Exhibit 99.1











ANNUAL
INFORMATION FORM



YEAR ENDED
JUNE 30, 2012



September
21, 2012











TABLE OF CONTENTS



|DOCUMENTS INCORPORATED BY REFERENCE               | i 
|------------------------------------------------- | --
|BASIS OF PRESENTATION                             | i 
|FORWARD-LOOKING STATEMENTS                        | i 
|GLOSSARY OF TERMS AND PROPER NAMES                | iv
|CORPORATE STRUCTURE                               | 8 
|GENERAL DEVELOPMENT OF THE BUSINESS               | 9 
|RISK FACTORS                                      | 26
|DIRECTORS AND SENIOR MANAGEMENT                   | 38
|MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 45
|AUDIT FEES                                        | 53
|INDEPENDENCE OF EXPERTS                           | 54
|LEGAL PROCEEDINGS                                 | 54
|TRANSFER AGENT AND REGISTRAR                      | 54
|MATERIAL CONTRACTS                                | 54
|ADDITIONAL INFORMATION                            | 55











DOCUMENTS
INCORPORATED BY REFERENCE



The following documents
are incorporated by reference in, and form part of, this Annual Information Form (“AIF”):



| | · | the audited consolidated balance sheets as at June 30, 2011 and June 30, 2012 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, 2012 (collectively, the “Financial Statements”); and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | management’s discussion and analysis of financial condition and results of operations for
the year ended June 30, 2012 (the “MD&A”).
| | - | ------------------------------------------------------------------------------------------------------------------------------------



All of the documents
referred to above have been filed on SEDAR (System for Electronic Document Analysis and Retrieval) and are available to the public
at www.sedar.com. Further information may also be found on our website at www.ymbiosciences.com. Our website is not intended to
be, nor are the contents of such website intended to be, incorporated by reference into this AIF.



BASIS OF
PRESENTATION



Except where the context
otherwise requires, all references in this AIF to the “Company”, “YM BioSciences”, “YM”, “we”,
“us”, “our” or similar words or phrases are to YM BioSciences Inc. and its subsidiaries, taken together.
In this AIF, references to “US$” are to U.S. dollars and references to “C$” or “$” are to Canadian
dollars. Unless otherwise indicated, the statistical and financial data contained in this AIF are presented as at June 30, 2012.



FORWARD-LOOKING
STATEMENTS



This AIF, including
any documents incorporated by reference, contains “forward-looking statements” within the meaning of the U.S. and Canadian
federal securities laws. The words “intend”, “plan”, “may”, “believe”, “will”,
“anticipate”, “expect”, “estimate”, “project”, “future” and other expressions
that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking
statements. The forward-looking statements in this AIF, including any documents incorporated by reference, include, among others,
statements with respect to:



| | · | our expected expenditure and accumulated deficit levels;
| | - | --------------------------------------------------------



| | · | our intentions with respect to acquiring or investing in production facilities;
| | - | -------------------------------------------------------------------------------



| | · | production quantities;
| | - | ----------------------



| | · | our ability to obtain sufficient supplies of our products;
| | - | ----------------------------------------------------------



| | · | our ability to identify licensable products or research suitable for licensing and commercialization;
| | - | -----------------------------------------------------------------------------------------------------



| | · | the locations of our clinical trials;
| | - | -------------------------------------



| | · | our intention to license products from multiple jurisdictions;
| | - | --------------------------------------------------------------



| | · | our ability to obtain necessary funding on favourable terms or at all;
| | - | ----------------------------------------------------------------------



| | · | our potential sources of funding;
| | - | ---------------------------------



| | · | our business strategy;
| | - | ----------------------



- i -







| | · | our drug development plans;
| | - | ---------------------------



| | · | our ability to obtain licenses on commercially reasonable terms;
| | - | ----------------------------------------------------------------



| | · | the effect of third party patents on our commercial activities;
| | - | ---------------------------------------------------------------



| | · | our intentions with respect to developing manufacturing, marketing or distribution programs;
| | - | --------------------------------------------------------------------------------------------



| | · | our expectations with respect to the views toward our products held by potential partners;
| | - | ------------------------------------------------------------------------------------------



| | · | our plans for generating revenue;
| | - | ---------------------------------



| | · | our plans for increasing expenditures for the development of certain products;
| | - | ------------------------------------------------------------------------------



| | · | our strategy for protecting our intellectual property;
| | - | ------------------------------------------------------



| | · | the success of trial results, the timing for the receipt thereof, and the efficacy of our products;
| | - | ---------------------------------------------------------------------------------------------------



| | · | the sufficiency of our financial resources to support our activities and our prospective pivotal trials;
and
| | - | ------------------------------------------------------------------------------------------------------------



| | · | our plans for future clinical trials and for seeking clinical clearance.
| | - | ------------------------------------------------------------------------



Reliance should not
be placed on forward-looking statements, as they involve known and unknown risks, uncertainties and other factors that may cause
the actual results to differ materially from the anticipated future results expressed or implied by such forward-looking statements.
Factors that could cause actual results to differ materially from those set forward in the forward-looking statements include,
but are not limited to:



| | · | our ability to obtain, on satisfactory terms or at all, the capital required for research, product
development, operations and marketing;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------



| | · | general economic, business and market conditions;
| | - | -------------------------------------------------



| | · | our ability to successfully and timely complete clinical studies;
| | - | -----------------------------------------------------------------



| | · | product development delays and other uncertainties related to new product development;
| | - | --------------------------------------------------------------------------------------



| | · | our ability to attract and retain business partners and key personnel;
| | - | ----------------------------------------------------------------------



| | · | the risk of our inability to profitably commercialize our products;
| | - | -------------------------------------------------------------------



| | · | the risk that our clinical trials will not yield positive results or that we will not support regulatory
market approvals for our products;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------



| | · | the extent of any future losses;
| | - | --------------------------------



| | · | the risk of our inability to establish or manage manufacturing, development or marketing collaborations;
| | - | --------------------------------------------------------------------------------------------------------



| | · | the risk of delay of, or failure to obtain, necessary regulatory approvals and, ultimately, product
launches;
| | - | -------------------------------------------------------------------------------------------------------------



| | · | dependence on third parties for successful commercialization of our products;
| | - | -----------------------------------------------------------------------------



| | · | inability to obtain product in sufficient quantity or at standards acceptable to health regulatory
authorities to complete clinical trials or to meet commercial demand;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | the risk of the termination or conversion to non-exclusive licenses or our inability to enforce
our rights under our licenses;
| | - | ------------------------------------------------------------------------------------------------------------------------------



- ii -







| | · | 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;
| | - | -----------------------------------------------------------------------------------------------------------



| | · | uncertainty related to intellectual property liability rights and liability claims asserted against
us;
| | - | -------------------------------------------------------------------------------------------------------



| | · | the uncertainty of recovery of advances to subsidiaries;
| | - | --------------------------------------------------------



| | · | the impact of competitive products and pricing;
| | - | -----------------------------------------------



| | · | future levels of government funding; and
| | - | ----------------------------------------



| | · | additional risks and uncertainties, many of which are beyond our control, referred to elsewhere
in this AIF. See “Risk Factors”.
| | - | --------------------------------------------------------------------------------------------------------------------------------



Except as required
by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise.



- iii -







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.



Adjuvant: Substance added to a vaccine
to enhance its immunogenicity (i.e. its ability to stimulate an immune response). May also mean “at the time of surgery”
as in “treatment with another agent of its type at, or close to, the time of surgery”



Amgen: Amgen Incorporated



API: Active pharmaceutical ingredient;
the substance in a pharmaceutical drug that is biologically active



ASCO: The American Society of Clinical
Oncology



ASH: The American Society of Hematology



AstraZeneca: AstraZeneca PLC



BID: bis in die; Latin for twice-a-day
dosage



Board: Board of directors of YM



BMS: Bristol Myers Squibb



Cancer Therapeutics CRC: Cancer
Therapeutics CRC Pty Ltd.



CIM: Centro de Immunología
Molecular (Cuba)



CIMAB: CIMAB S.A., a Cuban company
responsible for commercializing products developed at CIM



CIMYMandCIMYM BioSciences:
CIMYM BioSciences Inc., an 80% owned joint venture subsidiary of YM



CIMYM (Barbados): CIMYM Inc., a
predecessor company to CIMYM BioSciences, incorporated under the laws of Barbados



Cisplatin: A platinum-containing
chemotherapy drug



CNS: Central nervous system



Clinical Trial Application (“CTA”):
Previously known as an “Investigational New Drug” application, which must be filed and accepted by the Canadian regulatory
agency, Health Canada, before each phase of human clinical trials may begin



Cytopia:Cytopia Limited,
acquired by YM effective January 29, 2010



Cytotoxic: Having capacity to kill
cells



Daiichi: Daiichi Pharmaceutical
Co. Ltd. or Daiichi Sankyo Co., Ltd.



EGF: A growth factor that stimulates
cell growth by binding to its receptor, EGFR



EGFR: A protein known as epidermal
growth factor receptor



EMA (formerly EMEA): The European
Medicines Agency - the European health regulatory authority



- iv -







Erlotinib: A drug used to treat
cancer that specifically targets the epidermal growth factor receptor (EGFR) tyrosine kinase



Essential thrombocythemia:A
chronic myeloproliferative neoplasm characterized by an increased number of platelets in the circulating blood



Eximias: Eximias Pharmaceutical
Corporation, acquired by YM effective May 9, 2006



FAK: Focal adhesion kinase –
a kinase target in cancer drug development



FDA: U.S. Food and Drug Administration



FMS: Feline McDonough Strain –
a kinase target in cancer and other disease conditions



FOLFIRI: A chemotherapy regimen
for treatment of colorectal cancer (FOL – Folinic acid; F – Fluorouracil; IRI - irinotecan



FOLFOX: A chemotherapy regimen for
treatment of colorectal cancer (FOL – Folinic acid; F – Fluorouracil; OX- Oxaliplatin)



Genentech: Genentech Incorporated



Genmab: Genmab A/S



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 U.S., used as a standard in accordance
with the World Health Organization’s Certification Scheme on the quality of pharmaceutical products



Humanized: The process whereby an
antibody derived from murine cells is altered to resemble a human antibody



ICH guidelines: Guidelines for the
development of drug candidates as defined by the International Conference on Harmonisation of Technical Requirements for Registration
of Pharmaceuticals for Human Use (ICH)



ImClone: ImClone Systems Incorporated
(now Eli Lilly and Company)



Incyte: Incyte Corporation



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



JAK: Janus Kinase – therapeutic
kinase targets for drugs known as JAK1, 2 or 3 inhibitors, specific kinases on the kinome



JAK1andJAK2: Members of
the four-member Janus kinase (JAK) family and main components of the JAK-STAT pathway



JAK-STAT: A signalling pathway that
transmits information from chemical signals outside the cell to the cell nucleus, which can lead to activity in the cell. The JAK-STAT
pathway has been implicated in regulation of the immune system and blood cell production



- v -







Kinase: A type of enzyme that acts
on and modifies the activity of specific proteins; kinases are used extensively to transmit signals and control complex processes
in cells



KRAS: A protein that in humans is
encoded by the KRAS gene



KRAS wild-type: The protein product
of the normal (wild-type) KRAS gene, which performs an essential function in normal tissue signalling, while the mutated KRAS gene
is implicated in the development of certain cancers



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



MD&A: Management’s discussion
and analysis of financial condition and results of operations for the year ended June 30, 2012



Merck: Merck KGaA



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



Monoclonal antibody (“mAb”):
Antibodies of high purity and specificity derived from hybridoma cells



MTD: Maximum tolerated dose



Murine: Relating to or produced
by the mouse species



Myelodisplastic syndrome: A diverse
collection of blood-related medical conditions that involve ineffective production of blood cells by the bone marrow



Myelofibrosis:A debilitating and
potentially fatal disorder that causes anemia, splenomegaly and constitutional symptoms such as bone pain, night sweats, itching,
cachexia (and loss of appetite) and fatigue.



Myeloproliferative neoplasms: A
closely related group of hematological malignancies in which the bone marrow cells that produce the body's blood cells develop
and function abnormally. The three main myeloproliferative neoplasms are Polycythemia Vera (PV), Essential Thrombocythemia (ET)
and Primary Myelofibrosis (PMF)



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



Novartis: Novartis International
AG and subsidiaries



NSCLC: Non-small-cell lung cancer



OFAC: Office of Foreign Assets Control
of the U.S. Department of the Treasury



Oncoscience: Oncoscience AG of Germany



Orphan Drug: A designation typically
granted by the FDA or EMA to medicines intended for the treatment of rare, life-threatening or chronically-debilitating conditions.
Developers of medicines that have been designated as orphan drugs may receive fee reductions, protocol assistance, as well as periods
of marketing exclusivity once authorized



OSI: OSI Pharmaceuticals, Inc. (now
Astellas)



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



Oxaliplatin: A platinum-containing
chemotherapy drug



Paclitaxel: A chemotherapy drug
derived from the bark of the Pacific yew tree



- vi -







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



Polycythemia vera: A chronic progressive
myeloproliferative neoplasm primarily characterized by an elevation of the red blood cells. Patients may also have an elevated
leukocyte (white blood cell) count, an elevated platelet count, and an enlarged spleen



Primary Myelofibrosis (PMF): A chronic
bone marrow disorder in which excessive scar tissue forms in the bone marrow and impairs its ability to produce normal blood cells.
MF is thought to be caused by abnormal blood stem cells in the bone marrow. The abnormal stem cells produce more mature cells that
grow quickly and take over the bone marrow, causing both fibrosis (scar tissue formation) and chronic inflammation. As a result,
the bone marrow becomes less able to create normal blood cells and blood cell production may move to the spleen, causing enlargement,
or to other areas of the body. Classified as a myeloproliferative neoplasm (MPN), MF can arise on its own (primary myelofibrosis,
PMF), or as a progression of polycythemia vera or essential thrombocythemia



Pyrimidine scaffold: A pyrimidine
molecule that acts as a starting material around which another molecule, such as a drug, is created. This new molecule contains
key desirable chemical elements and bonds from the original pyrimidine molecule used in the reaction



Qualified Person(s)orQP:A technical term used in European Union pharmaceuticalregulation
(Directive 2001/83/EC for Medicinal products for human use); the regulations specify that no batch of medicinal product can be
released for sale or supply prior to certification by a QP that the batch is in accordance with the relevant requirements (EudraLex,
Volume 4, Chapter 1). The QP is typically a licensed pharmacist, biologist or chemist (or a person with another permitted
academic qualification) who has several years of experience working in pharmaceutical manufacturing operations and has passed examinations
attesting to his or her knowledge



RadioTheraCIM: A radiolabeled humanized
antibody targeting the EGFR for the treatment of cancer



RECIST: Response Evaluation Criteria
in Solid Tumors, a U.S. standard



Roche: F.Hoffmann-LaRoche Ltd.



Sorafenib: A small molecule inhibitor
of several tyrosine protein kinases, approved for the treatment of certain cancers



Splenomegaly: An enlargement of
the spleen



SUNY: Research Foundation of State
University of New York



Tyrosine kinase: The high-affinity
cell surface receptor for growth factors such as EGF



TYK2: A member of the four-member
Janus kinase (JAK) family and a main component of the JAK-STAT pathway



U.S.: United States of America



VDA: Vascular Disrupting Agent –
a molecule that impedes or reverses the formulation of capillaries that provide blood flow to tumours



Vintafolide: A drug consisting
of folate (vitamin B9) linked to a potent chemotherapy agent, designed to preferentially target the chemotherapy agent to fast
growing cancer cells that actively take up folate via the folate receptor expressed in a variety of cancers



YM BioSciences Australia: YM BioSciences
Australia Pty Ltd (formerly Cytopia Research Pty Ltd), an indirect wholly-owned subsidiary of YM



YM USA: YM BioSciences USA Inc.,
a wholly-owned subsidiary of YM



- vii -







CORPORATE
STRUCTURE



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



Our head office and
principal place of business is 5045 Orbitor Drive, Building 11, Suite 400, Mississauga, Ontario, L4W 4Y4; telephone (905) 629-9761.
Our registered head office is 1959 Upper Water Street, Suite 900, Halifax, Nova Scotia, B3J 2X2; telephone: (902) 420-3200.



We currently have the
following subsidiaries:









| | (1) | Subject to current negotiations, ownership may become reduced to 70% mitigated by additional revenues
to YM from a manufacturing royalty
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------





On June 30, 2006 CIMYM
Inc., an Ontario corporation, was amalgamated under the laws of Ontario, Canada with CIMYM Inc., a Barbados corporation, to form
CIMYM BioSciences Inc. CIMYM is 80% directly owned by the Company and 20% owned by CIMAB.



YM BioSciences USA
Inc. was incorporated on November 23, 2005 under the laws of Delaware. YM US Operations Inc. was incorporated on April 10, 2006
under the laws of Delaware. On May 9, 2006 YM US Operations Inc. was merged with Eximias. On March 6,
2008 YM US Operations Inc. was merged into YM USA. YM USA is 100% directly owned by the Company.



On January 29, 2010
we acquired Cytopia Research Pty Ltd., an Australian company, through the acquisition of all of the issued and outstanding ordinary
shares of Cytopia, an Australian company listed on the Australian Stock Exchange. YM issued to the Cytopia shareholders common
shares of YM in consideration for their shares of Cytopia. On March 9, 2010, Cytopia Research
Pty Ltd changed its name to “YM BioSciences Australia Pty Ltd.”. YM BioSciences Australia is 100% indirectly owned
by the Company.



In December 2010, we
incorporated a wholly-owned subsidiary under the laws of Anguilla, YM BioSciences Ltd. IBC 217171.



8







In October 2011, we
formed a wholly-owned subsidiary in the United Kingdom, YM BioSciences UK Limited.



GENERAL
DEVELOPMENT OF THE BUSINESS



Business Overview



YM BioSciences Inc. is a drug development
company advancing hematology and cancer-related products. We use our expertise to manage and perform, within our means, what we
believe are value-enhancing activities in the development process of a drug, which include, but are not limited to, the design
and conduct of clinical trials, the development and execution of strategies for the protection and maintenance of intellectual
property rights, interaction with drug regulatory authorities internationally, and the securing of partners to assist in the development
and commercialization processes. We do not have research laboratories of our own, and have acquired or in-licensed our current
products and do not directly engage in early-stage research, avoiding the earlier risk and investment of time and capital that
is generally required before a compound is identified as appropriate for drug development. We both conduct and out-source clinical
trials and we out-source the manufacture of clinical materials to third parties.



We principally intend
to co-develop and/or license the rights to manufacture or market our products in development to other pharmaceutical companies
in exchange for license fees and royalty payments. We do 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 rights to specific products in certain market regions. We intend to continue to seek other in-licensing or acquisition
opportunities in pursuing our business strategy.



We have two product
candidates currently in clinical stages of development:



| | · | CYT387 is an oral small molecule inhibitor of the kinase enzymes JAK1 and JAK2, which have been
implicated in a family of hematological conditions known as myeloproliferative neoplasms, including myelofibrosis, and as well
in numerous other disorders including indications in hematology, oncology and inflammatory diseases. We are currently evaluating
CYT387 in a Phase I/II trial and a Phase II trial for the treatment of patients with myelofibrosis, a chronic debilitating disease
in which a patient’s bone marrow is replaced by scar tissue, often rendering the patient anemic and suffering from significant
symptoms. The U.S. Food and Drug Administration (FDA) has granted Orphan Drug designation to CYT387 and the European Commission
has granted Orphan Medicinal Product designation to CYT387, both for the treatment of myelofibrosis. We retain full global commercialization
rights to CYT387.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Nimotuzumab is a humanized monoclonal antibody targeting EGFR with an enhanced side-effect profile
over currently marketed EGFR-targeting antibodies. Nimotuzumab is licensed to CIMYM for Western and Eastern Europe, North America,
and Japan, as well as Australia, New Zealand, Israel and certain Asian and African countries. Certain of CIMYM’s rights to
nimotuzumab have been sub-licensed to Daiichi-Sankyo Co. Ltd. in Japan, Oncoscience AG in Europe, to Kuhnil Pharmaceutical Company
for South Korea, Medison Pharma Ltd. for Israel and to Innogene Kalbiotech Ltd. of Singapore for certain Pacific-rim countries
and certain African countries. These sub-licensees are currently evaluating the drug in several Phase II and III trials. Nimotuzumab,
according to CIMAB, has been approved in 28 countries that are outside of the major market territories for which CIMYM has a license
and more than 23,500 patients have been reportedly treated with the drug to date in 35 countries.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, we own
approximately 4,000 pre-clinical molecules resulting from the merger of Cytopia into YM and from YM-sponsored research. The molecules
are at different stages of development:



| | · | YM is currently evaluating a number of JAK inhibitor candidates in preclinical testing, with the
goal of identifying a candidate suitable for clinical testing as a therapeutic for the treatment of chronic inflammatory diseases,
such as rheumatoid arthritis.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



9







| | · | In 2008, Cytopia entered into an early stage collaboration with Cancer Therapeutics CRC Pty Ltd
to discover FAK inhibitors for the treatment of cancer. Cancer Therapeutics CRC had the responsibility to conduct lead optimization
studies with the goal of identifying FAK inhibitors that meet pre-agreed upon criteria. YM had the option to buy-back rights to
the FAK inhibitors should the compounds pass internal review, however YM declined its option in May 2012. In 2011, YM entered into
an early stage collaboration and license with SYN│thesis Medchem Pty Ltd. to identify inhibitors of the FMS kinase for the
treatment of particular tumour types including metastatic cancers. As with the Cancer Therapeutics CRC arrangement, YM has a buy-back
right should the identified compounds pass internal review.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | CYT997 is a small molecule microtubule polymerisation inhibitor for the treatment of solid and
other tumours in cancer patients. As well as being cytotoxic, CYT997 also acts as a vascular disrupting agent and is able to be
administered orally as well as intravenously to patients. Several small Phase I/II trials of CYT997 given intravenously have been
completed. A single-arm intravenous Phase Ib/II study in patients with relapsed glioblastoma multiforme was closed to enrolment
in February 2011. Subsequent preclinical work was recently completed involving the examination of repeated low doses of CYT997,
the envisioned optimal dosing regimen for this drug, in a mouse breast cancer model. Based on the results obtained in this preclinical
model, in conjunction with the earlier clinical trial data, YM has decided not to pursue further clinical development of CYT997
at this time.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have three additional
licenses to products that are not in clinical development and are not subject to expenditure, including tesmilifene, for which
all development activities were terminated in 2007.



We also own the rights
to AeroLEF®, a proprietary formulation of both free and lipsome-encapsulated fentanyl administered by pulmonary
inhalation, which was being developed for the treatment of severe and moderate acute pain including cancer pain. On August 4, 2010,
we announced the discontinuation of further expenditures on AeroLEF-related activities.



We continue to evaluate
and pursue opportunities to expand and diversify our development portfolio through licensing or acquisition.



A description of our
principal capital expenditures and divestitures and a description of acquisitions of material assets is found in our MD&A and
in the notes to our Financial Statements incorporated herein by reference.



Business Strategy



We are principally
focused on the development of products for the treatment of hematological and cancer or cancer-related conditions. Our strategy
is to in-license rights to promising products or to acquire such products, and further develop those products by conducting and
managing clinical research trials and progressing the products toward regulatory approval. We principally intend to co-develop
and/or license the rights to manufacture or market our products in development to other pharmaceutical companies in exchange for
license fees and royalty payments. We do 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
rights to specific products in certain market regions. We intend to continue to seek other in-licensing or acquisition opportunities
in pursuing our business strategy.



The main elements of
our business strategy are described below:



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



10







In-Licensing
or Acquisition: Upon identifying a promising biopharmaceutical product candidate, we seek to negotiate the acquisition
of the product candidate or the company owning the product candidate or license the rights for the product candidate from the holder
of those rights, the developer or researcher. The terms of such licenses vary, but generally our 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”.



Further Development:
Upon in-licensing or acquiring a product candidate, our 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 us, pre-clinical research and testing, product
optimization, formulating or reformulating drug products, manufacturing and scale-up of manufacturing, 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
and Commercialization: We generally plan to further license manufacturing and marketing rights to our licensed products
to other pharmaceutical firms. This is commonly known as “out-licensing”. Under our business model, licensees would
be expected, to the extent necessary, to participate wholly or partially in the remaining clinical and ancillary development required
to obtain final regulatory approval for the product. The sharing of development expenses between the licensee and licensor is commonly
known as “co-development”. We expect that out-licensing/co-development 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 ours, we may retain certain co-development or marketing rights to
particular products, indications or territories. To date, we have out-licensed the development and marketing rights to nimotuzumab
in Europe, South Korea, Japan and several jurisdictions in South East Asia and Africa to four separate companies. We have also
licensed certain rights to early stage drug discovery preclinical programs to three organizations and have retained rights of first
refusal to in-license back these programs upon the accomplishment of pre-specified milestones. See “Business Overview - Licensing
Arrangements - Out-Licensing”.



We actively search
for new product opportunities using the expertise and relationships of our management, board and advisors, and through the monitoring
of the academic and biotechnology environments in hematology, oncology and certain other therapeutic areas. Our staff analyze and
evaluate opportunities on a regular basis. We intend to seek other in-licensing or acquisition opportunities in pursuing our business
strategy.



Cancer and the Cancer Therapeutic
Market



According to the International
Agency for Research on Cancer (IARC), cancer remains the leading cause of death in developed countries and second worldwide. There
were approximately 12 million new cancer cases and seven million cancer deaths worldwide in 2008, with 20-26 million new cases
and 13-17 million deaths projected for 2030 (World Cancer Report 2008).



Globally, according
to the World Health Organization, the cancers which cause the most deaths are lung (1.4 million), stomach (866,000), liver (653,000),
colon (677,000) and breast (548,000). According to the American Cancer Society, it is estimated that 1.59 million new cancer cases
will be diagnosed in the U.S. in 2011 and 571,950 will die from the disease, while in Canada, according to the Canadian Cancer
Society, there will be an estimated 177,800 new cases of cancer and 75,000 deaths from cancer in 2011. Cancer is the second leading
cause of disease-related death in North America behind cardiovascular disease and is predicted to surpass cardiovascular disease
in the next few years as the leading cause of disease-related death in North America according to the World Health Organization.
The principal reasons for this projection appear to be the aging population, environmental issues related to industrial development
and improvements in the treatment of cardiovascular disease. North America, Europe and Japan are currently the principal markets
for cancer therapies because of their established healthcare and payer systems.



11







Surgery, radiation
and chemotherapy remain the principal effective treatments for cancer. Chemotherapy is defined broadly as the use of medicine or
drugs to treat cancer. Chemotherapy includes treatment with both classical cytotoxic drugs such as cisplatin and paclitaxel, as
well as the new generation of targeted therapy drugs such as erlotinib and sorafenib, which are designed to target and interfere
with specific proteins, enzymes or processes involved in cancer growth and proliferation. Targeted therapy represents the new generation
of cancer therapy that utilizes drugs to more precisely identify and attack cancer cells, while potentially causing less damage
to normal healthy cells than chemotherapy. Targeted therapy is a growing part of many cancer treatment regimens and is the dominant
focus of current cancer research and drug development worldwide.



According to “Evaluate
Pharma and Defined Health’s July 2011 Insight Briefing”, the current oncology pharmaceutical market is estimated to
be approximately US$75-80 billion. Unlike other therapeutic areas such as cardiovascular, CNS or respiratory diseases where revenue
from drug sales are forecasted to decline or remain flat over the next five years, sales of oncology drugs are forecasted to surpass
US$100 billion in the next five years. Much of the current drug sales in oncology are from targeted therapy agents. In 2010, seven
targeted therapy agents contributed 81% of the US$33.8 billion of sales from the top ten oncology drugs. Approval of new oncology
indications for existing targeted therapy and approval of new targeted therapy agents are forecast to drive growth in the oncology
market over the next five years. In 2016, nine targeted therapy agents are predicted to contribute 93% of the estimated US$42.7
billion of sales from the top ten oncology drugs.



Cancer is often grouped
into two categories: solid tumour (cancer of an organ) and hematological malignancies (cancer of the blood). Solid tumour has traditionally
dominated the oncology market with more than 90% of new cancer diagnosis in the U.S. being solid tumour. However, in recent years,
agents for the treatment of hematological disorder and malignancies have played an increasing role in the oncology market. Of the
24 new oncology drugs approved by the FDA between 2000 and 2009, 14 had indications for hematologic malignancies.For oncology drugs launched in recent years, the average annual treatment costs for hematological malignancies was US$61,000
versus US$21,000 for solid tumours. Of the top ten blockbuster drugs in oncology, five are approved for the treatment of hematological
disorders and malignancies. We believe that there are significant market opportunities in hematological malignancies as well as
in solid tumours.



Product Portfolio



CYT387



Overview



CYT387 is a dual inhibitor
of the kinases JAK1 and JAK2 in clinical development initially for the treatment of myeloproliferative neoplasms and potentially
other diseases where inhibition of JAK1 and JAK2 activity may have therapeutic benefit, such as various cancers. See “General
Development of the Business – Intellectual Property” for a list of our CYT patent claims.



|Product type:       | Small molecule pyrimidine kinase inhibitor                                                                                                                                                                                                                                                   
|------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                                                                                                                                                                                              
|Initial Indication: | Treatment of myeloproliferative neoplasms                                                                                                                                                                                                                                                    
|                    |                                                                                                                                                                                                                                                                                              
|Development Status: | International (PCT) patent application filed March 2008. Patent application is in regional/national phase in various jurisdictions.  Maximum patent term ends March 2028 (subject to possible extension).                                                                                    
|                    |                                                                                                                                                                                                                                                                                              
|Project Status:     | Dosing in a Phase I/II clinical study commenced in November 2009; Interim data reported at ASH 2010, ASCO 2011 and ASH 2011. Enrolment of 166 patients was completed in September 2011. Dosing in a Phase II BID study was commenced in September 2011 with enrolment completed in July 2012.



12







Preclinical data



CYT387
is a small molecule based on a pyrimidine scaffold that belongs to the class of drugs known as kinase inhibitors. These drugs inhibit
the action of enzymes called kinases, which are known to be over-active in certain diseases. CYT387 selectively inhibits the kinases
JAK1 and JAK2, two kinases which are excessively active in a number of diseases including certain cancers and myeloproliferative
neoplasms (or myeloproliferative disorders) such as polycythemia vera (PV), essential thrombocythemia (ET) and myelofibrosis (MF).
The selectivity and potency profile of CYT387 is a potential advantage over other JAK inhibitors currently in development.



In
preclinical studies CYT387 has been shown to possess a favourable selectivity and potency profile in a range of in-vitro screens
using both isolated enzyme and cell-based assay systems. In particular, using cells isolated from patients with myeloproliferative
neoplasms, CYT387 was shown to block the action of the hyperactive JAK2 mutant enzyme present in patients with this disease, leading
to a decrease in cells possessing the disease-driving mutation.



In
an in vivo model of myeloproliferative disorders, CYT387 was shown to effect significant disease reversal as observed by a reduction
in spleen size and a decrease in red-blood cell production, both returning to normal levels. Furthermore, the compound caused a
return of blood cell production to the bone marrow as well as leading to a decrease in systemic inflammation, as measured by the
decrease of certain markers (cytokines) in the circulation. In preclinical cancer studies, CYT387 has been shown to decrease the
proliferation of certain cancer cells and to block the action of signalling molecules known to drive cancer cell growth.



Clinical Development



CYT387
has undergone preclinical safety studies in preparation for clinical studies in patients. A preclinical data package has been reviewed
by the FDA, which permitted commencement of a clinical study in patients with myelofibrosis.



A first in-man Phase
I/II clinical trial evaluating CYT387 in myelofibrosis was initiated at Mayo Clinic in November 2009 and subsequently expanded
to include centres in the U.S., Canada and Australia. In September 2011, enrolment was completed in the trial with 166 patients
recruited. The Core Study consists of nine 28-day treatment cycles. Patients who complete the nine-month trial are able to continue
receiving CYT387 in an Extension trial.



Interim data for the
first 60 patients who were enroled in the study were reported in an oral presentation delivered at the Annual Meeting of the American
Society of Hematology (ASH) in December 2010 and updated interim data for these 60 patients were reported in an oral poster session
at the Annual Meeting of the American Society of Clinical Oncology (ASCO) in June 2011. Interim data indicated that CYT387 was
generally safe, well tolerated and was able to reduce spleen size and improve constitutional symptoms in patients with a degree
of efficacy comparable to other JAK targeting molecules in late-stage development. These early data also indicated that, unlike
other JAK-targeting molecules, CYT387 was able to enable more than half of the patients with myelofibrosis who were initially dependent
on transfusions to become transfusion independent for clinically relevant periods of time, an effect that potentially differentiates
CYT387 from other drugs in its class.



In December 2011, interim
results for all 166 patients enroled in the trial were reported in a poster session at ASH 2011. In this multicenter setting, CYT387
continued to indicate an ability to render and maintain patients with myelofibrosis transfusion independent for clinically-relevant
periods of time. CYTY387 also continued to produce significant and durable reductions in splenomegaly and improvements in constitutional
symptoms for many patients. In addition, MRI results obtained from a subset of subjects confirmed the meaningful reductions in
splenomegaly as measured by palpation. CYT387 was also safe and well tolerated, with daily dosing up to and exceeding two and a
half years. In June 2012, all eligible patients completed the core part of the Phase I/II trial by receiving drug for nine months.
Many of these patients continue treatment with CYT387 in an ongoing extension trial.



13







Phase
II BID Study



Given
the favourable safety profile of CYT387 observed in the Phase I/II trial, we also initiated a complementary Phase II clinical trial
during calendar Q3 2011 exploring safety and efficacy under a protocol in which the drug is administered BID (twice-daily dosing)
at increasingly higher doses. In July 2012, enrolment for this trial was completed with a total of 61 patients recruited at six
sites across North America. A review of clinical data obtained across multiple doses and schedules indicate that the optimal dose
for CYT387 is the 300mg once-daily dose. Further data from the ongoing 166 patient Core Phase I/II trial and Extension trial, as
well as initial data from the Phase II BID trial, are expected to be reported by the end of calendar 2012.



Regulatory Matters



The
FDA has granted Orphan Drug Designation to CYT387 for the treatment of myelofibrosis. The European Commission has also granted
Orphan Medicinal Product Designation to CYT387 for the treatment of myelofibrosis. These designations are typically granted to
medicines intended for the treatment of rare, life-threatening or chronically-debilitating conditions. Developers of medicines
that have been designated as orphan drugs may receive fee reductions, protocol assistance, as well as periods of marketing exclusivity
once authorized.



During
calendar mid-2012, YM conducted productive discussions with regulatory authorities in the US and Europe which affirmed the range
of options were available for the pivotal clinical development program of CYT387.



Intended Market and Commercialization
Status



CYT387
is an orally-administered, selective, small molecule, inhibitor of both JAK1 and JAK2. Both receptors and the JAK-STAT pathway
have been implicated in myeloproliferative disorders such as myelofibrosis, in hematological malignancies such as multiple myeloma,
leukemia and lymphoma and in solid tumours such as NSCLC, head and neck cancer and hepatocellular carcinoma.



The initial development and commercialization
strategy for CYT387 is in myelofibrosis, the most serious neoplastic condition among the myeloproliferative disorders. Myelofibrosis
is a debilitating and potentially fatal disorder that causes anemia, enlargement of the spleen (splenomegaly), cachexia and constitutional
symptoms such as bone pain, night sweats, itching and fatigue. Myelofibrosis can also transform into acute myelogenous leukemia
and shorten survival. Primary myelofibrosis presents as myelofibrosis without any other etiology, while secondary myelofibrosis
(post-polycythemia vera and post-essential thrombocythemia myelofibrosis) are progressions of polycythemia vera and essential thrombocythemia.
According to research conducted by Mayo Clinic (Mesa R, Silverstein M, Jacobson, Wollan P, Tefferi A. Population-based incidence
and survival figures in essential thrombocythemia and agnogenic myeloid metaplasia: an Olmsted county study, 1976-1995.Am J Hematol,
1999; 61:10-5), the prevalence of myelofibrosis in the U.S. is approximately 17,000 – 19,000. The prevalence of myelofibrosis
in the E.U. is approximately 23,000 – 25,000. Treatment options to date have been limited or unsatisfactory. Myelofibrosis
represents an unmet medical need with significant commercial opportunity.



Beyond
myeloproliferative disorders, indication and market expansion opportunities exist within hematological malignancies. The JAK receptor
has been implicated in hematological malignancies such as multiple myeloma, leukemia and lymphoma. The anemia responses observed
with CYT387 may be of benefit in treating myelodysplastic syndrome patients with anemia. Small molecule inhibitors of the JAK receptor
have been reported to be effective anticancer agents in in vitro and in vivo preclinical models. We believe the combination of
CYT387 with other cancer drugs represents additional opportunities for developing new therapies in various solid tumour indications.



Considerable
interest has been shown by pharmaceutical companies for JAK inhibitors, particularly with their broader potential applicability
in cancers and other indications. A significant arrangement reported in November 2009 was the out-licensing of ex-U.S. rights by
Incyte to Novartis of a JAK1/JAK2 inhibitor for myelofibrosis and other cancers. In December 2009, Incyte reportedly licensed worldwide
rights to another JAK1/2 inhibitor for inflammatory disease indications to Eli Lilly Corporation. In April 2012 Cell Therapeutics,
Inc. and Singapore based S*Bio Pte Ltd. announced an agreement to develop and commercialise the S*Bio JAK2 inhibitor pacritinib
and in June 2010 Sanofi-Aventis acquired TargeGen, Inc. reportedly principally for TargeGen’s JAK2 molecule. In general,
there continues to be strong interest within the pharmaceutical industry in establishing development and commercialization partnerships
for novel agents. Examples of recently established collaborations include Pharmacyclics, Inc. and Janssen Biotech, Inc. partnerships
to develop ibrutinib, a small molecule inhibitor for the treatment of various hematological malignancies, and Endocyte and Merck
partnerships to develop vintafolide, for the treatment of cancer.



14







Competitive
Position



We
believe seven small molecule JAK inhibitors are in active clinical development in hematology and oncology: INCB18424, CYT387, TG101348,
SB1518, AZD1480, NS-018 and BMS-911543. Each of these inhibitors have differing selectivity against the family of four JAK receptors
(JAK1, JAK2, JAK3 and Tyk2) as well as other kinases. CYT387 and INCB18424 are dual
JAK1 and JAK2 inhibitors, while TG101348, SB1518, AZD1480, NS-018, and BMS-911543 are described as JAK2 inhibitors, with FLT3 inhibition
activity reported for TG101348 and SB1518. Emerging preclinical and clinical data in myeloproliferative disorders such as myelofibrosis
strongly suggest that appropriate dual inhibition of JAK1 and JAK2 is necessary to obtain optimal benefit from treatment with JAK
inhibitors. Inhibition of FLT3, as observed in the selectivity profile of TG101348 and SB1518, is undesirable as it could lead
to significant side-effects such as gastrointestinal toxicity, which has been reported in the clinical trials of these two compounds.
There are other JAK inhibitors with differing selectivity against the family of four JAK receptors currently in development for
inflammatory-related diseases including Pfizer Inc.’s tofacitinib, Vertex Pharmaceuticals Incorporated’s
VX-509 and Eli Lilly and Company’s (“Eli Lilly”)baricitinib.



Nimotuzumab



Overview



Nimotuzumab is a humanized
mAb targeting the EGF receptor. The EGFR is present in high concentrations on the surface of many cancer cells and scientists believe
that the binding of ligands to this receptor is important in the continuing growth of cancer cells. Nimotuzumab appears to block
this binding resulting in the potential for inhibition of cell growth or, possibly, cell destruction by the immune system. Improved
tumour responses or clinical benefit have been reported when EGFR targeting agents are combined with other anti-cancer treatments.
Nimotuzumab is being developed to be administered alone or in combination with other anti-cancer treatments.



Clinical Experience and Development
Pathway



Nimotuzumab is reported
by CIMAB to have been administered to approximately 23,500 cancer patients worldwide and shown to be well tolerated. According
to CIMAB, the product has been approved for sale in 28 countries that are outside of the major market territories for which CIMYM
has a license. It has also been cleared for use in numerous clinical trials by various regulatory agencies including the EMA, Health
Canada and the FDA.



CIMYM supports the
development and commercialization activities of its sub-licensees, who have advanced the drug into late-stage clinical development.



Daiichi Sankyo Co.,
Ltd., CIMYM’s sub-licensee for nimotuzumab in Japan, advised that it has completed a randomized Phase II trial with nimotuzumab
in second line gastric cancer together with Kuhnil Pharma Co. Ltd., CIMYM’s licensee in South Korea. Data from this trial
were presented in January 2011 at the ASCO Gastrointestinal Cancers Symposium, and demonstrated evidence of an improvement in Progression
Free Survival in a subset of patients who were EGFR-positive. Daiichi also has advised that it has completed a Phase II trial in
first-line NSCLC for which for which patients are being followed up.



15







Oncoscience AG (OSAG),
CIMYM’s sub-licensee for Europe, reported updated data from a single-arm Phase III trial of nimotuzumab as first-line therapy
in combination with radiotherapy for diffuse intrinsic pontine glioma (DIPG). Data from a series of patients with DIPG that studied
the combination of nimotuzumab plus vinorelbine and radiation was reported by OSAG. Updated safety data from a Phase III trial
in adult glioma patients has been reported along with preliminary efficacy and biomarker analyses. OSAG advises they continue to
follow-up patients in a Phase IIb/III trial in pancreatic cancer.



Innogene Kalbiotech
PTE Ltd. (IGK), a CIMYM sub-licensee, has reported receiving marketing approval for nimotuzumab in the Philippines and Indonesia.
In January 2009, the National Cancer Centre of Singapore (NCCS) announced that it was launching a worldwide 710-patient Phase III
trial of nimotuzumab in the post-operative or adjuvant setting in head and neck cancer in cooperation with IGK. This trial is in
addition to an ongoing NCCS Phase II trial in locally advanced head and neck cancer, and the initiation of a Phase II trial in
cervical cancer also reportedly being conducted by IGK.



Marketing



Nimotuzumab is licensed
by CIMYM from a Cuban source, CIMAB, and as such is likely to be prohibited from sale in the U.S. unless OFAC issues a license
or the U.S. embargo against Cuba is lifted. YM USA has received a Special License from OFAC to import nimotuzumab for clinical
trials. YM USA made an application to OFAC for a license to commercialize nimotuzumab in the U.S. The current licence from OFAC
is due to expire September 30th, 2012. YM USA has no plans to extend this licence.



Nimotuzumab, which
is being developed in Canada, the U.S., Europe, Japan, Korea, certain African countries and Southeast Asian countries sub-licensed
by CIMYM, is also being separately developed, tested or marketed by licenses unrelated to us in Argentina, Brazil, China, Cuba,
India and Mexico, amongst others.



Regulatory Matters



In July 2004, nimotuzumab
was designated an Orphan Medicinal Product for glioma by EMA.



In November 2004, nimotuzumab
was designated an Orphan Medicinal Product for glioma by the FDA.



In September 2006,
YM USA received a special license from OFAC for the importation of nimotuzumab for a U.S. trial in pediatric pontine glioma.



In October 2007, CIMYM
was advised by OSAG that an application for marketing approval for nimotuzumab was submitted to EMA.



In March 2008, a Withdrawal
Assessment Report on the withdrawal by the applicant of an application for marketing approval for nimotuzumab to the EMA was published
by the EMA citing that the benefit/risk balance for the drug in that application was negative.



In June 2008, CIMYM
was advised that nimotuzumab was designated an orphan drug for pancreatic cancer by EMA.



In August 2009, YM
USA received clearance from the U.S. Treasury Department to extend our U.S. clinical program for nimotuzumab, permitting us to
conduct trials in any solid tumour indication. This License will expire on September 30th, 2012.



Nimotuzumab has also
been reported by CIMAB to have received marketing approval in 28 countries, none of which are in the major-market territories for
which CIMYM has a license.



Competitive Position



To our knowledge, other
companies that are involved in the development of monoclonal antibody cancer therapeutics directly related to our efforts include
Amgen, ImClone /BMS and Merck, amongst others.



16







We understand that
AstraZeneca and Astellas Pharma (formerly OSI), in concert with Genentech and Roche have small molecules designed to target the
tyrosine kinase domains of EGFR.



We understand that
Iressa®, previously approved as third-line monotherapy in locally-advanced or metastatic NSCLC, is undergoing a revision of
registration in various countries. In Europe, the EMA recently approved Iressa® for the treatment of locally advanced or metastatic
NSCLC with activating mutations of EGFR across all lines of therapy in 2010. An initial European filing submitted in 2003 for NSCLC
in patients previously treated with platinum-based and docetaxel chemotherapy was withdrawn in January 2005 following survival
results from the Iressa Survival Evaluation in Lung cancer trial. In 2011, AstraZeneca withdrew its regulatory application for
Iressa® in the U.S..



Astellas reported that
it has positive survival data in a Phase III monotherapy study in refractory lung cancer. Tarceva® monotherapy is now
approved by the FDA for the treatment of patients with locally advanced or metastatic NSCLC. In addition, Tarceva® in
combination with gemcitabine is approved for the first-line treatment of patients with locally advanced, unresectable or metastatic
pancreatic cancer. Tarceva® also received FDA and EMA approval as a monotherapy maintenance treatment in patients with advanced
NSCLC with stable disease after platinum-based initial chemotherapy. Recently Tarceva® received approval in Europe for use
in NSCLC patients with activating EGFR mutation.



Astella’s product,
Tarceva®, is in co-development with Roche and Genentech and is reported to be in numerous trials in various solid tumour indications.
See “Competition”.



We understand that
Erbitux®, developed by ImClone/BMS and Merck, is approved in the U.S., Canada, Japan, Germany, Austria, Australia, Switzerland
and numerous other jurisdictions is indicated in the U.S. for use in combination with irinotecan
for the treatment of irinotecan-refractory, EGFR-expressing, metastatic colorectal carcinoma after failure of both irinotecan-
and oxaliplatin-based regimens, and as a monotherapy in EGFR-expressing colorectal carcinoma patients who are intolerant to irinotecan-based
chemotherapy. It is also indicated in the U.S., Europe and Japan in combination with chemotherapy for the first-line treatment
of EGFR-expressing, KRAS wild-type metastatic colorectal carcinoma. Erbitux® is additionally indicated in combination with
radiotherapy for the treatment of locally or regionally advanced squamous cell carcinoma of the head and neck (SCCHN), or as a
single agent for the treatment of patients with recurrent or metastatic SCCHN for whom prior platinum-based therapy has failed.



We understand that
Vectibix®, developed by Amgen, is approved for the third-line treatment of EGFR-expressing, metastatic colorectal carcinoma
with disease progression on or following fluoropyrimidine-, oxaliplatin-,
and irinotecan-containing chemotherapy regimens. In the EU,
Vectibix is indicated as a monotherapy for the treatment of patients with metastatic colorectal carcinoma expressing EGFR with
non-mutated KRAS after failure of fluoropyrimidine-, oxaliplatin-, and irinotecan-containing chemotherapy regimens, and in combination
with FOLFOX and FOLFIRI for the first- and second-line treatment, respectively, of wild-type KRAS metastatic colorectal carcinoma.
In Japan, Vectibix® is indicated for the treatment of unresectable CRC with wild-type KRAS.



Manufacturing



Overview



According to Laurus
Labs, it manufactures products for other clients at commercial scales. Although Laurus Labs is not currently able to manufacture
CYT387 at the predicted commercial scale, the utility and services infrastructure, warehousing, and site acreage would be able
to support commercial production of CYT387 with appropriate facility build-out and acquisition of larger reaction vessels at the
Vizag site.



Manufacturing of
CYT387 occurs at the contract manufacturing organization (CMO) Laurus Labs (formerly Aptuit Laurus), located in the province
of Andhra Pradesh, India.



17







YM has been advised
by Laurus that it complies with ICH guidelines and adheres to cGMP and GLP and that its manufacturing sites have FDA approval.



CYT387 manufacturing:



CYT387 API is manufactured
under cGMP at Laurus’ facility located in Visakhapatnam. The current production scale for Phase II and Phase III material
is undertaken in a campaign fashion comprised of up to 2 x 15 kg batches. The API is currently under an ongoing stability program
in accordance with ICH guidelines.



Nimotuzumab manufacturing:



The CIMYM license agreement
with CIMAB requires that CIMAB will manufacture and supply, or will contract for the manufacture and supply of, commercial quantities
of nimotuzumab in accordance with the current licensing agreements at such time and stage of product development as commercial
quantities of these products are required. Product from CIMAB’s manufacturing plant has been cleared for use in clinical
trials in Canada, Europe, the U.S. and Japan. Recent reports on inspections of the manufacturing plant by Qualified Persons confirmed
that the plant operates according to GMP.  In addition, YM has been advised by CIMAB that the facility was inspected and approved
by the Darmstadt Regional Presidium in Germany that is responsible for approvals of biological manufacturing facilities in
Germany. The Darmstadt approval included 300 and 500 litre fermenters and covered a period of two years that expired in January
2009, following which two inspections by Qualified Persons declared the facilities to be in accordance with GMP principles. Another
inspection occurred in February 2011.  We understand that CIMAB received a number of recommendations from the authorities
in Darmstadt.  These recommendations were accepted and documentation has been sent back to the authorities for their consideration.
CIMAB is now awaiting a formal GMP certificate.



As part of increasing
nimotuzumab production capabilities to support expansion of clinical and commercial supplies in CIMYM’s territory, a new
facility was built that was commissioned in 2011. Within this facility, the nimotuzumab manufacturing process was scaled-up to
a 2,000 L production scale, concomitant with manufacturing process changes. Current efforts are being conducted to confirm adequacy
of the process and product made in the new facility using the scaled-up process, through comparability analysis of in-process,
API and drug product manufacturing unit operations.



The new facility has
been inspected and approved by the by Cuban regulatory authorities. In addition, an independent audit of the facility and of the
2,000 L production process was conducted by Daiichi Sankyo Co. Ltd.



CIMAB, or a supplier
contracted by CIMAB, manufactures and supplies the product to CIMYM. YM has been advised by CIMAB that 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”.



Licensing Arrangements



In-Licensing



Licenses
for CYT387



The
principal intellectual property claims for CYT997 and CYT387 are primarily owned by YM, not licensed, although patent families
have been in-licensed from SUNY relating to the use of JAK2 inhibitors to treat cardiovascular conditions, and from the Ludwig
Institute for Cancer Research relating to the JAK2 enzyme and gene, and JAK2 antibodies. The Ludwig license is exclusive and was
subject to cash payments that have already been made. The SUNY license also is exclusive, and worldwide, and is subject to certain
payments based on achievement of clinical milestones, and a royalty on net sales of product in the field covered by the SUNY patents.
See “General Development of the Business – Intellectual Property”.



18







Licenses
for Nimotuzumab



In May 1995, CIMYM
entered into 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 EGFR. CIMAB is the company responsible for the commercialization of products developed at CIM. The 1995 CIMYM License
is in respect of Western and Eastern Europe, North America, and Japan, as well as Australia, New Zealand, Israel and certain Asian
and African countries.. As a term of the 1995 CIMYM License, CIMYM 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 we incorporated CIMYM and assigned the 1995 CIMYM License to CIMYM. Pursuant to the terms of the 1995 CIMYM
License, CIMAB acquired a 20% equity interest in CIMYM as partial consideration for the 1995 CIMYM License. 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 nimotuzumab
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. nimotuzumab) 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 commercially reasonable efforts to
obtain a sub-license agreement in which CIMAB retains the right to manufacture the product. The CIMYM License 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.



As at June
30, 2012 we had advanced $78,691,578 million to CIMYM for the licensing and development
of the products licensed by CIMYM. YM has the right to recover all funds advanced to CIMYM. To the extent that the net revenues
of CIMYM are less than or equal to the advanced amounts, we are entitled to recover such advances from 30% of the net revenues.
These advances have been partially repaid from license fees paid by the licensees in Japan, Indonesia and Korea.



On June 30, 2006 CIMYM
amalgamated with CIMYM (Barbados) to form CIMYM BioSciences Inc., an Ontario company. CIMAB owns a 20% equity interest in CIMYM
BioSciences and is entitled to receive 10% of net revenues received by CIMYM. We have agreed to negotiate in good faith a further
10% equity interest in CIMYM for CIMAB such that we would then own a 70% equity interest and CIMAB would own a 30% equity interest
in CIMYM. Such a change in the equity holdings would not affect the current economics of the license.



Nimotuzumab
Sublicenses



In November 2003, CIMYM
and CIMAB licensed the rights for nimotuzumab (known as “Theraloc” in Europe) in most of Europe to Oncoscience. Under
the terms of the agreement, CIMYM is entitled to receive up to US$30 million as a share of any amounts received by OSAG 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 receive royalties on net sales but at a lesser percentage. OSAG has agreed to use diligent and reasonable efforts
to develop and commercially exploit nimotuzumab in the licensed territory. The amount of royalties received each year by CIMYM
from OSAG has not been significant and no sub-licensing fees have been received. This license agreement may be terminated by either
party in the event of specified breaches and insolvency events. In addition, OSAG may terminate the agreement at any time on 90
days’ notice.



19







In August 2005, CIMYM
and CIMAB sub-licensed development and marketing rights to Kuhnil for Korea. CIMYM received an initial fee on signing and is entitled
on signing and is entitled to receive additional milestone payments and royalties. The maximum aggregate amount of milestone payments
payable under the Kuhnil license agreement is US$700,000.



In October 2005, CIMYM
and CIMAB sub-licensed development and marketing rights to IGK (a wholly owned subsidiary of P.T. Kalbe Farma Tbk, Indonesia) for
Indonesia, Malaysia, the Philippines and Singapore and certain African countries including South Africa. CIMYM received an initial
fee on signing of U$1,000,000 and it is entitled to receive additional milestone payments and royalties. The maximum aggregate
amount of milestone payments payable under the IGK license agreement is US$3,800,000.



In July 2006, CIMYM
and CIMAB sub-licensed development and marketing rights for nimotuzumab in Japan to Daiichi (a wholly owned subsidiary of Daiichi
Sankyo Co., Ltd.) one of Japan’s largest pharmaceutical companies. Under the agreement, CIMYM received an up-front payment
of US$14.5 million and milestone payments at certain states of development for each of a number of indications as well as payments
based on supply of nimotuzumab and sales performance in the territory. The maximum aggregate amount of milestone payments payable
under the Daiichi license agreement is US$21,400,000. Daiichi is developing nimotuzumab for the Japanese market in several cancer
indications.



In June 2012, CIMYM
and CIMAB sub-licensed development and marketing rights for nimotuzumab to Medison Pharma Ltd. for Israel. The maximum aggregate
amount of payments which CIMYM could receive under that agreement is US$300,000 plus royalties.



Licenses
for Early Stage Drug Discovery and Preclinical Programs



In May 2008, YM BioSciences
Australia (formerly Cytopia) licensed to Cancer Therapeutics CRC Pty Ltd certain rights to a drug discovery preclinical program
related to a cancer target known as focal adhesion kinase or FAK. Under the terms of the license, YM BioSciences Australia retains
rights of first refusal to in-license back the program and potential drug candidates upon the accomplishment of pre-specified scientific
milestones. In March 2010, YM BioSciences Australia (formerly Cytopia) licensed to Pulmokine Inc rights to certain intellectual
property for the discovery and development of drugs candidates for the inhaled treatment of pulmonary arterial hypertension. In
April 2011, YM BioSciences Australia licensed to SYN│thesis Medchem Pty Ltd. certain rights to a drug discovery preclinical
program related to a cancer target known as colony-stimulating factor-1 receptor tyrosine kinase (Feline McDonough Strain) or FMS.
Under the terms of the license, YM BioSciences Australia retains rights of first refusal to in-license back the program and potential
drug candidates upon the accomplishment of pre-specified scientific milestones.



Out-Licensing



We principally intend
to co-develop and/or license the rights to manufacture or market our products in development to other pharmaceutical companies
in exchange for license fees and royalty payments. We do 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 rights to specific products in certain market regions. We believe this model is consistent with current biotechnology
and pharmaceutical industry licensing practices.



Our objectives in seeking
to out-license products include:



| | · | obtaining long term revenue streams on the sale of the products through royalty payments or co-marketing
arrangements;
| | - | ----------------------------------------------------------------------------------------------------------------------



| | · | providing access to the resources and experience of large pharmaceutical companies;
| | - | -----------------------------------------------------------------------------------



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



20







| | · | minimizing our development expenditures through cost sharing programs (especially late-stage clinical
trials and regulatory approval applications).
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------



We believe 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, we anticipate that prospective licensees would view our products as
having a reduced risk of failure to achieve regulatory approval.



Regulatory
Approval



Securing final regulatory
approval for the manufacture and sale of human therapeutic products in the U.S., Canada, Europe and other territories, is a long
and costly process that is controlled by that particular territory’s regulatory agency. The national regulatory agency in
Canada is Health Canada, in Europe it is the EMA, and in the U.S. it is the FDA. Each regulatory agency has its own approval processes,
although they are typically similar. Although test results from one territory are often used in applications for regulatory approval
in another territory, approval by one regulatory agency does not assure approval by other regulatory agencies.



Prior to obtaining
final regulatory approval to market a drug product, each 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 labelling.



None of our 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 products. To date we have obtained various regulatory approvals to develop and test our in-licensed products. CYT387
and nimotuzumab have been designated as orphan drugs in Europe and the U.S. for certain indications. See “Products in Clinical
Development”.



U.S.
Approval Process



In the U.S., 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 U.S. 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 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 U.S. 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. Animal studies are conducted in accordance to GLP (good laboratory practices). 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.



21







Phase I Clinical
Studies. 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 necessarily tested at this stage. Ultimately, Phase I studies demonstrate how
an drug candidate affects the body of a healthy individual. Phase I consists of a series of small studies typically 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.Phase II clinical studies are generally 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 Clinical
Studies. Phase III clinical studies are expanded controlled and uncontrolled trials that are used to more fully investigate
the safety and effectiveness 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. The patients
in Phase III studies thus more closely reflect the general population. If Phase III clinical trials are successful, the information
from these trials forms the basis for most of the drug’s initial labelling, which will guide physicians on how to use the
drug.



Stage 3: FDA
Review for Approval.Following Phase III clinical studies, the pharmaceutical company prepares reports of all studies conducted
on the drug and a complete dossier on the manufacturing of the product 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 can be marketed for that purpose.



Phase IV Clinical
Studies. Phase IV clinical 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 clinical studies. FDA-required Phase IV studies can also involve very large numbers of patients to further assess the drug’s
safety.



Arrangements
with CIMYM



YM and CIMAB entered
into a funding agreement with CIM in November 1995 in connection with the 1995 CIMYM License. The Funding Agreement provides that
YM will arrange on behalf of CIMYM 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, at YM’s sole discretion, 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 adequate generation of revenue.



22







YM and CIMAB, contemporaneously
with the assignment of the 1995 CIMYM License, entered into a shareholders agreement (the “Shareholders Agreement”)
with CIMYM relating to its operations. 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 board 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.



Intellectual Property



The following is a
description of our key current and pending patents in connection with CYT387, CYT997 and nimotuzumab.



CYT387 and CYT997



|Program        |  | International # |  | Type of IP                      |  | Pending                                                                                                        |  | Granted                                                                   
|-------------- |  | --------------- |  | ------------------------------- |  | -------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|CYT387         |  | WO2008/109943   |  | New Chemical entity             |  | Australia, Brazil, Canada, China, Europe, Hong Kong, India, Indonesia, Japan, South Korea, Mexico, Russia, USA |  | South Africa                                                              
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK2 inhibitor |  | WO2002/060927   |  | Mechanism of action             |  |                                                                                                                |  | Australia, USA                                                            
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK2 inhibitor |  | WO2006/119542   |  | Design of compounds             |  | Europe                                                                                                         |  | USA                                                                       
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK2 inhibitor |  | WO2007/101232   |  | Method of treatment             |  | Australia, Brazil, Europe, USA                                                                                 |  |                                                                           
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK2 inhibitor |  | WO2003/020202   |  | In licensed Method of Treatment |  | Australia, Brazil, Canada, Europe, Hong Kong, Japan                                                            |  | India, Mexico, New Zealand, South Africa, USA                             
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK2 inhibitor |  | WO1992/010519   |  | In licensed Target Patents      |  |                                                                                                                |  | Australia, Canada, Europe, Japan, USA                                     
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK2 inhibitor |  | WO2012/071612   |  | Method of treatment             |  | PCT stage                                                                                                      |  |                                                                           
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK3 inhibitor |  | WO2005/054230   |  | New Chemical entities           |  | Brazil, Canada, Europe, Israel, South Korea                                                                    |  | Australia, China, India, Japan, Mexico, New Zealand, South Africa, UK, USA
|               |  |                 |  |                                 |  |                                                                                                                |  |                                                                           
|JAK3 inhibitor |  | WO2005/066156   |  | New Chemical entities           |  | Brazil, Canada, Europe, Japan, South Korea, USA                                                                |  | Australia, China, India, Israel, Mexico, New Zealand, South Africa, UK    



23







|Program            |  | International # |  | Type of IP            |  | Pending                                                    |  | Granted                                                                                                
|------------------ |  | --------------- |  | --------------------- |  | ---------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|JAK3 inhibitor     |  | WO2008/092199   |  | New Chemical entities |  | Australia, Canada, Europe, Japan, USA                      |  |                                                                                                        
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|CYT997             |  | WO2005/054199   |  | New chemical entity   |  | Brazil, Canada, Hong Kong, India, Israel, South Korea, USA |  | Australia, China, Europe, Japan, Mexico, New Zealand, South Africa, USA                                
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|CYT997             |  | WO2006/133498   |  | Salt form of CYT997   |  | Europe                                                     |  |                                                                                                        
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|FMS inhibitor      |  | WO2008/058341   |  | New Chemical entities |  | Australia, Canada, Europe, Japan, USA                      |  |                                                                                                        
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|Kinase inhibitors  |  | WO2003/099811   |  | New Chemical entities |  | Canada, South Korea                                        |  | Australia, China, Europe, India, Israel, Japan, New Zealand, South Africa, UK, USA                     
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|Kinase inhibitors  |  | WO2003/099796   |  | New Chemical entities |  |                                                            |  | Australia, Canada, China, Europe, India, Israel, Japan, New Zealand, South Africa, South Korea, UK, USA
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|Kinase inhibitors  |  | WO2004/054977   |  | New Chemical entities |  | Canada, Europe                                             |  | Australia, Japan, USA                                                                                  
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|Kinase inhibitors  |  | WO2009/062258   |  | New Chemical entities |  | Australia, Canada, Europe, Hong Kong, Japan, USA           |  |                                                                                                        
|                   |  |                 |  |                       |  |                                                            |  |                                                                                                        
|Tubulin inhibitors |  | WO2004/052868   |  | New Chemical entities |  | Canada, China, Europe, South Korea, USA                    |  | Australia, India, Israel, Japan, New Zealand, South Africa, UK                                         



Nimotuzumab



CIMYM is the exclusive
licensee for a number of territories, including the U.S. The patent estate includes coverage for the composition of matter, claiming
the amino acid sequence of nimotuzumab and variants thereof and end-uses in the treatment of EGFR-dependent cancers. Patents are
granted in the U.S., Europe, Canada and Japan. The patents US5,891,996 and US6,506,883 expire November 2015, and term extensions
of up to five years may be available in the US under the Patent Term Restoration Act. The same term and provision of data exclusivity
may apply also to the key European patent, EP712863. A patent related to the manufacture of nimotuzumab is approved in Europe,
and Japan as well as other additional jurisdictions. The patent expires in 2023. The patent is pending in the U.S. and Canada.



24







We are aware of US5,770,195,
a patent granted to Genentech, for the anti-cancer use of EGFR MAbs in combination with a cytotoxic agent. We are also aware of
U.S. patents granted to others in this field. In April 2001 Rorer International (Overseas) Inc. (“Rorer”) was issued
US6,217,866 (the “866 patent”) which includes claims to any antibody targeting the EGFR administered with any anti-neoplastic
agent. We believe that the Rorer patents were exclusively licensed to ImClone (now Eli Lilly). A counterpart patent has been granted
in Europe. The European patent has now expired. On the related U.S. patent a September 19, 2006 decision in the U.S. District Court
of Southern New York granted sole inventorship of the 866 patent to scientists from Weizmann Institute of Science (Rehovet, Israel)
represented by Yeda Research & Development Company Limited. Yeda now has the right to grant, and has granted, non-exclusive
licenses in the U.S. In addition, we are 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 tumours. In Europe, Japan, and Canada, and in other countries, this application has been withdrawn
in response to prior art brought to the attention of the respective patent examiners by YM. YM continues to monitor a counterpart
application filed in the United States. ImClone also filed U.S. and PCT applications covering the use of EGFR MAbs to treat patients
having tumours that are refractory to treatment with conventional therapies. We continue to monitor pending patent applications
by Eli Lilly. We plan on vigorously challenging claims by Eli Lilly ImClone’s in respect of any patent applications that
are material to our business.  The outcome of these challenges cannot be predicted and there can be no assurance that we will
succeed in challenging the validity or scope of patent claims by Eli Lilly or any other patent applicant.   If our challenges
are not successful, this may have a material adverse effect on our business. We are also aware of a European patent, EP1058562,
granted to the University of Pennsylvania and relating to compositions and methods for treating tumours. CIMYM’s European
sub-licensee, OSAG, and others have filed oppositions to the grant of this patent. The European opposition board has recently revoked
this patent in its entirety. An appeal has been lodged by the University of Pennsylvania, and YM is monitoring its progression.
YM is also aware that the University of Pennsylvania has been granted a counterpart patent in the United States, as US 7625558.



The manufacturing of
nimotuzumab may fall within the scope of process patents owned by PDL BioPharma Inc., Genentech and the Medical Research Council
of the United Kingdom. We are aware that some of these process patents are currently being challenged by companies other than us.
In the event any of the applicable process patents are upheld, we believe we will be able to obtain licenses under such patents
on commercially reasonable terms, though we cannot assure you that we will be able to do so.



Certain of the U.S.
patents for nimotuzumab licensed to CIMYM are subject to a lien in the United States, pursuant to a court order, to a third party.
The lien is a consequence of a dispute unrelated to either YM or CIMAB. Counsel has advised the Company that the lien does not
affect the exclusive, royalty-free license for nimotuzumab issued by CIMAB to CIMYM for numerous territories, including the United
States. None of the international patents for nimotuzumab for which CIMYM is licensed are affected. The lien against the two patents,
which were issued by the U.S. Patent and Trademark Office to CIMAB, appears to form part of an award resulting in liens against
approximately 60 patents from a number of scientific institutes assigned to that third party by a court in Miami, Florida. The
liens have no relation to the U.S. embargo against Cuba and result specifically from a civil suit brought to seek compensation
for a plaintiff in a matter unrelated to these patents. The lien is against the patents which are already subject to the license
to YM's subsidiary, may solely affect the rights of CIMAB to benefit from the patents, and, consequently, this situation is not
expected to be material to us. We are advised that CIM has mounted a vigorous defence against its patents being the subject of
an award for matters unrelated to CIM.



Property, Plant and Equipment



Facilities



We currently occupy
7,070 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, 2008 (the “Lease Amending Agreement”). The Lease Amending
Agreement extended the initial terms of the Sub-Lease for a term of five years commencing on February 1, 2008 and expiring on January
31, 2013. Average annual fixed rent, excluding operating costs, is approximately $75,000.



We are not aware of
any environmental issues associated with any of our facilities. We are currently reviewing opportunities to relocate our main office
in Mississauga to larger offices nearby that can better accommodate an increased number of employees.



25







Employees



As of June 30, 2012,
we employed 32 employees located in Mississauga, Ontario. Our subsidiary, YM USA, has 6
employees located throughout the United States, YM BioSciences UK Limited employs 1 employee in London, United Kingdom and YM BioSciences
Australia employs 2 employees in Melbourne, Australia. Other than administrative staff, all employees
conduct licensing and product development activities. No employees are represented by labour unions.



RISK FACTORS



An investment in our
securities is speculative and involves a high degree of risk. Prospective investors should carefully consider, together with other
matters referred to herein, the following risk factors. If any event arising from these risks occurs, our business, prospects,
financial condition, results of operations and cash flows could be materially adversely affected.



Risks Related To Our Business



We have few revenues
and a history of losses and, therefore, are unable to predict the extent of any future losses or when or if we will become profitable.



As at June 30, 2012,
we have an accumulated deficit of $233,458,177. We expect expenditures and the accumulated deficit to increase as we proceed with
our commercialization programs until such time as sales, license fees and royalty payments, if any, may generate sufficient revenues
to fund our continuing operations. There can be no assurance that the revenues from the commercialization of our products will
be sufficient to support required expenditures and therefore there can be no assurance of when or if we will become profitable.



We deal with products
that 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.



Since our incorporation
in 1994, none of our products, licensed or owned, has received regulatory approval for sale in any major market country in which
we have an economic interest in the product’s sales. Accordingly, we have not generated any significant revenues from product
sales. A substantial commitment of resources to conduct clinical trials and for additional product development will be required
to commercialize most of the products. There can be no assurance that our 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 us in the commercialization of the products will be recovered through sales, license fees or related royalties.



We have limited internal
resources to conduct clinical trials and must rely on third party service providers to conduct our studies and trials and to carry
out certain data gathering and analyses. We will also rely on third party manufacturers for the production of sufficient supply
to conduct the trials. If our third party service providers are unable for any reason to meet their obligations in a timely manner,
this may have an adverse effect on the regulatory, manufacturing and development activities for our products, which may prevent
us from advancing them sufficiently to initiate clinical trials in a timely manner.



Even if we are successful
in commercially producing our products and receive the requisite marketing approvals, our products may not gain market acceptance
by physicians, patients, insurers and others stakeholders, which might significantly limit the commercial success of our products.



If our clinical
testing of drug products does not produce successful results, we will not be able to commercialize our products.



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



26







We are not able to
predict the results of pre-clinical and clinical testing of our drug 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. Further,
pre-clinical data may not be sufficient for regulators to accept positive clinical data for approval to commercialize a product.
Pre-clinical data must have been conducted to high regulatory standards and may be found, on review by health regulatory authorities,
to be of insufficient quality to support an application for commercialization of our products. 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 our products will yield satisfactory results that will enable
us to progress toward commercialization of such products. Unsatisfactory results may have a material adverse effect on our business,
financial condition or results of operations as they could result in us having to reduce or abandon future testing or commercialization
of particular drug products. Clinical trials require the enrolment of patients and we may experience difficulties identifying and
enroling suitable human subjects for ongoing and future trials of our products. This could be as a result of a number of factors
including, but not limited to, design protocol, the size of the available patient population, the eligibility criteria for participation
in the clinical trials, and the availability of clinical trial sites.



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 our other markets, including the U.S., is a long
and costly process that is controlled by each such country’s regulatory agency. The applicable regulatory agency in Canada
is Health Canada, in Europe it is the EMA and in the United States it is the FDA. Other applicable regulatory agencies have similar
regulatory approval processes, but each is different. Approval in Canada, Europe or the United States does not assure approval
by other applicable 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 jurisdiction 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 good manufacturing practices during production and storage and control
of marketing activities, including advertising and labelling. We have no assurance that a viable, economic path to regulatory approval
for our products in the United States and other regulatory jurisdictions can be negotiated with the applicable regulatory authorities.
Clinical requirements imposed by the FDA and other regulators to obtain approval for our products may not be achievable within
the resources and capabilities available to us.



None of our 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 products. To date, we have obtained various regulatory clearances to develop and test our products. CYT387 has been
approved for use in clinical trials by the FDA and Health Canada. The FDA or other regulatory authority may require additional
extensive clinical trials or impose other regulatory process requirements which may delay or prevent us from continuing to develop
our products.



Favourable results
in early trials may not be repeated in later trials. Early trials results are not necessarily indicative of results from more advanced
studies and also may not predict the ability of our products to achieve their intended goals in a safe and effective manner.



Nimotuzumab, which
is being developed in Canada, the U.S., Europe, Japan, Korea, certain African countries and Southeast Asian countries sub-licensed
by CIMYM, is also being separately developed, tested or marketed by licenses unrelated to us in Argentina, Brazil, China, Cuba,
India and Mexico, amongst others. The United States established an embargo against Cuba in 1961, reinforced by the Cuban Liberty
and Democratic Solidarity Act (the “Helms-Burton Act”) in 1996, and Cuba is among several nations which have been
identified by the U.S. Department of State as being a state sponsoring terrorism. As such, the U.S. Government has put in place
certain limitations on conduct of business with Cuba and anti-terrorism legislation against Cuba. Although to date such anti-terrorism
controls have not had any adverse effect on our operations, because of the anti-terrorism controls and the Helms-Burton Act, we
cannot assure that we will be able to complete clinical testing in the U.S. or obtain OFAC or final regulatory approval in order
to successfully commercialize nimotuzumab in the U.S. We were successful in September 2006 in our application for a Special License
to import nimotuzumab for a clinical trial in the U.S., received clearance for this trial from the FDA following the fiscal 2007
year end and subsequently received a Special License in 2009 to treat any solid tumours with further FDA clearances in 2010. OFAC
approval expires in September 2012.



27







We cannot assure that
the licensed products will be successfully commercialized. The process of completing clinical testing and obtaining final regulatory
approval 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 our
ability to develop the product and delay commercialization of the product. Further, we cannot assure that our licensed products
will prove to be safe and effective in clinical trials under the regulations in the territories in which we operate or receive
applicable regulatory approvals from applicable regulatory bodies. Even if we were to obtain the requisite regulatory approvals,
our products would remain subject to ongoing regulatory requirements, including, but not limited to, additional clinical trials,
non-clinical testing, new or revised requirements for manufacturing, or product recalls or withdrawals.



Changes in government
regulations, although beyond our control, could have an adverse effect on our business.



We have, or have had,
licenses with, or clinical trials at, various academic organizations, hospitals and companies in Australia, Canada, Cuba, India,
Italy, Japan, Korea, Germany, the U.S., the United Kingdom, countries in Southeast Asia and other countries and we depend 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 our control
and may adversely affect our business.



Our business 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 our control and the effect of any such changes cannot be predicted.



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



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 of our competitors
and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and
human resources than we have. Our 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 we are able to commercialize
our products or they may succeed in developing products that are more effective than our products. Moreover, we have no assurance
that clinical investigators and key opinion leaders will continue to want to work with our products and remain favourable to their
prospects.



With respect to CYT387,
we consider our main competitors to be Novartis AG, Eli Lilly and Company, Incyte Corporation, S*Bio Pte Ltd., Cell Therapeutics
Inc, and Sanofi-Aventis. With respect to CYT997 we consider our main competitors to be Oxigene, Inc., Antisoma plc and Novartis
AG.



With respect to nimotuzumab,
we consider our main competitors to be Amgen Inc., AstraZeneca PLC, Bristol-Myers Squibb, Hoffmann-La Roche Ltd., Eli Lilly and
Company, Genentech, Inc., Genmab A/S, Merck KGaA and Astellas Pharma Canada, Inc.



28







Our 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 we will seek to expand our technological capabilities in order to remain competitive,
there can be no assurance that developments by others will not render our products non-competitive or that we 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 our products and may be more effective or less costly than our products. In addition, other forms of medical treatment
may offer competition to the products. The success of our competitors and their products and technologies relative to our technological
capabilities and competitiveness could have a material adverse effect on the future pre-clinical and clinical trials of our products,
including our ability to obtain the necessary regulatory approvals for the conduct of such trials.



We depend upon
being able to identify promising molecules for licensing or acquisition and successfully completing the acquisitions or licensing
on economically reasonable. There is no assurance that we can continue to identify and license molecules for development.



We do not conduct basic
research of our own. Basic research on a particular product candidate is conducted by other biopharmaceutical companies, scientific
and academic institutions and hospitals, or scientists affiliated with those institutions. Generally, once the basic research is
complete, we enter into agreements to in-license the right to develop and market the products or acquire them. While we own a library
of pre-clinical compounds, there can be no assurance that we will have the resources available to identify potential drug candidates
in that library, or that any of the compounds in the library may have the potential to become a drug candidate. We may be unable
to identify new drug candidates from internal sources or license new ones from others.



The acquisition of
any new product candidates by us will result in an increase of expenditures for the additional staff and resources, which may result
in the need for us to seek additional financing. If we are unsuccessful in our financing efforts, we may have insufficient funds
to complete our clinical development plans as planned.



We depend upon
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.



We enter into arrangements
with and depend upon others with respect to the manufacture, development and sale of our products. Product development includes,
but is not limited to, pre-clinical testing, regulatory approval processes, clinical testing, the development of additional regulatory
and marketing information and, finally, marketing approval. Our ability to successfully develop and commercialize our products
is dependent on our ability to make arrangements with others on commercially acceptable terms and subject to our depending upon
them to meet regulatory quality standards. The product development process may be delayed or terminated if we cannot secure or
maintain such arrangements on terms acceptable to us or at all. The manufacturing process for our products may not be sufficient
to meet the quantity and quality requirements for pivotal trials for the drug.Outsourcing of the manufacture of our products
means that we are dependent upon third party manufacturers over whom we do not have control. Any failure of a manufacturer to supply
the necessary quantities or quality of product may have an adverse effect on our prospects. We do not have long-term, material,
third party manufacturing, formulation or supply agreements, except with respect to one of our licensed products, nimotuzumab,
subject to certain terms and conditions of the licensing agreements between us and CIMAB and CIMAB has contracted to supply commercial
quantities or will source such supply if, as and when approval for sale has been granted. Should CIMAB be unable to supply us,
we have no readily available alternative source for the product.



We expect to enter
into out-licensing agreements with others with respect to the manufacturing and marketing of our drug products. We may retain co-development
and marketing rights if management determines it appropriate to do so.



We cannot assure that
we will be successful in maintaining our relationships with research institutions or licensees or others or in negotiating additional
in-licensing or out-licensing agreements on terms acceptable to us or at all, or that any such arrangements will be successful.
In addition, there can be no assurance that other parties will not enter into arrangements with such entities for the development
or commercialization of similar products or that the parties with whom we have made such arrangements will not pursue alternative
technologies or develop products on their own or in collaboration with others, including our competitors. If we do not establish
sufficient in-licensing and out-licensing arrangements, we may encounter delays in product introductions or may find that the development,
manufacture or sale of our licensed products could be materially adversely affected. If we are unable to successfully negotiate
a partnership with an entity that can facilitate the further development and commercialization of our products, our prospects may
be adversely affected.



29













We lack 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.



We have not commercially
launched any of our licensed or owned products and have no commercial manufacturing experience with respect to our products. To
be successful, the products must be manufactured in commercial quantities in compliance with regulatory requirements and at acceptable
costs over which we have no control. We do not have, and do not intend to acquire, facilities for the production of our products,
although we may invest in the ownership of production facilities, or parts of the production process, if appropriate opportunities
are available.



Nimotuzumab is required
to be manufactured in quantities sufficient for clinical testing by CIMAB or a related party, subject to certain terms and conditions
of the licensing agreements between us 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 sufficient commercial scale quantities in a
commercially reasonable manner. In addition, there are risks that we cannot control regarding the CIMAB manufacturing plant, including
amongst others, events such as weather, fire and other natural disasters as well as political risks. All manufacturing facilities
must comply with applicable regulations in their jurisdiction and 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 our licensed
and owned products.



We rely upon licensors
and others for research on new products.



We do not conduct our
own basic research with respect to the identification of new products. Instead, we review and analyze research and development
work conducted by others as a primary source for new products. While we expect that we will be able to continue to identify licensable
products or research suitable for licensing and commercialization by us, there can be no assurance that useful products will be
available to us on commercially acceptable terms.



We conduct our
development 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.



Clinical trials on
our development products have been conducted by us and our sub-licensees in more than 20 jurisdictions including Australia, Canada,
the United Kingdom, the European Union, Japan, India, Indonesia, Korea, Russia and the U.S., and we intend 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 our interests. There is no assurance that we, as a Canadian
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 we will be able to enforce our licenses in foreign
jurisdictions or obtain and maintain the necessary regulatory approvals for our products. Governments have, from time to time,
established foreign exchange controls which could have a material adverse effect on our business and financial condition, since
such controls may limit our ability to flow funds into a particular country to meet our obligations under in-licensing agreements,
and to flow funds which we may be entitled to, in the form of royalty and milestone payments, under out-licensing agreements out
of a particular country In addition, the value of our licenses will depend upon the absence of punitive or prohibitive legislation
in respect of biological materials.



30







We depend upon
our key personnel, and if we cannot retain or attract key employees, the development and commercialization of our products will
be adversely affected



Our success depends
to a significant extent upon the expertise and experience of certain key personnel working in management, scientific, supervisory,
operational and administrative capacities. While we have an informal ad hoc program for the succession of management and training
of management, the loss of the services of its key personnel could have a material adverse effect on us and our business and results
of operations. We face competition for such persons from other companies, academic institutions, government entities and other
organizations. There is no assurance that we will be able to recruit such key personnel on a timely basis.



We are subject
to privacy laws, violations of which could result in substantial liability and expenses to comply with such laws.



As our business is focused on development
of products for the treatment of hematological and cancer or cancer-related conditions, we are subject to certain privacy laws
in Canada, the U.S. and various other jurisdictions regulating the use, disclosure, transmission and retention of confidential
personal information. We have implemented a program of information protection practices to ensure compliance with such regulations,
but diligence and/or insurance coverage may not protect us from all regulatory action and liability, particularly liability that
may arise from our own negligent actions or misconduct. We could be materially and adversely affected if we are required to respond
to regulatory action, pay damages, or bear the costs of defending any claim which is beyond the level of our insurance coverage.
There can be no assurance that we will be able to maintain such insurance coverage on terms acceptable to us.



Risk Related To Intellectual Property
And Litigation



Our success depends
upon our ability to protect our intellectual property and our proprietary technology.



Our success depends,
in part, upon our ability and our licensors’ ability to obtain patents, maintain trade secrets protection and operate without
infringing on the proprietary rights of third parties or having third parties circumvent our rights. Certain licensors, the institutions
that they represent and, in certain cases, us 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, certain important legal principles
remain unresolved. There can be no assurance that the patent applications made in respect of the owned or 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 us will provide us with any competitive advantages, that the patents of others will not impede our ability
to do business or that third parties will not be able to circumvent or successfully challenge the patents obtained in respect of
the licensed products. The cost 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 our processes or products or those of our licensors do not or
will not infringe upon the patents of third parties or that the scope of our patents or those of our licensors will successfully
prevent third parties from developing similar and competitive products.



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



31







We maintain patents
in connection with our products including nimotuzumab. There may also be risks related to nimotuzumab as our license originates
from Cuba. Cuba is a formally 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 agreement for our Cuban sourced products
is the 1995 CIMYM License with respect to nimotuzumab. There is no guarantee that, with any future changes in the political regime,
the Cuban government would continue to honour such a license agreement.



Our potential
involvement in intellectual property litigation could negatively affect our business.



Our future success
and competitive position depend in part upon our 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 or licensed to us will not be challenged. Our ability to establish and maintain a competitive
position may be achieved in part by prosecuting claims against others who we believe are infringing our rights and by defending
claims brought by others who believe that we are infringing their rights. In addition, enforcement of our patents in foreign jurisdictions
will depend on the legal procedures in those jurisdictions. Even if such claims are found to be invalid, our 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, our involvement in intellectual property litigation could result in significant expense, which could materially
adversely affect the use or licensing of related intellectual property and divert the efforts of our valuable technical and management
personnel from their principal responsibilities, whether or not such litigation is resolved in our favour. (See “General
Development of the Business – Business Strategy” and “Product Portfolio”)



We depend upon
licenses from third parties and the maintenance of licenses is necessary for our success.



The principal intellectual
property claims for CYT387 and CYT997 are primarily owned by YM and not licensed, although certain patent families have been in-licensed
from SUNY and the Ludwig Institute for Cancer Research. (See “General Development of the Business – Licensing Arrangements
– In-Licensing – Licenses for CYT387”)



With respect to nimotuzumab,
we have obtained our rights to the product currently being developed under a license agreement from CIMAB originally dated May
3, 1995, as amended.



We depend upon the
license rights to certain products for commercialization. While we believe we are in compliance with our obligations under these
licenses, they 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 a license is enforceable or will not be terminated or converted. The termination or conversion
of the licenses or our inability to enforce our rights under the licenses would have a material adverse effect on our business
as we would not have the rights to certain of the products that we are developing. To the extent that management considers a particular
license to be material to our undertaking, we have entered into a signed license agreement for that license. The in-license agreements
to which we are currently a party require us to maintain and defend the patent rights that we in-license against third parties.



Not all of our current
licenses are governed by the laws of Ontario and therefore, the enforcement of certain of them may necessitate pursuing legal proceedings
and obtaining orders in other jurisdictions, including the U.S. and 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 license agreements with us, the parties have agreed that the law governing
the agreements is Ontario law and the parties will attorn to the courts of Ontario or the Federal Court of Canada to resolve any
dispute regarding the agreements.



One of our products
in clinical development is licensed from Cuba. The commercial and legal environment may be subject to political risk. It is possible
that we may not be able to enforce our legal rights in Cuba or against Cuban entities to the same extent that we would be able
to do in a country with a more established commercial and legal system. Termination of our license arrangements or difficulties
in enforcement of such arrangements could have a material adverse effect on our ability to continue development of our licensed
products from that country.



32







We have a number of
license agreements with CIMAB. CIMAB is a corporation owned by 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. CIMAB is
reportedly akin to a “crown corporation” in Canada. CIMAB’s management is purportedly both autonomous and responsible
for the success of its business decisions. Despite the fact that CIMAB’s management is purportedly both autonomous and responsible
for business decisions and that the license agreements with us declare Ontario law as the governing law, because of the fact that
CIMAB is ultimately a state-owned entity we will not necessarily be able to enforce compliance by CIMAB with any judgment if CIMAB
or the Government of Cuba refuses to comply.



We also conduct
our in-licensing internationally and we currently own or license products and technologies from sources in Canada, Australia and
Cuba. We have previously licensed, and intend to and may license, products from sources in other jurisdictions.



We have out-licensed
nimotuzumab to a number of licensees internationally to advance the drug towards regulatory approval and commercialization in their
respective jurisdictions. Should a licensee choose not to continue to advance the drug we may have difficulties identifying another
potential licensee in such jurisdiction and development may be significantly delayed or cease altogether in such jurisdiction.
This would reduce the number of countries in which nimotuzumab could be marketed and sold.



We have licensed nimotuzumab
from CIMAB, a corporation representing a scientific institute in Cuba. The U.S. has maintained an embargo against Cuba, administered
by the U.S. Department of the Treasury. The laws and regulations establishing the embargo have been amended from time to time,
most recently by the passage of the Helms-Burton Act. The embargo applies to almost all transactions involving Cuba or Cuban enterprises,
and it bars from such transactions any U.S. persons unless such persons obtain specific licenses from the U.S. Department of the
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 Act will not be enforceable in Canada.
The U.S. embargo could have the effect of limiting our access to U.S. capital, U.S. financing, U.S. customers and U.S. suppliers.
In particular, our products licensed from Cuban sources, noted above, are likely to be prohibited from being licensed or sold in
the U.S. unless the U.S. Department of the Treasury issues a license or the embargo is lifted.



The Helms-Burton Act
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 U.S. We do not own any real
property in Cuba and, to the best of our knowledge, and based upon the advice of the Cuban government, none of the properties of
the scientific centers of the licensors in which 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 U.S. However, there can be
no assurance that this is correct.



The U.S. has imposed
economic sanctions against Cuba. These sanctions apply to certain transactions from the U.S. or activities by a person subject
to U.S. jurisdiction. Among other things, the sanctions prohibit transactions that involve property in which Cuba or any Cuban
national has or has had any interest whatsoever, direct or indirect.



For purposes of interpreting
the sanctions, “person subject to U.S. jurisdiction” means any U.S. citizen and U.S. permanent resident alien wherever
located, any entity organized under the laws of the U.S. or any jurisdiction within the U.S. (including foreign branches and subsidiaries)
or any person in the U.S. We (other than our subsidiary YM USA and any U.S. citizen and U.S. permanent resident alien working or
acting for the company, wherever located) are not a person subject to U.S. jurisdiction for purposes of the sanctions and are not
subject to the sanctions with respect to our activities outside of the U.S.



33







Nevertheless, we cannot
assure you that OFAC, which administers the U.S. government’s Cuba sanctions, would agree that the measures we have taken
and will take are sufficient to comply with the sanctions described above.



We are the exclusive
licensee of U.S., European and other patents related to nimotuzumab licensed to us by CIMAB, a Cuban company responsible for commercializing
products developed at CIM, a research institute formed by the government of Cuba. In connection with a default judgment obtained
from a U.S. federal court in Miami, Florida by an individual claimant against Cuba, the Cuban government and a number of other
parties, including CIM, the claimant has recorded a lien against the U.S. patents that are licensed by us from CIMAB. These are
patents US5,891,996 and US6,506,883, each of which expires in November 2015. The claimant also has commenced an action to enforce
that default judgment. If the claimant succeeds in its action to enforce the judgment, ownership of the licensed U.S. patents could
be transferred from CIM to the claimant or sold to a third party. Based on the advice of our counsel, we believe that any transfer
of the U.S. patents will be subject to our existing license from CIMAB and that any such transfer should have no bearing on our
rights under the license agreement. However, there can be no assurance that any subsequent owner of the U.S. patents will fully
cooperate with us in connection with our efforts to continue the development of nimotuzumab in the U.S., will not attempt to invalidate
our license agreement, or will not attempt to take any other action that could potentially impact our license to the U.S. patents.



Loss or destruction
of our data may adversely affect our business.



Our
clinical data is stored offsite by third parties. If such data is lost, damaged or destroyed or there is inappropriate disclosure
of confidential or proprietary information, we could incur liability and the development of our product candidates could be significantly
delayed.



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. We currently maintain
clinical trial liability insurance with an ultimate net loss value of up to C$10,000,000 per claim and a policy aggregate of C$10,000,000.
We currently have 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 our business 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 us.



Risks Related To Our Common Shares,
Financial Results And Need For Financing



We are susceptible
to general economic conditions.



Recent years have been
marked by global economic turmoil. General economic conditions may have a significant impact on us, including our commercialization
opportunities, our ability to raise financing and our ability to work with others upon whom we rely for basic research, manufacture,
development and sale of our products.



Although all of
the funds advanced to our joint venture subsidiaries have been expensed, we are only entitled to recover those expenditures 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 in connection with the 1995 CIMYM License with respect to nimotuzumab. The
funding agreement provides that we 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, we make the final determination as to whether or not a clinical trial expense is justified with respect to any given
product.



34







We are entitled to
reimbursement of all advances made by us pursuant to the funding agreement, from the results of the successful development of the
licensed products and generation of income. CIMYM repays such advances out of a portion of its revenues in priority to eventual
revenue or profit sharing arrangements under the 1995 CIMYM License.



As at June 30, 2012,
we had advanced $78,818,938 to CIMYM. Since we have expensed the total amount advanced, any reimbursement of such advances would
be considered to be income by us.



We expect to be
a “passive foreign investment company” for the current taxable year, which would likely result in materially adverse
U.S. federal income tax consequences for investors who are U.S. persons.



We generally will be
designated as a “passive foreign investment company” under the meaning of Section 1297 of the U.S. Internal Revenue
Code of 1986, as amended (the “Code”), (a "PFIC") if (a) 75% or more of our gross income is “passive
income” (generally, dividends, interest, rents, royalties, and gains from the disposition of assets producing passive income)
in any taxable year, or (b) if at least 50% or more of the quarterly average value of our assets produce, or are held for the production
of, passive income in any taxable year. A shareholder who is a U.S. person (as such term is defined under applicable U.S. legislation)
should be aware that we believe that we were a PFIC during one or more prior taxable years, and based on current business plans
and financial projections, we expect to be a PFIC for the current taxable year and for the foreseeable future. If we are a PFIC
for any taxable year during which a U.S. person holds common shares of the Company, it would likely result in materially adverse
U.S. federal income tax consequences for such U.S. person, including, but not limited to, any gain from the sale of our common
shares would be taxed as ordinary income, as opposed to capital gain, and such gain and certain distributions on our common shares
would be subject to an interest charge, except in certain circumstances. It may be possible for U.S. persons to fully or partially
mitigate such tax consequences by making a “qualifying electing fund election,” as defined in the Code (a “QEF
Election”). U.S. persons that hold our common shares should be aware that we will make available to shareholders who are
U.S. persons, upon their written request: (a) information as to our status as a PFIC and the status of any subsidiary PFIC in which
we own more than 50% of such subsidiary PFIC’s total aggregate voting power, and (b) for each year in which we are a PFIC
provide to a shareholder who is a U.S. person, upon written request, all information and documentation that a shareholder making
a QEF Election with respect to us and such more than 50% owned subsidiary PFIC is required to obtain for U.S. federal income tax
purposes. The PFIC rules are extremely complex. A U.S. person holding our common shares is encouraged to consult its own tax advisor
regarding the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of our common
shares.



We may not be
able to obtain necessary funding from sales, license fees, milestones or royalties and, as a result, may need to try to obtain
capital through the public market or private financing which may not be available on acceptable terms, or at all.



We will require additional
funding for the commercialization of our products, licensed and owned, and 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.
Our business strategy is to in-license or acquire rights to promising products, further develop those products by progressing the
products toward regulatory approval by conducting and managing clinical trials, and finally, generally, to out-license rights to
manufacture and/or market resulting products to other pharmaceutical firms generally in exchange for royalties and license fees.
Due to the in- and out-licensing arrangements and our dependence on others for the manufacture, development and sale of our in-licensed
products, we do not have consistent monthly or quarterly expenditures and cannot determine the amount and timing of required additional
funding with any certainty.



There is no assurance
that we will have sufficient resources, either through the capital markets or from a potential partner, to advance and broaden
the development program for CYT387 through to commercialization. To the extent that we are unable to fund our expenditures from
sales, license fees and royalties, it will be necessary to reconsider whether to continue existing projects or enter into new projects,
or to access either the public markets or private financings if conditions permit. In addition, we have no established bank financing
arrangements and there can be no assurance that we will be able to establish such arrangements on satisfactory terms or at all.
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 favourable terms.



35







Our operating
results and stock price may fluctuate significantly.



The trading price of
our common shares, as with many pharmaceutical and biotechnology companies, has historically been and is likely to remain highly
volatile. The market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. Factors such as the efficacy and safety of our products or the products of our competitors,
announcements of technological innovations by us or our competitors, governmental regulations, developments in our patents or other
proprietary rights, our licensors or our competitors, litigation, fluctuations in our operating results, thin capitalization, market
conditions for biopharmaceutical stocks and general market and economic conditions could have a significant impact on the future
trading price of our common shares. In addition, the price of our common shares is highly volatile since it may take years before
any of our licensed products will receive final regulatory approval to be marketed in Canada, the U.S. or other jurisdictions,
if at all.



There is no assurance
that an active trading market in our common shares will be sustained.



Our common shares are
listed for trading on the NYSE MKT and on the TSX. However, there can be no assurance that an active trading market in our common
shares on these stock exchanges will be sustained.



Our share price
is volatile.



The market price of
our common shares, as with that of the securities of many other biotechnology companies in the development stage, has been, and
is likely to continue to be, highly volatile. This increases the risk of securities litigation related to such volatility. Factors
such as the results of our pre-clinical studies and clinical trials, as well as those of our collaborators or our competitors other
evidence of the safety or effectiveness of our products or those of our competitors, announcements of technological innovations
or new products by us or our competitors, governmental regulatory actions, developments with our collaborators, developments (including
litigation) concerning patent or other proprietary rights of our company or our competitors, concern as to the safety of our products,
period-to-period fluctuations in operating results, changes in estimates of our performance by securities analysts, market conditions
for biotechnology stocks in general and other factors not within the control of our company could have a significant adverse effect
on the market price of our common shares.



We have not paid
dividends.



We have never paid
cash dividends on our common shares and do not anticipate paying any cash dividends in the foreseeable future. We currently intend
to retain our future earnings, if any, to finance further research and the expansion of our business.



Our outstanding
common shares could be subject to dilution.



The exercise of stock
options and warrants already issued by us and the issuance of other additional securities in the future could result in dilution
in the value of our common shares and the voting power represented by the common shares. Furthermore, to the extent holders of
our stock options or other securities exercise their securities and then sell the common shares they receive, our share price may
decrease due to the additional amount of our common shares available in the market.



We have adopted
a shareholder rights plan, which could make it more difficult for a third party to acquire us, thus potentially depriving our shareholders
of a control premium.



We have adopted a shareholder
rights plan. The provisions of such plan could make it more difficult for a third party to acquire a majority of our outstanding
common shares, the effect of which may be to deprive our shareholders of a control premium that might otherwise be realized in
connection with an acquisition of our common shares. See “Description of Share Capital, Common Shares and Related Information”.



36







Risks Related To Being A Canadian
Entity



We are 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, U.S.



The material differences
between the Nova Scotia Companies Act (the “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 quarters of the votes of shareholders who cast votes (a “Special Resolution”) (and,
in addition, especially where the holders of 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 our articles of association, whereas under DGCL, quorum requires the holders of a majority
of the shares entitled to vote to be present; and (iii) our articles of association require a Special Resolution and the Corporations
Miscellaneous Provisions Act (Nova Scotia) requires three-quarters of the votes of shareholders that, in aggregate, represent the
majority of the shares issued and outstanding at the time, 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.



It may be difficult
for non-Canadian investors to obtain and enforce judgments against us because of our Canadian incorporation and presence.



We are a corporation
existing under the laws of Nova Scotia, Canada. Most of our directors and officers, and certain of the experts named herein, are
residents of Canada or otherwise reside outside the U.S., and all or a substantial portion of their assets, and a substantial portion
of our assets, are located outside the U.S. Consequently, although we have appointed an agent for service of process in the U.S.,
it may be difficult for investors in the U.S. to bring an action against such directors, officers or experts or to enforce against
those persons or us a judgment obtained in the U.S. court predicated upon the civil liability provisions of federal securities
laws or other laws of the U.S. Investors should not assume that Canadian courts (1) would enforce judgments of U.S. courts obtained
in actions against us or such directors, officers or experts predicated upon the civil liability provisions of the U.S. federal
securities laws or the securities or “blue sky” laws of any state within the U.S. or (2) would enforce, in original
actions, liabilities against us or such directors, officers or experts predicated upon the U.S. federal securities laws or any
such state securities or “blue sky” laws. In addition, we have been advised by our Canadian counsel that in normal
circumstances, only civil judgments and no other rights arising from U.S. securities legislation (for example, penal or similar
awards made by a court in a regulatory prosecution or proceeding) are enforceable in Canada and that the protections afforded by
Canadian securities laws may not be available to investors in the U.S.



If there are substantial
sales of our common shares, the market price of our common shares could decline.



Sales of substantial
numbers of our common shares could cause a decline in the market price of our common shares. Any sales by existing shareholders
or holders of options may have an adverse effect on our ability to raise capital and may adversely affect the market price of our
common shares.



37







DIRECTORS
AND SENIOR MANAGEMENT



Directors



The name, municipality
of residence, age as of the date hereof and position with us of each of the current directors are set forth below. The term of
each director of the Company expires as of the next annual general meeting of the Company, which is expected to be held in November
2012.



|Name                                                                      |  | Age |  | Position                                        |  | Period Served
|------------------------------------------------------------------------- |  | --- |  | ----------------------------------------------- |  | -------------
|David G.P. Allan (2)Toronto, Ontario, Canada                              |  | 70  |  | Chairman and Director                           |  | Since 1994   
|                                                                          |  |     |  |                                                 |  |              
|Thomas I.A. Allen, Q.C. (1)(2)Toronto, Ontario, Canada                    |  | 72  |  | Director                                        |  | Since 1996   
|                                                                          |  |     |  |                                                 |  |              
|Nick Glover Salt Spring Island, British Columbia, Canada                  |  | 43  |  | President, Chief Executive Officer and Director |  | Since 2010   
|                                                                          |  |     |  |                                                 |  |              
|Mark Entwistle, M.A. (3)Toronto, Ontario, Canada                          |  | 56  |  | Director                                        |  | Since 1997   
|                                                                          |  |     |  |                                                 |  |              
|Henry Friesen, C.C., M.D. (1)Winnipeg, Manitoba, Canada                   |  | 78  |  | Director                                        |  | Since 2001   
|                                                                          |  |     |  |                                                 |  |              
|Philip Frost, M.D., Ph.D. (2)(3)Morristown, New Jersey, U.S.              |  | 72  |  | Director                                        |  | Since 2007   
|                                                                          |  |     |  |                                                 |  |              
|Catherine J. Mackey, Ph.D.(3)
        Old Lyme, Connecticut,
        U.S. |  | 57  |  | Director                                        |  | Since 2011   
|                                                                          |  |     |  |                                                 |  |              
|Nicole Onetto, M.D.(1)
        Toronto, Ontario, Canada                   |  | 59  |  | Director                                        |  | Since 2011   
|                                                                          |  |     |  |                                                 |  |              
|Francois Thomas, M.D. (3)Brussels, Belgium                                |  | 54  |  | Director                                        |  | Since 2007   
|                                                                          |  |     |  |                                                 |  |              
|Tryon M. Williams, B.Sc. (1)(2)Anguilla, BWI                              |  | 71  |  | Director                                        |  | Since 1995   



Notes:

| | (1) | Member of Audit Committee.
| | --- | --------------------------

| | (2) | Member of Corporate Governance and Nominating Committee.
| | --- | --------------------------------------------------------

| | (3) | Member of Compensation Committee.
| | --- | ---------------------------------



David
G.P. Allan - Chairman and Director



Mr. Allan is the Chairman
of the board of directors of the Company, a position he has held since 1994. He previously served as the Chief Executive Officer
of the Company from April 1998 to November 2010. In addition, Mr. Allan is the Executive Chairman of Stem Cell Therapeutics Corp.,
lead director at DiaMedica Inc., Canada, Chairman of AvidBiologics Inc and a member of a number of private company boards. Mr.
Allan was formerly a governor of The Toronto Stock Exchange, a member, and working group Chair, of the Ontario Biotechnology Advisory
Board, and a member of the Awards Selection Committee for the Networks of Centres of Excellence in Canada. He has been a member
of the Board of the Shaw Festival Theatre and of the Board of Trustees for the Ontario College of Art and Design. Mr. Allan is
currently a member of BIOTECanada’s Emerging Companies Advisory Board and a member of the Board of Directors of Life Sciences
Ontario. He is the 2012 recipient of the “Gold Leaf Award for Industry Leadership” from the industry organization BIOTECanada.



38







Thomas
I.A. Allen, Q.C., F.C.I.Arb - Director



Mr. Allen is counsel
to Norton Rose OR LLP, a law firm in Canada. Mr. Allen was the initial Chairman of the Accounting Standards Oversight Council of
Canada and was a member of the Advisory Board of the Office of the Superintendent of Financial Institutions of Canada. He is currently
a director of Forsys Metals Corp., a TSX-listed company. Mr. Allen was Chairman of the Task Force to Modernize Securities Legislation
in Canada. Mr. Allen has been a director of the Company since 1996.



Nick
Glover, Ph.D. – President, Chief Executive Officer and Director



Dr. Glover is the President
and Chief Executive Officer of the Company. He previously served as the Company’s Chief Operating Officer from June 2010
to November 2010. Prior to this, he was providing life sciences consultancy services to the industry. From January 2004 until June
2008, Dr. Glover was President and Chief Executive Officer of Viventia Biotech Inc., having previously held the position of Vice
President, Corporate Development and Product Operations. Dr. Glover was formerly an investment manager at MDS Capital Inc., a life
sciences venture capital fund. He holds a Ph.D. in chemistry from Simon Fraser University, British Columbia.



Mark
Entwistle, M.A. - Director



Mr. Entwistle is Director
and Special Advisor to Acasta Capital, and has maintained his own boutique consulting practice in Cuba business since 1997. He
was Ambassador of Canada to Cuba from 1993 to 1997, and previously a career diplomat with the Canadian Department of Foreign Affairs
and International Trade in a variety of embassy positions from 1982 to 1997. Mr. Entwistle 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 Company since October 1997.



Henry
Friesen, C.C., M.D., F.R.S.C. - Director



Dr. Friesen served
from 2004-2009 as Chair of the Gairdner Foundation whose international awards are Canada’s most prestigious prizes in the
biomedical sciences. He was Founding Chair, Genome Canada, 2000-2005, a $600 million budget non-profit organization that supports
genomics/proteomics programs to position Canada as a world leader in selected areas in this important sector. From 1991 to 2000
Dr. Friesen was President of the Medical Research Council of Canada and was instrumental in transforming it into the Canadian Institutes
of Health Research, an organization with an annual budget in 2008 of over $900 million dedicated to supporting Canadian researchers
as well as industry participants. Dr. Friesen is noted for his discoveries of the human hormone prolactin. For 19 years he was
Head of the Department of Physiology at the University of Manitoba and now is Distinguished University Professor Emeritus. Dr.
Friesen is a Fellow of the Royal Society of Canada, a Companion of the Order of Canada, and a recipient of eight honorary degrees.
Dr. Friesen also serves on the board of Stem Cell Therapeutics Corp. Dr. Friesen has been a director of the Company since November
2001.



Philip
Frost, M.D., Ph.D. - Director



Dr. Frost is the founder
and Chief Scientific Officer of Primrose Therapeutics Inc. In 2005, Dr. Frost was appointed Executive Vice-President and Chief
Scientific Officer at ImClone where he oversaw the company’s research, clinical and regulatory departments. He subsequently
held the post of Interim Chief Executive Officer until December 2006. Prior to ImClone, Dr. Frost served as Vice President of Oncology
and Co-Director of the Oncology Therapeutic Area Leadership Team at Wyeth, where he was responsible for the development of various
oncology compounds and contributed to the approval and commercialization of Mylotarg® for the treatment of a specific form
of acute myeloid leukemia. Dr. Frost has held the positions of Adjunct Professor of Cell Biology and Adjunct Professor of Medicine
at The University of Texas M.D. Anderson Cancer Center. He was previously a Director of Innovive Pharmaceuticals, a New York-based
oncology company and a Director of Avalon Pharmaceuticals, Inc. Dr. Frost has been a director of the Company since 2007.



39







Catherine
J. Mackey, Ph.D. - Director



Dr. Mackey is the Founder
of MindPiece Partners, a management consulting practice serving the biotech industry. Dr. Mackey has 30 years of experience in
the life science industry, most recently serving as Senior Vice President of Worldwide Research and Development for Pfizer Inc.
She also held senior management roles at Monsanto and DEKALB Genetics Corporation. She earned her Ph.D. degree in microbiology
from Cornell University. Dr. Mackey serves on the board of directors of Althea Technologies Inc., Genelux Corporation, CONNECT,
Rady Children’s Hospital, and Project Concern International. She has been a director of the company since 2011.



Nicole Onetto,
M.D. - Director



Dr. Onetto is currently
Deputy Director and Chief Scientific Officer of the Ontario Institute for Cancer Research. She most recently served as Chief Medical
Officer of Zymogenetics, Inc. from September 2005 to May 2009, as Executive Vice President and Chief Medical Officer at OSI Pharmaceuticals,
Inc. from 2003 to 2005, as Executive Vice President of OSI Pharmaceutical's Oncology Division from 2002 to 2003, and as Senior
Vice President, Medical Affairs, at Gilead Sciences, Inc. from 2000 to 2001. Dr. Onetto has a Doctor of Medicine degree with a
specialization in pediatrics and hematology from the University of Paris V, France and a M.Sc. in Pharmacology from University
of Montréal. She currently serves on the board of directors for ImmunoGen, Inc., a public U.S. company developing anticancer
therapeutics, and XLV Diagnostics Inc., a private Canadian company.



François
Thomas, M.D. - Director



Dr.Thomas,
a board certified medical oncologist, is a former director of DNA Therapeutics, Entomed, Eurogentec, Neurotech, Newron, Novexel,
Unibioscreen and CropDesign, and CEO of Cytheris. Dr. Thomas is currently General Manager at Bioserve Ltd. (Cambridge, UK), a consultancy
for the life sciences arena. Dr. Thomas has been a Senior Advisor at Bryan Garnier, a Paris-based investment bank, and a Venture
Partner at Atlas Venture, a venture capital firm in London (UK). He was previously Vice President Licensing, Medical Affairs and
Pharmacogenomics at Genset (Paris, France), Vice President, Clinical Development at Ipsen (Paris, France) and Assistant Professor
of Medical Oncology at Institut Gustave Roussy (Paris, France). Dr. Thomas has been a director of the Company since 2007.



Tryon
M. Williams, B.Sc. (Math) - Director



Mr. Williams is the
Executive Chairman, and director of Bingo.com, Ltd., an internet technology company and Chairman and director of CellStop International
Ltd., an automobile security device manufacturer. From 1993 to 2007, Mr. Williams was Adjunct Professor, Sauder School of Business,
The University of British Columbia.  Mr. Williams is also a director of several other private corporations. Mr. Williams
has been a director of the Company since November 1995.



Officers



The name, municipality
of residence, age as of the date hereof and position with us of each of the current officers are set forth below.



|Name                                                              |  | Age |  | Position                                                    
|----------------------------------------------------------------- |  | --- |  | ------------------------------------------------------------
|Wendy ChapmanErin, Ontario, Canada                                |  | 47  |  | Vice-President, Clinical Operations                         
|                                                                  |  |     |  |                                                             
|Nick Glover
        Salt Spring Island, British

Columbia, Canada |  | 43  |  | President and Chief Executive Officer                       
|                                                                  |  |     |  |                                                             
|Mark KowalskiWinchester, Massachussetts,
 U.S.                    |  | 57  |  | Chief Medical Officer and Vice-President, Regulatory Affairs



40









|Name                                                 |  | Age |  | Position                                  
|---------------------------------------------------- |  | --- |  | ------------------------------------------
|James Smith
        Toronto,
        Ontario, Canada |  | 42  |  | Vice-President, Corporate Communications  
|                                                     |  |     |  |                                           
|Leonard Vernon Nobleton, Ontario, Canada             |  | 68  |  | Vice-President, Finance and Administration
|                                                     |  |     |  |                                           
|Ernest WongBroomfield, Colorado, U.S.                |  | 44  |  | Vice-President, Business Development      



Wendy
Chapman – Vice-President, Clinical Operations



Ms. Chapman joined
the Company in 2010. Prior to joining, she was the Chief Operating Officer and Vice President of Clinical Operations at Viventia
Biotechnologies, an oncology biopharmaceutical company specializing in the discovery and development of targeted monoclonal antibodies.
At Viventia, Ms. Chapman was responsible for the execution of all corporate operational initiatives, provided strategic input to
clinical development plans, and oversaw the planning and implementation of all clinical trials. Ms. Chapman has more than 20 years
of experience in clinical drug development at several pharmaceutical and contract research organizations in Canada and the U.S.
including Bayer, AstraZeneca and MDS. Prior to joining Viventia, Ms. Chapman was the Canadian Business Unit Head for AAI Pharma.



Mark Kowalski
– Chief Medical Officer and Vice-President, Regulatory Affairs



Dr. Kowalski joined
the Company in 2010. Prior to joining YM, Dr. Kowalski was the Chief Medical Officer and Vice President of Medical/Regulatory Affairs
at Viventia Biotechnologies Inc., a biopharmaceutical company involved in the discovery and development of monoclonal antibody-based
technologies for the treatment of cancer. Prior to Viventia, he was the Senior Director of Medical Affairs at AAI Pharma Inc. Dr.
Kowalski has extensive experience in Phase I through Phase IV drug development and clinical trials in a wide variety of therapeutic
areas including oncology, urology, infectious diseases, analgesia, allergy, rheumatology and cardiovascular diseases. His past
experience also includes basic scientific research on the molecular biology of HIV as well as clinical practice in Internal Medicine.
Dr. Kowalski holds a B.A. from Rutgers University and an M.D. and Ph.D. from the University of Kansas School of Medicine. He completed
his postgraduate training in Internal Medicine and Infectious Diseases at Duke University and Harvard Medical School.



James
Smith – Vice-President, Corporate Communications



Mr. Smith joined the
Company in 2011. Prior to joining YM, Mr. Smith was Vice President, Healthcare at TMX Equicom, a leading investor relations consulting
firm. In his ten years at Equicom, he worked with numerous biotechnology, healthcare services and pharmaceutical companies providing
strategic insight and communications counsel. Prior to his role at Equicom, Mr. Smith provided consulting services to a venture
capital firm, working closely with its investee biotechnology companies and evaluating new investment opportunities. He also conducted
research for eight years primarily focused on animal cell culture. He has a Bachelor’s degree in Engineering Chemistry and
a Master’s degree in Biochemical Engineering from Queen’s University.



Leonard
Vernon, B.Sc., C.A. – Vice-President, Finance and Administration



Mr. Vernon has been
an officer of the Company since 1997. 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. Mr. Vernon earned a B.Sc. in 1968 and was awarded his C.A. in 1972 with Clarkson Gordon & Co. (now
Ernst & Young llp).



41







Ernest Wong
– Vice-President, Business Development



Dr. Wong joined the
Company in 2010. He has more than 15 years of experience working for biotechnology and pharmaceutical companies in business development,
drug discovery and clinical development strategy. Prior to joining, he held business development and global development project
leadership positions at OSI Pharmaceuticals and AnorMED Inc. He has negotiated and managed a variety of deal transactions, including
the out-licensing of clinical programs, the in-licensing of research technologies and preclinical programs and the establishment
of multi-year R&D collaborations. In addition to his business development roles, Dr. Wong has been the global project leader
for two oncology clinical programs, including a first-in-class kinase inhibitor in Phase III development. Dr. Wong holds a PhD
in chemistry from the University of British Columbia and an MBA from the Leeds School of Business at the University of Colorado.
He has authored and co-authored numerous scientific papers and is a named inventor on multiple patents. Dr. Wong also holds the
Certified Licensing Professional (CLPTM) designation from the Licensing Executive Society.



Cease Trade Orders,
Bankruptcies, Penalties or Sanctions



No director or executive
officer is, as at the date of this annual information form, or has been, within 10 years before the date of the information circular,
a director, chief executive officer or chief financial officer of any company (including our Company) that, while that person was
acting in that capacity,



| | 1. | was the subject of a cease trade or similar order or an order that denied the relevant company
access to any exemption under securities legislation, for a period of more than 30 consecutive days, with the exception of Thomas
Allen. Mr. Allen is a former director of Thomas Weisel Partners Group, Inc. (“TWPG”). On April 28, 2010, the U.S. Financial
Industry Regulatory Authority (“FINRA”) commenced an administrative proceeding against TWPG. FINRA’s complaint
related to a transaction on January 29, 2008 in which approximately $15.7 million in auction rate securities were sold from TWPG’s
account to the accounts of three customers, and charged TWPG with violations of various FINRA Rules and Section 10(b) of the United
States Securities Exchange Act of 1934, as amended and SEC Rule 10b-5. On July 1, 2010, TWPG was acquired by Stifel Financial Corp.
and ceased to be a public company, and Mr. Allen ceased to be a director; or
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | was subject to an event that resulted, after the director or executive officer ceased to be a director,
chief executive officer or chief financial officer, in the company being the subject of a cease trade or similar order or an order
that denied the relevant company access to any exemption under securities legislation, for a period of more than 30 consecutive
days.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



No director, executive
officer or a shareholder holding a sufficient number of securities of our Company to affect materially the control of our Company:



| | 1. | is, at the date of this annual information form, or has been within the 10 years before the date
of this annual information form, a director or executive officer of any company (including our Company) that, while that person
was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal
under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise
with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; with the exception of Thomas Allen.
Mr. Allen was previously a director and secretary of Unisphere Waste Conversion Ltd. (“Unisphere”), a company listed
on the TSX Venture Exchange. By press release dated February 1, 2005, Unisphere indicated it was unable to make its current payments
or pay off any indebtedness and that discussions with secured debenture holders of Unisphere were ongoing. Unisphere’s wholly-owned
subsidiary, Unisphere Tire Recycling Inc., filed a notice of intention to make a proposal to its creditors under the Bankruptcy
and Insolvency Act (Canada). On February 9, 2005, Mr. Allen resigned as a director and secretary of Unisphere. Effective February
14, 2005 trading in the shares of Unisphere was suspended by the TSX Venture Exchange due to the failure to maintain exchange requirements,
as Unisphere had less than three directors. On March 21, 2005, Unisphere filed an assignment in bankruptcy. Mr. Allen has also,
until early August 2011, acted as one of three outside directors of a New Hampshire-based private company owned by his step-daughter
and her husband. The company sought the protection of Chapter 11 under U.S. bankruptcy laws. The process is on-going. One of the
creditors made a proposal to creditors which was approved by the presiding judge; or
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





42









| | 2. | has, within the 10 years before the date of this annual information form, become bankrupt, made
a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement
or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Committees
of the Board of Directors



Our Board currently
has three committees: the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee. Pursuant
to its written charter, each committee assists and provides advice and recommendations to our Board of Directors.



Audit Committee



The Audit Committee
is directly responsible for overseeing our accounting and financial reporting processes and audits of our financial statements,
and for the appointment, compensation and oversight of the work of any registered external auditor employed by us (including resolution
of disagreements between management of the Company 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 U.S.
securities laws, rules and guidelines, any applicable stock exchange requirements or guidelines and any other applicable regulatory
rules.



The Audit Committee
is 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 Company. 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 U.S. 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 NYSE
MKT; and
| | --- | --------------------------------------------------------------------------------------------



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



A detailed description
of the duties and responsibilities of the Audit Committee can be found in the Audit Committee Mandate, which is attached as Schedule
A to this Annual Information Form.



The members of the
Company’s Audit Committee are Tryon M. Williams (Chair), Thomas I.A. Allen, Henry Friesen and Nicole Onetto.



The Board has determined
that Mr. Williams qualifies as an “audit committee financial expert” (as such term is defined in Form 40-F of the U.S.
Securities and Exchange Commission (“Form 40-F”)) because of his experience as Chairman, CEO and director of Bingo.com
Ltd., Chairman and director of CellStop International Ltd. and as an Adjunct Professor, Sauder School of Business, The University
of British Columbia. Mr. Williams is “independent” within the meaning of such term in the rules of the NYSE MKT.



Compensation Committee



The Compensation Committee
is comprised of a minimum of three directors who, other than a non-executive Chair, may not be executive officers or employees
of the Company or any of its affiliates. The members of the Company’s Compensation Committee are Mark Entwistle (Chair),
Philip Frost, Catherine Mackey and François Thomas.





43













Nominating and Corporate
Governance Committee



The Committee is comprised
of a minimum of three directors, none of whom is an officer or an employee of the Company, other than a non-executive chair. Each
Committee member shall satisfy the independence and experience requirements of applicable securities laws, rules or guidelines,
any applicable stock exchange requirements or guidelines and any other applicable regulatory rules. Determinations as to whether
a particular director satisfies the requirements for membership on the Committee shall be made by the Board. The members of the
Company’s Nominating and Corporate Governance Committee are Thomas I.A. Allen (Chair), David Allan, Philip Frost and Tryon
M. Williams.



Share Ownership



The following table
sets out details of our shares and options that are directly or indirectly owned or controlled by directors and executive officers
as at June 30, 2012, based on 157,546,793 common shares issued and outstanding on such date.





|Name              |  | Number of Common Shares |         |  | Percentage of Common Shares Outstanding |  |   | Common Shares Held Under Option |  |  | Exercise Price |  |  | Expiration
Date
|----------------- |  | ----------------------- | ------- |  | --------------------------------------- |  | - | ------------------------------- |  |  | -------------- |  |  | ---------------
|David G.P. Allan  |  |                         | 417,180 |  |                                         |  | * |                                 |  |  | 1,689,502      |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Thomas I.A. Allen |  |                         | -       |  |                                         |  | - |                                 |  |  | 376,635        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Wendy Chapman     |  |                         | -       |  |                                         |  | - |                                 |  |  | 100,834        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Mark Entwistle    |  |                         | -       |  |                                         |  | - |                                 |  |  | 364,440        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Henry Friesen     |  |                         | -       |  |                                         |  | - |                                 |  |  | 304,745        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Philip Frost      |  |                         | 6,000   |  |                                         |  | * |                                 |  |  | 241,585        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Nick Glover       |  |                         | -       |  |                                         |  | - |                                 |  |  | 595,000        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Mark Kowalski     |  |                         | -       |  |                                         |  | - |                                 |  |  | 180,000        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Catherine Mackey  |  |                         | -       |  |                                         |  | - |                                 |  |  | 75,000         |  |  |                





44









|Name              |  | Number of Common Shares |         |  | Percentage of Common Shares Outstanding |  |   | Common Shares Held Under Option |  |  | Exercise Price |  |  | Expiration Date
|----------------- |  | ----------------------- | ------- |  | --------------------------------------- |  | - | ------------------------------- |  |  | -------------- |  |  | ---------------
|Nicole Onetto     |  |                         | -       |  |                                         |  | - |                                 |  |  | 75,000         |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|James Smith       |  |                         | -       |  |                                         |  | - |                                 |  |  | 104,000        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Francois Thomas   |  |                         | -       |  |                                         |  | - |                                 |  |  | 155,000        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Leonard Vernon    |  |                         | -       |  |                                         |  | - |                                 |  |  | 612,126        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Tryon M. Williams |  |                         | 275,540 |  |                                         |  | * |                                 |  |  | 245,000        |  |  |                
|                  |  |                         |         |  |                                         |  |   |                                 |  |  |                |  |  |                
|Ernest Wong       |  |                         | -       |  |                                         |  | - |                                 |  |  | 131,250        |  |  |                





* Less than one percent



As of the date
of hereof,the directors and senior officers of YM BioSciences as a group beneficially owned or controlled, directly or
indirectly, 698,720common shares of YM, representing less than one percent of the issued and
outstanding voting shares of the Company.



MAJOR SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS



Major Shareholders



We are not directly
or indirectly owned or controlled by another company or by any foreign government.



As at the date hereof,
to the knowledge of the directors and officers of the Company, there are no persons or corporations who beneficially own, directly
or indirectly, or exercise control or direction over, our Common Shares carrying more than 10% of the voting rights attached to
all our outstanding Common Shares.



Interests of Management and Others
in Material Transactions



Occasionally,
directors will provide assistance to management on a consulting basis to evaluate new opportunities or provide guidance for drug
development activities. The fees incurred during the fiscal year ended June 30, 2012 totalled $125 thousand(2011 - $92 thousand). The transactions occurred in the normal course of operations and were measured at the exchange amount,
which is the amount of consideration established and agreed by the related parties.



Our CommonShares
are traded on the NYSE MKT and the TSX under the symbols “YMI” and “YM”, respectively. The last reported
sales price of our Common Shares on the date hereof on the NYSE MKT was US$1.80 and on the TSX
was C$1.74. The following table sets forth the high and low per share sales prices for our Common
Shares on the NYSE MKT and TSX for the periods indicated.



45







Market Price



|                     |  | TSX (C$) |      |  | NYSE MKT (US$) |  
|-------------------- |  | -------- | ---- |  | -------------- | -
|Calendar period      |  | High     |      |  | Low            |  
|                     |  |          |      |  |                |  
|May 2011             |  | $        | 3.61 |  |                | $
|                     |  |          |      |  |                |  
|June 2011            |  | $        | 3.58 |  |                | $
|                     |  |          |      |  |                |  
|July 2011            |  | $        | 2.83 |  |                | $
|                     |  |          |      |  |                |  
|August 2011          |  | $        | 2.28 |  |                | $
|                     |  |          |      |  |                |  
|September 2011       |  | $        | 2.04 |  |                | $
|                     |  |          |      |  |                |  
|October 2011         |  | $        | 1.94 |  |                | $
|                     |  |          |      |  |                |  
|November 2011        |  | $        | 1.85 |  |                | $
|                     |  |          |      |  |                |  
|December 2011        |  | $        | 1.76 |  |                | $
|                     |  |          |      |  |                |  
|January 2012         |  | $        | 2.05 |  |                | $
|                     |  |          |      |  |                |  
|February 2012        |  | $        | 2.40 |  |                | $
|                     |  |          |      |  |                |  
|March 2012           |  | $        | 1.98 |  |                | $
|                     |  |          |      |  |                |  
|April 2012           |  | $        | 1.83 |  |                | $
|                     |  |          |      |  |                |  
|May 2012             |  | $        | 2.19 |  |                | $
|                     |  |          |      |  |                |  
|June 2012            |  | $        | 2.10 |  |                | $
|                     |  |          |      |  |                |  
|July 2012            |  | $        | 2.28 |  |                | $
|                     |  |          |      |  |                |  
|August 2012          |  | $        | 2.00 |  |                | $
|                     |  |          |      |  |                |  
|September 1–20, 2012 |  | $        | 1.93 |  |                | $



Volatility of Common Shares



The trading price of
our common shares, as with many pharmaceutical and biotechnology companies, has historically been and is likely to remain highly
volatile. The market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating
performance of particular companies. Factors such as the efficacy and safety of our products or the products of our competitors,
announcements of technological innovations by us or our competitors, governmental regulations, developments in our patents or other
proprietary rights, our licensors or our competitors, litigation, fluctuations in our operating results, thin capitalization, market
conditions for biopharmaceutical stocks and general market and economic conditions could have a significant impact on the future
trading price of our common shares. In addition, the price of our common shares is highly volatile since it may take years before
any of our licensed products will receive final regulatory approval to be marketed in Canada, the U.S. or other territories, if
at all.



46







Share Capital



Authorized Capital



Our authorized share
capital 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 of September 20, 2012, there were 157,546,793
common shares, no Class A non-voting common shares and no Class A or Class B preferred shares outstanding.



The following is a
summary of the material provisions attached to the common shares, the Class A preferred shares and the Class B preferred shares.



Common
Shares



All of the common shares
rank equally as to voting rights, participation in a distribution of the assets of our Company on a liquidation, dissolution or
winding-up of our Company and the entitlement to dividends. The holders of our 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 our Company the holders of our common shares will be entitled, subject to the rights,
privileges, restrictions and conditions attaching to any other class of shares of our Company, to receive, on a pro rata basis,
share for share, with the Class A non-voting common shares, all of our remaining property. There are no pre-emptive or conversion
rights and no provisions for redemption, retraction, purchase for cancellation or surrender or singing or purchase funds.



Class A
Preferred Shares and Class B Preferred Shares



The Class A preferred
shares and Class B preferred shares are issuable in series. Each series may consist of such number of shares and have such designation,
rights, privileges, restrictions and conditions attached thereto as may be determined by the Board of Directors, subject to the
provisions attached to the Class A preferred shares as a class or the Class B preferred shares as a class. The Class A preferred
shares and the Class B preferred shares each rank ahead of the common shares with respect to the distribution of our assets upon
liquidation, dissolution or winding-up.



Stock Option
Plan



We have a stock option
plan (the “Option Plan”) pursuant to which options to purchase our common shares (“Options”) may be granted.
The material terms of the Option Plan are as follows:



| | · | The persons eligible to receive Options under the Option Plan are the officers, directors, employees
and service providers of the Company.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Board may grant Options to any of the foregoing (an “Eligible Person”), upon the
recommendation of the Compensation Committee. At the time of the grant of an Option the Board, in its discretion, must fix the
number of shares being optioned to the Eligible Person, the exercise price of the Option, the time when the Option is exercisable
(including any vesting provisions) and the expiration date of the Option shall be determined by the Compensation Committee.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The maximum number of common shares available for issuance under the Option Plan is a rolling number
equal to 15% of the number of common shares issued and outstanding on the particular date of grant. Options that are exercised
will be available for future grant and the number of options that can be granted under the Option Plan will grow as the number
of issued and outstanding shares increases.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47





| | · | The number of common shares that may be issuable to our insiders (as defined in the Securities
Act(Ontario)) and any affiliate and subsidiary thereof (collectively, “Insiders”) pursuant to the Plan, may not
exceed 10% of the then-outstanding issue.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | In any one-year period, Options that may be granted to any Insider, and such Insider’s associates,
shall not exceed 5% of the then-outstanding issue.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The exercise price of an Option may not be less than the market price of the common shares on the
date on which the grant of the Option is approved by the Board. For this purpose the market price is the closing price of the common
shares on the last trading day preceding the date of grant on which the common shares are traded on the TSX or another exchange
on which the common shares are listed.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The term of an Option may not exceed 10 years from the date of grant.
| | - | ---------------------------------------------------------------------



| | · | Once granted, the Options may only be transferred or assigned between an Eligible Person and a
related “Employee Corporation” (as defined in the Option Plan) provided the assignor gives notice to the Company prior
to assignment.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The number of common shares that may be issued to any one person under the Option Plan shall not
exceed 5% of the outstanding common shares.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| | · | An Option and all rights to purchase common shares pursuant thereto shall expire and terminate
immediately upon the optionee who holds such Option ceasing to be an Eligible Person, except in the following circumstances:
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | If, before the expiry of an Option in accordance with the terms thereof, an optionee shall cease
to be an Eligible Person (an “Event of Termination”) for any reason other than his or her resignation or the termination
for “cause” of his or her employment with the Company, or his or her resignation or failure to be re-elected as a director
of the Company, then the optionee may:
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------







| | a) | exercise the Option to the extent that he or she was entitled to do so at the time of such Event
of Termination, at any time up to and including, but not after, a date that is three (3) months (or such other longer period as
may be determined by the Board or the Compensation Committee in its sole discretion) following the date of such Event of Termination,
or prior to the close of business on the expiration date of the Option, whichever is earlier; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | with the prior written consent of the Board or the Compensation Committee, which consent may be
withheld in the Company’s sole discretion, exercise a further Option at any time up to and including, but not after, a date
that is three (3) months (or such other longer period as may be determined by the Board in its sole discretion) following the date
of such Event of Termination, or prior to the close of business on the expiration date of the Option, whichever is earlier, to
purchase all or any of the optioned shares as the Board or the compensation committee may designate but not exceeding the number
of optioned shares the optionee would have otherwise been entitled to purchase pursuant to the Option had the optionee’s
status as an Eligible Person been maintained for the term of the Option.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Option Plan also provides for the cashless exercise of Options, which allows the holder thereof
to receive, without cash payment (other than taxes), a number of common shares based on a specific formula tied to the market price
of the common shares.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | o | If an optionee dies before the expiry of an Option in accordance with the terms thereof, the optionee’s
legal representative(s) may, subject to the terms of the Option and the Option Plan:
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





48









| | a) | exercise the Option to the extent that the optionee was entitled to do so at the date of his or
her death at any time up to and including, but not after, a date one year following the date of death of the optionee, or prior
to the close of business on the expiration date of the Option, whichever is earlier; and
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) | with the prior written consent of the Board or the compensation committee, exercise at any time
up to and including, but not after, a date one year following the date of death of the optionee, a further Option to purchase all
or any of the optioned shares as the Board or the compensation committee may designate but not exceeding the number of optioned
shares the optionee would have otherwise been entitled to purchase had the optionee survived.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company is required under the Tax Act or any other applicable laws to remit to any governmental
authority an amount on account of tax on the value of any taxable benefit associated with the exercise or disposition of Options
by an optionee, then the optionee must concurrently with the exercise or disposition make acceptable arrangements to fund the required
tax remittance as set forth in the Option Plan.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Company has no security purchase agreement plan.
| | - | ----------------------------------------------------



| | · | By its terms, the Option Plan may be amended by the Board without the consent of the shareholders,
for limited purposes such as amendments necessary to ensure that the Option Plan complies with the applicable regulatory requirements,
including the rules of the TSX, in place from time to time; amendments respecting the administration of the Option Plan and eligibility
for participation under the Option Plan; amendments respecting the terms and conditions on which Options may be granted pursuant
to the Option Plan, including provisions relating to the option price, the option period and the vesting schedule provided, however,
that if the Board proposes to reduce the option price or extend the option period of Options granted to Insiders pursuant to the
Option Plan such amendments will require disinterested shareholder approval; and amendments that are of a housekeeping nature.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | The Board may terminate the Option Plan at any time.
| | - | ----------------------------------------------------



| | · | On February 22, 2012, the Board approved certain amendments to the Option Plan to allow for immediate
vesting of outstanding Options upon the occurrence of “change of control events” as defined therein. Such amendments
relate to the vesting schedule of Options and, therefore, shareholder approval is not required.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Shareholder
Rights Plan



We entered into a shareholder
rights plan effective November 28, 2007, upon the expiry of our previous shareholder rights plan (the “Rights Plan”).
The Rights Plan was not implemented in response to, or in anticipation of an acquisition or take-over bid of the Company. The Rights
Plan was reconfirmed by the shareholders of the Company at the annual and special meeting of the shareholders held on November
18, 2010.



Many Canadian public
companies continue to have shareholders rights plans in effect. These plans have as their objectives provided shareholders of the
companies involved, and the board of directors of such companies, with the time necessary to ensure that, in the event of a take-over
bid for their corporations, alternatives to the bid are explored and developed which may be in the best interest of the particular
corporation and its shareholders. Securities legislation in Canada currently permits a take-over bid to expire in 35 days. The
Board of Directors is of the view that this is not sufficient time to assess a take-over bid, were such a bid to be made, and if
the Board of Directors deems appropriate, to explore and develop alternatives in the best interests of the Company and its shareholders.
In the event that competing bids emerge, the Board of Directors also believes that current securities legislation in Canada does
not provide a sufficient minimum period of time for a board of directors to assess a competing offer or for shareholders to make
a reasoned decision about the merits of the competing bids. The Rights Plan is not intended to prevent a take-over bid or deter
offers for the common shares or any other voting securities of the Company that might be issued in the future. It is designed to
encourage anyone seeking to acquire control of the Company to proceed either by way of a “Permitted Bid” (as described
below), which requires a take-over bid to satisfy certain minimum standards designed to promote the fair treatment of all holders
of the voting shares, or with the concurrence of the Board of Directors.



49







The following is a
brief summary of the principal terms of our Rights Plan, which is qualified in its entirety by reference to the text of the Rights
Plan Agreement, which is filed herewith as an Exhibit and incorporated by reference herein. All capitalized terms used but not
defined herein are defined in the Rights Plan Agreement.



Term



The term of the Rights
Plan ends on the date of the Company’s Annual Meeting of Shareholders to be held in 2017, subject to ratification by the
Company’s shareholders every three years, at which time the Rights (as defined below) will expire unless they are earlier
terminated, redeemed or exchanged by the Board of Directors of the Company.



Distribution
of Rights



To implement the Rights
Plan, the Board of Directors authorized the issuance of share purchase rights (the “Rights”) to the then-current shareholders
of the Company at the rate of one Right for each common share outstanding as of the time of the termination of business at the
Company’s annual and special meeting of shareholders held on November 28, 2007 (the “Record Time”). In addition,
one Right has been, and will continue to be, issued with each common share issued after the Record Time and prior to the earlier
of the Separation Time (as defined below) and the redemption or expiration of the Rights. The Rights Plan Agreement provides for
the exercise of the Rights, the issue of certificates evidencing the Rights and other related matters.



Exercise
of Rights



The Rights will trigger
(i.e. separate from the Company’s common shares) and will become exercisable eight trading days (the “Separation Time”)
after a person (an “Acquiring Person”) has acquired 20% or more of, or commences or announces a take-over bid for,
the Company’s outstanding common shares (defined to include the common shares and any other shares that the Company may issue
that carry voting rights relating to the election of directors), other than by an acquisition pursuant to a Permitted Bid or a
Competing Permitted Bid (each as defined below). The acquisition by an Acquiring Person of 20% or more of the Company’s outstanding
common shares is referred to as a “Flip-in Event”.



Any Rights held by
an Acquiring Person will become void upon the occurrence of the Flip-in Event. By making any take-over bid other than a Permitted
Bid or a Competing Permitted Bid prohibitively expensive for an Acquiring Person, the Rights Plan is designed to require any person
interested in acquiring more than 20% of the Company’s common shares to do so by way of a Permitted Bid or a Competing Permitted
Bid, or to make a take-over bid that the Board of Directors considers to represent the full and fair value of the Company’s
common shares.



Prior to the Rights
being triggered, they will have no value and no dilutive effect on the Company’s common shares.



Certificates
and Transferability



Prior to separation,
the Rights will be evidenced by a legend imprinted on the Company’s common share certificates and will not be transferable
separately from the common shares. Common share certificates are not required to be exchanged in order for a shareholder to be
entitled to the Rights. A legend will be imprinted on all new certificates issued by the Company. From and after separation, the
Rights will be evidenced by Rights certificates and will be transferable separately from the Company’s common shares.



50







Rights
of Rights Holders



No holder of Rights
is entitled to vote, receive dividends or be deemed for any purpose whatsoever the holder of any common share or other share or
security of the Company that may at any time be issuable on the exercise of the Rights represented thereby, nor shall the holding
of a Right be construed or deemed to confer upon the holder of any Right any of the rights, titles, benefits or privileges of a
holder of common shares or any other shares or securities of the Company, any right to vote at any meeting of shareholders of the
Company, or any right to consent or withhold consent to any action of the Company.



Flip-in
Event



A “Flip-in Event”
will be triggered if a transaction occurs pursuant to which a person becomes an Acquiring Person (as defined in the Rights Plan).
Upon the occurrence of the Flip-in Event, each Right (except for Rights Beneficially Owned (as defined in the Rights Plan) by the
Acquiring Person and certain other persons specified below) will provide the right to purchase from the Company upon exercise of
the Right, in accordance with the terms of the Rights Plan, the number of common shares of the Company having an aggregate Market
Price (as calculated under the Rights Plan) on the date of the consummation or occurrence of such Flip-in Event equal to twice
the Exercise Price (as defined below) for an amount in cash equal to the Exercise Price. Accordingly, if one assumes a market price
of $10 per share, then a shareholder could purchase for $50.00 ten shares, effectively acquiring the shares at half of the current
market price, with the effect that the Acquiring Person may suffer substantial dilution of its interest in the Company.



The Rights Plan provides
that Rights that are Beneficially Owned by (i) an Acquiring Person or any affiliate or associate of an Acquiring Person, or any
person acting jointly or in concert with an Acquiring Person, or any affiliate or associate of such Acquiring Person; or (ii) a
transferee or other successor in title of Rights of an Acquiring Person (or of an affiliate or associate of an Acquiring Person
or of any person acting jointly or in concert with an Acquiring Person or any associate or affiliate of an Acquiring Person) who
becomes a transferee or successor in title concurrently with or subsequent to the Acquiring Person becoming an Acquiring Person,
shall become null and void without any further action, and any holder of such Rights (including transferees or successors in title)
shall not have any right whatsoever to exercise such Rights under any provision of the Rights Plan.



Beneficial
Ownership



Beneficial ownership
is broadly defined in the Rights Plan, but certain exceptions from its scope are provided, including an exception designed to avoid
inadvertent triggering of the dilutive effects of the Rights by portfolio managers acting for pension funds and others who do not
intend to make a take-over bid for the Company’s common shares.



Acquiring
Person



An “Acquiring
Person” is a person who Beneficially Owns (as defined in the Rights Plan) 20% or more of the outstanding voting shares of
the Company. An Acquiring Person does not, however, include the Company or any subsidiary of the Company, or any person who becomes
the Beneficial Owner of 20% or more of the outstanding voting shares of the Company as a result of Permitted Bids, Competing Permitted
Bids and certain other exempt transactions.



Exercise
Price and Anti-Dilution Adjustments



The “Exercise
Price” of a Right is, as of any date, the price at which a holder may purchase the common shares issuable upon exercise of
one whole Right. Until that price is adjusted under the terms of the Rights Plan, the Exercise Price will be $200.00.



The Exercise Price
of a Right, the number and kind of shares subject to purchase upon exercise of a Right and the number of Rights outstanding are
subject to adjustment from time to time upon certain events, including:





51









| | 1. | if there is a dividend paid or payable in common shares or securities exchangeable for or convertible
into or giving a right to acquire common shares or other securities, other than the issue of common shares or such other securities
to holders of common shares in lieu of, but not in an amount that exceeds the value of, regular periodic cash dividends;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. | a subdivision or consolidation of the common shares into a greater or lesser number of common shares,
as the case may be;
| | -- | -------------------------------------------------------------------------------------------------------------------------



| | 3. | the issuance of any common shares or securities exchangeable for or convertible into or giving
a right to acquire common shares or other securities in respect of, in lieu of or in exchange for existing common shares, except
as otherwise permitted under the Rights Plan; or
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | if the Company fixes a record date for the distribution to all holders of common shares of evidences
of indebtedness, cash (other than a regular periodic cash dividend paid in common shares, but including any dividend payable in
securities other than common shares), assets or subscription rights, options or warrants (other than securities referred to in
the following paragraph), at a price per common share that is less than 90% of the Market Price per common share on the second
trading day immediately preceding such record date; and
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. | if the Company fixes a record date for the distribution to all holders of common shares of certain
rights, options or warrants to acquire common shares or securities convertible into or exchangeable for or carrying a right to
purchase common shares at a price per common share less than 90% of the Market Price per common share on such record date.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



No adjustment to the
Exercise Price is required unless the adjustment, together with all other adjustments that have not been made as of such time as
a result of this de minimis exception, would require an increase an increase or decrease in the Exercise Price of at least
1%.



Permitted
Bids and Competing Permitted Bids



A Permitted Bid or
Competing Permitted Bid will not trigger the dilutive effects of the Rights. A “Permitted Bid” is a take-over bid made
by take-over bid circular in compliance with the following additional provisions:



| | 1. | the bid must be made to all holders of record of common shares;
| | -- | ---------------------------------------------------------------



| | 2. | the bid must be open for a minimum of 60 days following the date of the bid, and no shares may
be taken up prior to such time;
| | -- | ------------------------------------------------------------------------------------------------------------------------------



| | 3. | take-up and payment for shares may not occur unless the bid is accepted by persons holding more
than 50% of the outstanding common shares (excluding, among others, shares held by the person responsible for triggering the Flip-in
Event or any person that has announced an intention to make, or who has made, a takeover bid for the shares of the Company and
the respective affiliates and associates of such persons and persons acting jointly or in concert with such persons);
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. | shares may be deposited into or withdrawn from the bid at any time prior to the take-up date; and
| | -- | -------------------------------------------------------------------------------------------------



| | 5. | if the bid is accepted by the requisite percentage specified in clause (3) above, the bidder must
extend the bid for a period of 10 business days to allow other shareholders to tender into the bid, should they so wish, and must
make a public announcement to such effect.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A “Competing
Permitted Bid” is a take-over bid that satisfies all of the criteria of a Permitted Bid except that since it is made after
a Permitted Bid has been made, the minimum deposit period and the time period for the take-up of and payment for shares tendered
under a Competing Bid is not 60 days, but is instead the greater of 35 days (the minimum permitted by applicable law) and the 60th
day after the date on which the Permitted Bid then in existence was made.



52







Neither a Permitted
Bid nor a Competing Permitted Bid must be approved by the Board of Directors and may be taken directly to the shareholders of the
Company. Acquisitions of common shares made pursuant to a Permitted Bid or a Competing Permitted Bid do not give rise to a Flip-in
Event.



Redemption
and Waiver



The Board of Directors
may, at any time prior to the occurrence of a Flip-in Event, and subject to shareholder approval, elect to redeem all, but not
less than all, of the Rights at a redemption price of C$0.0001 per Right (the “Redemption Price”), appropriately adjusted
in certain events. Rights will be deemed to be automatically redeemed at the Redemption Price where a person that has made a Permitted
Bid, a Competing Permitted Bid or a take-over bid otherwise exempted by the Board of Directors takes up and pays for the Company’s
shares under the terms of the bid. If the Board of Directors elects or is deemed to have elected to redeem the Rights, the right
to exercise the Rights will terminate, and each Right will, after redemption, be null and void, and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price. Under the Rights Plan, the Board of Directors has discretion to
waive application of the Rights Plan to a take-over bid, subject to an automatic waiver with respect to all other take-over bids
made while the waived take-over bid is outstanding. The Board of Directors may also waive the application of the Rights Plan to
a Flip-in Event that occurs through inadvertence, subject to the “inadvertent” Acquiring Person reducing its holding
of the Company’s shares within an agreed time. Other waivers of the Rights Plan will require shareholder approval.



Shareholder
Approval



The Rights Plan must
be ratified by a majority of the votes cast at the Company’s applicable shareholder meeting by shareholders present or voting
by proxy. In addition, The Toronto Stock Exchange requires the Rights Plan to be ratified by shareholders within six months of
the date of adoption of the Rights Plan by the Board of Directors. The Rights Plan will be subject to further ratification by the
Company’s shareholders every three years.



Amendment



Amendments or supplements
to the terms of the Rights Plan (other than to fix clerical errors or to maintain the Rights Plan’s validity as a result
of changes in legislation) require shareholder approval. Changes arising from changes in applicable legislation will require subsequent
shareholder ratification.



AUDIT FEES



During the years ended
June 30, 2012 and 2011, we were billed the following fees by our external auditors, KPMG LLP:





|                   |  | Fees Billed |        
|------------------ |  | ----------- | -------
|Service            |  | 2012        |        
|                   |  |             |        
|Audit Fees         |  | $           | 449,500
|Audit-Related Fees |  | $           | 62,000 
|Tax Fees           |  | $           | 40,000 
|All Other Fees     |  | $           | Nil    
|Total Fees Billed  |  | $           | 551,500





Audit Fees. Audit fees consist of
fees for the audit of the Company’s annual financial statements and internal control over financial reporting, or services
that are normally provided in connection with statutory and regulatory filings or engagements.



53







Audit-Related Fees. Audit-related
fees consist of the aggregate fees billed for assurance and related services, including conversion to IFRS and assistance with
compliance with Section 404 (internal controls) of the Sarbanes-Oxley Act of 2002, that are reasonably related to the performance
of the audit or review of the Company’s financial statements and are not disclosed in the “Audit Fees” column.



Tax Fees. Tax fees consist of fees
for tax advisory services, such as the preparation of income tax returns for the Company and its subsidiaries in Canada and the
United States and for services in regard to tax planning, tax advice, tax compliance, capital taxes and sales taxes.



Pre-Approval Policies and Procedures



The Board of Directors
has established a written mandate for the Audit Committee, a copy of which is attached hereto as Schedule “A”. The
Audit Committee follows the policies and procedures for the pre-approval of services to be provided by our external auditors set
out in the mandate, which require Audit Committee pre-approval of all permitted audit, audit-related, tax and non-audit services.



Under these policies,
all permitted services to be provided by our external auditors must be pre-approved by the Audit Committee or a designated member
of the Audit Committee. Any pre-approval granted by a designated member must be reported to the Audit Committee at its next scheduled
meeting. The pre-approval of services may be given at any time up to one year before commencement of the specified service.



Of the fees reported
above, none of the fees billed by our external auditors were approved by the Audit Committee pursuant to the de minimis exception
provided by Section (c)(7)(i)(C) of Rule 2-01 of Regulation S-X of the U.S. Securities and Exchange Commission.



INDEPENDENCE OF EXPERTS



The Company’s
auditors are KPMG, who have prepared an independent auditors' report in respect of the Company’s consolidated financial statements
with accompanying notes for the year ended June 30, 2012. KPMG has advised that they are independent with respect to the Company
within the meaning of the Rules of Professional Conduct of the Institute of Chartered Accountants of Ontario.



LEGAL PROCEEDINGS



We are 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.



TRANSFER AGENT AND REGISTRAR



The registrar and transfer
agent for our 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, there are no material contracts entered into by the Company since the beginning
of the financial year ending ended June 30, 2012, that are still in effect.



In the ordinary course
of our business, we enter into licenses for products which we develop; however, because of the immateriality of such licenses to
us, 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”.



54







ADDITIONAL INFORMATION



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



When securities of
the Company 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 Company’s securities, the Company will provide the following documents to any person or
company upon request to the Corporate Secretary of the Company:



| | 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 our Financial Statements, together with the accompanying auditors’ report as well
as copies of any subsequent interim financial statements that we have filed;
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. | a copy of our information circular in respect of our most recent annual meeting of shareholders
that involved the election of directors;
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------



| | 4. | a copy of any material contract not entered into in the ordinary course of business; and
| | -- | ----------------------------------------------------------------------------------------



| | 5. | 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, 4 and 5 above may be obtained from our Corporate Secretary, however,
a reasonable fee may be charged if the request is made by a person or company who is not a shareholder of YM.



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 | 



55







SCHEDULE A



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, the fraud programs and controls, and audits
of the financial statements of the Corporation. The Audit Committee shall also, in its capacity as a committee of the Board, 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,
but without limitation:



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



| | (b) | each member shall be “independent” within the meaning of the rules of NYSE MKT and
Rule 10A-3 under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”);
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | no member shall have participated in the preparation of the financial statements of the Corporation
or any current subsidiary of the Corporation at any time during the past three years;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | each member shall be able to read and understand fundamental financial statements, including a
company's balance sheet, income statement, and cash flow statement;
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                   

| | (e) | at least one member must be “financially sophisticated” within the meaning of Rule
803(B)(2)(a)(iii) of the NYSE MKT Company Guide; and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------



| | (f) | 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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





A-1









| | 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.



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 review and reassess
the adequacy of this Mandate at least annually, 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 contained in
all public disclosure documents, including all press releases, annual reports, annual information forms, management’s discussion
and analysis and offering documents containing such financial results.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | 4. | The Audit Committee shall discuss with management and the external auditor any correspondence with
regulators or governmental agencies any published reports that raise material issues regarding the Corporation’s financial
statements and accounting policies.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





A-2









Internal
Controls



| | 5. | The Audit Committee shall review, as appropriate, the Corporation’s internal system of audit
controls and the results of internal audits, if any.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. | The Audit Committee shall oversee the assessment of fraud risk performed by management.
| | -- | ---------------------------------------------------------------------------------------



External Auditors



| | 7. | 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.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 8. | 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.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 9. | 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.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10. | The Audit Committee will ensure the rotation of partners on the audit engagement team of the external
auditor, including, without limitation, the lead (or coordinating) audit partner having primary responsibility for the audit and
the audit partner responsible for reviewing the audit, in accordance with applicable law.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 11. | 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.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 12. | The Audit Committee shall discuss with the external auditor all matters required to be so discussed
relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions
on the scope of activities or access to requested information, and any significant disagreements with management.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 13. | The Audit Committee will ensure the receipt from the external auditor of a formal written statement
delineating all relationships between the external auditor and the Corporation, consistent with Independence Standards Board Standard
1, and will actively engage in a dialogue with the external auditor with respect to any disclosed relationships or services that
may impact the objectivity and independence of the external auditor and for taking, or recommending that the full Board take, appropriate
action to oversee the independence of the external auditor.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





A-3









| | 14. | The Audit Committee shall meet with the external auditor prior to commencement of the audit to
discuss the planning and staffing of the audit.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------



| | 15. | 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 ;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



| | 16. | The Audit Committee shall pre-approve all audit and permitted non-audit services to be provided
to the Corporation or its subsidiary entities by the Corporation’s external auditor. In fulfilling such requirement, if the
Committee deems it appropriate, the Audit Committee may form and delegate to subcommittees consisting of one or more members, the
authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant
pre-approvals shall be presented to the full Audit Committee at its next schedule meeting. The pre-approval of services pursuant
to delegated authority may be given at any time up to one year before commencement of the specified service.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Complaints procedure



| | 17. | 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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 18. | 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



| | 19. | 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.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





A-4









| | 20. | The Audit Committee shall review disclosures made to the Audit Committee by the principal executive
officer and principal financial officer of the Corporation during their certification process related to the Corporation’s
annual and quarterly regulatory filings, including with respect to any significant deficiencies in the design or operation of the
Corporation’s internal control over financial reporting or material weaknesses therein, and any fraud involving management
or other employees who have a significant role in the Corporation’s internal control over financial reporting.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Compliance Oversight



| | 21. | The Audit Committee shall obtain reports from management and the external auditor that the Corporation
and its subsidiary and foreign affiliated entities are in conformity with applicable legal requirements and any code of business
conduct and ethics adopted by the Corporation. The Audit Committee shall review reports and disclosures about insider and affiliated
party transactions. The Audit Committee shall advise the Board with respect to the Corporation’s policies and procedures
regarding compliance with applicable laws and regulations and with any code of business conduct and ethics adopted by the Corporation.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 22. | The Audit Committee shall obtain from the external auditor assurance that the Audit Committee has
received from the external auditor all required reports of illegal acts, if any, required to be reported by the external auditor
to the Audit Committee pursuant to Section 10A(b) of the Exchange Act.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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, 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 advisors employed by the Audit Committee.





A-5