amounts are owing
        and the amount of future fees is not determinable.
 
 The
        Company is also conducting a pharmacokinetic clinical trial evaluating
        tesmilifene with taxotere.  In June 2005 the Company entered into a
        contract with a CRO in the amount of $526K ($437K USD). Of this amount, $199K
        has not been paid as at June 30, 2007. Either party may cancel the contract
        with
        30 days’ notice.  If the Company cancels, it would pay for the cost to
        date plus a penalty equal to 10% of the remainder of the contract
        price.  The recruitment and pharmacokinetic portion of the study have
        been completed. Some of the patients have continued to receive treatment
        and are
        being followed for survival.
 
 In
        September 2005 the Company in-licensed certain technologies and committed
        to
        financial consideration of up to $700K depending upon the outcome of certain
        clinical results.  This commitment consists of a combination of an
        initial fee and contingent milestone payments.  The Company has also
        committed to royalty payments based on net sales revenue related to this
        license.  At September 30, 2005 the initial fee of $100K of the
        commitment was settled through the issuance of 26,316 common shares of the
        Company valued at $3.80 per share and was recognized as a product development
        expense. During fiscal 2007 the Company returned the license and have no
        further
        commitments outstanding with respect to this technology.
 
 6
 In
        May 2007 the Company entered into a clinical trial management services contract
        relating to a colorectal clinical trial for Nimotuzumab at an expected cost
        of
        $1.323M of which $1.127M has not been paid as at June 30, 2007. The Company
        may
        cancel the contract with 30 days notice and is obligated for services rendered
        by the CRO through to the effective date of termination and for any closeout
        services furnished by the CRO after the termination of the agreement. As
        at
        year-end the preparation for trial initiation was ongoing.
 
 In
        addition to the above, the Company has entered into contracts for pre-clinical
        and other studies totaling approximately $2.125M of which approximately $559K
        has not been incurred, paid, or accrued as at June 30, 2007.
 
 The
        Company plans to expend funds to continue the clinical development of
        nimotuzumab and AeroLEFTM.  There are also ongoing activities directed
        at out-licensing commercial rights for these products.
 
 **TREND
        INFORMATION**
 
 It
        is important to note that historical patterns of expenditures cannot be taken
        as
        an indication of future expenditures. The amount and timing of expenditures
        and
        therefore liquidity and capital resources vary substantially from period
        to
        period depending on the pre-clinical and clinical studies being undertaken
        at
        any one time and the availability of funding from investors and prospective
        commercial partners.
 
 Other
        than as discussed above, the Company is not aware of any material trends
        related
        to the Company's business of product development, patents and
        licensing.
 
 **RISKS
        AND UNCERTAINTIES**
 
 Prospective
        investors should give careful consideration to the risk factors contained
        under
“Risk Factors” in the Annual Information Form dated September 24, 2007 in
        respect of the fiscal year ended June 30, 2007. These risk factors include:
        (i)
        the Company being in an early stage of development; (ii) the Company’s lack of
        revenue and history of losses; (iii) risks of pre-clinical and clinical testing;
        (iv) the inability of the Company to obtain, protect and use patents and
        other
        proprietary rights; (v) the Company’s dependence on collaborative partners; (vi)
        the uncertain ability of the Company to keep abreast of rapid technological
        change; (vii) the inability of the Company to succeed against competition;
        (viii) the Company’s lack of manufacturing experience; (ix) the Company’s
        reliance on key personnel; (x) product liability and the Company’s ability to
        maintain insurance; (xi) the Company’s possible inability to maintain licenses;
        (xii) the Company’s reliance on licensors; (xiii) governmental regulation
        including risks associated with obtaining regulatory approval for drug products;
        (xiv) risks associated with doing business in certain countries; (xv) the
        need
        for future capital and the uncertainty of additional funding; (xvi) possible
        volatility of the share price; and (xvii) international taxation.
 
 **OUTLOOK**
 
 YM
        is the licensee of nimotuzumab for territories including Europe, North America,
        Japan and certain other Asian countries.
 
 YM
        initiated a Phase I/II trial in 2006 in patients with non-small-cell lung
        cancer
        (NSCLC) unfit for radical chemotherapy. Encouraging data presented at the
        12th
        World Conference on Lung Cancer suggest that the trial should move forward
        into
        a Phase II tranche. If Phase I data confirm the continuation into Phase II
        that
        trial is expected to initiate in mid-2008. YM has initiated its first trial
        in
        colorectal cancer combining nimotuzumab with chemotherapy in
        irinotecan-resistant patients. Recruitment of the first cohort of 50 patients
        is
        anticipated in calendar 2007 and data from the trial is expected in Q2 2008.
        YM
        has received clearance from the FDA and Health Canada for a Phase II,
        second-line trial in children with advanced diffuse, intrinsic pontine glioma
        (DIPG). We also anticipate filing an IND for a Phase II trial to evaluate
        nimotuzumab for the treatment of colorectal cancer in the immediate
        future.
 
 Recruitment
        in a Phase III trial in first-line therapy for pediatric pontine glioma was
        concluded by Oncoscience AG in Germany in August 2007. Data from this trial
        is
        expected in Q2/Q3 2008. Oncoscience has announced that a Phase III trial
        for the
        treatment of patients with adult glioma and a Phase IIb/IIIa trial for patients
        with advanced pancreatic cancer would initiate in calendar Q3 2007.
 
 7
 Daiichi
        Sankyo Co., Ltd., the Japanese licensee of nimotuzumab, obtained the approval
        of
        Japanese regulatory authorities to start a Phase I clinical trial of nimotuzumab
        for the treatment of solid tumours. This trial designed to enroll a maximum
        of
        20 patients is anticipated to complete its enrollment in 2007.
 
 In
        order to drive progress globally and rapidly, a group of the licensees has
        been
        formed that also includes YM sub-licensees and also licensees in India, China
        and South America, each participant in which may share in a common clinical
        development pathway for a number of cancers. Additional trials are expected
        to
        be announced by the various licensees acting cooperatively with the intention
        of
        using common protocols to permit the rapid recruitment of patients and the
        sharing of cost between participants.
 
 AeroLEFTM,
        our proprietary, patient-controlled inhaled-delivery composition of free
        and
        liposome-encapsulated fentanyl for the treatment of moderate to severe pain
        successfully completed a randomized Phase IIb trial and was cleared for its
        first US IND in calendar Q2 2007. An End-of-Phase II meeting with the FDA
        to
        discuss the prospective Phase III designs is in planning and is expected
        to
        occur in 2007. If protocols are cleared Phase III trials could commence in
        mid-2008.
 
 YM
        has the appropriate staffing levels to manage its current trials and its
        cash-on-hand at year-end is sufficient to support corporate and clinical
        activities into fiscal 2009.
 
 **CRITICAL
        ACCOUNTING POLICIES AND ESTIMATES**
 
 The
        preparation of financial statements in conformity with GAAP requires management
        to make estimates and assumptions that affect the reported amounts of assets
        and
        liabilities and disclosures of contingent assets and liabilities at the date
        of
        the financial statements, and the reported amount of revenue and expenses
        during
        the reporting period. Significant accounting policies and methods used in
        preparation of the financial statements are described in note 2 to the
        Consolidated Annual Financial Statements. Significant policies and estimates
        affect: revenue recognition; intangible assets; research and development
        costs;
        the consolidation of variable interest entities; stock-based compensation;
        and
        the income tax valuation allowance.
 
 ***Revenue
        recognition***
 Revenue
        from licensing agreements is recognized when persuasive evidence of an
        arrangement exists, delivery has occurred or services have been rendered,
        the
        amount is determinable and collectibility is reasonably assured. Contingent
        revenue attributable to the achievement of milestones is recognized only
        on the
        achievement of the milestone. Non-refundable up-front fees for access to
        the
        Company’s proprietary technology are deferred and recognized on a systematic
        basis over the estimated remaining period of collaboration
        required.
 
 ***Intangible
        assets***
 The
        Company’s identifiable intangible assets consist of patents and in-process
        research and development technologies acquired on the acquisition of DELEX
        in
        May 2005 and workforce acquired on the acquisition of Eximias in May 2006.
        The
        intangible assets are amortized on a straight-line basis over the estimated
        useful life of seven years for technologies acquired and of two years for
        workforce from the date of acquisition. The carrying values of the intangible
        assets are reviewed annually, and on the occurrence of a significant event,
        to
        determine if there has been impairment in their value. When the workforce
        was
        acquired, the value was capitalized as an intangible asset because the Company
        anticipated the value of this asset would be realized when tesmilifene was
        out-licensed or taken to market in the USA.  With the failure of the
        DEC trial, that value has disappeared. Therefore, on February 1, 2007 the
        Company recorded an impairment for the unamortized portion of the workforce
        intangible asset that was attained in the Eximias acquisition on May 9, 2006
        as
        there is no longer a probable future economic benefit.
 
 ***Research
        and development costs***
 The
        Company does not engage in scientific research but does incur significant
        product development costs. Only development costs that meet strict criteria
        related to technical, marketing and financial feasibility would be capitalized
        under Canadian GAAP. To date, no costs have met such criteria and, accordingly,
        all development costs have been expensed as they have been
        incurred.
 
 8
 ***Variable
        interest entity***
 The
        Company has a majority interest in a joint venture that is funded entirely
        by
        the Company. This joint venture is classified as a variable interest entity
        since the Company maintains a controlling financial interest. The Company
        has
        recorded 100% of the results of operations and cash flows of this entity
        since
        its inception.
 
 ***Stock-based
        compensation***
 In
        fiscal 2005, the Company adopted the fair value-based method of accounting
        for
        stock-based compensation and retroactively applied this method to all employee
        stock options granted on or after July 1, 2002, and restated prior
        periods.  The Company expenses all stock based payments using the fair
        value method and uses the Black-Scholes Option Pricing Model in estimating
        the
        fair value.  Under the fair value method and the option pricing model
        used to determine fair value, estimates are made as to the volatility of
        the
        Company’s shares and the expected life of the options.  Such estimates
        affect the fair value determined by the option pricing model.
 
 ***Income
        tax valuation allowance***
 The
        Company and its joint ventures have a net tax benefit resulting from non-capital
        losses carried forward, pools of scientific research and experimental
        development expenditures, investment tax credit, and withholding taxes paid.
        In
        view of the history of net losses incurred, management is of the opinion
        that it
        is not more likely than not that these tax assets will be realized in the
        foreseeable future and hence, a full valuation allowance has been recorded
        against these
        future tax assets. Accordingly, no future tax assets are recorded on the
        balance
        sheets.
 
 **NEW
        ACCOUNTING PRONOUNCEMENTS**
 
 Recent
        accounting pronouncements issued but not yet effective:
 
 ***Accounting
        Changes***
 Effective
        July 1, 2007, the Company will adopt the new recommendations of the CICA
        Handbook Section 1506, Accounting Changes. Under these new recommendations,
        voluntary changes in accounting policy are permitted only when they result
        in
        the financial statements providing reliable and or relevant information,
        These
        recommendations also require changes in accounting policy to be applied
        retrospectively unless doing so is impracticable, require prior period errors
        to
        be corrected retrospectively, require enhanced disclosures about the effects
        of
        changes in accounting policies, estimates and errors on the financial
        statements, and require the disclosure of new primary sources of generally
        accepted accounting principles that have been issued but not yet effective.
        The
        impact that the adoption of this section will have on the Company’s financial
        statements will depend on the nature of future accounting changes and the
        required additional disclosure on Recent Accounting Pronouncements as noted
        below.
 
 ***Capital
        Disclosures***
 CICA
        Handbook Section 1535, Capital Disclosures, requires disclosure of an entity's
        objectives, policies and processes for managing capital, quantitative data
        about
        what the entity regards as capital and whether the entity has complied with
        any
        capital requirements and, if it has not complied, the consequences of such
        noncompliance. This
        standard is effective for interim and annual financial statements relating
        to
        fiscal years beginning on or after October 1, 2007, specifically July 1,
        2008
        for the Company. The Company has not yet determined the impact of the adoption
        of this change on the disclosure in its financial statements.
 
 ***Financial
        Instruments:***
 In
        January 2005, the CICA issued Section 3855, Financial Instruments - Recognition
        and Measurement, Section 1530, Comprehensive Income, Section 3251, Equity,
        Section 3861, Financial Instruments - Disclosure and Presentation, and Section
        3865, Hedges. The new standards will be effective for interim and annual
        financial statements relating to fiscal years beginning on or after October
        1,
        2006, specifically July 1, 2007 for the Company. The new standards will require
        presentation of a separate statement of comprehensive income under specific
        circumstances. Derivative financial instruments will be recorded in the balance
        sheet at fair value and the changes in fair value of derivatives designated
        as
        cash flow hedges will be reported in comprehensive income. The Company is
        assessing the impact of the new standards.
 
 9
 ***Financial
        Instruments Disclosures***
 CICA
        Handbook Section 3862, Financial Instruments - Disclosures, increases the
        disclosures currently required that will enable users to evaluate the
        significance of financial instruments for an entity's financial position
        and
        performance, including disclosures about fair value. In addition, disclosure
        is
        required of qualitative and quantitative information about exposure to risks
        arising from financial instruments, including specified minimum disclosures
        about liquidity risk and market risk. The quantitative disclosures must also
        include a sensitivity analysis for each type of market risk to which an entity
        is exposed, showing how net income and other comprehensive income would have
        been affected by reasonably possible changes in the relevant risk variable.
        This
        standard is effective for interim and annual financial statements relating
        to
        fiscal years beginning on or after October 1, 2007, specifically July 1,
        2008
        for the Company. The Company has not yet determined the impact of the adoption
        of this change on the disclosure in its financial statements.
 
 ***Financial
        Instruments Presentation***
 CICA
        Handbook Section 3863, Financial Instruments - Presentation, replaces the
        existing requirements on presentation of financial instruments which have
        been
        carried forward unchanged to this new section. This standard is effective
        for
        interim and annual financial statements relating to fiscal years beginning
        on or
        after October 1, 2007,
        specifically July 1, 2008 for the Company. The Fund does not expect the adoption
        of this standard to have a material impact on presentation in its financial
        statements.
 
 ***General
        Standards on Financial Statement Presentation***
 CICA
        Handbook Section 1400, General Standards on Financial Statement Presentation,
        has been amended to include requirements to assess and disclose an entity’s
        ability to continue as a going concern. The changes are effective for the
        Company for interim and annual financial statements beginning on or after
        January 1, 2008. The Company
        does not expect the adoption of these changes to have an impact on its financial
        statements.
 
 ***International
        Financial Reporting Standards***
 The
        CICA plans to converge Canadian GAAP with International Financial Reporting
        Standards (IFRS) over a transition period expected to end in 2011. The impact
        of
        the transition to IFRS on the Company's financial statements is not yet
        determinable.
 
 **DISCLOSURE
        CONTROLS AND PROCEDURES**
 
 The
        Chief Executive Officer and the Chief Financial Officer, after evaluating
        the
        effectiveness of the Company's "disclosure controls and procedures" (as defined
        in Multilateral Instrument 52-109-Certification of Disclosure in Issuer's
        Annual
        and Interim Filings) as of June 30, 2007 (the "Evaluation Date") have concluded
        that as of the Evaluation Date, our disclosure controls were effective to
        provide reasonable assurance that information required to be disclosed in
        our
        reports filed or submitted under Canadian securities laws is recorded,
        processed, summarized and reported within the time periods specified by those
        rules, and that material information relating to our company and any
        consolidated subsidiaries is made known to management, including the chief
        executive officer and chief financial officer, particularly during the period
        when our periodic reports are being prepared to allow timely decisions regarding
        required disclosure.
 
 In
        connection with the evaluation referred to in the foregoing paragraph, we
        have
        identified no change in our disclosure controls and procedures that occurred
        during the quarter ended June 30, 2007 that has materially affected, or is
        reasonably likely to materially affect, our disclosure controls over financial
        reporting.
 
 **INTERNAL
        CONTROLS OVER FINANCIAL REPORTING**
 
 Management
        has assessed the design and effectiveness of internal controls over financial
        reporting as at June 30, 2007, and based on that assessment determined that
        internal controls over financial reporting were designed and operating
        effectively to provide reasonable assurance regarding the reliability of
        financial reporting and the preparation of financial statements for external
        purposes in accordance with GAAP. No changes were made to the design of the
        Company’s internal controls over financial reporting during the quarter June 30,
        2007, that has materially affected, or is reasonably likely to materially
        affect, the design of our internal controls over financial
        reporting.
 
 10
 **INHERENT
        LIMITATIONS ON EFFECTIVENESS OF CONTROLS**
 
 The
        Company’s management, including the chief executive officer and chief financial
        officer, do not expect that our disclosure controls or our internal controls
        over financial reporting will prevent or detect all error and all fraud.
        A
        control system, no matter how well designed and operated, can provide only
        reasonable, not absolute, assurance that the control system’s objectives will be
        met. The design of a control system must reflect the fact that there are
        resource constraints, and the benefits of controls must be considered relative
        to their costs. Further, because of the inherent limitations in all control
        systems, no evaluation of controls can provide absolute assurance that
        misstatements due to error or fraud will not occur or that all control issues
        and instances of fraud, if any, within the company have been detected. These
        inherent limitations include the realities that judgments in decision-making
        can
        be faulty and that breakdowns can occur because of simple error or mistake.
        Internal control over financial reporting can also be circumvented by collusion
        or improper management override. The design of any system of controls is
        based
        in part on certain assumptions about the likelihood of future events, and
        there
        can be no assurance that any design will succeed in achieving its stated
        goals
        under all potential future conditions. Projections of any evaluation of controls
        effectiveness to future periods are subject to risks. Over time, controls
        may
        become inadequate because of changes in conditions or deterioration in the
        degree of compliance with policies or procedures.
 
 **OTHER
        MD&A REQUIREMENTS**
 
 Share
        Data as at June 30, 2007:
 Outstanding
              
              
              NumberCommon
                  shares
              
              $
              172,921,153
              
              
              
              55,835,356Warrants
              
              $
              4,553,308
              
              
              
              8,972,277*Note
                  1:*  *If all warrants were to be exercised,*8,972,277
                  *shares would be issued for an aggregate consideration of
                  $25,921,997.*
                *Note
                  2:  In addition to the 55,835,356 shares outstanding, 2,380,953
                  shares are held in escrow to be released contingent upon the completion
                  of
                  certain milestones.  They are valued and accounted for when they
                  are released from
                  escrow.*
  Additional
        information relating to the Company, including the Company’s Annual Information
        Form, is available on SEDAR at www.sedar.com.
 
 
 Dated:
        September 24, 2007
    11