**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        20-F**
  £
              Registration
                  Statement Pursuant to Section 12(b) or 12(g) of the Securities
                  Exchange
                  Act of 1934
  OR
  T
              Annual
                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934 for the fiscal year ended June 30,
                  2008
  OR
  £
              Transition
                  Report Pursuant to Section 13 or 15(d) of the Securities Exchange
                  Act of
                  1934
  OR
  £
              Shell
                  Company Report Pursuant to Section 13 or 15(d) of the Securities
                  Exchange
                  Act of 1934
  **Commission
        file number 1-32186**
  **YM
        BIOSCIENCES INC.**
 (Exact
        Name of Registrant as Specified in its Charter)
  **Not
        Applicable**
 (Translation
        of Registrant’s Name into English)
  **Nova
        Scotia, Canada**
 (Jurisdiction
        of Incorporation or Organization)
  **Suite
        400, Building 11**
 **5045
        Orbiter Drive**
 **Mississauga,
        Ontario**
 **CANADA,
        L4W 4Y4**
 (Address
        of Principal Executive Offices)
  **David
        G.P. Allan, Telephone (905) 629-9761, Facsimile (905) 629-4959, EMAIL:**
 **ir@ymbiosciences.com** , **5045
        Orbitor Drive, Building 11, Suite 400, Mississauga, Ontario, L4W
        4Y4**
 (Name,
        Telephone, E-mail and/or Facsimile number and Address of Company Contact
        Person)
  Securities
        registered or to be registered pursuant to Section 12(b) of the
        Act:
  **Title
                  of Each Class**
              
              **Name
                  of Each Exchange on Which Registered**Common
                  Shares, No Par Value
              
              American
                  Stock ExchangeRights
                  to Purchase Common Shares, No Par Value
              
              American
                  Stock Exchange
  Securities
        registered or to be registered pursuant to Section 12(g) of the Act:
        NONE
  Securities
        for which there is a reporting obligation pursuant to Section 15(d) of the
        Act:
        NONE
  Indicate
        the number of outstanding shares of each of the issuer’s classes of capital or
        common stock as of the close of the period covered by the annual report:
        55,835,356 Common Shares (excluding 2,380,953 shares that are held in escrow
        to
        be released contingent upon the completion of certain milestones), no par
        value,
        as of June 30, 2008.
  Indicate
        by check mark whether the registrant is a well-known seasoned issuer, as
        defined
        in Rule 405 of the Securities Act
 Yes  £   No  S
  If
        this
        report is an annual or transition report, indicate by check mark if the
        registrant is not required to file reports pursuant to Section 13 or 15(d)
        of
        the Securities Exchange Act of 1934.
 Yes  £   No  S
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 Yes  S    No  £
  Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer or a non-accelerated filer. See definition of “accelerated
        filer” and “large accelerated filer” in Rule 12b-2 of the Exchange
        Act.
  Large
                  accelerated filer£
              Accelerated
                  filerS
              Non-accelerated
                  filer£
  Indicate
        by check mark which basis of accounting the registrant has used to prepare
        the
        financial statements included in this filing:
  US
                  GAAP£
              International
                  Financial Reporting Standards as issued£
              OtherSby
                  the International Accounting Standards Board
  If
        “Other” has been checked in response to the previous question, indicate by check
        mark which financial statement item the registrant has elected to
        follow.
 Item
        17  £   Item
        18  S
  If
        this
        is an annual report, indicate by check mark whether the registrant is a shell
        company (as defined in Rule 12b-2 of the Exchange Act).
 Yes  £   No  S
  
 
   **TABLE
        OF CONTENTS**
  PagePART
                  I
              
              6Item
                  1:
              Identity
                  of Directors, Senior Management and Advisors
              6A
              Directors
                  and Senior Management
              6B
              Advisors
              6C
              Auditors
              6Item
                  2:
              Offer
                  Statistics and Expected Timetable
              6A
              Offer
                  Statistics
              6B
              Method
                  and Expected Timetable
              6Item
                  3:
              Key
                  Information
              6A
              Selected
                  Financial Data
              6B
              Capitalization
                  and Indebtedness
              7C
              Reasons
                  for the Offer and Use of Proceeds
              7D
              Risk
                  Factors
              7Item
                  4:
              Information
                  on the Company
              18A
              History
                  and Development of the Company
              18B
              Business
                  Overview
              20C
              Organizational
                  Structure
              36D
              Property,
                  Plant and Equipment
              36Item
                  5:
              Operating
                  and Financial Review and Prospects
              37Item
                  6:
              Directors,
                  Senior Management and Employees
              47A
              Directors
                  and Senior Management
              47B
              Compensation
              51C
              Board
                  of Directors Practices
              57D
              Employees
              61E
              Share
                  Ownership
              61Item
                  7:
              Major
                  Shareholders and Related Party Transactions
              62A
              Major
                  Shareholders
              62B
              Related
                  Party Transactions
              63C
              Interests
                  of Experts and Counsel
              63Item
                  8:
              Financial
                  Information
              63A
              Consolidated
                  Statements and Other Financial Information
              63B
              Significant
                  Changes
              63Item
                  9:
              The
                  Offer and Listing
              63A
              Offer
                  and Listing Details
              63B
              Plan
                  of Distribution
              64C
              Markets
              64D
              Selling
                  Shareholders
              64E
              Dilution
              64F
              Expenses
                  of the Issue
              65Item
                  10:
              Additional
                  Information
              65A
              Share
                  Capital
              65B
              Articles
                  of Continuance
              71C
              Material
                  Contracts
              71D
              Exchange
                  Controls
              71E
              Taxation
              73F
              Certain
                  US Federal Income Tax Considerations
              74G
              Dividends
                  and Paying Agents
              81H
              Statements
                  by Experts
              81I
              Documents
                  on Display
              81J
              Subsidiary
                  Information
              82Item
                  11:
              Quantitative
                  and Qualitative Disclosures About Market Risk
              82Item
                  12:
              Description
                  of Securities Other Than Equity Securities
              82A
              Debt
                  Securities
              82
  
 
 B
              Warrants
                  and Rights
              82C
              Other
                  Securities
              82D
              American
                  Depository Shares
              82PART
                  II
              
              83Item
                  13:
              Defaults,
                  Dividend Arrearages and Delinquencies
              83Item
                  14:
              Material
                  Modification to the Rights of Security Holders and Use of
                  Proceeds
              83Item
                  15:
              Controls
                  and Procedures
              83Item
                  16A:
              Audit
                  Committee Financial Expert
              84Item
                  16B:
              Code
                  of Ethics
              84Item
                  16C:
              Principal
                  Accounting Fees and Services
              84Item
                  16D:
              Exemptions
                  from the Listing Standards for Audit Committee
              85Item
                  16E:
              Purchases
                  of Equity Securities by the Issuer and Affiliated
                  Purchases
              85PART
                  III
              
              86Item
                  17:
              Financial
                  Statements
              86Item
                  18:
              Financial
                  Statements
              86Item
                  19:
              Exhibits
              86
  
  **BASIS
        OF PRESENTATION**
  **General**
  Except
        where the context otherwise requires, all references in this Form 20-F to
        the
“Company”, “YM”, “we”, “us”, “our” or similar words or phrases are to YM
        Biosciences Inc. and its subsidiaries, taken together. In this Form 20-F,
        references to “US$” are to US dollars and references to “C$” or “$” are to
        Canadian dollars. Unless otherwise indicated, the statistical and financial
        data
        contained in this Form 20-F are presented as at June 30, 2008.
  **FORWARD-LOOKING
        STATEMENTS**
  This
        annual report on Form 20-F contains “forward-looking statements” within the
        meaning of the United States federal securities laws. The words “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 annual report on Form
        20-F
        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 favorable terms or at
                  all;
  ·
              our
                  potential sources of funding;
  ·
              our
                  business strategy;
  ·
              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
                  sufficiency of our financial resources to support our activities
                  and our
                  prospective pivotal trials; and
  ·
              our
                  plans to for future clinical trials and for seeking clinical
                  clearance.
  -
            1
            -
  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, 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
                  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 sufficient quantities of active ingredients 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;
  ·
              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 Form 20-F and our other SEC
                  filings.
  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. However, any further disclosures made on related subjects
        in subsequent reports on Forms 20-F or 6-K should be consulted.
  -
            2
            -
  **GLOSSARY
        OF TERMS AND PROPER NAMES**
  This
        glossary contains general terms used in the discussion of the biopharmaceutical
        industry, as well as specific technical terms used in the descriptions of
        our
        technology and business.
  **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
  **ASCO** :
        The
        American Society of Clinical Oncology
  **AstraZeneca** :
        AstraZeneca PLC
  **Board** :
        board
        of directors of YM
  **BMS** :
        Bristol
        Myers Squibb
  **Cancer
        Vaccine** :
        Vaccines or candidate vaccines designed to treat cancer. Active
        immunotherapy.
  **cGMP** :
        current
        good manufacturing practices, as mandated from time to time by health regulatory
        authorities
  **CIM** :
        Centro
        de Inmunología Molecular (Center for Molecular Immunology), Havana,
        Cuba
  **CIMAB** :
        CIMAB
        S.A., a Cuban company responsible for commercializing products developed
        at CIM
  **CIMYM** and **CIMYM BioSciences** :
        CIMYM
        BioSciences Inc., an 80% owned subsidiary of YM
  **CIMYM
        (Barbados)** :
        CIMYM
        Inc., a predecessor company to CIMYM BioSciences, incorporated under the
        laws of
        Barbados
  **Cmax** :
        Peak
        plasma concentration
  **CR** :
        Complete Response, the disappearance of a tumor
  **CRO** :
        contract research
  **Clinical
        Trial Application** (“ **CTA** ”):
        previously known as an Investigational New Drug application which must be
        filed
        and accepted by the regulatory agency of Health Canada before each phase
        of
        human clinical trials may begin
  **Cytoprotective** :
        Having
        the capacity to protect cells
  **Cytotoxic** :
        Having
        capacity to kill cells
  **Daiichi** :
        Daiichi
        Pharmaceutical Co. Ltd. or Daiichi Sankyo Co., Ltd.
  **DEA** :
        Drug
        Enforcement Administration (US)
  **DEC** :
        DPPE
        Epirubicin Cyclophosphamide
  **DELEX** :
        DELEX
        Therapeutics Inc., a wholly-owned subsidiary of YM which was wound up on
        April
        30, 2006 into the Corporation
  **EGFr** :
        A
        protein known as Epidermal Growth Factor Receptor
  **EMEA** :
        The
        European Medicines Agency - the European health regulatory
        authority
  -
            3
            -
  **Epithelial** :
        Derived
        from epithelium which is the layer of cells forming the epidermis of the
        skin
        and the surface layer of the serous and mucous membranes
  **Eximias** :
        Eximias
        Pharmaceutical Corporation
  **5-FU** :
        Approved chemotherapeutic agent, Fluorouracil
  **FDA** :
        US Food
        and Drug Administration
  **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 US, to be used as a standard
        in
        accordance with the World Health Organization’s Certification Scheme on the
        quality of pharmaceutical products
  **HER-1
        positive tumors** :
        Tumors
        expressing/producing the EGF receptor
  **Humanized** :
        The
        process whereby an antibody derived from murine cells
        is
        altered to resemble a human antibody
  **ImClone** :
        ImClone
        Systems Incorporated
  **IND** :
        Investigational New Drug application which must be filed and accepted by
        the FDA
        before each phase of human clinical trials may begin
  **Irinotecan** :
        An
        approved chemotherapeutic agent
  **In
        vivo** :
        In the
        living body or organism. A test performed on a living organism
  **K** :
        thousand
  **Ligand** :
        Used
        herein to describe a protein or peptide that binds to a particular
        receptor
  **M** :
        million
  **Merck** :
        Merck
        KGaA
  **Metastatic** :
        A term
        used to describe a cancer where tumor cells have migrated from the primary
        tumor
        to a secondary site (e.g. from prostate to bone)
  **MD&A** :
        Management’s discussion and analysis of financial condition and results of
        operations
  **MTD:** Maximum
        tolerated dose
  **Monoclonal
        antibody** (“ **MAb** ”):
        Antibodies of exceptional purity and specificity derived from hybridoma cells
        Murine - adjective for mouse
  **Neoplastic** :
        New and
        abnormal growth of tissue (neoplasm), which may be benign or
        cancerous
  **NSCLC** :
        Non-small-cell lung cancer
  **OFAC** :
        Office
        of Foreign Assets Control of the US Department of the Treasury
  **Oncoscience** :
        Oncoscience AG of Germany
  **Orange
        Book** :
        A
        reference to the Hatch/Waxman Act
  -
            4
            -
  **Orphan
        Drug** :
        A drug
        aimed at treating a condition with an incidence of less than 200,000 per
        year in
        the US (often given a seven year market exclusivity by the FDA
  **OSI** :
        OSI
        Pharmaceuticals, Inc.
  **Overall
        Survival or OS** :
        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
  **PD:** Pharmacodynamics - studies the actions of drugs within the body - the routes
        and
        mechanisms of absorption and excretion, the rate at which a drug action begins
        and the duration of the effect, the biotransformation of the substance in
        the
        body and the effects and routes of excretion of the metabolites of the
        drugs.
  **PK:** Pharmacokinetics –
        the study of the process by which a drug is absorbed, distributed, metabolized,
        and eliminated by the body
  **PR** :
        Partial
        Response, the shrinkage of a tumor measured by decrease by at least 30% as
        measured by a decrease in the sums of the longest diameter according to RECIST
        criteria
  **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
  **Phosphorylation** :
        Addition/donation of a phosphate group to a particular amino acid which can
        lead
        to tumor growth
  **RECIST** :
        Response Evaluation Criteria in Solid Tumors, a US standard
  **Roche** :
        F.Hoffmann-LaRoche Ltd.
  **SAE:** Serious
        Adverse Event – a term from clinical trials referring to untoward medical
        occurrence that results in hospitalization or death, or is
        life-threatening
  **SD** :
        Stable
        Disease
  **TGFα** :
        Transforming growth factor alpha
  **Therapeutic
        vaccine** :
        An
        approach to the treatment of cancer utilizing “active
        immunotherapy”
  **Tyrosine
        kinase** :
        An
        enzyme that catalyzes the phosphorylation of tyrosine residues in proteins
        with
        nucleotides as phosphate donors
  **US** :
        United
        States of America
  **YM
        USA** :
        YM
        BioSciences USA Inc., a wholly-owned subsidiary of YM
  -
            5
            -
  **PART
        I**
  **Item
                  1:**
              **Identity
                  of Directors, Senior Management and
                  Advisors**
  **A**
              **Directors
                  and Senior Management**
  Not
        applicable.
  **B**
              **Advisors**
  Not
        applicable.
  **C**
              **Auditors**
  Not
        applicable.
  **Item
                  2:**
              **Offer
                  Statistics and Expected
                  Timetable**
  **A**
              **Offer
                  Statistics**
  Not
        applicable.
  **B**
              **Method
                  and Expected Timetable**
  Not
        applicable.
  **Item
                  3:**
              **Key
                  Information**
  **A**
              **Selected
                  Financial Data**
  The
        following table of selected consolidated financial data of our Company has
        been
        derived from financial statements prepared in accordance with Canadian generally
        accepted accounting principles (“GAAP”). The data is qualified by reference to,
        and should be read in conjunction with, the consolidated financial statements
        and related notes thereto prepared in accordance with GAAP (See Item 18,
        “Financial Statements”). All dollar amounts are expressed in thousands of
        Canadian dollars, except per share data.
  **Years
                  Ended June 30****2008**
              
              **2007**
              
              **2006**
              
              **2005**
              
              **2004****Consolidated
                  operating data:**Revenue
              
              $
              7,443
              
              $
              7,647
              
              $
              2,549
              
              $
              1,452
              
              $
              347Operating
                  income:Income
                  (loss) from continuing operations
              
              $
              (14,886
              )
              $
              (30,061
              )
              $
              (25,815
              )
              $
              (15,859
              )
              $
              (7,692
              )Net
                  income (loss)
              
              $
              (14,886
              )
              $
              (31,730
              )
              $
              (25,815
              )
              $
              (15,859
              )
              $
              (7,692
              )Basic
                  and diluted weighted average earnings (loss) per share:Income
                  (loss) from continuing operations
              
              $
              (0.27
              )
              $
              (0.54
              )
              $
              (0.59
              )
              $
              (0.47
              )
              $
              (0.36
              )Net
                  Income (loss)
              
              $
              (0.27
              )
              $
              (0.57
              )
              **$**
              (0.59
              )
              $
              (0.47
              )
              $
              (0.36
              )Cash
                  dividends declared per share
              
              
              Nil
              
              
              Nil
              
              
              Nil
              
              
              Nil
              
              
              Nil
  -
            6
            -
  **Years
                  Ended June 30****2008**
              
              **2007**
              
              **2006**
              
              **2005**
              
              **2004****Consolidated
                  balance sheet**Cash,
                  cash equivalents and short-term deposits
              
              $
              58,101
              
              $
              75,572
              
              $
              88,341
              
              $
              30,569
              
              $
              20,388Working
                  capital
              
              $
              52,233
              
              $
              68,314
              
              $
              86,418
              
              $
              28,293
              
              $
              19,708Total
                  assets
              
              $
              63,073
              
              $
              81,740
              
              $
              100,048
              
              $
              38,200
              
              $
              20,883Long-term
                  obligations
              
              $
              4,414
              
              $
              8,930
              
              $
              844
              
              $
              327
              
              $
              NilCommon
                  Shares
              
              $
              172,921
              
              $
              172,921
              
              $
              172,772
              
              $
              87,488
              
              $
              59,842Shareholders’
                  equity (net assets)
              
              $
              52,013
              
              $
              64,835
              
              $
              94,748
              
              $
              33,840
              
              $
              19,719Number
                  of Common Shares issued and outstanding (000s)
              
              
              55,835,356
              
              
              55,835,356
              
              
              55,781,523
              
              
              38,584,288
              
              
              28,684,591The
                  above number of Common Shares excludes common shares held in escrow
                  for
                  contingent additional payment related to the acquisition of
                  Delex
              
              
              2,380,953
              
              
              2,380,953
              
              
              2,380,953
              
              
              2,777,778
  Notes:
  (1)
              Effective
                  July 1, 2007, the Company adopted CICA Handbook Sections 1530,
                  3855, 3861
                  and 3865 relating to financial instruments retrospectively, without
                  restatement and therefore the losses for fiscal 2007 above do not
                  include
                  any adjustment to reflect the adoption of these standards. There
                  was no
                  effect to the Company’s opening balances as a result of the change in
                  accounting policy.
 (2)
              The
                  consolidated financial statements have been prepared by management
                  in
                  accordance with accounting principles generally accepted in Canada
                  (Canadian GAAP). These accounting principles differ in certain
                  respects
                  from United States GAAP. The differences, as they affect our consolidated
                  financial statements, are set out in Note 17 to the audited consolidated
                  financial statements for the fiscal year ended June 30,
                  2008.
 
 **B**
              **Capitalization
                  and Indebtedness**
  Not
        applicable.
  **C**
              **Reasons
                  for the Offer and Use of Proceeds******
  Not
        applicable.
  **D**
              **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
        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 a product. Accordingly, we have not generated any
        significant revenues from the 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 remaining 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.
  -
            7
            -
  **We
        have a lack of revenues and a history of losses and, therefore, are unable
        to
        predict the extent of any future losses or when or if we will become
        profitable.**
  For
        the
        year ended June 30, 2008, we recognized as revenue approximately $4.9 million
        from a number of licensing agreements including a January 2005 agreement
        with
        Shin Poong Pharmaceutical Co., Ltd. to which we licensed the commercial rights
        for tesmilifene for the South Korean market; an August 2005 agreement with
        Kuhnil Pharmaceutical Co., Ltd. to which the Company licensed the commercial
        rights for nimotuzumab for the South Korean market; an October 31, 2005
        agreement with Innogene Kalbiotech Private Limited to which the Company licensed
        the commercial rights for nimotuzumab for several countries in Asia and Africa;
        a 2006 agreement with TTY BioPharm for Taiwan and a July 2006 agreement among
        our subsidiary CIMYM BioSciences, CIMAB and Daiichi Pharmaceutical Co., Ltd.
        under which CIMYM licensed certain development and marketing rights for
        nimotuzumab in Japan. As at June 30, 2008, we have an accumulated deficit
        of
        $133.2 million. 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
        depend upon being able to identify promising molecules for licensing or
        acquisition and successfully completing the acquisitions or licensing on
        economic terms. 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 drug product
        is conducted by biopharmaceutical companies, scientific and academic
        institutions and hospitals, or scientists affiliated with those institutions.
        Once the basic research is complete, we enter into agreements to in-license
        the
        right to develop and market the products or acquire them. We have negotiated
        certain in-licensing agreements with the University of Manitoba, CancerCare
        Manitoba, Vincent Research and Consulting, and CIMAB. In addition,
        AeroLEF ® technology was developed at Dalhousie University.
  **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 are dependent on others with respect to, the
        manufacture, development and sale of our in-licensed products. Product
        development includes, but is not limited to, pre-clinical testing, regulatory
        approval processes, clinical testing, and the development of additional
        regulatory and marketing information. Our ability to successfully develop
        and
        commercialize our in-licensed products is dependent on our ability to make
        arrangements with others on commercially acceptable terms. The product
        development process may be delayed or terminated if we cannot secure or maintain
        such arrangements on terms acceptable to us or at all. We do not have long-term
        material third party manufacturing, formulation or supply agreements, except
        with respect to one of our licensed products, nimotuzumab, which is 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 and CIMAB has contracted to supply commercial quantities or will
        source such supply if, as and when approval for sale has been granted. The
        formulation of AeroLEF ® is
        manufactured for us by Dalton Pharma Services in Toronto, Canada in quantities
        sufficient for clinical trials. YM has not yet identified an importer in
        the
        European Union to test, certify or release either clinical or commercial
        supplies. Tesmilifene was manufactured for us by Abraxis Bioscience Inc.
        Grand
        Island, NY, in quantities sufficient for clinical trials.
  -
            8
            -
  **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.**
  On
        November 12, 2003, we entered into the first out-licensing agreement through
        our
        subsidiary, CIMYM Inc., an Ontario corporation, now CIMYM BioSciences Inc.
        On
        such date, CIMYM BioSciences out-licensed the rights for nimotuzumab in most
        of
        Europe to Oncoscience. Under the terms of the agreement, CIMYM BioSciences
        is
        entitled to receive up to US$30 million as a share of any amounts received
        by
        Oncoscience in relation to the development or sublicensing of the product
        and/or
        as a royalty on sales. Once CIMYM BioSciences has received US$30 million,
        CIMYM
        BioSciences will continue to receive royalties on net sales of nimotuzumab
        but
        at a lesser percentage.
  YM
        and
        CIMYM (Barbados) (now CIMYM BioSciences Inc.) entered into the second
        out-licensing agreement with Tarcanta and CIMAB relating to the licensing
        of
        TGFa and HER-1 to Tarcanta from CIMAB. CancerVax (now, Micromet Inc.) received
        a
        license from the US Department of Treasury authorizing Tarcanta to enter
        into
        the transactions with CIMAB and us. On July 13, 2004, the Corporation, CIMYM
        (Barbados), CIMAB and Tarcanta entered into a License, Development,
        Manufacturing and Supply Agreement. Under the terms of this agreement, the
        2001
        CIMYM License was suspended until such time that there was a default under
        the
        agreement with Tarcanta. Under the terms of the new agreement and in
        consideration for the suspension of the 2001 CIMYM License, we have received
        an
        aggregate payment of $1,000,000 paid in four equal instalments. On July 23,
        2008 ,
        CIMAB
        terminated the license to Tarcanta and thus both the HER1 and TGFα license are
        returned to CIMYM.
  On
        July
        25, 2006 CIMYM BioSciences and CIMAB licensed development and marketing rights
        in Japan for nimotuzumab to Daiichi Pharmaceutical Co., Ltd. (a wholly owned
        subsidiary of Daiichi Sankyo Company , Ltd.,
        one
        of Japan’s largest pharmaceutical companies). Under the agreement, CIMYM
        received an up-front payment of $16.2M ($14.6 million net of withholding
        taxes)
        and is entitled to receive certain milestone payments at certain stages of
        development for each of a number of indications as well as payments based
        on
        supply of nimotuzumab and sales performance in several cancer
        indications.
  There
        can
        be no assurance that we will be successful in maintaining our relationships
        with
        research institutions or others or in negotiating additional in-licensing
        or
        out-licensing agreements on terms acceptable to 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.
  **We
        have no experience in commercial manufacturing of our products and may encounter
        problems or delays in making arrangements for products to be commercially
        manufactured, which could result in delayed development, regulatory approval
        and
        marketing.**
  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. 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 if appropriate
        opportunities are available.
  -
            9
            -
  Nimotuzumab
        is expected 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 commercial scale quantities
        in a commercially reasonable manner. In addition, there are risks that we
        cannot
        control with it comes to the CIMAB manufacturing plant, such as weather,
        fire
        and other natural disasters. AeroLEF ® (which
        is owned by us) **** is
        a
        combination of free and liposome-encapsulated fentanyl. The drug product
        is
        manufactured, finished and vials are filled in quantities sufficient for
        clinical testing. AeroLEF ® is
        currently delivered through a patient-activated nebulizer known as
        AeroEclipse ® and the
        devices are purchased by us to be used in clinical trials. The manufacturing
        processes for both AeroLef ® drug
        product and the AeroEclipse ® device
        are such that we expect that commercial quantities of both can be manufactured.
        If the current AeroLef ® supplier
        cannot manufacture commercial quantities or we otherwise experience a problem
        with the current supplier, it will be necessary for us to obtain
        AeroLef ® from
        a
        second supplier. The manufacture of AeroLef ® has
        been
        successfully transferred to a second manufacturing source in the US which
        may
        provide clinical material as well as future commercial supply. We do not
        have
        supply agreements with the third party suppliers of AeroLEF ® ,
        but
        suppliers have produced quantities for us to specification on purchase order.
        We
        expect that we could find new suppliers for AeroLEF ® ,
        if
        necessary. There can be no assurance, however, that we will be able to reach
        satisfactory arrangements with our current suppliers or, if necessary, new
        suppliers or that such arrangements for either AeroLEF ® or
        an
        alternative nebulizing device will be successful. The Company has not clinically
        tested any nebulizers appropriate for the out-patient market and it is not
        known
        whether any of the products in this category currently available could be
        purchased at an economic price or whether the combination of AeroLEF ® in
        a
        portable electronic nebulizer would be safe or effective. All manufacturing
        facilities must comply with applicable regulations in their jurisdiction
        or
        where products are to be sold. In addition, production of the licensed and
        owned
        products may require raw materials for which the sources and amount of supply
        are limited. An inability to obtain adequate supplies of such raw materials
        could significantly delay the development, regulatory approval and marketing
        of
        our licensed and owned products.
  **We
        are dependent on devices from third parties in order to successfully
        commercialize AeroLEF** **®** **.**
  Third-party
        devices will be an important element for successful commercialization of
        AeroLEF ® in both
        the inpatient and outpatient settings.
  We
        have
        selected the AeroEclipse ® inhalation device for our Phase II clinical studies for the inpatient
        indications for AeroLEF ® and
        anticipate using the AeroEclipse ® for
        further clinical studies for the inpatient market opportunity. Material changes
        to the AeroEclipse ® device
        by the manufacturer or a decision to switch to an alternative inhalation
        device
        would likely delay the initiation of later stage clinical trials. Switching
        after the initiation of Phase III studies, however, would require additional
        clinical trials and could significantly delay the commercialization of
        AeroLEF ® .
        Currently YM purchases the AeroEclipse ® and it
        does not have a defined supply agreement. ****
  While
        inpatient use of AeroLEF ® ,
        in the
        hospital or hospice setting, is accomplished with existing equipment such
        as the
        AeroEclipse ® ,
        outpatient use will require a portable nebulization device. Several devices
        currently exist and are otherwise approved for use with certain respiratory
        agents (bronchodilators, antibiotics, steroids). We have established criteria
        to
        evaluate and identify the best devices for use with AeroLEF ® .
        Although we would prefer to access these devices on an arms-length basis
        from
        the manufacturer, we will explore the benefits of a strategic partnership
        that
        could provide for custom adaptations to optimize product delivery, lower
        prices
        or other benefits.
  **The
        Drug Enforcement Administration limits the availability of the active
        ingredients in certain of our current drug candidates and, as a result, our
        quota may not be sufficient to complete clinical trials, or to meet commercial
        demand or may result in clinical delays.**
  The
        DEA
        and similar opioid-regulating agencies of other countries regulate chemical
        compounds defined as Schedule I, II, III, IV and V substances, with Schedule
        I
        substances considered to present the highest risk of substance abuse and
        Schedule V substances the lowest risk. Certain active ingredients in
        AeroLEF ® ,
        such as
        fentanyl, are listed by the DEA as Schedule II under the *Controlled
        Substances Act of 1970* .
        Consequently, their manufacture, research, shipment, storage, sale and use
        are
        subject to a high degree of oversight and regulation. For example, all Schedule
        II drug prescriptions must be signed by a physician, physically presented
        to a
        pharmacist and may not be refilled without a new prescription. Further, the
        amount of Schedule II substances we can obtain for clinical trials and
        commercial distribution is limited by the DEA and our quota may not be
        sufficient to complete clinical trials or meet commercial demand. There is
        a
        risk that DEA regulations may interfere with the supply of the drugs used
        in our
        clinical trials, and, in the future, our ability to produce and distribute
        our
        products in the volume needed to meet commercial demand. Manufacturers for
        this
        product are limited because only those holding a DEA license to manufacture
        Schedule II compounds may be considered.
  -
            10
            -
  **We
        are dependent on licenses from third parties and the maintenance of licenses
        is
        necessary for our success.**
  We
        have
        obtained our rights to the licensed products under license agreements from
        various third party licensors as follows:
  (a)
              License
                  Agreement between CIMAB and us dated May 3, 1995 as amended with
                  respect
                  to nimotuzumab; and
  (b)
              License
                  Agreement between our Company, the University of Manitoba and The
                  Manitoba
                  Cancer Treatment and Research Foundation, carrying on its undertaking
                  as
                  CancerCare Manitoba, dated November 2, 2000 with respect to
                  tesmilifene.
  As
        we own
        AeroLEF ® ,
        there
        are no license terms.
  We
        depend
        upon the license rights to the licensed products for commercialization of
        the
        licensed products. While we believe we are in compliance with our obligations
        under the licenses, certain licenses may be terminated or converted to
        non-exclusive licenses by the licensors if there is a breach of the terms
        of the
        licenses. There can be no assurance that the licenses are enforceable or
        will
        not be terminated or converted. The termination or conversion of the licenses
        or
        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 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. Terms of certain remaining licenses are to be
        determined at a later date. 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.
  Although
        our current licenses are governed by the laws of Ontario, the enforcement
        of
        certain of them may necessitate pursuing legal proceedings and obtaining
        orders
        in other jurisdictions, including the US and the Republic of Cuba. There
        can be
        no assurance that a court judgment or order obtained in one jurisdiction
        will be
        enforceable in another. In international venture undertakings it is standard
        practice to attorn to a neutral jurisdiction to seek remedy for unresolved
        commercial disputes. These arrangements are usually negotiated as part of
        the
        original business agreement. In the case of the 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 is licensed from Cuba, a developing country. As is the case
        in many
        developing countries, the commercial and legal environment in Cuba is in
        a
        formative stage and may be subject to greater 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.
  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 their business decisions. Despite the fact
        that
        CIMAB’s management is purportedly both autonomous and responsible for business
        decisions and that the license agreements with 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 force CIMAB to comply with any
        judgment if CIMAB or the Government of Cuba refuses to comply.
  -
            11
            -
  **We
        have advanced funds to our joint venture subsidiaries which we are only entitled
        to recover when the joint venture’s net income exceeds the amount of cumulative
        advances.**
  YM
        and
        CIMAB entered into a funding agreement with CIMYM (now CIMYM BioSciences)
        in
        November 1995 (the “Funding Agreement”) in connection with the 1995 CIMYM
        License as amended. The Funding Agreement provides that we will arrange for
        the
        appropriate studies and clinical trials for the licensed products held by
        CIMYM
        BioSciences 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.
  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 BioSciences 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, 2008, we have advanced $48.9 million to CIMYM BioSciences. Since
        we
        have expensed the total amount no further accounting for those advances would
        affect our balance sheet and any reimbursement of such advances would be
        considered to be income by us.
  **We
        are reliant on 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 rely upon 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 this
        will
        occur.
  **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 products in development have been conducted by us and our
        sub-licensees in more than 20 countries including Canada, the United Kingdom,
        Japan, Germany, India, Russia and the US 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.
        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.
  **We
        also conduct our in-licensing internationally and we currently license products
        and technologies from sources in Canada and Cuba. We have previously licensed,
        and intend to and may license, products from sources in other
        jurisdictions.**
  We
        have
        licensed nimotuzumab from CIMAB, a corporation representing a scientific
        organization in Cuba. The US has maintained an embargo against Cuba,
        administered by the US Department of Treasury. The laws and regulations
        establishing the embargo have been amended from time to time, most recently
        by
        the passage of the Cuban Liberty and Democratic Solidarity Act (the
“Helms-Burton Act”). The embargo applies to almost all transactions involving
        Cuba or Cuban enterprises, and it bars from such transactions any US persons
        unless such persons obtain specific licenses from the US Department of 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 US embargo could have the effect of limiting our
        access to US capital, US financing, US customers and US suppliers. In
        particular, our products licensed from Cuban sources, noted above, are likely
        to
        be prohibited from sale in the US unless the US Department of Treasury issues
        a
        license or the embargo is lifted.
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            12
            -
  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
        US. 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
        US. However, there can be no assurance that this is correct.
  **Risks
        Related To Our Financial Results And Need For
        Financing**
  **We
        expect to be a “passive foreign investment company” for the current taxable
        year, which would likely result in materially** **adverse** **US** **federal income tax consequences for US investors.**
  We
        will
        be designated as a “passive foreign investment company” under the meaning of
        Section 1297 of the United States Internal Revenue Code of 1986, as amended
        (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% of
        the
        average value of our assets produce, or are held for the production of, passive
        income. US shareholders should be aware that we may have been 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. If we are
        designated as a PFIC for any taxable year during which a US shareholder holds
        our common shares, it would likely result in materially adverse US federal
        income tax consequences for such US shareholder, 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. In addition, US Holders should be aware that there can be
        no
        assurances that the Company will satisfy the record keeping requirements
        that
        apply to a PFIC, or that the Company will supply US Holders with the information
        that such US Holders require to make certain elections available under the
        Code
        that are intended to mitigate the adverse tax consequences of the PFIC rules.
        The PFIC rules are extremely complex. A. US shareholder of our common shares
        is
        encouraged to consult a tax advisor regarding the PFIC Rules and the US federal
        income tax consequences of the acquisition, ownership, and disposition of
        our
        common shares. This discussion is qualified in its entirety by the section
        below
        entitled “Certain United States Federal Income Tax Considerations.”
  **We
        may not be able to obtain necessary funding from sales or license fees or
        royalties and, as a result, may need to try to obtain 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 rights to promising products, further develop those products by
        progressing the products toward regulatory approval by conducting and managing
        clinical trials, and finally to out-license rights to manufacture and/or
        market
        resulting 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. As at June 30, 2008 we had cash and short-term
        deposits totalling $58.1 million and accounts payables and accrued liabilities
        of $2.0 million.
  We
        assess
        our additional funding needs on a project-by-project basis from time-to-time.
        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 favorable terms.
  -
            13
            -
  **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 US or other territories, 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 TSX, AMEX and AIM. However, there
        can be no assurance that an active trading market in our common shares on
        these
        stock exchanges will be sustained.
  **Risks
        Related To Our Industry**
  **If
        our pre-clinical and clinical testing of drug products do not produce successful
        results, we will not be able to commercialize our
        products.**
  Each
        of
        our products, licensed or owned, must be subjected to additional pre-clinical
        and/or 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 pre-clinical and clinical trials and subsequent
        pre-clinical and clinical trials that have not yet begun.
  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, preclinical data may not be sufficient
        for
        regulators to accept positive clinical data for approval to commercialize
        a
        product. 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.
  **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. We consider our main competitors to be: Amgen, AstraZeneca,
        BMS, Roche, Genentech, Genmab, ImClone, Merck and OSI with respect to
        nimotuzumab. The main competitors, to our knowledge, for the AeroLEF ® product
        are Cephalon, Inc., Endo Pharmaceuticals Holdings Inc., Akela Inc., Alexza
        Molecular Delivery Corporation, Javelin Pharmaceuticals, Inc. (formerly IDDS,
        Inc.), Barr Pharmaceuticals, Inc., CeNeS Pharmaceuticals plc and Alza
        Corporation.
  -
            14
            -
  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
        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 US, is a long and
        costly
        process that is controlled by that particular country’s national regulatory
        agency. The national regulatory agency in Canada is Health Canada, in Europe
        it
        is the EMEA and in the US it is the FDA. Other national regulatory agencies
        have
        similar regulatory approval processes, but each is different. Approval in
        Canada, Europe, or the US does not assure approval by other national regulatory
        agencies, although often test results from one country may be used in
        applications for regulatory approval in another country.
  Prior
        to
        obtaining final regulatory approval to market a drug product, every national
        regulatory agency has a variety of statutes and regulations which govern
        the
        principal development activities. These laws require controlled research
        and
        testing of products, government review and approval of a submission containing
        pre-clinical and clinical data establishing the safety and efficacy of the
        product for each use sought, approval of manufacturing facilities including
        adherence to good manufacturing practices during production and storage,
        and
        control of marketing activities, including advertising and
        labelling.
  None
        of
        our products have been completely developed or tested and, therefore, we
        are not
        yet in a position to seek final regulatory approval to market any of our
        products. To date we have obtained various regulatory clearances to develop
        and
        test our products. Nimotuzumab has been cleared for testing in the US, Canada,
        Europe, Japan, Korea, and Indonesia/Malaysia/Singapore and has been designated
        as an orphan drug for certain indications in Europe and the US. It is in
        Phase
        II and III trials in certain of those territories. Trials of AeroLEF ® have
        concluded a Phase I, IIa and IIb in Canada, a Phase II has been cleared for
        initiation in the US and a Phase III is currently being designed.
  Nimotuzumab,
        which is being developed in Canada, the US, Europe, Japan, Korea, certain
        African countries and Southeast Asian countries sub-licensed by YM is also
        being
        separately developed or tested in Argentina, China, Colombia, Cuba, India,
        and
        Peru, amongst others. The US established an embargo against Cuba in 1961,
        reinforced by the Helms-Burton Act in 1996, and Cuba is among several nations
        which have been identified by the US Department of State as being a state
        sponsoring terrorism. As such the US Government has put in place certain
        limitations on conduct of business with Cuba and anti-terrorism legislation
        against Cuba. Although as of the date of this filing such anti-terrorism
        controls have not had any adverse effect on our operations, because of the
        anti-terrorism controls and the Helms-Burton Act there is no assurance that
        the
        Company will be able to complete clinical testing in the US or obtain final
        regulatory approval in order to successfully commercialize our nimotuzumab
        in
        the US. We were successful in September 2006 in our application for a Special
        License to import nimotuzumab for a clinical trial in the US and received
        clearance for this trial from the FDA in certain of these territories following
        the fiscal 2007 year end.
  -
            15
            -
  There
        can
        be no assurance 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, there can be no assurance that our licensed products
        will prove to be safe and effective in clinical trials under the standards
        of
        the regulations in our territories or receive applicable regulatory approvals
        from applicable regulatory bodies.
  **Changes
        in government regulations although beyond our control could have an adverse
        effect on our business.**
  We
        have,
        or have had, licenses with, or clinical trials at, various academic
        organizations, hospitals and companies in Canada, Cuba, Italy, Japan, Korea,
        Germany, the US and the United Kingdom and numerous 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.
  **Risks
        Related To Intellectual Property And Litigation**
  **Our
        success depends upon our ability to protect our intellectual property and
        our
        proprietary technology.**
  Our
        success will depend, in part, on 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 and 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.
  We
        maintain patents in connection with nimotuzumab, AeroLEF ® and
        tesmilifene. The following is a description of our key current and pending
        patents in connection with these drug products.
  -
            16
            -
  ***Nimotuzumab***
  CIMYM
        is
        the exclusive licensee for particular territories including the US under
        a
        patent estate that includes composition of matter coverage for nimotuzumab,
        and
        further includes coverage for nimotuzumab-based formulations and end-uses
        in the
        treatment of EGFr-dependent cancers. Patents are granted in the US, Europe,
        Japan, and Canada.
  CIMYM’s
        key US patent, US 5,891,996 expires in November 2015, and term extensions
        of up
        to five years may be available under the Patent Term Restoration Act. The
        same
        term and extension apply also to the key European patent, EP
        712863.
  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 a license agreement between us and CIMAB, dated May 3, 1995,
        as
        amended, 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.
  ***AeroLEF*** **®**
  The
        AeroLEF ® product
        is described in four patent families. We own key patents, expiring in 2014,
        claiming a method of administering systemic analgesia by inhaling free and
        liposome-encapsulated opioid analgesic. North American coverage includes
        a
        reissued US patent and a Canadian patent. We own two US applications with
        counterpart PCT applications, expiring in 2024, claiming the formulation
        for use
        in a method comprised of continuously inhaling the formulation to deposit
        at
        least one rapid-onset opioid and one sustained-effect opioid in the lungs
        to
        avoid the onset of side effects. A pending PCT application entitled “Stable
        Compositions” claims the manufacturing method and other physical characteristics
        of the formulation.
  ***Tesmilifene***
  We
        are
        the exclusive licensee to patents and patent applications from the University
        of
        Manitoba for tesmilifene. Patents that claim the use of tesmilifene in
        combination with chemotherapeutic agents have been issued in the US, Europe,
        Japan, Canada and Australia. US patent 5,859,065 broadly claims the use of
        tesmilifene and structurally related analogs in combination with any
        chemotherapeutic agent **** for
        the
        treatment of any cancer. Although the twenty-year term of this patent expires
        in
        December 2010, we may take full advantage of patent terms extensions of up
        to
        five additional years granted under the Patent Term Restoration Act in the
        US.
        Other issued patents US 6,284,799 and US 5,747,543 expire in 2014 and 2015
        respectively. In addition to these granted patents, patent applications relevant
        to the use of tesmilifene in neoadjuvant treatment are pending.
  In
        addition to patent protection, we intend to rely upon the available term
        of data
        exclusivity in the US and other countries for NCEs. Furthermore, full advantage
        will be taken, if required by us, of the Orange Book provisions in the US
        and
        equivalent provision in Canada and other countries, as a means for delaying
        generic competition.
  **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
        favor.
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            17
            -
  **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 $10 million per claim
        and a
        policy aggregate of $10 million (except for AeroLEF which has a limit of
        $5
        million per claim and a policy aggregate of $5 million). 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 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,
        US.**
  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-quarter majority vote by
        shareholders which in most instances requires a confirmatory resolution by
        a
        majority of the shareholders (and, in addition, especially where the holders
        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 all shareholders
        entitled to vote to pass a resolution for one or more directors to be removed,
        whereas DGCL only requires the affirmative vote of a majority of the
        shareholders.
  **Item
                  4:**
              **Information
                  on the Company**
  **A**
              **History
                  and Development of the
                  Company**
  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 NSCA.
  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.
  **GENERAL
        DEVELOPMENT OF THE BUSINESS**
  We
        were
        founded in 1994 to acquire rights to develop drug products. We are principally
        focused on products for the treatment of patients with cancer.
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            18
            -
  In
        1995,
        we secured our first drug licenses and our initial financing. We initially
        licensed a range of drug products and devices at various stages of assessment
        and development, including certain of our current anti-cancer products. In
        1998,
        we concentrated our activities on anti-cancer products. We have used funds
        raised in our initial financing and subsequent financings to advance certain
        of
        our licensed drug products through clinical trials in Canada, the US, Europe
        and
        elsewhere, and to expand our portfolio of anti-cancer products by licensing
        additional cancer drug and cancer-related products in later stages of
        development. In addition, we have previously licensed certain drug products
        that
        were pre-clinical. See “Business Overview - Products in Clinical Development”.
  We
        have
        three product candidates currently in the clinical stage of development:
  ·
              NIMOTUZUMAB
                  (previously known as TheraCIM hR3), a humanized monoclonal antibody,
                  targeting the protein known as Epidermal Growth Factor Receptor
                  (“EGFr”),
                  is designed to treat epithelial cancers and to be administered
                  prior to,
                  simultaneously with, or subsequent to, chemotherapy and radiotherapy.
                  In
                  various Phase II trials, the drug has significantly improved the
                  reported
                  complete response rate to radiation in head-and-neck tumors and
                  demonstrated clinical benefit in adult and pediatric glioma. The
                  drug has
                  reportedly been approved for sale in the People’s Republic of China (PRC)
                  for nasopharangeal cancer and for head and neck cancer in Argentina,
                  Colombia, India, and Peru. Certain of our rights to nimotuzumab
                  have been
                  sub-licensed to Daiichi-Sankyo Co. Ltd in Japan, Oncoscience AG
                  in Europe,
                  to Kuhnil Pharmaceutical Company for Korea and to Innogene Kalbiotech
                  Ltd.
                  of Singapore for certain Pacific-rim countries and certain African
                  countries.
  ·
              AeroLEF®,
                  a
                  proprietary formulation of both free and liposome-encapsulated
                  fentanyl
                  administered by pulmonary inhalation, is being developed for the
                  treatment
                  of severe and moderate acute pain including cancer pain.
                  AeroLEF®has been developed to provide both rapid onset and extended relief
                  from
                  pain while recognizing the need for interpersonal variability as
                  well as
                  inter-episode variability in the amount of drug needed. A 120-patient
                  (99
                  randomized) Phase IIb trial reported positive results in 2007 and
                  has been
                  cleared by the US FDA to commence a US trial.
  ·
              TESMILIFENE
                  is a small molecule drug with multiple modes of action that demonstrated
                  enhancement of the activity of traditional chemotherapy. On January
                  30,
                  2007, we stopped our pivotal Phase III trial of tesmilifene in
                  patients
                  with metastatic or recurrent breast cancer on the basis that an
                  interim
                  analysis of a Phase III trial in 723 women with advanced metastatic
                  breast
                  cancer indicated it was very unlikely significant differences in
                  the
                  overall survival rate would be shown between treatment arms. In
                  January
                  2006 we entered into a collaborative agreement with Sanofi-Aventis
                  to test
                  tesmilifene together with Taxotere®in
                  women with aggressive metastatic breast cancer. Thirty-three patients
                  have
                  been recruited - five patients in lead-in safety dose escalation
                  group and
                  28 in the randomized crossover PK group. Pharmcokinetics data indicate
                  only a minor interaction of tesmilifene with Taxotere®pharmacokinetics (a slight decrease in Cmax for Taxotere®in
                  the presence of tesmilifene). Twenty-six of the 33 patients completed
                  all
                  eight cycles of 100 mg/m2 Taxotere®without dose reductions. Twenty-six of the 33 patients had Partial
                  Response and four had Stable Disease. Overall Survival and
                  Progression-free Survival data should be available by calendar
                  year-end
                  2008. Whereas additional pre-clinical activity is ongoing regarding
                  the
                  mode of action of this molecule we have announced that it is our
                  intention
                  to not include this molecule in any further clinical
                  development.
  There
        is
        no indication of any public takeover offers by third parties in respect of
        YM’s
        shares or by YM in respect of other companies’ shares which have occurred during
        the last and current financial year.
  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 consolidated financial statements included elsewhere in
        this
        annual report.
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            19
            -
  **B**
              **Business
                  Overview**
  We
        are a
        biopharmaceutical company engaged in the development of products primarily
        for
        the treatment of patients with cancer. We own or in-license substances or
        products in order to advance them along the regulatory and clinical pathways
        toward commercial approval. Our licenses generally cover the major market
        countries of the developed world (including Canada, the US, Japan and Europe)
        or
        are world-wide. We use our expertise to manage and perform what we believe
        are
        the most critical aspects of the drug development process which include the
        design and conduct of clinical trials, the development and execution of
        strategies for the protection and maintenance of intellectual property rights
        and the interaction with drug regulatory authorities internationally. We
        concentrate on drug development and do not engage in drug discovery, avoiding
        the investment of time and capital that is generally required before a compound
        is identified as appropriate for clinical trials. We have previously in-licensed
        certain preclinical products which have been relevant to our clinical programs.
        We both conduct and out-source clinical trials, and we out-source the
        manufacture of clinical materials to third parties.
  Our
        current portfolio of products in active clinical development includes one
        anti-cancer agent (a monoclonal antibody) in a number of clinical trials
        currently targeting more than 10 different tumors and/or stages of cancer,
        and a
        proprietary, inhalation-delivery approach for fentanyl to treat acute pain
        including cancer pain. We also have a financial interest in two additional
        anti-cancer immunotherapies in pre-clinical development. We principally intend
        to license the rights to manufacture and/or market our drug products to other
        pharmaceutical companies in exchange for license fees and royalty payments
        and
        to continue to seek other in-licensing opportunities in pursuing our business
        strategy. 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
        or
        co-development rights to specific products. We intend to generally license
        the
        rights to manufacture and/or market our drug products to other pharmaceutical
        companies in exchange for license fees and royalty payments and to continue
        to
        seek other in-licensing opportunities in pursuing our business strategy.
  **Business
        Strategy**
  We
        are
        principally focused on development of products for the treatment of cancer
        or
        cancer-related conditions. Our strategy is to in-license rights to promising
        products or acquire such products, further develop those products by conducting
        and managing clinical research trials and progressing the products toward
        regulatory approval, and, generally, sub-license or out-license rights to
        manufacture and/or market resulting drug products to other pharmaceutical
        firms
        in exchange for royalties and license fees. We seek to use our product
        development capabilities to bridge discoveries and research from
        scientific/academic institutions or other biopharmaceutical companies, on
        the
        one hand, with commercial manufacturing and marketing of biopharmaceutical
        products, on the other hand.
  The
        main
        elements of our business strategy are described below:
  ***Identification
        of Product Candidates:*** We
        directly 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 in such products and research,
        with
        a view to determining the therapeutic and commercial potential of the applicable
        product candidates.
  ***In-Licensing:*** Upon
        identifying a promising biopharmaceutical product, we seek to negotiate a
        license to the rights for the product from the holder of those rights, the
        developer or researcher. The terms of such licenses vary, but generally 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 a cancer-related product, 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, the formulating
        or
        reformulating of drug products, making regulatory submissions, performing
        or
        managing clinical trials in target jurisdictions, and undertaking or managing
        the collection, collation and interpretation of clinical and field data and
        the
        submission of such data to the relevant regulatory authorities in compliance
        with applicable protocols and standards.
  -
            20
            -
  ***Out-Licensing:*** 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 in the remaining clinical development required
        to obtain final regulatory approval for the product. We expect that
        out-licensing would result in a pharmaceutical company or other licensee
        marketing or manufacturing the product in return for licensing fees in addition
        to royalties on any sales of the product. Management believes this model
        is
        consistent with current biotechnology and pharmaceutical industry licensing
        practices. In addition, although out-licensing is a primary strategy of ours,
        we
        may retain co-development or marketing rights to particular products or
        territories. To date, we have out-licensed one of our products in certain
        European countries, two anti-cancer pre-clinical products to two wholly-owned
        subsidiaries of a US corporation, one product in Japan, one product in several
        jurisdictions in South East Asia and Africa and two products in South Korea.
        See
“Business Overview - Licensing Arrangements - Out-Licensing”.
  We
        actively search for new product opportunities using the relationships of
        our
        management and advisory team and continuous monitoring of the academic and
        biotechnology environment in cancer treatment developments. Our staff analyses
        and evaluates opportunities and continuously reviews them. In addition, we
        have
        existing rights of first refusal in certain of our existing license agreements
        for certain additional products and extensions to existing products. We intend
        to seek other in-licensing opportunities in pursuing our business strategy.
  **Cancer
        And Cancer Therapeutic Market** ****
  According
        to World Health Organization (WHO) (July 2008) approximately eight million
        people died from cancer globally in 2007, representing 13% of all deaths.
        The
        WHO projects that the annual global deaths from cancer will increase to 12
        million by 2030. Globally, the cancers which contribute the most deaths are
        lung
        (1.4 million), stomach (866,000), liver (653,000), colon (677,000), and breast
        (548,000). Also, according to Surveillance Epidemiology and End Results (SEER
        2008), it is estimated that 1.4 million new cancer cases will be diagnosed
        in
        the US in 2008. Cancer is the second leading cause of disease-related death
        in
        North America behind cardiovascular disease which it is predicted to surpass
        in
        the next few years. The principal reasons for this projection appear to be
        the
        aging population in more developed countries, environmental issues related
        to
        industrial development, and improvements in the treatment of cardiovascular
        disease. North America, Europe and Japan are currently the principal markets
        for
        cancer therapies because of the established healthcare and payer systems.
  The
        principal types of cancer in the US, accounting for approximately 51% of
        the
        incidence of all cancers are lung (15%), breast (13%), prostate (13%), and
        colorectal (10%), according to SEER 2008 projections. These four types of
        cancer
        are also responsible for the highest combined mortality, accounting for
        approximately 50% of all cancer deaths in the US. Bladder, ovarian, brain
        and
        oral cancer, as well as lymphoma, leukemia and melanoma account for the majority
        of the balance of cancer deaths. The incidence of a particular cancer varies
        greatly between geographical areas, principally because of diet and habit.
  Surgery,
        radiation and chemotherapy remain the principal effective treatments for
        cancer.
        Although there is an ongoing debate about the value of chemotherapeutics
        with
        regards to prolongation of life, their palliative value has resulted in
        significant improvements in quality of life for cancer sufferers. In addition,
        although the reason is not clearly understood, current cancer drugs are
        effective in only a subpopulation of individuals with the same disease.
        Notwithstanding this, revenues across seven major oncology markets were reported
        to be approximately US$34.6 billion in 2005 and are expected to increase
        to over
        US$45 billion (Datamonitor, 2006) by 2011. The use of cancer therapies is
        forecast to increase as diagnostic methods improve (as already demonstrated
        in
        prostate cancer) and, particularly, as more effective treatments are developed.
  Numerous
        new approaches to cancer are currently in clinical trials. As targets become
        validated and technologies improve, research is beginning to yield therapeutic
        approaches that appear to be more effective than existing ones. Monoclonal
        antibodies were first described in 1978, and have now become commercially
        viable
        therapeutic products. The first approved (1998) in this category was Rituxan®.
        The Company is aware of only six naked monoclonal antibodies approved in
        the US for the treatment of cancer, Rituxan®, Campath®, Herceptin®, Avastin®,
        Erbitux® and Vectebix® although many more are in development A second approach
        to cancer treatment, therapeutic cancer vaccines, has been under development
        for
        many years, and the first such vaccine, Melacine®, was approved in 1999 in
        Canada.
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            21
            -
  We
        are
        also developing a novel formulation of an opioid, fentanyl, for the treatment
        of
        severe and moderate pain, including cancer pain. In the US cancer pain is
        suffered by more than 800,000 patients, according to Datamonitor 2006. We
        are
        aware of several other companies that are pursuing approaches to the delivery
        of
        fentanyl including Cephalon, Inc. (“Cephalon”), Endo Pharmaceuticals Holdings
        Inc. (“Endo”), Akela Inc. (“Akela”), Alexza Molecular Delivery Corporation
        (“Alexza”), Aradigm Corporation (“Aradigm”), Barr Pharmaceuticals, Inc.
        (“Barr”), CeNeS Pharmaceuticals plc (“CeNeS”) and Alza Corporation
        (“Alza”).
  **Product
        Portfolio**
  Our
        current portfolio of products includes two anti-cancer agents (a monoclonal
        antibody and a small molecule) in a number of trials currently targeting
        more
        than 10 different tumors and/or stages of cancer as well as a proprietary,
        inhalation-delivery approach for fentanyl to treat acute pain including cancer
        pain. We also have a financial interest in two additional anti-cancer
        immunotherapies. The Company’s only product in current clinical development
        involving a newer approach to the treatment of cancer is the novel monoclonal
        antibody, nimotuzumab. Another product, tesmilifene, is a chemical that has
        been
        clinically reported to enhance the activity of certain known chemotherapeutics
        although its subsequent clinical failure in 2007 makes its future development
        uncertain. The principal targets for our monoclonal antibody are of the most
        ubiquitous cancer indications, including non-small cell lung cancer, and
        colorectal cancer as well as head-and-neck cancer, brain cancers and certain
        indications with orphan drug designations. We expect, based on clinical trials
        done to date, to develop our clinical stage candidates beyond their respective
        initial indications.
  **Nimotuzumab**
  Background:
  Nimotuzumab
        is a humanized MAb targeting the EGF receptor. The EGFr is present in high
        concentrations on the surface of many cancer cells and it is postulated that
        the
        binding of ligands to this receptor is important in the continuing growth
        of
        cancer cells. Nimotuzumab appears to block this binding, resulting in the
        potential for inhibition of cell growth or, possibly, cell destruction by
        the
        immune system. Improved tumor responses or clinical benefit have been reported
        when EGFr targeting agents are combined with other anti-cancer treatments.
        Our
        EGFr MAb is being developed to be administered alone, or in combination with
        other anti-cancer treatments.
  Clinical
        Experience and Development Pathway:
  Nimotuzumab
        is reported to have been administered to approximately 3,000 cancer patients
        worldwide and shown to be well tolerated. The product has been cleared for
        use
        in numerous clinical trials by various regulatory agencies including the
        EMEA,
        Health Canada and the FDA. Nimotuzumab is reportedly approved for sale for
        the
        treatment of certain cancers in Argentina, China, Colombia, Gabon, India,
        Peru,
        and the Philippines. Trials that were or are being conducted with the drug
        include:
  (a)
              Phase
                  I safety and PK/PD trial in 12 patients with epithelial-derived
                  cancers
                  conducted by CIMAB and completed in
                  2004.
  (b)
              Phase
                  I PK/PD trial in 10 patients withlocally
                  advanced, unresectablehead and neck cancers receiving nimotuzumab + radiation, conducted
                  by
                  CIMAB. The study was completed in
                  2005.
  (c)
              Phase
                  I pharmaco-dynamic study by CIMYM in heavily pre-treated patients
                  with
                  solid tumors. The study investigated EGFr-related signalling in
                  tumor and
                  skin biopsies before and after treatment with 100, 200, 400 and
                  800 mg
                  doses of nimotuzumab. Of the 16 evaluable patients enrolled in
                  the trial,
                  confirmed stable disease was reported in six patients, a confirmed
                  partial
                  response in one patient and prolonged progression-free status observed
                  in
                  three patients. The study was completed in
                  2006.
  (d)
              Phase
                  I clinical trial of nimotuzumab monotherapy for the treatment of
                  solid
                  tumors conducted by Daiichi Sankyo Inc. in Japan, in 13 patients
                  with
                  various solid tumors to evaluate the safety of nimotuzumab in the
                  Japanese
                  population. The best response was stable disease in 11 of the 13
                  patients.
                  There were no SAEs. The study was completed in
                  2007.
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            22
            -
  (e)
              Phase
                  I trial in metastatic pancreatic cancer in combination with chemotherapy
                  to study PD conducted by Oncoscience study. The study included six
                  patients. The study was completed in
                  2007.
  (f)
              Phase
                  I safety, PK/PD and MTD trial in 15 patients with stage III breast
                  cancer
                  receiving nimotuzumab and chemotherapy, conducted by CIMAB; The
                  study is
                  ongoing, with 13 patients included up to August
                  2008.
  (g)
              Phase
                  I safety, PK/PD and MTD trial of nimotuzumab + chemotherapy in
                  up to 15
                  patients with transarterial immunochemoembolization in hepatocellular
                  carcinoma conducted by CIMAB; The study is ongoing, with nine patients
                  included up to August 2008.
  (h)
              In
                  March 2006, the FDA cleared the use of nimotuzumab as a monotherapy
                  in the
                  treatment of a child with advanced glioma under an investigator-initiated
                  IND. A total of eight investigator-initiated or compassionate use
                  patients
                  have been treated up to the date of this
                  form.
  (i)
              Phase
                  I/II trial in patients with locally advanced, unresectable head
                  and neck
                  cancers conducted by CIMAB enrolled 24 fully evaluable patients
                  receiving
                  nimotuzumab with radiation. This trial demonstrated a greater than
                  60%
                  complete response rate compared to approximately 30% complete response
                  rate historically expected with radiation alone. The study was
                  completed
                  in 2001.
  (j)
              Phase
                  I/II trial in Canada and Korea in patients with stage IIb, III
                  and IV
                  NSCLC, who are not sufficiently fit to tolerate the standard chemotherapy
                  regimen, conducted by CIMYM and Kuhnil Pharmaceutical Co., Ltd.
                  The study
                  is designed to assess safety, response rate and survival in these
                  patients. The CIMYM study was completed in 2007. This study enrolled
                  18
                  patients in Canada: partial response rate was observed in eight
                  patients
                  (44.4%), stable disease in eight and progressive disease in two.
                  The
                  disease control rate was 88.8%. Preliminary data in the Korean
                  arm, in
                  which recruitment was completed in 2007, from 16 patients resulted
                  in
                  partial response in seven of them and stable disease in eight within
                  the
                  radiation field. There was a response rate of 46.7% and a disease
                  control
                  rate of 100.0%.
  (k)
              Phase
                  I/II safety, PK/PD and MTD trial of nimotuzumab plus chemotherapy
                  in up to
                  15 patients with liver metastasis from colorectal cancer conducted
                  by
                  CIMAB. The study is ongoing, with one patient included up to August
                  2008.
  (l)
              Phase
                  II clinical trial in patients with locally advanced head and neck
                  cancer
                  designed to evaluate safety and efficacy in this indication. The
                  study was
                  completed in 2003. Complete tumor response was observed in 17 out
                  of 24
                  evaluable patients and 14 patients are still alive more than 5.5
                  years
                  after the start of the study, conducted by CIMYM.
  (m)
              Phase
                  II pivotal trial conducted by CIMAB and Biotech Pharmaceuticals
                  Limited
                  (China) assessing efficacy and safety of nimotuzumab combined with
                  radiation compared to radiation alone in locally advanced Stage
                  III-IV
                  nasopharyngeal carcinoma, a subset of head-and-neck cancer.  Of the
                  130 patients in the intent-to-treat analysis, those in the combination
                  arm
                  had a 90.6% complete response rate compared to 51.5% in the
                  radiation-alone group. The study was completed in
                  2005.
  (n)
              A
                  Phase II randomized, four-arm safety and efficacy trial in 92 patients
                  with locally advanced head and neck cancers comparing nimotuzumab
                  +
                  chemotherapy + radiation to chemotherapy + radiation and nimotuzumab
                  +
                  radiation to + radiation, conducted by Biocon Biopharm Pvt. Ltd.
                  The study
                  was completed in 2005. There were 76 evaluable patients. The study
                  demonstrated 90% of complete response in the
                  antibody-chemotherapy-radiation arm and 70.59% in the
                  antibody-radiotherapy arm, with objective responses of 100% and
                  76.47%
                  respectively.
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            23
            -
  (o)
              Phase
                  II study in first-line high grade gliomas of 24 adult patients,
                  to
                  evaluate efficacy and safety of nimotuzumab in combination with
                  radiotherapy. This study was conducted by CIMAB and showed complete
                  responses in the 16.7% of patients, PR 20.8%; SD 50%; PD 12.5%;
                  with an
                  overall median survival of 18.1 months. The study was completed
                  in
                  2005.
  (p)
              Phase
                  II study in pediatric patients with progressive high grade gliomas
                  conducted by Oncoscience. The trial demonstrated a 38% clinical
                  benefit
                  rate in 45 evaluable patients. This included two partial responses
                  in a
                  patient population where no such responses had previously been
                  documented.
                  The study was completed in 2006.
  (q)
              Phase
                  II clinical trial in metastatic pancreatic cancer in combination
                  with
                  chemotherapy for evaluating dose escalation, PK, safety, conducted
                  by
                  Oncoscience. The study was completed in 2006 with 65
                  patients.
  (r)
              Phase
                  II randomized trial in patients with locally advanced head and
                  neck
                  cancers conducted by CIMAB. The study was designed to assess local
                  control, safety and survival in 112 patients receiving either nimotuzumab
                  + radiation or radiation alone. The study was completed in
                  2007.
  (s)
              Phase
                  II randomized trial of nimotuzumab + radiation vs. radiation alone
                  in 30
                  patients with brain metastases from NSCLC, to evaluate efficacy
                  and
                  quality of life, conducted by CIMAB. The study is ongoing with
                  29 patients
                  included up to August 2008.
  (t)
              Phase
                  II trial investigating nimotuzumab in colorectal cancer patients
                  who have
                  failed previous irinotecan-containing regimens. The single-arm
                  trial
                  conducted by CIMYM enrolled 61 patients in Canada who were treated
                  with
                  irinotecan plus nimotuzumab. The study was completed in 2008. There
                  were
                  fifty-eight evaluable patients. The prospective primary endpoint
                  was
                  objective tumor response rate (RR), secondary endpoints included
                  overall
                  survival, the rate and duration of stable disease, and progression
                  free
                  survival (PFS). The objective response rate was of 3.4%; disease
                  control
                  rate 50%, (27 patients stable disease; two patients partial response).
                  The
                  Median PFS was 12 weeks. The median overall survival was 9.3
                  months.
  (u)
              Phase
                  II randomized trial of nimotuzumab + chemotherapy vs. chemotherapy
                  alone
                  designed to evaluate efficacy and safety in 70 patients with hormone
                  refractory prostate cancers, conducted by CIMAB. There were 62
                  patients
                  included up to August 2008.
  (v)
              Phase
                  II randomized trial of nimotuzumab + radiation + chemotherapy vs.
                  radiation + chemotherapy designed to evaluate efficacy and safety
                  in 68
                  patients with esophageal cancers, conducted by CIMAB. There were
                  59
                  patients included up to August
                  2008.
  (w)
              Phase
                  II randomized trial of nimotuzumab + radiation vs. radiation alone
                  in 80
                  patients with high grade malignancy astrocytic tumors conducted
                  by CIMAB.
                  The study is designed to assess survival, local control and safety.
                  The
                  study is ongoing, with 67 patients included up to August
                  2008.
  (x)
              Phase
                  II trial investigating nimotuzumab in pediatric patients with recurrent
                  diffuse intrinsic pontine glioma (DIPG), a form of inoperable,
                  treatment-resistant brain cancer. This study is being conducted
                  by YM
                  BioSciences USA Inc. and includes leading US pediatric clinical
                  centers.
                  The single-arm trial will enrol 44 patients with DIPG who will
                  be treated
                  with nimotuzumab as monotherapy. The study is ongoing, with seven
                  patients
                  included up to August 2008.
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            24
            -
  (y)
              Phase
                  II pediatric trial with first-line brain stem glioma conducted
                  by CIMAB.
                  Monotherapy with nimotuzumab to evaluate survival, local control
                  and
                  safety. The study is ongoing. The study will enroll 47 patients
                  and has
                  five patients included up to August
                  2008.
  (z)
              Phase
                  II trial, induction and maintenance therapy in combination with
                  radiotherapy and temozolomide in 58 patients with glioblastoma
                  multiforme
                  (Grade 4 astrocytoma). It is an evaluation of efficacy and safety.
                  The
                  study is being conducted by Biocon Biopharm Pvt. Ltd. The study
                  is
                  ongoing, with 40 patients included up to August
                  2008.
  (aa)
              Phase
                  II study in 37 patients with locally advanced, non-resectable SCCHN.
                  The
                  study is ongoing. The study is being conducted by the National
                  Cancer
                  Center of Singapore and sponsored by Innogene Kalbiotech. It is
                  non-randomised, nimotuzumab plus chemoradiation. The study will
                  evaluate
                  response rates as primary endpoint andprogression-free
                  survival and toxicity as secondaries. There were three patients
                  included
                  up to June 2008.
  (bb)
              Phase
                  II trial, nimotuzumab in combination with chemotherapy in 110 patients
                  with Stage IIIb/IV non-small cell lung cancer (NSCLC), conducted
                  by Biocon
                  Biopharm Pvt.Ltd., to evaluate efficacy and safety. The study is
                  ongoing.
  (cc)
              Phase
                  IIb/IIIa study in 188 patients with locally advanced or metastatic
                  pancreatic cancer who will be treated with either gemcitabine plus
                  nimotuzumab or gemcitabine plus placebo conducted by Oncoscience. 
                  The primary end-points for this trial are time to tumor progression
                  and
                  overall survival with quality of life and response rate among the
                  secondary endpoints. There were 40 patients included up to August
                  2008.
  (dd)
              Phase
                  III single arm pediatric trial of nimotuzumab in combination with
                  radiation in 40 patients newly diagnosed with DIPG. The trial was
                  conducted by Oncoscience in several European countries and intended
                  to
                  serve as a registration trial in EMEA countries. Enrolment was
                  completed
                  in 2007. Median progression free survival was reported as 5.9 months,
                  median overall survival was 9.7
                  months.
  (ee)
              Phase
                  III study in which nimotuzumab and the current standard of care
                  is
                  compared to the current standard of care in 148 patients with glioblastoma
                  multiforme (GBM), conducted by Oncoscience. The primary end-point
                  for this
                  first-line trial is progression-free survival with response rate
                  and
                  symptom control among the secondary endpoints. The study is ongoing,
                  with
                  45 patients included up to August
                  2008.
  (ff)
              Phase
                  IV study on head and neck. Post-marketing study conducted by Biocon
                  Biopharm Pvt.Ltd. on the use of nimotuzumab plus chemoradiotherapy.
                  The
                  study is ongoing and is to include 150 patients of which 134 were
                  included
                  up to August 2008.
  Several
        more trials are in planning stage but have not yet received regulatory
        clearances.
  Regulatory
        Matters
  In
        July
        2004, nimotuzumab was designated an orphan drug for glioma by EMEA.
  In
        November 2004, nimotuzumab was designated an orphan drug for glioma by the
        FDA
        in the US.
  In
        April
        2005, we were advised that nimotuzumab was approved for sale in
        China.
  In
        June
        2006, we were advised that India’s health regulatory body, The Drug Control
        General, had granted initial marketing approval to nimotuzumab for the treatment
        of head-and-neck cancers.
  In
        September 2006, YM USA received a Special License from OFAC for the importation
        of nimotuzumab for a US trial in pediatric pontine glioma.
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            25
            -
  In
        October 2007, we were advised that nimotuzumab was approved for sale in
        Ukraine.
  In
        October 2007, we were advised that an application for marketing approval
        for
        nimotuzumab was submitted to EMEA.
  In
        June
        2008, we were advised that nimotuzumab was designated an orphan drug for
        pancreatic cancer by EMEA.
  In
        August
        2008, we were advised that nimotuzumab was approved for sale in the
        Philippines.
  Manufacturing:
  CIMAB
        supplies nimotuzumab to facilitate the clinical development of these products.
        The 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 then-current licensing
        agreements at such time and stage of product development as commercial
        quantities of these products are required. There is a risk that CIMAB may
        experience difficulties obtaining or producing commercially viable quantities
        of
        these products. Product from CIMAB’s manufacturing plant has been cleared for
        use in clinical trials in Canada, Europe, the USA and Japan amongst others.
        The
        plant operates according to GMP principles and its cGMP compliance status
        has
        been reviewed on behalf of the Company by industry experts and was inspected
        and
        approved by the Paul Erlich Institute (PEI) that is responsible for approvals
        of
        biological manufacturing facilities in Germany. The PEI approval covers 300,
        500
        and 1000 litre fermenters. The manufacturing facility has to continue to
        meet
        GMP standards in order to supply product for commercial use and, should the
        2007
        application to EMEA proceed beyond the review process, an inspection from
        the
        EMEA would be expected. In 2007, CIMAB’s manufacturing process was accepted by
        Health Canada for commercial scale manufacturing.
  Our
        license agreement for nimotuzumab contemplates the manufacturing of the product
        by CIMAB or a supplier contracted by CIMAB. Should CIMAB agree to alternative
        manufacturing arrangements, such as a sub-licensee of CIMYM manufacturing
        the
        product, the loss of manufacturing benefits to CIMAB may be reflected in
        a lower
        license fee and royalty payable to CIMYM than if manufacturing remains with
        CIMAB. See “Business - Licensing Arrangements”.
  Marketing:
  Nimotuzumab
        is licensed by us from a Cuban source, CIMAB, and as such is likely to be
        prohibited from sale in the US unless OFAC issues a license or the US embargo
        against Cuba is lifted. YM USA has received a special license from OFAC to
        import nimotuzumab for a clinical trial that has been cleared by the FDA
        to
        proceed.
  Intellectual
        Property:
  CIMYM
        is
        the e xclusive
        licensee for the many market territories, including the US. The patent estate
        includes coverage for the composition of matter, claiming the amino acid
        sequence of the nimotuzumab and variants thereof, and end-uses in the treatment
        of EGFr-dependent cancers. Patents are granted in the US, Europe, Canada,
        and
        Japan. The patents US5,891,966 and US6,506,883 expire November 2015.
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            26
            -
  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 US
        patents
        granted to others in this field. In April 2001 Rorer International (Overseas)
        (“Rorer”) was issued the US6,217,866 (“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. A
        counterpart patent has been granted in Europe. We have filed an opposition
        to
        the grant of the European patent. The opposition proceedings in Europe were
        suspended pending the outcome of cases in the U.K. and Germany related to
        inventorship claims filed by Yeda Research and Development Corporation, Ltd.
        (“Yeda”). Those cases have culminated in a title transfer to the current
        co-owners, Yeda and Aventis (the successor of Rorer). We do not know when
        the
        opposition proceedings against that European patent will resume. On the related
        US patent a September 19, 2006 decision in the US 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. Yeda now has
        the
        right to grant non-exclusive licenses in the US. 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 tumors. ImClone has also filed a US and PCT applications
        covering the use of EGFr MAbs to treat patients having tumors that do not
        respond to treatment with conventional therapies. We continue to monitor
        ImClone’s pending radiation-related patent applications. A European patent
        application claiming the use of radiation in combination with tyrosine kinase
        receptors was withdrawn due to prior art brought to the attention of the
        examiner by YM, interalia. We plan on vigorously challenging ImClone’s claims in
        respect of the radiation-related patent applications by having filed additional
        prior art in Canada and Japan.  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 ImClone 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 tumors. YM and others have filed
        oppositions to the grant of this patent, and now await preliminary ruling
        of the
        oppositions board before taking matters further.
  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 there can be no assurance
        of this.
  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,
        Genmab, ImClone/BMS, and Merck, amongst others.
  We
        understand that OSI, in concert with Genentech and Roche, and AstraZeneca,
        have
        small molecules designed to target the tyrosine kinase domains of EGF receptors.
        We understand that Iressa(R), from AstraZeneca, has been approved in thirty-five
        countries, including Japan and the US for third line monotherapy of NSCLC.
        OSI
        reported that it has positive survival data in a Phase III monotherapy study
        in
        refractory lung cancer. TARCEVA® monotherapy is now approved 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.
  OSI’s
        product, Tarceva®, is in co-development with Roche and Genentech and is reported
        to be in numerous trials in various indications, including Phase III trials
        in ovarian cancer, colorectal cancer, and NSCLC (1st line and adjuvant).
        Tarceva TM has been
        approved in the US for NSCLC. See “Competition”.
  We
        understand that Erbitux(R), developed by ImClone/BMS and Merck, is approved
        in
        the US, Canada, Japan, Germany, Austria, Australia, and Switzerland for
        metastatic colorectal cancer in combination with irinotecan in
        irinotecan-refractory patients. Management understands that Erbitux(R) is
        under
        review by other regulatory agencies including EMEA for this and additional
        indications.
  **AERO** **LEF** **®**
  Background:
  AeroLEF ® is a
        proprietary formulation of fentanyl, an opioid analgesic, that is administered
        by inhalation and permits self-titration by patients. The development of
        AeroLEF ® as a
        combination of pulmonarily-delivered free and liposomal dosage form takes
        advantage of (1) the lung’s large absorptive surface and thin barrier to
        absorption to permit rapid transport of the free fentanyl fraction (loading
        dose) into the systemic circulation and (2) the capacity of liposomes to
        function as reservoirs for the regulated release over time of the encapsulated
        fentanyl. AeroLEF ® is being
        developed to provide both rapid and extended opioid analgesic levels for
        patients with severe and moderate acute pain and, eventually, breakthrough
        cancer pain.
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            27
            -
  Clinical
        Experience:
  The
        clinical experience with AeroLEF ® includes
        two Phase I studies with healthy volunteers, one completed Phase II acute
        pain
        study in post-surgical patients carried out in Canada, one Phase IIb randomized
        trial in 120 patients (99 randomized, 21 open label) under IND submissions
        approved by Health Canada and clearance by the FDA in June 2007 to initiate
        a
        Phase II trial in the US.
  The
        preliminary results of a Phase II acute pain study using AeroLEF ® as the
        primary postoperative analgesic were reported at the annual meeting of the
        American Society of Anesthesiologists in October 2004. The study involved
        a
        unique “dose-to-effective-analgesia” following patient-controlled administration
        of AeroLEF ® as the
        primary analgesic treatment in adult patients experiencing severe and moderate
        pain following elective orthopedic surgery. This Phase II study demonstrated
        that 95% of patients successfully achieved analgesia via self-titration with
        AeroLEF ® as the
        primary medication. Eighteen (18) subjects rapidly achieved perceptible
        analgesia soon after commencing nebulization (median 2.7 min) and continued
        self-titration to a median time to effective/adequate analgesia of 17
        minutes.
  On
        August
        30, 2005 YM received clearance from Health Canada to initiate a randomized
        Phase
        IIb study with AeroLEF ® ,
        the
        first patient was recruited in January 2006, the final patient in March 2007
        and, in May 2007, the trial succeeded in meeting its primary endpoint – the
        Summed Pain Relief plus Pain Intensity Difference (SPRID).
  In
        January 2008 the FDA issued a “clinical hold” on the development of
        AeroLEF ® in
        the US
        and the restriction was subsequently lifted in June 2008 permitting a phase
        II
        study.
  Manufacturing:
  The
        AeroLEF ® formulation is manufactured through a controlled process that has been developed
        to produce a specific ratio of liposome encapsulated fentanyl to free fentanyl
        in combination. AeroLEF ® clinical
        product supply for the two Phase I studies and the Phase IIa study was produced
        by a manufacturer based in the Netherlands. During 2004, the manufacturing
        process was transferred to a company located in Ontario, Canada.
        AeroLEF ® drug
        product produced at the Canadian manufacturer was used in the Phase IIb trial,
        and is expected to be used for future clinical trials and other development
        activities. The manufacturing of AeroLEF ® has been
        successfully transferred to a second manufacturing source in the US which
        may
        provide pivotal trial material and future commercial supply. Fentanyl, the
        active pharmaceutical ingredient in the AeroLEF ® formulation, is commercially available from multiple vendors holding Drug
        Master
        Files (DMF) with the FDA and licensed to synthesize controlled
        substances.
  Intellectual
        Property:
  The
        AeroLEF ® product
        is described in four patent families. We own key patents, expiring in 2014,
        claiming a method of administering systemic analgesia by inhaling free and
        liposome-encapsulated opioid analgesic. North American coverage includes
        a
        reissued US patent and a granted patent in Canada. We own two US applications
        with counterpart PCT applications, expiring in 2024, claiming the formulation
        for use in a method comprised of continuously inhaling the formulation to
        deposit at least one rapid-onset opioid and one sustained-effect opioid in
        the
        lungs to avoid side effects. A pending PCT application entitled “Stable
        Compositions” claims the manufacturing methods related to liposomal composition
        and other physical characteristics.
  We
        are
        aware of US patents owned by Phares Pharmaceutical Research NV related to
        liposome compositions. These patents expire in 2008 and 2009 **** and
        are
        not expected to hamper our commercial activities.
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            28
            -
  Competitive
        Position:
  The
        opioid analgesic market which includes products based on morphine, fentanyl,
        oxycodone, or hydromorphone is currently dominated by several pharmaceuticals
        companies such as Johnson & Johnson Inc., Abbott Laboratories, Baxter
        International Inc., AstraZeneca, Purdue Pharma L.P., Cephalon, Inc., and
        Endo
        Pharmaceutical Holdings Inc. The fentanyl segment of the opioid analgesic
        market
        includes three approved routes of administration:
  (a)
              intravenous
                  administration of fentanyl citrate available as generic products
                  from
                  various suppliers
  (b)
              transdermal
                  administration via the Duragesic® patch and Ionsys®
                  patch
  (c)
              transmucosal
                  administration via the Actiq® lollipop and
                  Fentora®
  Several
        competitors are developing non-invasive alternatives for enhanced delivery
        of
        fentanyl, including Endo (Rapinyl for sublingual delivery), BDSI (BEMA for
        buccal delivery), Archimedes (intranasal delivery), Sosei (sublingual spray),
        Alexza (pulmonary delivery) and Akela (pulmonary delivery). All the competitors,
        to our knowledge, will deliver fixed dosage forms of the drug.
  **Tesmilifene**
  Background:
  Tesmilifene
        is a small molecule drug with multiple modes of action that appears to enhance
        the activity of traditional chemotherapy agents. Its chemical designation
        is
        N,N-diethyl-2-[4-(phenylmethyl)phenoxy]ethanamine hydrochloride. It has
        demonstrated synergistic effects with anthracyclines in late-stage clinical
        trials and with taxanes, 5-FU vinca alkaloids and platins in earlier-stage
        clinical and pre-clinical studies.
  Intellectual
        Property:
  We
        obtained an exclusive license to patent rights covering tesmilifene from
        the
        University of Manitoba. Aspects of tesmilifene, including its anti-cancer
        and
        cytoprotective uses, are the subject of patents that have issued in the US,
        Europe, Japan, Canada and Australia.
  The
        patent estate comprises numerous layers of patent protection. A key patent
        among
        these is US Patent No. 5,859,065 claiming the use of tesmilifene, including
        certain structural analogs, in combination with any chemotherapeutic agents
        for
        the treatment of any cancer. The twenty year term of this patent expires
        in
        2010. Still other issued patents US 6,284,799 and 5,747,543, expire in 2014
        and
        2015 respectively. It is anticipated that tesmilifene will qualify for patent
        term extension under the Patent Term Restoration Act which could provide
        additional protection of up to five years. We intend to take full advantage
        of
        the available term extension.
  In
        addition, international patent applications are pending based upon our clinical
        development program. This series of patent applications focused on the survival
        advantage demonstrated following the analysis of the earlier phase III trial
        and
        relates to the selection of patient populations that will most benefit from
        the
        chemopotentiating and cytoprotective properties of tesmilifene. Patents that
        result from these filings should expires in 2022 in the US and other major
        markets.
  Development
        Status
  On
        January 30, 2007, following a review by the Data Safety Monitoring Board
        (DSMB)
        of patients enrolled in 723-patient Phase III randomized trial of tesmilifene
        and doxorubicin, the trial was stopped because it was very unlikely significant
        differences in overall survival would be shown between treatment arms as
        the
        data matured.
  In
        January 2006 we entered into a collaborative agreement with Sanofi-Aventis
        to
        test tesmilifene together with Taxotere ® in women
        with aggressive metastatic breast cancer. Thirty-three patients have been
        recruited - five patients in lead-in safety dose escalation group and 28
        in the
        randomized crossover PK group. Pharmcokinetics data indicate only a minor
        interaction of tesmilifene with Taxotere ® pharmacokinetics (a slight decrease in Cmax for Taxotere ® in the
        presence of tesmilifene). Twenty-six of the 33 patients completed all eight
        cycles of 100 mg/m2 Taxotere ® without
        dose reductions. Twenty-six of the 33 patients had Partial Response and four
        had
        Stable Disease. Overall Survival and Progression-free Survival data should
        be
        available by calendar year-end 2008.
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            29
            -
  Whereas
        additional pre-clinical activity is ongoing regarding the mode of action
        of this
        molecule we have announced that it is our intention to not include this molecule
        in any further clinical development.
  **Clinical,
        Pre-Clinical And Basic Research**
  We
        design, fund and manage clinical and some pre-clinical research, and may
        support, but do not conduct, basic research. We manage the development of
        products that we in-license through our own team of clinical, regulatory,
        licensing and business development executives and through a number of research
        and medical collaborations. We are responsible for filing applications with
        the
        relevant authorities for regulatory approval for clinical trials and conduct,
        or
        have conducted on our behalf, clinical trials to progress products in
        development toward regulatory approval and possible out-licensing for commercial
        sale. Our current licenses generally provide that we will conduct, or cause
        to
        be conducted, the tests and clinical studies necessary to progress products
        in
        development toward regulatory approval with a view to obtaining the approval
        for
        sale of the licensed drug from appropriate regulatory authorities. We, and/or
        our licensees, have received regulatory clearances for clinical trials in
        a
        number of countries, including in Canada, the US, the United Kingdom, Europe,
        Japan, Korea, Singapore, and South Africa from Phase I through Phase III.
        Some
        basic research is conducted at the facilities of our licensors, and we pay
        for
        certain amounts of this research.
  **Licensing
        Arrangements**
  ***In-Licensing***
  Licenses
        For Nimotuzumab
  In
        May
        1995, YM acquired an exclusive, sub-licensable license (as amended, the “1995
        CIMYM License”) from CIMAB, acting on behalf of CIM, to products for passive
        immunotherapy of cancer directed toward EGF and EGFr as targets, including
        hR3,
        a humanized MAb targeting the EGFr. CIMAB is the company responsible for
        the
        commercialization of products developed at CIM. The 1995 CIMYM License is
        in
        respect of Europe, Canada, the US, Japan, Australia, Taiwan, Singapore,
        Thailand, Hong Kong, South Korea, Malaysia, Indonesia and the Philippines.
        As a
        term of the 1995 CIMYM License, YM has a right of first refusal with respect
        to
        licensing any other products derived from the EGF and EGFr programs of CIMAB
        except its anti-EGFr monoclonal antibody for psoriasis in Europe.
  Pursuant
        to the 1995 CIMYM License, in 1995 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 to that 20% equity interest in CIMYM, CIMAB is
        entitled to receive 10% of net revenues received by CIMYM. In addition, YM
        and
        CIMYM, pursuant to the terms of the 1995 CIMYM License, paid US$2,750,000
        for
        certain product development costs for 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
        its best efforts to obtain a sub-license agreement in which CIMAB retains
        the
        right to manufacture the product. YM will be responsible for any failure
        of
        CIMYM to fulfill its obligations under the 1995 CIMYM License. This license
        agreement shall be in force as long as any patents thereunder are valid,
        or
        until such time as the license agreement is terminated by either party because
        of a default by the other party, or by CIMYM with written notice within 90
        days
        after the end of a stage of pre-clinical trials or after each stage of clinical
        trials.
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            30
            -
  As
        at
        September 30, 2004 we had advanced US$24 million to CIMYM and CIMYM (Barbados),
        collectively, for the licensing and development of the products licensed
        by
        CIMYM. We were given the right to recover all funds advanced to CIMYM and
        CIMYM
        (Barbados), collectively, from either CIMYM and CIMYM (Barbados). To the
        extent
        that the net revenues of CIMYM are less than or equal to the advanced amounts,
        we are only permitted to recover such advances from 30% of the net revenues.
        At
        this time none of the advances have been repaid. There have been no revenues
        to
        date.
  On
        June
        30, 2006 CIMYM amalgamated with CIMYM (Barbados) to form CIMYM BioSciences
        Inc.,
        an Ontario company. CIMAB owns equity a 20% 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 BioSciences
        to
        CIMAB such that we would then own a 70% equity interest and CIMAB would own
        a
        30% equity interest in CIMYM BioSciences.
  Licenses
        For AeroLEF®
  The
        technology related to AeroLEF ® formulation and delivery is owned not licensed.
  License
        For Tesmilifene
  In
        November 2000, YM was granted an exclusive worldwide license by the University
        of Manitoba and The Manitoba Cancer Treatment and Research Foundation (now
        CancerCare Manitoba) (the “Original Licensor”) for all products and formulations
        of tesmilifene pursuant to which the Company undertook the responsibility
        for
        the clinical development of the product and its commercialization.
  We
        must
        pay to the Original Licensor a specified minority percentage of revenues
        received from sub-licensing the product, after our recovery of certain specified
        development and attributed overhead costs. If we manufacture and sell
        tesmilifene itself rather than through sub-licensing, we must pay a specified
        lesser minority percentage of net sales, after our recovery of certain specified
        development and attributed overhead costs, to the Original Licensor. We believe
        these royalties are consistent with general industry practice for similar
        arrangements. No royalties have been paid to date, and future royalties cannot
        be quantified because they are dependent on net sales, net royalties and
        net
        revenues which have not yet materialized. There can be no assurance as to
        if or
        when we may sell the licensed product nor enter into sub-licensing arrangements
        for the product. We may sub-license the product. This license agreement shall
        be
        in force as long as any patents thereunder are valid, or until such time
        as the
        license agreement is terminated by either party because of a default by the
        other party, by either party if the other party enters into liquidation or
        reorganization proceedings or receivership or bankruptcy, or by YM on 90
        days
        written notice if there are no sub-licensees. In 2003, we acquired certain
        additional patent rights related to a method of selecting patients demonstrating
        an enhanced survival benefit. Vincent Research and Consulting transferred
        assignment of the patent applications in exchange for a small share of YM’s
        future royalty revenues. We do not consider the agreement with Vincent Research
        and Consulting to be material to us as of the date hereof.
  Nimotuzumab
  On
        November 12, 2003, our subsidiary, CIMYM (now CIMYM BioSciences), licensed
        the
        rights for nimotuzumab (known as “Theraloc” in Europe) in most of Europe to
        Oncoscience of Germany. Under the terms of the agreement, CIMYM BioSciences
        is
        entitled to receive up to US$30 million as a share of any amounts received
        by
        Oncoscience in relation to development or sublicensing of the product and
        as a
        royalty on initial net sales. After CIMYM BioSciences has received US$30
        million, CIMYM BioSciences continues to receives royalties on net sales but
        at a
        lesser percentage. Oncoscience has agreed to use diligent and reasonable
        efforts
        to develop and commercially exploit nimotuzumab in the licensed territory.
        No
        amounts or royalties have been received as of the date hereof by CIMYM
        BioSciences from Oncoscience, since no sublicensing fees or net sales amounts
        have been received by Oncoscience. This license agreement may be terminated
        by
        either party in the event of specified breaches and insolvency events, if
        a
        Phase II trial of nimotuzumab has not commenced in Europe within two years
        of
        licensing, or if certain regulatory approvals for marketing nimotuzumab in
        Europe have not been obtained within five years. In addition, Oncoscience
        may
        terminate the agreement at any time on 90 days notice.
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            31
            -
  In
        May
        2005, we licensed the rights to nimotuzumab in South Korea to Kuhnil. They
        formed a joint development team to oversee the expansion of the development
        program for nimotuzumab, its monoclonal antibody against the EGF receptor,
        for a
        specific population of patients with non-small cell lung cancer. Kuhnil will
        fully fund development costs and will provide up-front, milestone and royalty
        payments.
  On
        October 31, 2005, IGK, a subsidiary of P.T. Kalbe Farma TBK of Jakarta Indonesia
        paid CIMYM BioSciences Inc. a license fee of US$1,000,000. The agreement
        also
        entitles the CIMYM BioSciences Inc. to receive milestone payments on the
        occurrence of regulatory approval and royalties on the commercial sale of
        the
        developed product.
  In
        July
        2006, CIMYM BioSciences licensed development and marketing rights for
        nimotuzumab in Japan to Daiichi Pharmaceutical Co., Ltd., a wholly owned
        subsidiary of Daiichi Sankyo Co., Ltd., one of Japan’s largest pharmaceutical
        companies. Under the agreement, CIMYM BioSciences will receive an up-front
        payment of US$14.5 million and significant 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. Daiichi will
        develop nimotuzumab for the Japanese market in several cancer
        indications.
  ***Out-Licensing***
  We
        generally plan to out-license our licensed drugs to pharmaceutical companies
        for
        manufacturing and marketing under license, although we may retain co-development
        or marketing rights if management considers it appropriate to do so. Under
        our
        business model, licensees would be expected, to the extent necessary, to
        participate in the remaining clinical development required to obtain final
        regulatory approval for the product. We expect that out-licensing would result
        in a pharmaceutical company or other licensee marketing or manufacturing
        the
        product in return for licensing fees and royalties on the sale of the product.
        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 from royalty payments on the sale of
                  the
                  products;
  ·
              providing
                  access to the resources and experience of large pharmaceutical
                  companies;
  ·
              obtaining
                  up-front payments for product sub-licensing rights; and
  ·
              minimizing
                  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.
  We
        do not
        intend to develop our own manufacturing, marketing or distribution programs
        although we may wish to participate in ownership of manufacturing facilities
        if
        appropriate opportunities become available. We intend to remain principally
        focused on the identification, further development and commercialization
        of
        in-licensed products.
  ***Regulatory
        Approval***
  Securing
        final regulatory approval for the manufacture and sale of human therapeutic
        products in Canada and our other territories, including the US, is a long
        and
        costly process that is controlled by that particular territory’s national
        regulatory agency. The national regulatory agency in Canada is Health Canada,
        and in the US it is the FDA. Other national regulatory agencies have similar
        regulatory approval processes, but each national regulatory agency has its
        own
        approval processes. Approval in either Canada or the US does not assure approval
        by other national regulatory agencies, although often test results from one
        country may be used in applications for regulatory approval in another country.
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            32
            -
  Prior
        to
        obtaining final regulatory approval to market a drug product, every national
        regulatory agency has a variety of statutes and regulations which govern
        the
        principal development activities. These laws require controlled research
        and
        testing of products, government review and approval of a submission containing
        pre-clinical and clinical data establishing the safety and efficacy of the
        product for each use sought, approval of manufacturing facilities including
        adherence to GMP during production and storage, and control of marketing
        activities, including advertising and 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
        in-licensed products. To date we have obtained various regulatory approvals
        to
        develop and test our in-licensed products. Currently we are conducting an
        international Phase III trial of tesmilifene in metastatic and recurrent
        breast
        cancer in 700 patients. We have received regulatory approvals for the
        tesmilifene study in several countries, including Canada and the US, and
        approval is pending in a few other countries. In addition, nimotuzumab has
        been
        designated an orphan drug in Europe and by the FDA in the US. See “Products in
        Clinical Development”.
  ***Canadian
        Approval Process***
  The
        manufacture, distribution and consumption of medical products, drugs and
        equipment is regulated by a variety of industry-specific statutes and
        regulations in Canada and the countries to which YM has rights for the licensed
        products. Drugs sold in Canada are regulated by the *Food
        and Drugs Act* (Canada)
        and the regulations made under that Act.
  Even
        though a drug, medical product or device may be approved for use in another
        jurisdiction, it may not be sold in Canada until approved by Health Canada.
        Outside Canada, the regulatory approval process for the manufacture and sale
        of
        pharmaceuticals varies from country to country and the time required may
        be
        longer or shorter than that required by Health Canada.
  The
        Canadian Food and Drug Regulations require licensing of manufacturing
        facilities, carefully controlled research and testing of products, governmental
        review and approval of test results prior to marketing of therapeutic products,
        and adherence to GMP, as defined by each licensing jurisdiction, during
        production.
  The
        principal activities which must be completed prior to obtaining approval
        for
        marketing of a therapeutic drug product are essentially the same in Canada
        as in
        most major markets of the world and are as follows:
  ***Pre-clinical
        Animal Studies*** **.** Pre-clinical studies are conducted in animals to test pharmacology and
        toxicology and to do formulation work based on in vivo results.
  ***Phase
        I Clinical Trials.*** Phase I
        clinical trials consist of testing a product in a small number of humans
        for its
        safety (toxicity), dose tolerance and pharmacokinetic properties.
  ***Phase
        II Clinical Trials.*** Phase II
        clinical trials usually involve a larger patient population than is required
        for
        Phase I trials and are conducted to evaluate the efficacy of a product in
        patients having the disease or medical condition for which the product is
        indicated. These trials also serve to further identify side effects and risks
        in
        a larger group of patients.
  ***Phase
        III Clinical Trials.*** Phase
        III clinical trials involve “conducting tests in an expanded patient population
        at geographically dispersed test sites (multi-center trials) in a controlled
        and/or uncontrolled environment to gather information about clinical safety
        and
        efficacy.” These trials also generate information from which the overall
        benefit-risk relationship of the drug can be determined and provide a basis
        for
        drug labeling.
  Two
        key
        factors influencing the progression of clinical trials are the rate at which
        patients can be recruited into clinical trials and whether effective treatments
        are currently available for the disease the drug is intended to treat. Patient
        recruitment is largely dependent upon the incidence and severity of the disease
        and the alternative treatments available, as well as alternate research studies.
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            33
            -
  A
        Clinical Trial Application must be filed and accepted by either the Therapeutic
        Products Directorate (“TPD”) or the Biologics and Genetic Therapies Directorate
        (“BGTD”) of Health Canada before each phase of human clinical trials may begin.
        The CTA application must contain specified information including the results
        of
        the pre-clinical or clinical tests completed at the time of the CTA application.
        In addition, since the method of manufacture may affect the efficacy and
        safety
        of a drug, information on chemistry and manufacturing methods must be presented.
        Health Canada conducts inspections to determine compliance with GMP. Good
        manufacturing practices and quality control procedures must be in place.
  Upon
        completion of all clinical studies, the results are submitted to the TPD
        or BGTD
        as part of a New Drug Submission (“NDS”). A notice of compliance (“NOC”) which
        permits marketing of the product typically takes between 12 and 24 months
        from
        the date a NDS is submitted.
  Even
        after marketing approval has been obtained, further studies may be required
        to
        provide additional data on safety and efficacy in order to gain approval
        for the
        use of a drug as a treatment for clinical indications other than those for
        which
        the product was initially tested. Also, Health Canada conducts post-market
        surveillance programs to monitor a product’s side effects. Results of
        post-marketing programs may limit or expand the further marketing of products.
        A
        serious safety or efficacy problem involving an approved drug or medical
        device
        may result in Health Canada action requiring withdrawal of the product from
        the
        market.
  ***US
        Approval Process***
  In
        the
        US, 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 US follows.
  ***Stage
        1: Preclinical Research*** After
        an
        experimental drug is discovered, research is conducted to help determine
        its
        potential for treating or curing an illness. This is called preclinical
        research. Animal studies are conducted to determine if there are any harmful
        effects of the drug and to help understand how the drug works. Information
        from
        these experiments is submitted to the FDA in an Investigational New Drug
        Application. The FDA reviews information in an IND Application and decides
        if
        the drug is safe to study in humans.
  ***Stage
        2: Clinical Research*** In
        Stage
        2, the experimental drug is studied in humans. The studies are known as clinical
        trials. Clinical trials are carefully designed and controlled experiments
        in
        which the experimental drug is administered to patients to test its safety
        and
        to determine the effectiveness of an experimental drug. The four general
        phases
        of clinical research are described below.
  *Phase
        I Clinical Studies.* Phase I
        clinical studies are generally conducted with healthy volunteers who are
        not
        taking other medicines; patients with the illness that the drug will treat
        are
        not tested at this stage. Ultimately, Phase I studies demonstrate how an
        experimental drug affects the body of a healthy individual. Phase I consists
        of
        a series of small studies consisting of “tens” of volunteers. Tests are done on
        each volunteer throughout the study to see how the person’s body processes,
        responds to, and is affected by the drug. Low doses and high doses of the
        drug
        are usually studied, resulting in the determination of the safe dosage range
        in
        volunteers by the end of Phase I. This information will determine whether
        the
        drug proceeds to Phase II.
  -
            34
            -
  *Phase
        II Clinical Studies.* ****** Phase
        II
        clinical studies are conducted in order to determine how an experimental
        drug
        affects people who have the disease to be treated. Phase II usually consists
        of
        a limited number of studies that help determine the drug’s short-term safety,
        side effects, and general effectiveness. The studies in Phase II are often
        controlled investigations, involving comparison between the experimental
        drug
        and a placebo, or between the experimental drug and an existing drug.
        Information gathered in Phase II studies will determine whether the drug
        proceeds to Phase III.
  *Phase
        III 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”(CFR).
        These trials differ from Phase II trials because a larger number of patients
        are
        studied (sometimes in the thousands) and because the studies are usually
        of
        longer duration. As well, Phase III studies can include patients who have
        more
        than one illness and are taking medications in addition to the experimental
        drug
        used in the study. Therefore, the patients in Phase III studies more closely
        reflect the general population. The information from Phase III forms the
        basis
        for most of the drug’s initial labeling, which will guide physicians on how to
        use the drug.
  *Phase
        IV 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 studies. FDA-required
        Phase IV studies can also involve very large numbers of patients to further
        assess the drug’s safety.
  ***Stage
        3: FDA Review for Approval*** Following
        Phase III, the pharmaceutical company prepares reports of all studies conducted
        on the drug and submits the reports to the FDA in a New Drug Application
        (“NDA”). The FDA reviews the information in the NDA to determine if the drug is
        safe and effective for its intended use. Occasionally, the FDA will ask experts
        for their opinion of the drug; this occurs at advisory committee meetings.
        If
        the FDA determines that the drug is safe and effective, the drug will be
        approved.
  ***Stage
        4: Marketing*** After
        the
        FDA has approved the experimental drug, the pharmaceutical company can make
        it
        available to physicians and their patients. A company may also continue to
        conduct research to discover new uses for the drug. Each time a new use for
        a
        drug is discovered, the drug is once again subject to the entire FDA approval
        process before it an be marketed for that purpose.
  ***Arrangements
        With Subsidiaries***
  YM
        and
        CIMAB entered into a funding agreement with CIMYM in November 1995 in connection
        with the 1995 CIMYM License. The Funding Agreement provides that YM will
        arrange
        for the appropriate studies and clinical trials for the licensed products
        held
        by CIMYM and will fund the cost of such studies and trials, provided that
        doing
        so would not be commercially or scientifically unreasonable. Accordingly,
        YM
        makes the final determination as to whether or not a clinical trial expense
        is
        justified with respect to any given product. YM is entitled to be reimbursed
        for
        all funds we provide pursuant to the Funding Agreement out of revenue generated
        from the exploitation of the relevant license, subject to the successful
        development of the licensed products and adequate generation of revenue.
  YM
        and
        CIMAB, contemporaneously with the assignment of the 1995 CIMYM License, entered
        into a joint-venture shareholders agreement (the “Shareholders Agreement”) with
        CIMYM relating to its operation. Pursuant to the Shareholders Agreement,
        CIMYM
        is required to include nominees of CIMAB both as board members and as members
        of
        operating management. The Shareholder Agreement provides that: (i) issued
        and
        outstanding shares of CIMYM may not be sold or transferred without the consent
        of both YM and CIMAB; (ii) the issue of additional shares of CIMYM shall
        first
        be offered to each of YM and CIMAB in proportion to their holdings, and
        thereafter, with the consent of both YM and CIMAB, to any other person; and
        (iii) the boards of directors of CIMYM will consist of five directors, three
        of
        whom are nominees of YM and two of whom are nominees of CIMAB. All material
        and
        out-of-the-ordinary-course-of-business contracts of CIMYM, including those
        relating to the borrowing of money, issuing guarantees, entering into non
        arm’s-length agreements, paying dividends and pledging of property, must be
        approved by four-fifths of the Board of Directors.
  -
            35
            -
  CIMYM
        (Barbados) was incorporated in Barbados in May 1996 to market the licensed
        products under the 1995 CIMYM License outside of Canada. On June 30, 2006,
        CIMYM
        (Barbados) was amalgamated with CIMYM to form CIMYM BioSciences
        Inc.
  **C**
              **Organizational
                  Structure**
  We
        currently have two material subsidiaries, shown in the following diagram:
  
  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). CIMYM is 80% owned by the Company and 20% owned
        by
        CIMAB.
  YM
        BioSciences USA Inc. (YM USA) 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 Pharmaceutical Corporation. On March 6, 2008 YM US Operations Inc.
        was
        merged into YM USA. YM USA is 100% owned by the Company.
  **D**
              **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”),
        such 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
        $76,000.
  YM
        USA
        currently occupies 9,000 square feet of space in Wayne, Pennsylvania pursuant
        to
        a lease agreement dated July 27, 2006 that expires on February 15, 2012.
        Average
        annual fixed rent, excluding operating costs is approximately US $240,000.
  There
        are
        no environmental issues associated with any of our facilities and we currently
        have no plans to construct, expand or improve our facilities.
  **Item 4A:**
              **Unresolved
                  Staff Comments**
  Not
        applicable.
  -
            36
            -


**Item
                  5:**
              **Operating
                  and Financial Review and
                  Prospects**
  **MANAGEMENT’S
        DISCUSSION AND ANALYSIS**
  The
        following MD&A should be read in conjunction with the audited financial
        statements for the years ended June 30, 2008, 2007, 2006, and the notes thereto.
  This
        MD&A contains forward-looking statements that reflect our current views with
        respect to future events and financial performance and that involve risks
        and
        uncertainties. Our actual results, performance or achievements could differ
        materially from those anticipated in the forward-looking statements as a
        result
        of certain factors, including risks discussed under the heading “Forward-Looking
        Statements” and elsewhere in this annual report on Form 20-F for the year ended
        June 30, 2008.
  The
        consolidated financial statements have been prepared by management in accordance
        with accounting principles generally accepted in Canada (Canadian GAAP).
        These
        accounting principles differ in certain respects from United States GAAP.
        The
        differences, as they affect our consolidated financial statements, are set
        out
        in Note 17 to the audited consolidated financial statements for the fiscal
        year
        ended June 30, 2008.
  **OVERVIEW
        OF BUSINESS**
  We
        are a
        company engaged in the licensing and commercialization of drug products and
        technologies from original research. We evaluate drug projects, technologies,
        and products and the prospective markets for them and obtain, as appropriate,
        a
        license for the further development and marketing of the products.
  We
        expend
        money on the evaluation, licensing and further development of certain drug
        products and on providing licensing, marketing, clinical development and
        regulatory affairs skills, patent advice and funding to facilitate the
        introduction of the licensed products into the principal pharmaceutical markets.
        This involves taking the products researched and developed by others and
        taking
        them through the clinical and regulatory processes in Canada and elsewhere
        in
        order to achieve regulatory approval for their sale in the markets to which
        we
        have rights.
  We
        will
        incur expenditures either directly or pursuant to agreements with certain
        licensees or partners. These expenditures will include: costs associated
        with
        the conduct of clinical trials; the collection and collation of data; the
        organizing of data and market information for each product; the development
        and
        production of non-confidential and confidential dossiers on each licensed
        product and the marketing of the information contained in the dossiers to
        prospective commercialization partners. We plan to generate its revenues
        from
        out-licensing the licensed products or from their direct commercialization
        of
        the products.
  We
        do not
        have our own manufacturing facilities but it may participate in ownership
        of
        manufacturing facilities and the marketing of the products if appropriate
        opportunities are available.
  **SELECTED
        ANNUAL FINANCIAL INFORMATION**
  Year ended June 30,2008
              
              2007
              
              2006Out-licensing
                  revenue
              
              $
              4,859,085
              
              $
              4,407,890
              
              $
              1,151,135Interest
                  income
              
              $
              2,584,080
              
              $
              3,239,540
              
              $
              1,397,558Expenses:General
                  and administrative
              
              $
              6,831,955
              
              $
              6,978,336
              
              $
              7,951,470Licensing
                  and product development
              
              $
              15,631,550
              
              $
              28,758,469
              
              $
              20,188,577Impairment
              
              
              -
              
              $
              1,829,538
              
              
              -Loss
                  for the period
              
              $
              14,885,744
              
              $
              31,730,240
              
              $
              25,814,607
  -
            37
            -
 Year ended June 30,2008
                
                2007
                
                2006Deficit,
                    beginning of period,
                
                $
                118,296,741
                
                $
                86,566,501
                
                $
                60,751,894Deficit,
                    end of period
                
                $
                133,182,485
                
                $
                118,296,741
                
                $
                86,566,501Basic
                    and diluted loss per common share
                
                $
                0.27
                
                $
                0.57
                
                $
                0.59Total
                    Assets
                
                $
                63,073,239
                
                $
                81,739,800
                
                $
                100,048,060
 **RESULTS
        OF OPERATIONS**
  **Year
        ended June 30, 2008 compared to year ended June 30, 2007**
  ***Out-licensing
        Revenue***
  Revenue
        from out-licensing has increased by $451K for the year ended June 30, 2008
        compared to the year ended June 30, 2007. The increase in revenue is due
        to the
        out-licensing agreement entered into at the end of July 2006 with Daiichi
        Pharmaceutical Co., Ltd (“Daiichi”), a subsidiary of Daiichi Sankyo Co., Ltd.
        The agreement licensed the commercial rights for nimotuzumab for the Japanese
        market and included a non-refundable up-front payment from Daiichi to the
        Company of $16.227M. This initial license fee has been recorded as deferred
        revenue and is being recognized over the estimated period of collaboration
        of
        four years. We also recognized royalty revenues based on a limited sales
        program
        in Europe.
  ***Interest
        Income***
  Interest
        income has decreased by $655K in the year ended June 30, 2008 compared to
        the
        year ended June 30, 2007. Interest income is decreasing as we draw on our
        cash
        balances to fund our operations.
  ***Licensing
        and Product Development Expenses***
  Licensing
        and product development expenses for the year ended June 30, 2008 decreased
        by
        $13.127M compared to the year ended June 30, 2007. In addition to the specific
        licensing and product development costs addressed below, there was a significant
        decrease in licensing and product development salary expenses. Salary expenses
        including termination costs were $2.039M less in fiscal 2008 compared to
        fiscal
        2007 as we reduced development staff following the termination of the DEC
        study.
  ***Nimotuzumab***
  Costs
        associated with development activities for nimotuzumab decreased by $784K
        to
        $5.159M for the fiscal year ended June 30, 2008 compared to $5.943M for the
        year
        ended June 30, 2007.
  The
        major
        costs in fiscal 2007 were associated with clinical trial in head and neck
        cancer
        which was completed in fiscal 2007. Expenses in fiscal 2008 are primarily
        associated with the monkey toxicity study, the Phase II clinical trial in
        colorectal cancer, and the Phase II clinical trial in pediatric diffuse
        incurable pontine glioma. All of these activities were begun in fiscal 2008
        and
        will continue into fiscal 2009.
  ***AeroLEFTM***
  Costs
        associated with development activities for AeroLEF *TM* decreased by $909K to $2.001M for the fiscal year ended June 30, 2008 compared
        to $2.910M for the year ended June 30, 2007. Last year’s costs were associated
        with the Phase IIb study in acute pain. This year, the costs include
        transferring the manufacturing to a contact manufacturer in the US and preparing
        the submissions to the FDA.
  -
            38
            -
  **Tesmilifene**
  Costs
        related to development activities for tesmilifene for the year ended June
        30,
        2008 decreased by $6.193M to $1.315M compared to $7.508M for the prior year.
        In
        the fiscal year ended June 30, 2007 we were completing a Phase III clinical
        trial (DEC) and gearing up for a FDA submission. With the termination of
        this
        study, development of tesmilifene halted at the end of January 2007 except
        for
        completing a pharmacokinetic study and, as a result, the development costs
        for
        fiscal 2008 are significantly lower compared to the same period last year.
        Costs
        in fiscal 2008 consisted mainly of winding down the DEC study, completing
        the PK
        studies, and maintaining the patent portfolio.
  ***General
        and Administrative Expenses***
  General
        and administrative expenses have decreased by $146K to $6.832M for the year
        ended June 30, 2008 compared to the prior year. Stock option expense has
        increased by $347K from $1.717M for the year ended June 30, 2007 to $2.064M
        for
        the year ended June 30, 2008. This increase has been offset by reductions
        in
        other expenses such as consulting and legal costs.
  **Fiscal
        Year Ended June 30, 2007 Compared to Fiscal Year Ended June 30,
        2006**
  ***Out-licensing
        Revenue***
  Revenue
        from out-licensing has increased by $3.257M in fiscal 2007 compared to fiscal
        2006 as a result of two out-licensing agreements entered into during the
        year.
        The most significant agreement, signed with Daiichi in July 2006, licensed
        the
        commercial rights for nimotuzumab for the Japanese market and included a
        non-refundable up-front payment from Daiichi to the Company of $16.227M.
        This
        initial license fee has been recorded as deferred revenue and is being
        recognized over the estimated period of required collaboration of four
        years.
  ***Interest
        Income***
  Interest
        income for fiscal 2007 has increased by $1.832M compared to fiscal 2006.
        This
        can be attributed to the significant increase in cash which resulted from
        the
        prospectus-based offering in February 2006, the acquisition of Eximias in
        May
        2006, and the licensing payment from Daiichi pursuant to the agreement signed
        in
        July 2006.
  ***Licensing
        and Product Development Expenses***
  Licensing
        and product development expenses have increased by $8.569M from $20.189M
        in
        fiscal 2006 to $28.758M in fiscal 2007. The change is mainly caused by employee
        compensation, amortization, tesmilifene, nimotuzumab, AeroLEF *TM* ,
        and an
        impairment charge, as explained below *.*
  Employee
        compensation relating to licensing and product development has increased
        by
        $5.192M for the year ended June 30, 2007 compared to fiscal 2006. The increase
        is partly attributed to salaries and bonuses related to employees who joined
        YM
        as part of the Eximias acquisition in May 2006. Also, during the year we
        incurred expenses with respect to the departure of certain US executives
        in
        February 2007.
  Total
        amortization with respect to intangible assets increased by $644K to $1.913M
        in
        fiscal 2007 compared to $1.269M in fiscal 2006.
  ***Tesmilifene***
  Costs
        related to development activities for tesmilifene for fiscal 2007 decreased
        by
        $3.821M to $7.508M in fiscal 2007 compared to $11.329M in fiscal 2006. On
        January 30, 2007, we terminated the Phase III trial based on the advice of
        the
        independent Data Safety Monitoring Board. Since then, costs for tesmilifene
        mainly pertain to closing down the trial and the settlement of holdback amounts
        from the original contract for the trial.
  -
            39
            -
  **Nimotuzumab**
  Costs
        associated with development activities for nimotuzumab increased by $1.167M
        to
        $5.943M compared to $4.776M in fiscal 2006. This is a result of commissions
        and
        consulting fees associated with obtaining the licensing agreement with Daiichi
        and additional costs relating to pre-clinical and clinical studies being
        conducted in fiscal 2007 compared to fiscal 2006.
  ***AeroLEFTM***
  Costs
        associated with development activities for AeroLEF *TM* decreased by $1.205M to $2.910M in fiscal 2007 compared to $4.115M in fiscal
        2006. This is mainly due to decreased costs related to the Phase II trial
        in
        acute pain. **
  ***Impairment
        of Intangible Asset***
  On
        February 1, 2007 we recorded an impairment for the unamortized portion of
        the
        workforce intangible asset that was acquired in the Eximias acquisition on
        May
        9, 2006. After the termination of the Phase III DEC trial in metastatic breast
        cancer, management re-evaluated the workforce intangible and determined it
        to be
        impaired because it is no longer a probable future economic benefit. This
        resulted in a write-down of $1.830M, the net book value of the asset on the
        day
        of impairment.
  ***General
        and Administrative Expenses***
  General
        and administrative expenses have decreased by approximately $973K to $6.978M
        in
        fiscal 2007 compared to $7.951M in fiscal 2006. This is mainly due to a decrease
        in stock based compensation expense of $872K.
  **Fourth
        Quarter – Three Months Ended June 30, 2008 Compared to Three Months Ended
        June 30, 2007**
  ***Out-licensing
        Revenue***
  Out-licensing
        revenue for the quarter ended June 30, 2008 of $1.420M has increased by $244K
        compared to $1.176M in the same quarter in the prior year. This is mainly
        attributable to royalty revenues recognized based on a limited sales program
        in
        Europe.
  ***Interest
        Income***
  Interest
        income has decreased by $190K to $544K for the three months ended June 30,
        2008
        compared to $734K in the same period in the prior year. Interest
        income is decreasing as we draw on our cash balances to fund our
        operations.
  ***Licensing
        and Product Development Expenses***
  Licensing
        and product development expenses have decreased by $1.530M to $3.579M for
        the
        fourth quarter ended June 30, 2008 compared to the same period last year.
        Approximately $929K of this decrease can be attributed to a reduction in
        consulting, legal, travel and trade shows and salaries.
  Costs
        associated with development activities for nimotuzumab increased by $780K,
        from
        $754K for the three months ended June 30, 2007 to $1.534M of the three months
        ended June 30, 2008 due to the
        monkey toxicity strudy, the Phase II clinical trial in colorectal cancer,
        and
        the Phase II clinical trial in pediatric diffuse incurable pontine glioma.
  AeroLEFTM
        expenses have decreased by $675K to $359K for the three months ended June
        30,
        2008 compared to the same period in the prior year. Prior year costs related
        to
        the phase IIb trial in acute pain whereas no such costs were incurred during
        the
        last three months of fiscal 2008. Costs in the fourth quarter of fiscal 2008
        went towards manufacturing and stability and removing AeroLEFTM from clinical
        hold in the United States.
  -
            40
            -
  Costs
        related to tesmilifene totalled $204K, a decrease of $577K compared to $781K
        in
        the previous year. C osts
        for
        tesmilifene in the fourth quarter in fiscal 2007 mainly pertained to closing
        down and settlement of holdback amounts from the original contract for the
        DEC
        trial. No such costs were incurred in the fourth quarter of 2008.
  ***General
        and Administrative Expenses***
  General
        and administrative expenses for the fourth quarter of fiscal 2008 were $1.306M,
        a decrease of $119K from $1.425M for the same quarter in the prior year.
        This is
        mainly due to a decrease in costs related to Sarbanes Oxley Section 404
        compliance. In 2007, implementation costs were incurred to document and test
        our
        internal controls over financial reporting while 2008 costs only consist
        of the
        testing of controls.
  **SUMMARY
        OF QUARTERLY RESULTS**
  **Revenue and**
                **Interest Income**
              
              **Net Loss****(1)**
              
              **Basic and diluted**
                **loss per**
                **common share**June
                  30, 2008
              
              $
              1,964,901
              
              $
              (2,962,900
              )
              $
              (0.05
              )March
                  31, 2008
              
              $
              1,777,864
              
              $
              (3,818,647
              )
              $
              (0.07
              )December
                  31, 2007
              
              $
              1,883,075
              
              $
              (4,479,888
              )
              $
              (0.08
              )September
                  30, 2007
              
              $
              1,817,325
              
              $
              (3,624,309
              )
              $
              (0.06
              )June
                  30, 2007
              
              $
              1,909,514
              
              $
              (4,749,837
              )
              $
              (0.08
              )March
                  31, 2007
              
              $
              1,984,707
              
              $
              (8,929,074
              )
              $
              (0.16
              )December
                  31, 2006
              
              $
              1,997,799
              
              $
              (8,352,471
              )
              $
              (0.15
              )September
                  30, 2006
              
              $
              1,755,410
              
              $
              (9,698,858
              )
              $
              (0.17
              )
  Note:
 (1)
              Effective
                  July 1, 2007, we adopted CICA Handbook Sections 1530, 3855, 3861,
                  and 3865
                  relating to financial instruments retrospectively, without restatement
                  and
                  therefore the quarterly losses for fiscal 2007 above do not include
                  any
                  adjustment to reflect the adoption of these standards. There was
                  no effect
                  to our opening balances as a result of the change in accounting
                  policy.
  In
        general, revenue has remained steady over the last eight quarters. We recognize
        revenue from out-licensing agreements over the estimated period of collaboration
        required. There have been no new out-licensing agreements signed since the
        second quarter of fiscal 2007. We recognized royalty revenue based for the
        first
        time on a limited sales program in Europe in the fourth quarter of fiscal
        2008.
        Interest earned from cash and short-term deposits peaked after the
        prospectus-based offering in February 2006, the acquisition of Eximias in
        May
        2006, and the licensing payment from Daiichi pursuant to the agreement signed
        in
        July 2006. However, interest income is decreasing as we draw on our cash
        balances to fund our operations and interest rates decline.
  Overall,
        development activity had increased until the termination of the 750-patient
        Phase III DEC trial in metastatic breast cancer on January 30, 2007. It is
        inherent in the development of drug products that planned expenditures vary
        depending on results achieved. Our current plans call for an increase in
        expenditures for both nimotuzumab and AeroLEFTM but the timing will be subject to
        regulatory approvals.
  **LIQUIDITY
        AND CAPITAL RESOURCES**
  Since
        inception, we have financed the evaluation, licensing, and further development
        of its products principally through equity issuances. Since we do not have
        net
        earnings from its operations, the Company’s long-term liquidity depends on its
        ability to out-license its products or to access the capital markets, both
        of
        which will depend substantially on results of product development programs.
  -
            41
            -
  Our
        cash
        requirements will be affected by the progress of its clinical trials, the
        development of its regulatory submissions, the achievement of commercialization
        agreements, the costs associated with obtaining and protecting the patents
        for
        licensed products, and the availability of funding for part of the process
        from
        investors and prospective commercialization partners.
  The
        audited consolidated financial statements have been prepared on a going-concern
        basis which assumes that we will continue in operation for the foreseeable
        future and accordingly, will be able to realize on its assets and discharge
        its
        liabilities in the normal course of operations. Our ability to continue as
        a
        going concern has always been dependent on obtaining capital and, ultimately,
        the achievement of profitable operations. There can be no assurance that
        we will
        be successful in increasing revenue or raising additional capital to generate
        sufficient cash flows to continue as a going concern. The audited consolidated
        financial statements do not reflect the adjustments that might be necessary
        to
        the carrying amount of reported assets, liabilities and revenue and expenses
        and
        the balance sheet classification used if we were unable to continue operation
        in
        accordance with this assumption.
  On
        February 16, 2006, pursuant to a prospectus filed with the Ontario Securities
        Commission and a registration statement filed with the SEC, we issued 9,436,471
        shares at a price of $4.91 (US$4.25) for total gross proceeds of $46.305M
        (US$40.105M). Net proceeds after costs amounted to approximately $42.623M.
        We
        intend to use the net proceeds to fund drug development activities not related
        to any products of Cuban origin or for general corporate purposes not related
        to
        the products and technologies licensed from any source in Cuba. Our
        Cuban-originated products and technologies are all related to nimotuzumab.
        As at
        June 30, 2008 the remaining restricted proceeds were approximately $1.371M
        and
        unrestricted cash and short-term deposits totaled approximately
        $56.730M.
  On
        May 9,
        2006, with the acquisition of Eximias, we obtained approximately $34.5M in
        cash
        and an experienced workforce in exchange for approximately 5.6 million common
        shares. Of the total purchase price paid, $3.3M was comprised of 474,657
        common
        shares valued at $3.0M and $300K in cash was held in escrow for one year,
        until
        May 9, 2007, to satisfy any claims arising out of the representations and
        warranties made by Eximias in the transaction. On January 30, 2007 we recorded
        an impairment for the unamortized portion of the workforce intangible asset
        that
        was acquired in the Eximias acquisition on May 9, 2006. After the termination
        of
        the Phase III DEC trial in metastatic breast cancer, management re-evaluated
        the
        workforce intangible and concluded that there was no longer a foreseeable
        future
        benefit.
  As
        at
        June 30, 2008 we had cash and cash equivalents and short-term deposits totaling
        $58.101M and payables and accrued liabilities totalling $2.023 compared to
        $75.572M and $3.273M respectively at June 30, 2007. Our short-term deposits
        consist principally of highly liquid deposit certificates with an R1 or
        equivalent rating, with terms not exceeding one year from the date of
        acquisition. These financial instruments have been classified as
        held-for-trading and all gains and losses are included in loss for the period
        in
        which they arise. None of our short-term investments is impaired.
  Taking
        into consideration the restricted and unrestricted cash and short-term deposits,
        management believes that the cash and short-term deposits at June 30, 2008
        are
        sufficient to support our activities beyond the next twelve months.
  **COMMITMENTS**
  We
        fully
        consolidate a joint venture (CIMYM BioSciences) in which it is considered
        the
        primary beneficiary; and as such, we have recognized 100% of the cost of
        operations and cash flows of this entity.
  In
        addition, we are party to certain licensing agreements that require us to
        pay a
        proportion of any fees that we may receive from sublicensees in the future.
        As
        of June 30, 2008 no amounts are owing and the amount of future fees, if any,
        is
        not determinable.
  In
        November 2007 we entered into a contract for contract research (“CRO”) services
        relating to a pediatric pontine glioma clinical trial for nimotuzumab in
        the US
        at a cost of $1.322M (US $1.297M) of which $452K has been paid as at June
        30,
        2008 and the obligation to pay the remaining $870K has not been incurred.
        We may
        cancel the contract with 30 days’ notice and is obligated for services rendered
        by the CRO through to the effective date of termination and for any closeout
        services furnished by the CRO after the termination of the agreement. As
        at June
        30, 2008 we continue to open clinical sites and is in the process of recruiting
        patients.
  -
            42
            -
  In
        May
        2007 we entered into a contract for CRO services relating to a colorectal
        clinical trial for nimotuzumab at a cost of $1.323M of which $834K has been
        paid
        as at June 30, 2008 and the obligation to pay the remaining $488K has not
        been
incurred. We may cancel the contract with 30 days notice and is obligated
        for
        services rendered by the CRO through to the effective date of termination
        and
        for any closeout services furnished by the CRO after the termination of the
        agreement. As at June 30, 2008 the recruitment portion of the study has been
        completed, some patients have continued to receive treatment and are being
        followed for survival.
  We
        are
        also conducting a pharmacokinetic clinical trial evaluating tesmilifene with
        taxotere. In June 2005 the Company entered into a contract for CRO services
        in
        the amount of $477K ($468K USD). Of this amount, $290K has been paid as at
        June
        30, 2008 and the obligation to pay the remaining $187K has not been incurred.
        Either party may cancel the contract with 30 days’ notice. If we cancel, we
        would pay for the cost to date plus a penalty equal to 10% of the remainder
        of
        the contract price. The recruitment and pharmacokinetic portion of the study
        have been completed. All of the patients have completed treatment and are
        being
        followed for survival.
  In
        addition to the above three contracts, we have entered into many additional
        contracts for pre-clinical and other studies, none of which individually
        exceed
        $1 million, totalling approximately $5.030M of which $2.128M has been paid
        as at
        June 30, 2008 and the obligation to pay the remaining $2.902M was unpaid.
        Any
        early termination penalties can not exceed the amount of the contract
        committed.
  We
        plan
        to expend funds to continue the development of nimotuzumab and AeroLEFTM. There
        are also ongoing activities directed at out-licensing commercial rights for
        these products and for tesmilifene.
  **TABULAR
        DISCLOSURE OF CONTRACTUAL OBLIGATIONS**
  **Contractual Obligations**
              
              **Total**
              
              **Less Than**
                **1 Year**
              
              **1-3 Years**
              
              **3-5 Years**
              
              **More Than**
                **5 Years**Office – Wayne,
                  Pennsylvania
              
              $
              880,000
              
              $
              234,000
              
              $
              487,000
              
              $
              159,000
              
              $
              NilOffice
                  – Mississauga, Ontario
              
              $
              349,000
              
              $
              73,000
              
              $
              152,000
              
              $
              124,000
              
              $
              NilTotal
                  Operating Leases
              
              $
              1,229,000
              
              $
              307,000
              
              $
              639,000
              
              $
              283,000
              
              $
              Nil
 
  **OFF-BALANCE
        SHEET ARRANGEMENTS**
  We
        have
        certain arrangements with its subsidiaries that have an effect or may have
        a
        future effect on our financial condition, revenues or expenses, results of
        operations, liquidity, capital expenditures or capital resources in that
        there
        is no assurance that funds advanced to its subsidiaries will be reimbursed.
        The
        arrangements are described in notes 2 and 7 of the Consolidated Financial
        Statements. The registrant has recorded 100% of the results of operations
        and
        cash flows of these entities.
  **TREND
        INFORMATION**
  It
        is
        important to note that historical patterns of expenditures cannot be taken
        as an
        indication of future expenditures. The amount and timing of expenditures
        and
        therefore liquidity and capital resources vary substantially from period
        to
        period depending on the pre-clinical and clinical studies being undertaken
        at
        any one time and the availability of funding from investors and prospective
        commercial partners.
  Other
        than as discussed above, we are not aware of any material trends related
        to our
        business of product development, patents and licensing.
  -
            43
            -
  **OUTLOOK**
  Our
        business is the identification, licensing, and further development of products
        it believes to have the prospect for utility in human health. We are continually
        evaluating the economic and prospective viability of its various products.
        Our
        majority-owned subsidiary, CIMYM BioSciences, is the licensee for nimotuzumab
        for Europe, North America, and Japan as well as Australia, New Zealand and
        certain Asian and African countries and we own AeroLEF ® ,
        our
        other principal product in development, outright.
  A
        Phase
        II, second-line trial in children with progressive diffuse, intrinsic pontine
        glioma (DIPG) is ongoing at multiple sites in the US, Canada, and Israel.
  An
        application for marketing nimotuzumab has been made by our sub-licensee,
        Oncoscience, to the EMEA based on data from its single-arm, Phase II trial
        in
        progressive pediatric DIPG. Completion of recruitment in a single-arm, Phase
        III
        trial of nimotuzumab as first-line therapy for DIPG was reported by Oncoscience
        in August 2007 and preliminary data from this trial was released at ASCO
        in
        2008.
  Daiichi,
        our Japanese licensee for nimotuzumab, reported completion of its Phase I
        clinical trial of nimotuzumab for the treatment of solid tumors in December
        2007
        and informed YM of its intention to proceed into later-stage randomized
        trials.
  In
        July,
        we announced the engagement of Dr. Ali Raza and Elizabeth Jenkins as President
        of the AeroLEF ® division
        and as principal regulatory advisor, respectively. Dr. Raza and Ms. Jenkins
        had
        recently succeeded in clearance of a Phase III trial of a fentanyl product
        through the EMEA. We intend to submit AeroLEF ® to
        regulatory bodies in Europe for advanced clinical clearance to establish
        its
        best options for aggressive development and partnering this unique approach
        to
        the use of opioids.
  While
        expenditures would increase with additional clinical activity we believe
        we have
        the resources to permit the two prospective pivotal trials of nimotuzumab
        to
        complete.
  **CRITICAL
        ACCOUNTING POLICIES AND ESTIMATES**
  The
        preparation of financial statements in conformity with Canadian GAAP requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and disclosures of contingent assets and liabilities
        at
        the date of the financial statements, and the reported amount of revenue
        and
        expenses during the reporting period. Significant accounting policies and
        methods used in preparation of the financial statements are described in
        note 2
        to our consolidated annual financial statements. Significant policies and
        estimates affect: revenue recognition; intangible assets; research and
        development costs; the consolidation of variable interest entities; stock-based
        compensation; and the income tax valuation allowance.
  ***Revenue
        recognition***
  Revenue
        from licensing agreements is recognized when persuasive evidence of an
        arrangement exists, delivery has occurred or services have been rendered,
        the
        amount is determinable and collectibility is reasonably assured. Contingent
        revenue attributable to the achievement of milestones is recognized only
        on the
        achievement of the milestone. Non-refundable up-front fees for access to
        our
        proprietary technology are deferred and recognized on a systematic basis
        over
        the estimated remaining period of collaboration required. Currently we have
        license agreements that specify that certain royalties are earned by the
        Company
        on sales of licensed products in the licensed territories. Licensees report
        sales and royalty information in the 90 days after the end of the quarter
        in
        which the activity takes place and typically do not provide us with forward
        estimates or current-quarter information. Because we are not able to reasonably
        estimate the amount of royalties earned during the period in which these
        licensees actually ship products, we do not recognize royalty revenue until
        the
        royalties are reported to us and the collection of these royalties is reasonably
        assured.
  -
            44
            -
  ***Intangible
        asset***
  Our
        identifiable intangible assets consist of patents and in-process research
        and
        development technologies acquired on the acquisition of DELEX in May 2005.
        The
        intangible assets are amortized on a straight-line basis over the estimated
        time
        to market of seven years for technologies acquired. The estimated useful
        life of
        the intangible asset is considered each reporting period and the carrying
        value
        is reviewed on the occurrence of a triggering event, to determine if there
        has
        been impairment in their value.
  ***Research
        and development costs***
  We
        do not
        engage in basic scientific research but does incur significant product
        development costs. Only development costs that meet strict criteria related
        to
        technical, marketing and financial feasibility would be capitalized under
        Canadian GAAP. To date, no costs have met such criteria and, accordingly,
        all
        development costs have been expensed as they have been incurred.
  ***Variable
        interest entity***
  We
        have a
        majority interest in a joint venture that is funded entirely by us. This
        joint
        venture is classified as a variable interest entity since we maintain a
        controlling financial interest. We have recorded 100% of the results of
        operations and cash flows of this entity since its inception.
  ***Stock-based
        compensation***
  We
        expense all stock based payments using the fair value method and uses the
        Black-Scholes Option Pricing Model in estimating the fair value. Under the
        fair
        value method and the option pricing model used to determine fair value,
        estimates are made as to the volatility of our shares and the expected life
        of
        the options. Such estimates affect the fair value determined by the option
        pricing model.
  ***Income
        tax valuation allowance***
  We
        and
        our joint venture have a net tax benefit resulting from non-capital losses
        carried forward, pools of scientific research and experimental development
        expenditures, investment tax credit, and withholding taxes paid. In view
        of the
        history of net losses incurred, management is of the opinion that it is not
        more
        likely than not that these tax assets will be realized in the foreseeable
        future
        and hence, a full valuation allowance has been recorded against these future
        tax
        assets. Accordingly, no future tax assets are recorded on the balance sheet.
  **NEW
        ACCOUNTING POLICIES**
  The
        following new accounting pronouncements have been adopted during fiscal
        2008:
  ***Accounting
        Changes***
  On
        July
        1, 2007, we adopted the new recommendations of the CICA Handbook Section
        1506,
        Accounting Changes. Under these new recommendations, voluntary changes in
        accounting policy are permitted only when they result in the financial
        statements providing reliable and or relevant information. These recommendations
        also require 1) changes in accounting policy to be applied retrospectively
        unless doing so is impracticable; 2) prior period errors to be corrected
        retrospectively; 3) enhanced disclosures about the effects of changes in
        accounting policies, estimates and errors on the financial statements; and
        4)
        the disclosure of new primary sources of generally accepted accounting
        principles that have been issued but not yet effective.
  -
            45
            -
  ***Financial
        Instruments***
  On
        July
        1, 2007, we adopted the recommendations of the Canadian Institute of Chartered
        Accountants (“CICA”) Handbook: Section 1530, *Comprehensive
        Income* ,
        Section
        3251, *Equity* ,
        Section
        3855, *Financial
        Instruments – Recognition and Measurement* ,
        Section
        3861, *Financial
        Instruments – Disclosure and*  *Presentation* and
        Section 3865, *Hedges* .
        These
        new Handbook Sections, which apply to fiscal years beginning on or after
        October
        1, 2006, provide requirements for the recognition and measurement of financial
        instruments, as well as standards on when and how hedge accounting may be
        applied. Section 1530 also establishes standards for reporting and displaying
        comprehensive income. Comprehensive income is defined as the change in equity
        from transactions and other events from non-owner sources. Other comprehensive
        income refers to items recognized in comprehensive income, but that are excluded
        from net income calculated in accordance with generally accepted accounting
        principles.
  Under
        Section 3855, all financial instruments are classified into one of the following
        five categories: held-for trading, held-to-maturity investments, loans and
        receivables, available-for-sale financial assets or other financial liabilities.
        All financial instruments, including derivatives, are included in the
        consolidated balance sheet and are measured at fair value with the exception
        of
        held-to-maturity investments, loans and receivables, and other financial
        liabilities, which are measured at amortized cost. Subsequent measurement
        and
        recognition of changes in fair value of financial instruments depend on their
        initial classification. Held-for trading investments are measured at fair
        value
        and all gains and losses are included in net income in the period in which
        they
        arise. Available-for-sale financial assets are measured at fair value with
        revaluation gains and losses included in other comprehensive income until
        the
        asset is derecognized or impaired.
  As
        a
        result of the adoption of these new standards, we have classified our cash
        and
        short-term investments as held-for-trading. Receivables are classified as
        loans
        and receivables. Accounts payable and accruals are classified as other financial
        liabilities.
  Adoption
        of these standards was on a retrospective basis without restatement of prior
        periods.
  Derivatives
        embedded in other financial instruments or contracts are separated from their
        host contracts and accounted for as derivatives when their economic
        characteristics and risks are not closely related to those of the host contract;
        the terms of the embedded derivative are the same as those of a free standing
        derivative; and the combined instrument or contract is not measured at fair
        value, with changes in fair value recognized in gain/(loss) on financial
        instruments. These embedded derivatives are measured at fair value with changes
        therein recognized in the statement of operations.
  We
        selected July 1, 2003 as the transition date for embedded derivatives.
        Accordingly, only contracts or financial instruments entered into or modified
        after the transition date were examined for embedded derivatives. As at July
        1,
        2007, we identified embedded derivatives in foreign currency derivatives
        in
        product out-licensing contracts that were based on a foreign currency that
        was
        not the functional currency of the Company or the third parties associated
        with
        the contracts. However, such embedded derivatives are of nominal value and
        therefore, have not been recognized in our financial statements.
  ***Financial
        instruments – disclosure***
  On
        June
        30, 2008, we adopted CICA Handbook Section 3862, Financial Instruments -
        Disclosures, which provides standards for disclosures about financial
        instruments, including disclosures about fair value and the credit, liquidity
        and market risks associated with the financial instruments. Note 16 has been
        added to our consolidated financial statements regarding these
        disclosures.
  ***Financial
        Instruments – presentation***
  On
        June
        30, 2008, we adopted CICA Handbook Section 3863, Financial Instruments -
        Presentation, which provides standards for presentation of financial instruments
        and non-financial derivatives. Adoption of this standard has no impact on
        our
        financial instrument-related presentation disclosures.
  ***Capital
        Disclosures***
  On
        June
        30, 2008, we adopted CICA Handbook Section 1535, Capital Disclosures, which
        requires disclosure of the objectives, policies, and processes for managing
        capital and compliance with any capital requirements and, in case of
        non-compliance, the consequences of such non-compliance. Note 15 has been
        added
        to the Company’s consolidated financial statements regarding these
        disclosures.
  -
            46
            -
  **NEW
        ACCOUNTING PRONOUNCEMENTS**
  Recent
        accounting pronouncements issued but not yet effective:
  ***General
        Standards on Financial Statement Presentation***
  CICA
        Handbook Section 1400, General Standards on Financial Statement Presentation,
        has been amended to include requirements to assess and disclose an entity’s
        ability to continue as a going concern. The changes are effective for the
        Company for interim and annual financial statements beginning on or after
        January 1, 2008, and specifically July 1, 2008 for us. We do not expect the
        adoption of these changes to have an impact on its financial
        statements.
  ***Goodwill
        and intangible assets***
  In
        February 2008, the CICA issued Section 3064, Goodwill and Intangible Assets,
        which replaces Section 3062, Goodwill and Intangible Assets, and Section
        3450,
        Research and Development Costs. This new section establishes standards for
        the
        recognition, measurement and disclosure of goodwill and intangible assets
        and is
        effective for annual and interim financial statements relating to fiscal
        years
        beginning on or after October 1, 2008, specifically July 1, 2009 for us.
        We are
        currently assessing the impact of this section on its intangible asset
        recognized on the acquisition of Delex.
  ***International
        Financial Reporting Standards***
  The
        CICA
        plans to converge Canadian GAAP with International Financial Reporting Standards
        (IFRS) over a transition period expected to end in 2011. The impact of the
        transition to IFRS on our financial statements has not been
        determined.
  **OTHER
        MD&A REQUIREMENTS**
  Share
                  Data as at June 30, 2008:
              
              Outstanding
              
              NumberCommon
                  shares
              
              $
              172,921,153
              
              
              55,835,356Warrants
              
              $
              3,150,539
              
              
              5,709,765
  Notes:
  (1)
              If
                  all warrants were to be exercised, 5,709,765 shares would be issued
                  for an
                  aggregate consideration of $13,886,253(weighted average exercise
                  price of
                  $2.43 per warrant).
 (2)
              In
                  addition to the 55,835,356 shares outstanding, 2,380,953 shares
                  are held
                  in escrow to be released contingent upon the completion of certain
                  milestones. They are valued and accounted for when they are released
                  from
                  escrow.
   **Item
                  6:**
              **Directors,
                  Senior Management and
                  Employees**
  **A**
              **Directors
                  and Senior Management**
  **Directors**
  The
        name,
        municipality of residence, age as of September 17, 2008 and position with
        us of
        each of the current directors are set forth below.
  -
            47
            -
  **Name**
              
              **Age**
              
              **Position**
              
              **Period
                  Served**David
                  G.P. Allan
                Toronto,
                  Canada
              
              66
              
              Chairman,
                  Chief Executive Officer and Director
              
              Since
                  1994Thomas
                  I.A. Allen, Q.C.(1)(2)(3)
                Toronto,
                  Canada
              
              68
              
              Director
              
              Since
                  1996Mark
                  Entwistle, M.A.(3)
                Ottawa,
                  Canada
              
              52
              
              Director
              
              Since
                  1997Henry
                  Friesen, C.C., M.D.(1)
                Winnipeg,
                  Manitoba
              
              75
              
              Director
              
              Since
                  2001Philip
                  Frost, M.D., Ph.D.(2)
                Morristown,
                  New Jersey
              
              67
              
              Director
              
              Since
                  2007Francois
                  Thomas, M.D.(3)
                Brussels,
                  Belgium
              
              49
              
              Director
              
              Since
                  2007Gilbert
                  Wenzel, Ph.D.(1)
                Zurich,
                  Switzerland
              
              52
              
              Director
              
              Since
                  2001Tryon
                  M. Williams, B.Sc.(1)(2)
                The
                  Valley, Anguilla
              
              67
              
              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, Chief Executive Officer And Director***
  Mr.
        Allan
        has been Chief Executive Officer of the Company since April 1998 and Chairman
        of
        the board of directors of the Company since 1994. In addition, Mr. Allan
        is a
        Director of Synthemed Inc. (medical devices) USA and DiaMedica Inc. (diabetes
        therapeutics) Canada. In 1992 he founded the Knowledge-Based Industries Group
        of
        a Canadian investment banking firm, organized as the first in Canada involved
        in
        financing, analyzing and creating strategic alliances for life sciences and
        information technology companies, where he was Executive Director until 1998.
        Mr. Allan was formerly a governor of The Toronto Stock Exchange, a member,
        and
        working group Chair, of the Ontario Biotechnology Advisory Board, a member
        of
        the Awards Selection Committee for the Networks of Centres of Excellence
        in
        Canada and a member 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.
  ***Thomas
        I.A. Allen, Q.C., F.C.I.Arb - Director***
  Mr.
        Allen
        is counsel to Ogilvy Renault, a Canadian law firm. 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 a number of public
        companies including Terra Nova Gold Inc., Mundoro Mining Inc., Middlefield
        Bancorp Limited, and Thomas Weisel Group Inc.. Mr. Allen recently acted as
        Chairman of the Task Force to Modernize Securities Legislation in Canada.
        Mr
        Allen has been a director of the Company since 1996.
  ***Mark
        Entwistle, M.A. - Director***
  Prior
        to
        founding his own consulting practice in 1997 in international trade, political
        business intelligence and strategic communications, Mr. Entwistle was Ambassador
        for Canada to Cuba from 1993 to 1997. Mr. Entwistle was previously a career
        diplomat with the Canadian Department of Foreign Affairs and International
        Trade
        in a variety of embassy positions from 1982 to 1997, and served as Press
        Secretary and Director of Communications to the Prime Minister of Canada
        from
        1991-1993. He is a Fellow of the Canadian Defence and Foreign Affairs Institute.
        Mr. Entwistle has been a director of the Company since October 1997.
  -
            48
            -
  ***Henry
        Friesen, C.C., M.D., F.R.S.C. - Director***
  Dr.
        Friesen currently serves as Chair of the Gairdner Foundation whose international
        awards are Canada’s most prestigious prizes in the biomedical sciences. He was
        most recently 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 recipient of 8 honorary degrees and also sits on the board of
        directors of Sanofi Pasteur Canada and Spectral Diagnostics Inc. Dr. Friesen
        has
        been a director of the Company since November 2001.
  ***Philip
        Frost, M.D., Ph.D. - Director***
  Dr.
        Frost
        is currently the President of Calesca Pharmaceuticals. 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 is also a Director of
        Innovive Pharmaceuticals, a New York-based oncology company and a Director
        of
        Avalon Pharmaceuticals. Dr. Frost has been a director of the Company since
        2007.
  ***François
        Thomas, M.D. - Director***
  Dr. **** Thomas,
        a
        board certified medical oncologist, is a member of the Board of Directors
        of
        Unibioscreen, Eurogentec and DNA therapeutics, and formerly was a Director
        of
        Newron, Entomed, Neurotech, Novexel and CropDesign. Dr. Thomas is currently
        a
        Senior Advisor at Bryan Garnier, a Paris-based investment back, and is
        responsible for corporate finance activities for pharmaceutical and
        biotechnology companies. Dr. Thomas has been a Venture Partner at Atlas Venture
        (London, UK), and a General Manager at Bioserve Ltd. (Cambridge, UK), a
        consultancy for the life sciences arena. 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.
  ***Gilbert
        Wenzel, Ph.D. - Director***
  Dr.
        Wenzel is currently Chairman of QUISISANA HOLDING AG and Chief Executive
        Officer, a pharma company focused on importing, registering and commercializing
        generics for private label use by pharmacy chains and insurance companies
        in
        Europe.. Prior to founding Quisisana in January 2003, Dr. Wenzel joined Novartis
        Group, a global pharmaceutical manufacturer, in November 2000 where he served
        as
        Head of Strategic Planning and a Member of its Executive Committee until
        January
        2003. Prior to joining Novartis in November 2000, Dr. Wenzel spent 15 years
        with
        McKinsey & Co., an international management consulting firm, and was a
        member of the European Leadership Group of its Pharma/Healthcare Sector and
        of
        the European New Venture Initiative. From 1981 to 1985, Dr. Wenzel was at
        Hoechst AG in Germany and developed global strategies for generics and
        over-the-counter medicines. Dr. Wenzel has been a director of the Company
        since
        March 2001.
  ***Tryon
        M. Williams, B.Sc. (Math) - Director***
  Mr.
        Williams is the Chairman, CEO 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.
  -
            49
            -
  **Officers**
  The
        name,
        municipality of residence, age as of September 17, 2008 and position with
        us of
        each of the current officers are set forth below.
  **Name**
              
              **Age**
              
              **Position**David
                  G.P. Allan
                Toronto,
                  Ontario
              
              66
              
              Chairman
                  and Chief Executive Officer, YM BioSciences Inc.
                President,
                  YM BioSciences USA Inc.Gary
                  Floyd
                Berwyn,
                  USA
              
              62
              
              Vice
                  President, Operations
                YM
                  BioSciences USA Inc.Vincent
                  Salvatori
                Victoria,
                  British Columbia
              
              56
              
              Executive
                  Vice President, YM BioSciences Inc.
                President,
                  CIMYM BioSciences Inc.Sean
                  Thompson
                Oakville,
                  Ontario
              
              42
              
              Vice
                  President, Corporate DevelopmentLeonard
                  Vernon
                Nobleton,
                  Ontario
              
              64
              
              Vice
                  President, Finance &
Administration
 
 ***Gary
        Floyd – Vice-President Of Operations***
  Mr.
        Floyd
        is a seasoned executive with an extensive background and 36 years of experience
        in the global pharmaceutical industry. Prior to joining Eximias in February
        2005
        as Vice-President, Operations, Mr. Floyd served as President of Pharmavene
        LLC,
        a pharmaceutical consulting firm. Prior to this, he was Senior Vice President,
        Worldwide Logistics and Procurement at Aventis Behring where he was responsible
        for Supply Chain Management of the company’s global business. He has also held
        senior positions in manufacturing, information systems, and sales and marketing
        at Aventis Behring and its predecessor companies. Mr.
        Floyd
        holds a Bachelors degree in Zoology and Chemistry from Olivet Nazarene
        University .
        Mr.
        Floyd has been an officer of the Company since 2006.
  ***Vincent
        Salvatori, Ph.D. - Executive Vice President, President And CEO, CIMYM
        Biosciences***
  Dr.
        Salvatori is an experienced drug development executive with an accomplished
        background in the pharmaceutical and biotechnology industry. He has more
        than 24
        years of experience in all aspects of drug development, corporate operations
        and
        external collaborations. Dr. Salvatori most recently held the position of
        Senior
        Vice President of Clinical Operations for Bioniche Life Sciences Inc. from
        May
        1998 to July 2002. He was previously at StressGen Biotechnologies Corporation
        from January 1995 to April 1998 where he held the positions of Chief Operating
        Officer and Vice President of Research and Development, subsequently appointed
        to Senior Vice President. In this capacity, Dr. Salvatori was responsible
        for
        corporate operations, strategic management and clinical/regulatory development.
        Prior to joining StressGen, Dr. Salvatori was the Senior Director of Program
        Management at QLT PhotoTherapeutics Inc. from June 1990 to December 1994
        and
        held various positions at Boehringer Ingelheim (Canada) Ltd. from April 1982
        to
        June 1990. Dr. Salvatori has been an officer of the Company since 2002.
  ***Sean
        Thompson, B.Sc. – Vice President, Corporate Development***
  Mr.
        Thompson is responsible for all aspects of corporate development for YM,
        including licensing, identifying targets for M&A and development
        partnerships. He has a solid background in clinical development and big Pharma
        marketing experience, and was previously Director of Clinical Research for
        YM.
        Prior to YM he worked for Roche, sitting on the Global Business Team in
        virology, and was Clinical Research Manager. Prior to Roche, he was a Clinical
        Scientist for SmithKline Beecham developing products for oncology, respiratory
        and CNS disorders. He is currently a member of the Ontario Institute for
        Cancer
        Research Industry Advisory Board, Vice Chair of the BIOTECanada Health Advisory
        Board and was a Board member for Variation Biotechnologies Inc. Mr. Thompson
        holds a Bachelor of Science degree from the University of Waterloo. Mr. Thompson
        has been an officer of the Company since 2000.
  -
            50
            -
  ***Leonard
        Vernon, B.Sc., C.A. – Vice-President, Finance And Administration***
  Mr.
        Vernon earned a B.Sc. in 1968 and was awarded his C.A. in 1972 with Clarkson
        Gordon & Co. (now Ernst & Young llp ).
        He has
        held senior financial positions with a number of organizations both public
        and
        private. Prior to joining YM as an officer in July 1997, Mr. Vernon was an
        independent consultant working with senior management in a variety of
        industries. Prior to 1992 he was Vice-President, Finance and Administration
        of
        Unitel Inc., now Allstream Inc., a major Canadian telecommunications company.
        Mr. Vernon has been an officer of the Company since 1997.
  **Clinical
        And Scientific Advisory Board**
  We
        maintain a Clinical and Scientific Advisory Board (“CSAB”) composed of
        internationally recognized clinicians and scientists. Management meets with
        members of the CSAB periodically to review operational aspects of our clinical
        and scientific programme and make recommendations with regard to the perceived
        trends and direction of medical and biopharmaceutical technologies and the
        industry generally. Each member of the CSAB has signed a confidentiality
        agreement with us. CSAB members receive honoraria paid by us of varying amounts
        per year. The current composition of the CSAB is as follows:
  ***Robert
        S. Kerbel, Ph.D.***
  Professor
        of Medical Biophysics, University of Toronto, Toronto, Ontario, Canada; Canada
        Research Chair in Molecular Medicine; Director, Molecular and Cell Biology
        Research, Sunnybrook and Women’s College Health Science Centre, Toronto,
        Ontario, Canada. Dr. Kerbel has been an advisor since April 1999.
  ***Leonard
        Saltz, M.D***
  Professor
        of Medicine, Weill College of Medicine, Cornell University, New York, New
        York,
        New York; Member of Memorial Sloan-Kettering Cancer Center, New York, New
        York,
        US; Attending Physician, Memorial Hospital for Cancer and Allied Diseases,
        New
        York, New York, US. Dr. Saltz has been an advisor since March 2006.
  ***Nicolas
        Stiernholm, Ph.D.***
  Chief
        Executive Officer, Trillium Therapeutics Inc., Toronto, Ontario, Canada.
        Dr.
        Stiernholm was an executive vice-president of the Company until he resigned
        in
        December 2002 at which time he became an advisor.
  ***Mark
        Vincent, M.D., M.R.C.P., F.R.C.P.C. - Chair***
  Associate
        Professor, Department of Oncology, University of Western Ontario, London,
        Ontario, Canada; Staff Medical Oncologist, London Regional Cancer Centre,
        London, Ontario, Canada. Dr. Vincent has been an advisor since October 1998.
  **B**
              **Compensation**
  **Summary
        of Compensation Paid to Directors in Fiscal 2008**
  Directors
        of the Company who are not full-time employees of the Company are entitled
        to
        receive an annual retainer fee of $12,000 plus an attendance fee of $1,500
        per
        meeting (with the exception of informational meetings) and per day spent
        traveling to attend the meeting, plus expenses. With respect to informational
        meetings, directors of the Company who are not full-time employees of the
        Company are entitled to an attendance fee of $500 per meeting and per day
        spent
        traveling to attend the meeting, plus expenses. In addition, the Chair of
        the
        Audit Committee is entitled to an annual retainer fee of $6,000 and the Chair
        of
        each of the Compensation and the Nominating and Corporate Governance Committees
        are entitled to an annual retainer fee of $4,000. Members of the Audit,
        Compensation, and Nominating and Corporate Governance Committees who are
        not
        full-time employees of the Company are entitled to an attendance fee of $1,500
        per meeting and per day spent traveling to attend the meeting, plus expenses.
        The Lead Director is entitled to an annual retainer fee of $10,000. As at
        the
        date hereof, the number of options held by non-executive directors is 805,613.
        An additional 1,103,252 options are held by the Chairman and Chief Executive
        Officer.
  -
            51
            -
  The
        table
        below sets out the total fees (including retainer and attendance fees) paid
        or
        accrued to each non-executive director of the Company for meetings held during
        the fiscal year ended June 30, 2008.
  **Name
                  of Director**
              
              **Retainer
                  Fees**
              
              **Attendance
                  Fees**Thomas
                  I.A. Allen(1)
              
              $
              26,000
              
              $
              27,000Mark
                  Entwistle(2)
              
              $
              16,000
              
              $
              15,000Henry
                  Friesen, O.C.,
              
              $
              12,000
              
              $
              19,500Phillip
                  Frost
              
              $
              7,000
              
              $
              10,500Francois
                  Thomas
              
              $
              7,000
              
              $
              10,500Gilbert
                  Wenzel
              
              $
              12,000
              
              $
              25,500Tryon
                  M. Williams(3)
              
              $
              18,000
              
              $
              39,000
 Notes:
 (1)
              Earned
                  a $10,000 annual retainer fee as Lead Director and a $4,000 annual
                  retainer fee as Chair of the Corporate Governance and Nominating
                  Committees.
 (2)
              Earned
                  a $4,000 annual retainer fee as Chair of the Compensation Committee.
 (3)
              Earned
                  a $6,000 annual retainer fee as Chair of the Audit
                  Committee.
  **Report
        on Executive Compensation**
  ***Compensation
        of Directors***
  The
        members of our Compensation Committee are Mark Entwistle (Chair), Thomas
        I.A.
        Allen and François Thomas.
  The
        mandate of the Compensation Committee is to establish and monitor our policies
        for attracting, retaining, developing and motivating senior employees. The
        compensation policies are designed to support our strategic objectives, ensure
        that incentive programs are designed to motivate senior managers to achieve
        or
        exceed corporate objectives and to enhance shareholder value and to ensure
        that
        there is reasonable consistency in the application of the compensation policies.
        The Committee’s responsibilities include reviewing annually the performance of
        the Chief Executive Officer (or more frequently if deemed necessary by the
        Compensation Committee), setting the Chief Executive Officer’s compensation and,
        in consultation with the Chief Executive Officer, establishing his personal
        objectives, reviewing the performance and approving the compensation of
        executive officers of the Company on the recommendation of the Chief Executive
        Officer, establishing incentive compensation programs and monitoring their
        effectiveness and developing and documenting the compensation policy and
        philosophy of the Company for approval by the Board of Directors. All members
        of
        this Committee are non-executive directors of the Company.
  Our
        compensation policies are designed to support our strategic objectives, ensure
        that incentive programs are designed to motivate senior managers to achieve
        or
        exceed corporate objectives and to enhance shareholder value and to ensure
        that
        there is reasonable consistency in the application of the compensation
        policy.
  The
        executive compensation comprises base salary, indirect compensation (benefits)
        and long-term incentives in the form of stock options. In determining actual
        compensation levels, the Committee considers the total program, rather than
        any
        single element in isolation. Total compensation levels are set to reflect
        both
        the marketplace (to ensure competitiveness) and the responsibility of each
        position (to ensure internal equity).
  -
            52
            -
  Our
        executive compensation program has the following objectives:
  ·
              to
                  attract, retain and motivate qualified
                  executives;
  ·
              to
                  provide incentives to executives to maximize productivity and enhance
                  enterprise value by aligning the interests of the executives with
                  those of
                  the shareholders;
  ·
              to
                  foster teamwork and entrepreneurial spirit;
  ·
              to
                  establish a direct link between all elements of compensation and
                  the
                  performance of the Company, its subsidiaries and individual performance;
                  and
  ·
              to
                  integrate compensation incentives with the development and successful
                  execution of strategic and operating
                  plans.
  ***Salary***
  The
        base
        salary for all executives is designed to be competitive and is adjusted for
        the
        realities of the market. The target salary is the mid-point, or just below
        the
        mid-point, of a salary range for an executive officer which is set at median
        levels in the comparator group to reflect similar positions in these companies
        using direct comparison of responsibilities. Base salaries for executive
        officers are then determined by the Committee within the above
        policy.
  **Chief
        Executive Officer**
  The
        compensation levels of the Chief Executive Officer are designed to recognize
        the
        Chief Executive Officer’s personal contributions and leadership. The Committee,
        in consultation with the Board of Directors, formally evaluates the performance
        of the Chief Executive Officer each year using both financial and non-financial
        measurements, and may increase the Chief Executive Officer’s total compensation
        to levels that are consistent with corporate and individual
        performance.
  Under
        the
        leadership and direction of the Chief Executive Officer, during the fiscal
        year
        ended June 30, 2008, the Company achieved a number of goals,
        including:
  The
        rationalization of senior staffing levels following the decision to terminate
        the development of tesmilifene;
  The
        oversight to ensure that our cash balances remained invested in the highest
        quality short-term paper avoiding any impairment;
  The
        inclusion of the first patients in the US for the first trial of nimotuzumab
        in
        that country and the elimination of restrictions on the number of treatment
        centers initially imposed by OFAC;
  The
        initiation and completion of the first cooperative trial between YM and one
        of
        its licensee’s, Kuhnil, (palliative NSCLC);
  The
        completion of heads-of-agreement on a corporate acquisition that was not
        concluded;
  The
        resolution of a clinical hold on AeroLEF ® and
        implementing a change in the management and development pathway for the
        product;
  The
        completion of corporate branding changes to be implemented in fiscal 2009
        and
        the establishment of a quality system for the Company.
  -
            53
            -
  **Compensation
        of Named Executive Officers**
  The
        following table sets forth the compensation of our Chief Executive Officer,
        Chief Financial Officer, and our three most highly compensated executive
        officers other than the Chief Executive Officer and Chief Financial Officer
        (the
“Named Executive Officers”) for our three most recently completed fiscal
        years.
  **Long-Term
                  Compensation****Name and**
                **Principal Position**
              
              **Year**
              
              **Annual Compensation**
              
              **Awards**
              
              **Payouts****Salary**
                **($)**
              
              **Bonus****(2)**
                **($)**
              
              **Other
                  Annual Compensation****(3)**
                **($)**
              
              **Securities
                  Under Options Granted**
              
              **Restricted
                  Shares or Restricted Share Units**
                **($)****(4)**
              
              **LTIP
                  Payouts**
                **($)****(5)**
              
              **All
                  Other Compensation**
                **($)**David
                  G.P. Allan
                CEO
              
              
              2008
                2007
                2006
              
              
              425,000
                322,000
                322,000
              **(6)**
              
              166,832
                Nil
                Nil
              
              
              166,015
                190,286
                41,460
              (1)
              
              203,252
                -
                290,000
              
              
              Nil
              
              
              Nil
              
              
              NilLeonard
                  Vernon
                VP,
                  Finance and
                Administration
              
              
              2008
                2007
                2006
              
              
              234,199
                242,213
                194,000
              
              
              69,481
                Nil
                Nil
              
              
              Nil
                94,172
                22,325
              
              
              101,626
                -
                100,000
              
              
              Nil
              
              
              Nil
              
              
              NilLisa
                  DeLuca(7
                VP,
                  Regulatory
                Affairs
              
              
              2008
                2007
                2006
              
              
              US
                  222,017
                US
                  214,203
                US
                  33,333
              
              
              64,591
                Nil
                Nil
              
              
              -
                US
                  18,000
                Nil
              
              
              93,495
                -
                70,000
              
              
              Nil
              
              
              Nil
              
              
              NilDiana
                  Pliura**(8**
                Executive
                  VP,
                AeroLEF
              
              
              2008
                2007
                2006
              
              
              220,138
                212,775
                200,000
              
              
              53,394
                Nil
                Nil
              
              
              Nil
                85,396
                22,325
              
              
              93,495
                -
                35,000
              
              
              Nil
              
              
              Nil
              
              
              NilVincent
                  Salvatori
                Executive
                  VP
              
              
              2008
                2007
                2006
              
              
              270,984
                299,589
                240,000
              
              
              78,124
                Nil
                Nil
              
              
              Nil
                103,036
                25,514
              
              
              101,626
                Nil
                110,000
              
              
              Nil
              
              
              Nil
              
              
              Nil
 Notes:
 (1)
              Mr.
                  Allan was provided an award resulting from conclusion of negotiations
                  with
                  the Board regarding the level of prior years’
                  compensation.
 (2)
              Bonus
                  figures include bonus earned in fiscal 2007 and paid in fiscal
                  2008 plus
                  bonus earned and accrued in fiscal 2008 and paid in fiscal
                  2009.
 (3)
              Payments
                  were made out of the Licensing Bonus Pool which has been discontinued
                  and
                  replaced with the Annual Incentive Plan described
                  below.
 (4)
              The
                  Company has not at any time granted restricted shares to executives
                  or
                  other employees.
 (5)
              The
                  Company has not established any Long Term Incentive Plans (LTIPs)
                  as
                  defined by the regulations to the*Securities
                  Act*(Ontario), which specifically exclude option
                  plans.
 (6)
              Mr.
                  Allan was awarded an increase in salary of $98,000 during the fiscal
                  year
                  which he has declined voluntarily and which is not reflected in
                  the chart
                  above. This compensation was paid out during fiscal
                  2008.
 (7)
                Lisa
                    DeLuca terminated employment with the Company effective July
                    31,
                    2008.
 (8)
              Diana
                  Pliura terminated employment with the Company effective July 14,
                  2008.
  **Incentive
        Plans**
  ***Stock
        Based Compensation***
  The
        stock-based compensation program provides stock options that create a direct
        link between executive rewards and enhanced shareholder value since the full
        benefit of this compensation element cannot be realized unless stock
        appreciation occurs over a number of years. The Committee, at its discretion,
        may grant stock options annually to executives and key employees under our
        stock
        option plan based on the executive’s position and annual compensation. In
        addition, special grants of stock options may be approved to recognize singular
        achievements or to retain and motivate executives in order to further align
        executive and shareholder interests and to motivate key
        employees.
  -
            54
            -
  The
        Committee designates from time to time eligible persons to whom options are
        granted and determines the number of shares covered by such options. Generally,
        participation in the stock option plan is limited to persons holding positions
        that can have a significant impact on our long term results. The underlying
        security of the options granted under the stock option plan are our common
        shares. During the fiscal year ended June 30, 2008, a total of 2,110,290
        options
        were issued of which 1,780,415 were issued to management and employees. The
        maximum number of shares available for issuance under the stock option plan
        is a
        rolling number equal to 15% of our issued and outstanding capital on the
        particular date of grant.
  **Stock
        Option Grants**
  **Option
        Grants During the Year ended June 30, 2008 and Option Values as at June 30,
        2008**
  **Name and Position**
              
              **Common**
                **Shares Under**
                **Options**
                **Granted**
              
              **Percentage of**
                **Total Options**
                **Granted in**
                **2008**
              
              **Exercise or**
                **Base Price**
                **($/Security)**
              
              **Market Value of**
                **Common Shares**
                **Underlying**
                **Options on the**
                **Date of Grant**
                **($/Security)**
              
              **Expiration**
                **Date**David G.P. Allan
                CEO and
                  Chairman
              
              
              203,252
              
              
              9.6
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Thomas
                  I.A. Allen
                Lead
                  Director
              
              
              60,975
              
              
              2.9
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Lisa
                  DeLuca(1)
                VP,
                  Regulatory Affairs
              
              
              93,496
              
              
              4.4
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Mark
                  Entwistle
                Director
              
              
              48,780
              
              
              2.3
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Henry
                  Friesen
                Director
              
              
              36,585
              
              
              1.7
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Philip
                  Frost
                Director
              
              
              36,585
              
              
              1.7
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Diana
                  Pliura(2)
                Executive
                  VP, AeroLEF
              
              
              93,495
              
              
              4.4
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Vincent
                  Salvatori
                Executive
                  VP
              
              
              101,626
              
              
              4.8
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Francois
                  Thomas
                Director
              
              
              36,585
              
              
              1.7
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Leonard
                  Vernon
                VP,
                  Finance and Administration
              
              
              101,626
              
              
              4.8
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Gilbert
                  Wenzel
                Director
              
              
              36,585
              
              
              1.7
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17Tryon
                  M. Williams
                Director
              
              
              73,780
              
              
              3.5
              %
              
              1.53
              
              
              1.53
              
              
              9/29/17
 Notes:
 (1)
              Lisa
                  DeLuca terminated employment with the Company effective July 31,
                  2008.
 (2)
              Diana
                  Pliura terminated employment with the Company effective July 14,
                  2008.
  -
            55
            -
  **Aggregated
        Options Exercised during Year ended June 30, 2008 and Option Values as at
        June
        30, 2008**
  There
        were no options exercised during the fiscal year ended June 30,
        2008
  **Outstanding
        Equity Awards at Fiscal Year-end**
  The
        following table provides information on the current holdings of option and
        stock
        awards by the Named Executive Officers as at June 30, 2008.
  **OUTSTANDING
        EQUITY AWARDS AT FISCAL YEAR-END**
  **Option Awards****Name and Position**
              
              **Grant**
                **Date**
              
              **Number of Securities**
                **Underlying**
                **Unexercised**
                **Options**
                **Exercisable**
                **(#)**
              
              **Number of**
                **Securities**
                **Underlying**
                **Unexercisable**
                **Options**
                **Unexercisable**
                **(#)**
              
              **Option**
                **Exercise**
                **Price**
                **($)**
              
              **Option**
                **Expiry**
                **Date**
              
              **Value of**
                **Underlying**
                **Unexercised**
                **In-the-Money**
                **Options of**
                **Fiscal Year**
                **End**
                **($)**David
                  G.P. Allan
                CEO
              
              
              2000-2007
              
              
              967,073
              
              
              136,179
              
              
              1.53-4.50
              
              
              2010-2017
              
              
              NilLeonard
                  Vernon
                VP,
                  Finance and Administration
              
              
              1998-2007
              
              
              251,536
              
              
              68,090
              
              
              1.53-4.50
              
              
              2008-2017
              
              
              NilLisa
                  DeLuca(1)
                VP,
                  Regulatory Affairs
              
              
              2006-2007
              
              
              100,853
              
              
              62,642
              
              
              1.53-5.75
              
              
              2016-2017
              
              
              NilDiana
                  Pliura(2)
                Executive
                  VP, AeroLEF
              
              
              2005-2007
              
              
              330,853
              
              
              62,642
              
              
              1.53-4.36
              
              
              2015-2017
              
              
              NilVincent
                  Salvatori
                Executive
                  VP
              
              
              2003-2007
              
              
              228,536
              
              
              68,090
              
              
              1.53-4.36
              
              
              2013-2017
              
              
              Nil
 Notes:
 (1)
              Lisa
                  DeLuca terminated employment with the Company effective July 31,
                  2008.
 (2)
              Diana
                  Pliura terminated employment with the Company effective July 14,
                  2008.
 
 **Equity
        Compensation Plan Information**
  The
        following table sets forth the securities authorized for issuance as at June
        30,
        2008.
  **Plan
                  Category**
              
              **A. Number of securities to**
                **be issued on exercise of**
                **outstanding options**
              
              **B. Weighted-average**
                **exercise price of**
                **outstanding options**
              
              **C. Number of securities**
                **remaining available for**
                **future issuance under**
                **equity compensation plans**
                **(excluding securities**
                **reflected in column A)**Equity
                  compensation plans approved by Security Holders
              
              
              5,633,102
              
              
              $2.80
              
              
              3,099,344Equity
                  compensation plans not approved by Security Holders
              
              
              Nil
              
              
              Nil
              
              
              Nil**Total**
              
              
              **5,633,102**
              
              
              **$**2.80
              
              
              **3,099,344**
  -
            56
            -
  **Pension
        Plan**
  We
        do not
        maintain a pension plan for our employees, officers or directors.
  **Indebtedness
        of Directors and Officers**
  As
        at
        September 17, 2008, there were no outstanding loans made by us to any director
        or officer. No securities have been purchased by any director or officer
        with
        our financial assistance during the 2008 fiscal year. Furthermore, no director,
        officer or executive is indebted to us in connection with securities purchase
        programs.
  It
        is our
        policy not to provide financial assistance to shareholders, directors, officers
        or employees in connection with the purchase of our Common Shares or the
        securities of any of our affiliates, nor to grant personal loans to directors
        and officers.
  **Directors’
        and Officers’ Liability Insurance**
  The
        Company has purchased liability insurance for the directors and officers
        of the
        Company.  The annual premium for such insurance is $198,000 no part of
        which is payable by the directors or officers of the Company.  The annual
        insurance coverage under the policies is limited to $15,000,000 per claim
        subject to an annual aggregate of $15,000,000. There is a $250,000 deductible
        provision for any claim made , but no such provision for claims made
        against any director or officer.
  **Indemnification**
  We
        have
        entered into an indemnification agreement with each of our directors. Pursuant
        to such agreements, we have agreed to indemnify each director, his heirs
        and
        legal representatives against all costs, charges and expenses including any
        amount paid to settle an action or satisfy a judgment, reasonably incurred
        by
        him in respect of any civil, criminal or administrative action or proceeding
        to
        which he is made a party by reason of being or having been a director of
        the
        Company (including in respect of acting as a member on one or more committees
        of
        the board of directors) or acting or having acted at our request as a director
        or officer of any other body corporate of which we are or have been a
        shareholder or creditor, if (a) he had reasonable grounds for believing he
        acted
        honestly and in good faith with a view to the best interests of the Company;
        and
        (b) in the case of a criminal or administrative action or proceeding that
        is
        enforced by a monetary penalty, he had reasonable grounds for believing that
        his
        conduct was lawful. We have also agreed to indemnify each director, his heirs
        and legal representatives from and against any and all claims, actions, suits,
        proceedings, damages, liabilities or expenses of whatsoever nature or kind,
        actual, anticipated or threatened (including, without limitation, costs incurred
        in the preparation to defend any such threatened or anticipated claim should
        it
        materialize), to which the director is made a party by reason of being or
        having
        been a director of the Company or acting or having acted at our request as
        a
        director or officer of any other body corporate of which the Company is or
        has
        been a shareholder or creditor, against all costs, charges, and expenses
        reasonably incurred by him in connection with such action if he fulfils the
        conditions set out above.
  **C**
              **Board
                  of Directors Practices**
  The
        Board
        of Directors has adopted corporate governance guidelines as well as written
        charters to provide the framework for effective governance of our company.
        These
        guidelines and charters are reviewed annually by the Nominating and Corporate
        Governance Committee and recommendations are made to the Board of Directors,
        if
        necessary.
  **Role
        of the Lead Director**
  The
        Board
        of Directors appointed Thomas I.A. Allen as Lead Director. In this role,
        Mr.
        Allen is responsible for providing leadership to the independent directors.
        Key
        elements of Mr. Allen’s role include, but are not limited to:
  ·
              fostering
                  processes to enable the Board to function effectively without
                  management;
  -
            57
            -
  ·
              providing
                  input to the Chairman of the Board of Directors on behalf of the
                  independent directors with respect to Board
                  agendas;
  ·
              working
                  with the Chairman of the Board of Directors to ensure adequate
                  resources
                  and timely and relevant information are available to the Board
                  of
                  Directors;
  ·
              chairing*in
                  camera*meetings
                  of the independent directors and communicating to the Chairman
                  of the
                  Board of Directors with regard to such discussions;
                  and
  ·
              assisting
                  the Board of Directors in satisfying itself as to the integrity
                  of the
                  Chief Executive Officer.
  **Mandate
        of the Board of Directors**
  Our
        directors are elected by the shareholders and are responsible for the
        stewardship of the business and affairs of the Company. The Board seeks to
        discharge such responsibility by reviewing, discussing and approving the
        Company’s strategic planning and organizational structure and supervising
        management to oversee that the foregoing enhance and preserve the underlying
        value of the Company.
  Although
        directors may be elected by the shareholders to bring special expertise or
        a
        point of view to Board deliberations, they are not chosen to represent a
        particular constituency. The best interests of the Company as a whole must
        be
        paramount at all times.
  ***Duties
        of Directors***
  The
        Board
        discharges its responsibility for overseeing the management of our business
        and
        delegates responsibility our senior officers for day-to-day management of
        the
        Company. The Board discharges its responsibilities, including those listed
        below, either directly or through one of its committees: the Audit Committee,
        the Nominating and Corporate Governance and the Compensation Committee. In
        addition to these regular committees, the Board may appoint ad hoc committees
        periodically to address certain issues of a more short-term nature. In addition
        to the Board’s primary roles of overseeing corporate performance and providing
        quality, depth and continuity of management to meet our strategic objectives,
        principal duties include, but are not limited to (i) appointment of management,
        (ii) Board organization, (iii) strategic planning, (iv) monitoring of financial
        performance and other financial reporting matters, (v) risk management, (vi)
        policies and procedures, (vii) communications and reporting, (viii) position
        descriptions, (ix) orientation and continuing education, (x) nomination of
        directors and (xi) Board evaluation.
  ***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 the Audit
        Committee is directly responsible 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 US securities laws, rules and
        guidelines, any applicable stock exchange requirements or guidelines and
        any
        other applicable regulatory rules.
  -
            58
            -
  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 US securities laws, rules and guidelines, any applicable stock
        exchange requirements or guidelines and any other applicable regulatory rules.
        In particular:
  (a)
              each
                  member shall be “independent” and “financially literate” within the
                  meaning of Multilateral Instrument 52-110 “*Audit
                  Committees*”;
  (b)
              at
                  least one member must be “financially sophisticated” under the rules of
                  the American Stock Exchange; and
  (c)
              at
                  least one member must be an “audit committee financial expert” within the
                  meaning of that term under the US Securities Exchange Act of 1934,
                  as
                  amended, and the rules adopted by the US Securities and Exchange
                  Commission thereunder.
  The
        members of the Company’s Audit Committee are Tryon M. Williams (Chair), Thomas
        I.A. Allen, Henry Friesen and Gilbert Wenzel.
  ***Compensation
        Committee***
  The
        Compensation Committee is comprised of a minimum of three directors, the
        majority of whom will be Canadian citizens ordinarily resident in Canada,
        and,
        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), Thomas I.A. Allen and François
        Thomas.
  The
        mandate of the Compensation Committee is to establish and monitor our policies
        for attracting, retaining, developing and motivating senior employees. The
        compensation policies are designed to support our strategic objectives, ensure
        that incentive programs are designed to motivate senior managers to achieve
        or
        exceed corporate objectives and to enhance shareholder value and to ensure
        that
        there is reasonable consistency in the application of the compensation policies.
        The Committee’s responsibilities include reviewing annually the performance of
        the Chief Executive Officer (or more frequently if deemed necessary by the
        Compensation Committee), setting the Chief Executive Officer’s compensation and,
        in consultation with the Chief Executive Officer, establishing his personal
        objectives, reviewing the performance and approving the compensation of
        executive officers of the Company on the recommendation of the Chief Executive
        Officer, establishing incentive compensation programs and monitoring their
        effectiveness and developing and documenting the compensation policy and
        philosophy of the Company for approval by the Board of Directors. All members
        of
        this Committee are non-executive directors of the Company.
  *Compensation
        Committee Authority and Responsibilities*
  (a)
              The
                  Compensation Committee has the power and authority of the Board
                  to perform
                  the following duties and fulfill the following
                  responsibilities:
  (i)
              Review
                  the compensation practices and policies of the Company to ensure
                  that they
                  are competitive and that they provide appropriate motivation for
                  corporate
                  performance and increased shareholder
                  value.
  (ii)
              Oversee
                  the administration of the Company’s compensation programs, and review and
                  approve the employees who receive compensation and the nature of
                  the
                  compensation provided under such programs, and to ensure that all
                  management compensation programs are linked to meaningful and measurable
                  performance targets.
  (iii)
              Make
                  recommendations to the Board regarding the adoption, amendment
                  or
                  termination of compensation programs and the approval of the adoption,
                  amendment and termination of compensation programs of the Company,
                  including for greater certainty, ensuring that if any equity-based
                  compensation plan is subject to shareholder approval, that such
                  approval
                  is sought.
  -
            59
            -
  (iv)
              Periodically
                  survey the executive compensation practices of other comparable
                  companies.
  (v)
              Establish
                  and ensure the satisfaction of performance goals for performance-based
                  compensation.
  (vi)
              Annually
                  review and approve the annual base salary and bonus targets for
                  the senior
                  executives of the Company, other than the Chief Executive Officer
                  (the
                  “CEO”).
  (vii)
              Review
                  and approve annual corporate goals and objectives for the CEO and
                  evaluate
                  the CEO’s performance against such goals and
                  objectives.
  (viii)
              Annually
                  review and approve, based on the Compensation Committee’s evaluation of
                  the CEO, the CEO’s annual base salary, the CEO’s bonus, and any stock
                  option grants and other awards to the CEO under the Company’s compensation
                  programs. In determining the CEO’s compensation, the Compensation
                  Committee will consider the Company’s performance and relative shareholder
                  return, the compensation of CEOs at other companies, and the CEO’s
                  compensation in past years.
  (ix)
              Review
                  the annual report on executive compensation required to be prepared
                  under
                  applicable corporate and securities legislation and regulation
                  including
                  the disclosure concerning members of the Compensation Committee
                  and
                  settling the reports required to be made by the Compensation Committee
                  in
                  any document required to be filed with a regulatory authority and/or
                  distributed to shareholders.
  ***Nominating
        and Corporate Governance Committee***
  *Members*
  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), Tryon M. Williams and Philip Frost.
  *Committee
        Authority and Responsibilities*
  The
        Committee has the power and authority of the Board to perform the following
        duties and fulfill the following responsibilities:
  (a)
              Develop
                  and recommend to the Board a set of corporate governance guidelines
                  and
                  procedures applicable to the Company. The Committee will annually
                  reassess
                  the corporate governance guidelines and procedures and recommend
                  any
                  necessary revisions to the Board;
  (b)
              Make
                  recommendations regarding the size and composition of the Board.
  (c)
              Establish
                  and recommend to the Board qualification criteria for the selection
                  of new
                  directors to serve on the Board and annually review the appropriate
                  experience, skills and characteristics required of each Board member.
  (d)
              Work
                  with the Chairman of the Board to identify individuals qualified
                  to become
                  Board members, consistent with criteria approved by the Board.
  -
            60
            -
  (e)
              Recommend
                  to the Board the director nominees for the next annual meeting
                  of
                  shareholders.
  (f)
              Recommend
                  the appropriate committee structure of the Board and annually review
                  and
                  recommend to the Board qualified members of the Board for membership
                  on
                  committees of the Board and recommend committee members to fill
                  vacancies
                  as needed.
  (g)
              Approve
                  an appropriate orientation and education program for directors
                  and oversee
                  the training and orientation of directors.
  (h)
              Establish
                  a minimum attendance expectation for directors.
  (i)
              At
                  intervals which the Committee considers appropriate, evaluate the
                  performance of
  (i)
              individual
                  directors,
  (ii)
              the
                  Board,
  (iii)
              Board
                  committees and
  (iv)
              executive
                  management of the Company. The purpose of the evaluations is to
                  assess
                  and, where possible, increase the effectiveness of the Board and
                  its
                  committees. The Committee may make recommendations to the Board
                  for
                  improving the Board’s effectiveness and shall discuss annually with the
                  full Board its effectiveness.
  (v)
              Recommend
                  the termination of board membership of individual directors when
                  appropriate.
  (vi)
              Provide
                  regular reports of the Committee’s activities to the Board.
  **D**
              **Employees**
  As
        of
        June 30, 2008, we employed 37 permanent employees. 26 employees are currently
        located in Mississauga, Ontario and 11 employees are in Wayne, Pennsylvania.
        Other than administrative staff, our employees conduct our licensing and
        product
        development activities. None of our employees are represented by labour
        unions.
  **E**
              **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, 2008, based on 58,216,309 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
              
              
              809,659
              
              
              1.39
              %
              
              1,103,252
              
              
              $1.53-$4.50
              
              
              2010-2017Thomas
                  I.A. Allen
              
              
              -
              
              
              -
              
              
              134,135
              
              
              $1.53-$4.50
              
              
              2010-2017Mark
                  Entwistle
              
              
              -
              
              
              -
              
              
              121,940
              
              
              $1.53-$4.50
              
              
              2010-2017Gary
                  Floyd
              
              
              -
              
              
              -
              
              
              163,495
              
              
              $1.53-$5.74
              
              
              2016-2017Henry
                  Friesen
              
              
              -
              
              
              -
              
              
              134,745
              
              
              $1.53-$4.50
              
              
              2011-2017Philip
                  Frost
              
              
              -
              
              
              -
              
              
              36,585
              
              
              $1.53
              
              
              2017Vincent
                  Salvatori
              
              
              -
              
              
              -
              
              
              296,626
              
              
              $1.53-$4.36
              
              
              2013-2017Francois
                  Thomas
              
              
              -
              
              
              -
              
              
              36,585
              
              
              $1.53
              
              
              2017Sean
                  Thompson
              
              
              19,500
              
              
              *
              
              
              246,675
              
              
              $1.53-$4.50
              
              
              2010-2017Leonard
                  Vernon
              
              
              -
              
              
              -
              
              
              319,626
              
              
              $1.53-$4.50
              
              
              2008-2017Gilbert
                  Wenzel
              
              
              -
              
              
              -
              
              
              129,745
              
              
              $1.53-$4.50
              
              
              2011-2017Tryon
                  M. Williams
              
              
              20,100
              
              
              *
              
              
              211,878
              
              
              $1.53-$4.50
              
              
              2010-2017
 *
        Less
        than one percent
  Note:
 (1)
              Of
                  such shares, 80,000 common shares are held through private holding
                  companies over which Mr. Allan exercises direction and
                  control.
  -
            61
            -


As
      of the
      date of hereof, the directors and senior officers of YM BioSciences as a group
      beneficially owned or controlled, directly or indirectly, 849,259 common shares
      of YM, representing approximately 1.46 % of the issued and outstanding voting
      shares of the Company.




**Item
                7:**
            **Major
                Shareholders and Related Party
                Transactions**




**A**
            **Major
                Shareholders**




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




To
      the
      knowledge of our directors and senior officers, at September 17, 2008 set out
      below are the only persons/entities who beneficially owned, directly or
      indirectly, or exercised control or direction over, our Common Shares carrying
      more than 5% of the voting rights attached to all our outstanding Common Shares.
      As used in the table below, “beneficial ownership” means sole or shared power to
      vote or direct the voting of the security, or the sole or shared investment
      power with respect to a security (i.e., the power to dispose, or direct a
      disposition, of a security). A person is deemed at any date to have “beneficial
      ownership” of any security that the person has a right to acquire within 60
      days. More than one person may be deemed to have beneficial ownership of the
      same securities.




**Name of Shareholder**
            
            **Approximate Number of Common**
              **Shares Beneficially Owned, Directly**
              **or Indirectly, or over which Control**
              **or Direction is********Exercised**
            
            **Percentage of Outstanding**
              **Common Shares Represented**Accipiter Capital Management, L.L.C.
            
            
            4,449,375
            
            
            7.64
            %





None
      of
      the shareholders set out above has different voting rights from the other
      shareholders.




To
      the
      knowledge of our directors and senior officers, the following table indicates
      as
      of September 17, 2008, the total number of Common Shares issued and outstanding,
      the approximate total number of holders of record of Common Shares, the number
      of holders of record of Common Shares with US addresses, the portion of the
      outstanding Common Shares held by US holders of record, and the percentage
      of
      Common Shares held by US holders of record. This table does not indicate
      beneficial ownership of Common Shares.




**Total Number of**
              **Holders of Record**
            
            **Total Number of**
              **Common Shares**
              **Issued and**
              **Outstanding**
            
            **Number of US**
              **Holders of Record**
            
            **Number of Common**
              **Shares Held by US**
              **Holders of Record**
            
            **Percentage of**
              **Common Shares Held**
              **by US**
              **Holders of Record**76
            
            
            58,216,309
            
            
            31
            
            
            22,162,029
            
            
            38.07
            %




-
          62
          -


**B**
            **Related
                Party Transactions**




During
      fiscal 2008, Dr. François Thomas, a director of the Company, provided consulting
      services to YM and received from YM consulting fees totalling $96,306.70.




**C**
            **Interests
                of Experts and Counsel**




Not
      applicable.




**Item
                8:**
            **Financial
                Information**




**A**
            **Consolidated
                Statements and Other Financial
                Information**




The
      financial statements filed as part of this annual report are filed under Item
      18.




**B**
            **Significant
                Changes**




Not
      applicable.




**Item
                9:**
            **The
                Offer and Listing**




**A**
            **Offer
                and Listing Details**




Our
      Common **** Shares
      are traded on the AMEX, the TSX and AIM under the symbols “YMI”, “YM” and
“YMBA”, respectively. The last reported sales price of our Common Shares on
      September 17, 2008 on the AMEX was US$0.50, on the TSX was C$0.55 and on the
      AIM
      was £0.265. The following table sets forth the high and low per share sales
      prices for our Common Shares on the AMEX and TSX for the periods
      indicated.




**Market
      Price**




**Common Shares****AMEX**(1)
            
            **TSX****High**
            
            **Low**
            
            **High**
            
            **Low****Fiscal**
            
            **C$**
            
            **US$**
            
            **C$**
            
            **C$****2004**
            
            
            **—**
            
            
            **—**
            
            
            4.28
            
            
            0.86**2005**
            
            
            3.33
            
            
            1.96
            
            
            4.1
            
            
            2.45**2006**
            
            
            6.5
            
            
            2.35
            
            
            7.4
            
            
            2.93**2007**
            
            
            4.15
            
            
            1.25
            
            
            4.88
            
            
            1.55Quarter
                1
            
            
            4.05
            
            
            2.58
            
            
            4.4
            
            
            2.91Quarter
                2
            
            
            3.45
            
            
            2.62
            
            
            3.9
            
            
            2.98Quarter
                3
            
            
            4.15
            
            
            1.25
            
            
            4.88
            
            
            1.55Quarter
                4
            
            
            2.11
            
            
            1.5
            
            
            2.39
            
            
            1.77**2008**
            
            
            1.89
            
            
            0.84
            
            
            1.98
            
            
            0.86January
            
            
            1.36
            
            
            0.97
            
            
            1.34
            
            
            0.95February
            
            
            1.24
            
            
            0.94
            
            
            1.21
            
            
            0.95March
            
            
            1.21
            
            
            0.84
            
            
            1.15
            
            
            0.91April
            
            
            1.06
            
            
            0.91
            
            
            1.08
            
            
            0.93May
            
            
            1.05
            
            
            0.87
            
            
            1.06
            
            
            0.89June
            
            
            1.05
            
            
            0.85
            
            
            1.06
            
            
            0.86July
            
            
            1.07
            
            
            0.7
            
            
            1.05
            
            
            0.72August
            
            
            1.01
            
            
            0.51
            
            
            1.05
            
            
            0.54September(to
                and including September 17)
            
            
            0.6
            
            
            0.46
            
            
            0.65
            
            
            0.5





Note:


(1) Commenced
      trading on the AMEX on October 1, 2004.


-
          63
          -




**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 US or other territories, if at all.




**B**
            **Plan
                of Distribution******




Not
      applicable.




**C**
            **Markets**




Our
      Common Shares are traded on the AMEX, the TSX and AIM under the symbols “YMI”,
“YM” and “YMBA”, respectively. The last reported sales price of our Common
      Shares on September 17, 2008 on the AMEX was US$0.50, on the TSX was C$0.55
      and
      on AIM was £0.265.




**D**
            **Selling
                Shareholders******




Not
      applicable.




**E**
            **Dilution**




Not
      applicable.


-
          64
          -


**F**
            **Expenses
                of the Issue******




Not
      applicable.




**Item
                10:**
            **Additional
                Information**




**A**
            **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 17, 2008, there were 58,216,309 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 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 stock 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”), as
                determined by the Board in its discretion. 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.




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            65
            -




·
            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.




·
            The
                number of common shares that may be reserved for issuance 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 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 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.




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:




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            66
            -





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 has no security purchase agreement or stock appreciation
                  rights
                  plan. The Compensation Committee has authority to and may from
                  time to
                  time consider the implementation of such other equity incentive
                  plans.
  ·
              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; and amendments that are of a housekeeping
                  nature.
  ·
              The
                  Board may terminate the Option Plan at any time.




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.




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.




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.





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            67
            -




***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 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 (“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) (the
“Separation Time”) and will become exercisable eight trading days 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.




***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.





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            68
            -




***Flip-in
      Event***




A
      “Flip- i n
      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:




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




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          69
          -




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.




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 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.





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            70
            -





***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.




**B**
            **Articles
                of Continuance******




**Other
      Provisions of Articles and By-laws**




There
      are
      no provisions in the Articles or By-laws:





·
            delaying
                or prohibiting a change in control of our company that operate only
                with
                respect to a merger, acquisition or corporate
                restructuring;




·
            discriminating
                against any existing or prospective holder of shares as a result
                of such
                shareholder owning a substantial number of
                shares;




·
            requiring
                disclosure of share ownership; or




·
            governing
                changes in capital, where such provisions are more stringent than
                those
                required by law.




**C**
            **Material
                Contracts**




In
      the
      prior two years, we have not entered into any contract other than in the
      ordinary course of business.




**D**
            **Exchange
                Controls**




Canada
      has no system of exchange controls. There are no Canadian restrictions on the
      repatriation of capital or earnings of a Canadian public company to non-resident
      investors. There are no laws in Canada or exchange restrictions affecting the
      remittance of dividends, profits, interest, royalties and other payments to
      non-resident holders of our securities, except as discussed in Section E,
      Taxation.




***Restrictions
      on Share Ownership by Non-Canadians***




There
      are
      no limitations under the laws of Canada or in our organizational documents
      on
      the right of foreigners to hold or vote securities of our company, except that
      the *Investment
      Canada Act* (the
      “Investment Canada Act”) may require review and approval by the Minister of
      Industry (Canada) of certain acquisitions of “control” of our company by a
“non-Canadian.”





-
            71
            -





***Investment
      Canada Act***




Under
      the *Investment
      Canada Act* (the
“ICA”), foreign investors proposing to acquire “control” of a “Canadian
      business” must file an Application for Review (“Application”) with the Director
      of Investments at Industry Canada if the proposed transaction exceeds the
      following financial thresholds:




·
            For
                non-WTO investors, C$5 million for direct acquisitions and C$50 million
                for indirect acquisitions (e.g., an acquisition of a US corporation
                with a
                Canadian subsidiary);




·
            For
                WTO investors, C$295 million for 2008 for direct acquisitions (the
                threshold is increased annually on or about January 1). Indirect
                acquisitions by WTO Investors are only subject to notification;
                or




·
            For
                both WTO and non-WTO investors, if the acquisition involves one of
                four
                policy sectors (uranium, financial services, transportation services
                and
                cultural businesses), C$5 million for direct acquisitions and C$50
                million
                for indirect acquisitions.




If
      an
      Application is required, the Investment Review Branch (the “IRB”) of Industry
      Canada must review the proposed transaction and the Minister of Industry (the
      “Minister”) must be satisfied that the transaction is likely to be of “net
      benefit to Canada.” The Minister is required to consider six economic factors
      specified in the ICA, as well as any written undertakings that may have been
      given by the investor. The ICA contemplates an initial review period of up
      to 45
      days after a complete Application is filed; however, the Minister may
      unilaterally extend the review period by up to 30 days (or a longer period
      with
      the investor’s consent) to permit completion of the review.




A
      transaction that requires an Application to be filed often cannot be implemented
      prior to the investor receiving regulatory clearance. Non-compliance may lead
      to
      court-ordered divestiture of control and a fine of up to C$10,000 for each
      day
      that the statute is contravened.




Even
      if
      the transaction is not reviewable because it does not meet or exceed the
      applicable financial threshold, the foreign investor must still file a
      notification (which essentially constitutes notice of the investment) with
      the
      Director of Investments within 30 days of the transaction’s closing.




***Competition
      Act***




The *Competition
      Act* (the
      “CA”) requires that a pre-merger notification filing be submitted by both
      parties to a transaction to the Commissioner of Competition (the “Commissioner”)
      in respect of proposed transactions that exceed certain financial and other
      thresholds. If a proposed transaction is subject to pre-merger notification,
      a
      pre-merger notification filing must be submitted to the Commissioner and a
      waiting period must expire or be waived by the Commissioner before the
      transaction may be completed. The parties to a proposed transaction may choose
      to submit either a short-form filing (in respect of which there is a 14-day
      statutory waiting period) or a long-form filing (in respect of which there
      is a
      42-day statutory waiting period). However, where the parties choose to submit
      a
      short-form filing, the Commissioner may, within 14 days, require that the
      parties submit a long-form filing, in which case the proposed transaction
      generally may not be completed until 42 days after the long-form filing is
      submitted by the parties.




The
      Commissioner may, upon request, issue an advance ruling certificate (“ARC”) in
      respect of a proposed transaction where she is satisfied that the transaction
      gives rise to no or minimal anti-competitive effects (or is pro-competitive).
      If
      the Commissioner issues an ARC in respect of a proposed transaction, the
      transaction is exempt from the pre-merger notification provisions. In addition,
      if the transaction to which the ARC relates is substantially completed within
      one year after the ARC is issued, the Commissioner may not challenge the
      transaction under the substantive merger provisions of the CA solely on the
      basis of information that is the same or substantially the same as the
      information on the basis of which the ARC was issued.





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If
      the
      Commissioner is unwilling to issue an ARC, she may nevertheless issue a “no
      action” letter confirming that she is of the view that grounds do not then exist
      to initiate proceedings before the Competition Tribunal under the merger
      provisions of the CA with respect to the proposed transaction, while preserving,
      during the three years following completion of the proposed transaction, her
      authority to challenge the transaction. A “no action” letter does not by itself
      eliminate the need for notification.




Regardless
      of whether pre-merger notification is required, within three years after a
      merger has been substantially completed, the Commissioner may apply to the
      Competition Tribunal (a special purpose tribunal) for an order under the merger
      provisions of the CA. If the Competition Tribunal finds that the transaction
      prevents or lessens or is likely to prevent or lessen competition substantially,
      it may order that the parties not proceed with the transaction or part of it
      or,
      in the event that the transaction has already been completed, order its
      dissolution or the disposition of some of the assets or shares involved. In
      addition, the Competition Tribunal may, with the consent of the person against
      whom the order is directed and the Commissioner, order that person to take
      any
      other action as is deemed necessary to remedy any substantial lessening or
      prevention of competition that the Competition Tribunal determines would or
      would likely result from the transaction.




**E**
            **Taxation**




***Canadian
      Federal Income Taxation***




In
      the
      opinion of Heenan Blaikie LLP, counsel to the Company, the following is a
      summary of the principal Canadian federal income tax considerations under the
      Tax Act generally applicable to holders of our Common Shares. This summary
      summarizes Canadian federal income tax considerations applicable to the holders
      of Common Shares who, for the purposes of the Tax Act are residents in Canada,
      who deal at arm’s length and are not affiliated with the Company and hold their
      Common Shares as capital property. No part of this summary is applicable to
      corporations which are “financial institutions” for the purposes of the “mark to
      market” provisions of the Tax Act, to any “specified financial institution” as
      defined in the Tax Act to any person an investment in which would constitute
      a
“tax shelter” for the purposes of the Tax Act, nor to Underwriters or agents
      acting on behalf of the Company. The Common Shares will generally be “capital
      property” to a holder unless they are held in the course of carrying on a
      business of trading or dealing in securities or the holder is engaged in an
      adventure in the nature of trade with respect to such shares. Certain holders
      who might not otherwise be considered to hold their Common Shares as capital
      property may, in certain circumstances, be entitled to have them treated as
      capital property by making the irrevocable election permitted by subsection
      39(4) of the Tax Act. **Holders
      of Common Shares contemplating making the election permitted by subsection
      39(4)
      of the Tax Act should consult their own independent tax advisors as such an
      election would affect the income tax treatment of dispositions by the holder
      of
      other Canadian securities.**




This
      summary is based upon the current provisions of the Tax Act and the Regulations
      in force as of the date hereof, all specific proposals (the “ **Proposed
      Amendments** ”)
      to
      amend the Tax Act or the Regulations that have been publicly announced by,
      or on
      behalf of, the Minister of Finance (Canada) prior to the date hereof and
      counsel’s understanding of the current published administrative and assessing
      practices of the Canada Revenue Agency. If the Proposed Amendments are not
      enacted as presently proposed or other relevant amendments to the Tax Act or
      Regulations come into force, the tax consequences may not be as described below.
      This summary does not take into account or anticipate any other changes to
      the
      law, whether by legislative, governmental or judicial decision or action, nor
      does it take into account provincial, territorial or foreign income tax
      legislation or considerations, which may differ from the Canadian federal income
      tax considerations. **This
      summary is of a general nature only, is not exhaustive of all possible Canadian
      federal income tax considerations and is not intended to be, nor should it
      be
      construed to be, legal or tax advice to any particular holder. Therefore,
      holders should consult their own tax advisors with respect to their particular
      circumstances.**




*Adjusted
      Cost Base of Shares*




The
      “adjusted cost base” of each Common Share of the Company owned by a holder at
      any particular time will be the average adjusted cost base to the holder of
      all
      common shares of the Company owned at that time.





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*Dividends*




Dividends
      received or deemed to be received on the Common Shares will be included in
      computing the holder’s income and will be subject to gross-up and dividend tax
      credit rules applicable to dividends paid by a taxable Canadian corporation.
      Taxable dividends received from a public corporation that is a taxable Canadian
      corporation which are designated by such corporation as “eligible dividends” in
      accordance with the Tax Act will be grossed-up by 45% and the tax credit will
      be
      11/18 of the grossed-up amount. Dividends which are not designated as “eligible
      dividends” will be grossed-up by 25% and the dividend tax credit will be 2/3 of
      the gross-up amount. Dividends received by a corporation on the Common Shares
      must be included in computing its income but generally will be deductible in
      computing its taxable income. Private corporations (as defined in the Tax Act)
      and certain other corporations controlled by or for the benefit of an individual
      (other than a trust) or related group of individuals (other than trusts)
      generally will be liable to pay a 33 1/3% refundable tax under Part IV of the
      Tax Act on dividends to the extent such dividends are deductible in computing
      the corporation’s taxable income. This refundable tax generally will be refunded
      to a corporate holder at the rate of $1 for every $3 of taxable dividends paid
      while it is a private corporation.




*Capital
      Gains or Capital Losses*




Upon
      a
      disposition (or a deemed disposition) of a common share of the Company, a holder
      generally will realize a capital gain (or a capital loss) equal to the amount
      by
      which the proceeds of disposition of such share, net of any reasonable costs
      of
      disposition, are greater (or are less) than the adjusted cost base of such
      share
      to the holder. One-half of any capital gain will be included in income as a
      taxable capital gain. One-half of any capital loss may generally be deducted
      as
      an allowable capital loss against taxable capital gains realized in the year
      of
      disposition, any of the three preceding taxation years or any subsequent
      taxation year, subject to detailed provisions of the Tax Act. The amount of
      any
      capital loss realized on the disposition or deemed disposition of common shares
      by a holder that is a corporation may be reduced by the amount of dividends
      received or deemed to have been received by it on such shares or shares
      substituted for such shares to the extent and in the circumstances prescribed
      by
      the Tax Act. Similar rules may apply where a holder is a corporation that is
      a
      member of a partnership or beneficiary of a trust that owns such shares or
      that
      is itself a member of a partnership or a beneficiary of a trust that owns such
      shares. A holder that is throughout the relevant taxation year a
“Canadian-controlled private corporation” (as defined in the Tax Act) also may
      be liable to pay an additional refundable tax of 6 2/3% on its “aggregate
      investment income” for the year which will include taxable capital gains. This
      refundable tax generally will be refunded to a corporate holder at the rate
      of
      $1 for every $3 of taxable dividends paid while it is a private corporation.




*Minimum
      Tax on Individuals*




The
      Tax
      Act provides for an alternative minimum income tax applicable to individuals
      (including certain trusts and estates) resident in Canada, which is computed
      by
      reference to an adjusted taxable income amount under which certain items are
      not
      deductible or exempt. In calculating adjusted taxable income for the purpose
      of
      determining the minimum tax liability, eighty percent of capital gains (net
      of
      capital losses) and the actual amount of taxable dividends (not including any
      gross-up or dividend tax credit) is included in the adjusted taxable income.
      Any
      additional tax payable by an individual under the minimum tax provisions may
      be
      carried forward and applied against certain tax otherwise payable in any of
      the
      seven immediately following taxation years; however, this carry-forward amount
      will only be creditable in a particular year to the extent that the individual’s
      tax payable for the year, calculated without reference to the minimum tax
      provisions, exceeds the tax payable under the minimum tax provisions for the
      year.




**F**
            **Certain
                US Federal Income Tax
                Considerations**




The
      following is a summary of certain material US federal income tax consequences
      to
      a US Holder (as defined below) arising from and relating to the acquisition,
      ownership, and disposition of our common shares of the Company.





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This
      summary is for general information purposes only and does not purport to be
      a
      complete analysis or listing of all potential US federal income tax consequences
      that may apply to a US Holder as a result of the acquisition, ownership, and
      disposition of our common shares. In addition, this summary does not take into
      account the individual facts and circumstances of any particular US Holder
      that
      may affect the US federal income tax consequences of the acquisition, ownership,
      and disposition of our common shares. Accordingly, this summary is not intended
      to be, and should not be construed as, legal or US federal income tax advice
      with respect to any US Holder. Each US Holder should consult its own tax advisor
      regarding the US federal income, US state and local, and foreign tax
      consequences of the acquisition, ownership, and disposition of our common
      shares.




***Scope
      of this Summary***




*Authorities*




This
      summary is based on the Internal Revenue Code of 1986, as amended (the “Code”),
      Treasury Regulations (whether final, temporary, or proposed), published rulings
      of the Internal Revenue Service (the “IRS”), published administrative positions
      of the IRS, the Convention Between Canada and the United States of America
      with
      Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended
      (the “Canada-US Tax Convention”), and US court decisions that are applicable
      and, in each case, as in effect and available, as of the date of this Annual
      Report. Any of the authorities on which this summary is based could be changed
      in a material and adverse manner at any time, and any such change could be
      applied on a retroactive basis. This summary does not discuss the potential
      effects, whether adverse or beneficial, of any proposed legislation that, if
      enacted, could be applied on a retroactive basis.




*US
      Holders*




For
      purposes of this summary, a “US Holder” is a beneficial owner of our common
      shares that, for US federal income tax purposes, is (a) an individual who
      is a citizen or resident of the US, (b) a corporation, or any other entity
      classified as a corporation for US federal income tax purposes, that is created
      or organized in or under the laws of the US, any state in the US, or the
      District of Columbia, (c) an estate if the income of such estate is subject
      to US federal income tax regardless of the source of such income, or (d) a
      trust if (i) such trust has validly elected to be treated as a US person
      for US federal income tax purposes or (ii) a US court is able to exercise
      primary supervision over the administration of such trust and one or more US
      persons have the authority to control all substantial decisions of such
      trust.




*Non-US
      Holders*




For
      purposes of this summary, a “non-US Holder” is a beneficial owner of our common
      shares other than a US Holder. This summary does not address the US federal
      income tax consequences of the acquisition, ownership, and disposition of our
      common shares to non-US Holders. Accordingly, a non-US Holder should consult
      its
      own tax advisor regarding the US federal income, US state and local, and foreign
      tax consequences (including the potential application of and operation of any
      income tax treaties) of the acquisition, ownership, and disposition of our
      common shares.




*US
      Holders Subject to Special US Federal Income Tax Rules Not
      Addressed*




This
      summary does not address the US federal income tax consequences of the
      acquisition, ownership, and disposition of our common shares to US Holders
      that
      are subject to special provisions under the Code, including the following US
      Holders: (a) US Holders that are tax-exempt organizations, qualified
      retirement plans, individual retirement accounts, or other tax-deferred
      accounts; (b) US Holders that are financial institutions, insurance
      companies, real estate investment trusts, or regulated investment companies;
      (c) US Holders that are dealers in securities or currencies or US Holders
      that are traders in securities that elect to apply a mark-to-market accounting
      method; (d) US Holders that have a “functional currency” other than the US
      dollar; (e) US Holders that are liable for the alternative minimum tax
      under the Code; (f) US Holders that own common shares as part of a
      straddle, hedging transaction, conversion transaction, constructive sale, or
      other arrangement involving more than one position; (g) US Holders that
      acquired common shares in connection with the exercise of employee stock options
      or otherwise as compensation for services; (h) US Holders that hold common
      shares other than as a capital asset within the meaning of Section 1221 of
      the Code; or (i) US Holders that own (directly, indirectly, or
      constructively) 10% or more of the total combined voting power of all classes
      of
      shares of the Company entitled to vote. US Holders that are subject to special
      provisions under the Code, including US Holders described immediately above,
      should consult their own tax advisors regarding the US federal income tax
      consequences of the acquisition, ownership, and disposition of our common
      shares.





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If
      an
      entity that is classified as a partnership for US federal income tax purposes
      holds common shares, the US federal income tax consequences of the acquisition,
      ownership, and disposition of our common shares to such partnership and the
      partners of such partnership generally will depend on the activities of the
      partnership and the status of such partners. Partners of entities that are
      classified as partnerships for US federal income tax purposes should consult
      their own tax advisors regarding the US federal income tax consequences of
      the
      acquisition, ownership, and disposition of our common shares.




*Tax
      Consequences Other than US Federal Income Tax Consequences Not
      Addressed*




This
      summary does not address the US state and local, US federal estate and gift,
      or
      foreign tax consequences to US Holders of the acquisition, ownership, and
      disposition of our common shares. Each US Holder should consult its own tax
      advisor regarding the US state and local, US federal estate and gift, and
      foreign tax consequences of the acquisition, ownership, and disposition of
      our
      common shares.




***US
      Federal Income Tax Consequences*** ***of
      the Acquisition, Ownership, and Disposition of Our Common
      Shares***




*Distributions
      on Common Shares*




Subject
      to the “passive foreign investment company” rules discussed below, a US Holder
      that receives a distribution, including a constructive distribution, with
      respect to our common shares will be required to include the amount of such
      distribution in gross income as a dividend (without reduction for any Canadian
      income tax withheld from such distribution) to the extent of the current or
      accumulated “earnings and profits” of the Company. To the extent that a
      distribution exceeds the current and accumulated “earnings and profits” of the
      Company, such distribution will be treated (a) first, as a tax-free return
      of capital to the extent of a US Holder’s tax basis in our common shares and,
      (b) thereafter, as gain from the sale or exchange of such common shares.
      (See “Disposition of our common shares” below).




*Reduced
      Tax Rates for Certain Dividends*




For
      taxable years beginning or before January 1, 2011, a dividend paid by the
      Company generally will be taxed at the preferential tax rates applicable to
      long-term capital gains if (a) the Company is a “qualified foreign
      corporation” (as defined below), (b) the US Holder receiving such dividend
      is an individual, estate, or trust, and (c) such dividend is paid on common
      shares that have been held by such US Holder for at least 61 days during the
      121-day period beginning 60 days before the “ex-dividend date.”




The
      Company generally will be a “qualified foreign corporation” under
      Section 1(h)(11) of the Code (a “QFC”) if (a) the Company is eligible
      for the benefits of the Canada-US Tax Convention, or (b) our common shares
      are readily tradable on an established securities market in the US However,
      even
      if the Company satisfies one or more of such requirements, the Company will
      not
      be treated as a QFC if the Company is a “passive foreign investment company” (or
“PFIC,” as defined below) for the taxable year during which the Company pays a
      dividend or for the preceding taxable year.




As
      discussed below, the Company may have been a “PFIC” for one or more prior
      taxable years, and based on current business plans and financial projections,
      the Company expects that it will be a PFIC for the current taxable year. (See
      “Passive Foreign Investment Company Rules” below). Accordingly, the Company does
      not expect to be a QFC for the current taxable year.




If
      a US
      Holder fails to qualify for the preferential dividend rate discussed above,
      subject to the PFIC rules discussed below, a dividend paid by the Company to
      a
      US Holder, including a US Holder that is an individual, estate, or trust,
      generally will be taxed at ordinary income tax rates (and not at the
      preferential tax rates applicable to long-term capital gains). The dividend
      rules are complex, and each US Holder should consult its own tax advisor
      regarding the dividend rules.





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*Distributions
      Paid in Foreign Currency*




The
      amount of a distribution received on our common shares in foreign currency
      generally will be equal to the US dollar value of such distribution based on
      the
      exchange rate applicable on the date of receipt. A US Holder that does not
      convert foreign currency received as a distribution into US dollars on the
      date
      of receipt generally will have a tax basis in such foreign currency equal to
      the
      US dollar value of such foreign currency on the date of receipt. Such a US
      Holder generally will recognize ordinary income or loss on the subsequent sale
      or other taxable disposition of such foreign currency (including an exchange
      for
      US dollars).




*Dividends
      Received Deduction*




Dividends
      received on our common shares generally will not be eligible for the “dividends
      received deduction.” The availability of the dividends received deduction is
      subject to complex limitations that are beyond the scope of this summary, and
      a
      US Holder that is a corporation should consult its own tax advisor regarding
      the
      dividends received deduction.




*Disposition
      of Common Shares*




A
      US
      Holder will recognize gain or loss on the sale or other taxable disposition
      of
      our common shares in an amount equal to the difference, if any, between
      (a) the amount of cash plus the fair market value of any property received
      and (b) such US Holder’s adjusted tax basis in our common shares sold or
      otherwise disposed of. Subject to the “passive foreign investment company” rules
      discussed below, any such gain or loss generally will be capital gain or loss,
      which will be long-term capital gain or loss if our common shares are held
      for
      more than one year.




Preferential
      tax rates apply to long-term capital gains of a US Holder that is an individual,
      estate, or trust. There are currently no preferential tax rates for long-term
      capital gains of a US Holder that is a corporation. Deductions for capital
      losses are subject to significant limitations under the Code.




*Foreign
      Tax Credit*




A
      US
      Holder that pays (whether directly or through withholding) Canadian income
      tax
      with respect to dividends received on our common shares generally will be
      entitled, at the election of such US Holder, to receive either a deduction
      or a
      credit for such Canadian income tax paid. Generally, a credit will reduce a
      US
      Holder’s US federal income tax liability on a dollar-for-dollar basis, whereas a
      deduction will reduce a US Holder’s income subject to US federal income tax.
      This election is made on a year-by-year basis and applies to all foreign taxes
      paid (whether directly or through withholding) by a US Holder during a taxable
      year.




Complex
      limitations apply to the foreign tax credit, including the general limitation
      that the credit cannot exceed the proportionate share of a US Holder’s US
      federal income tax liability that such US Holder’s “foreign source” taxable
      income bears to such US Holder’s worldwide taxable income. In applying this
      limitation, a US Holder’s various items of income and deduction must be
      classified, under complex rules, as either “foreign source” or “US source.” In
      addition, this limitation is calculated separately with respect to specific
      categories of income. Gain or loss recognized by a US Holder on the sale or
      other taxable disposition of our common shares generally will be treated as
“US
      source” for purposes of applying the foreign tax credit rules, unless such gain
      is resourced under an applicable provision of the Canada-US Tax Convention
      and
      an election is made under the Code. Dividends received on our common shares
      generally will be treated as “foreign source” and generally will be categorized
      as “passive income.” The foreign tax credit rules are complex, and each US
      Holder should consult its own tax advisor regarding the foreign tax credit
      rules.





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*Information
      Reporting; Backup Withholding Tax*




Payments
      made within the US, or by a US payor or US middleman, of dividends on, or
      proceeds arising from the sale or other taxable disposition of, common shares
      generally will be subject to information reporting and backup withholding tax,
      at the rate of 28%, if a US Holder (a) fails to furnish such US Holder’s
      correct US taxpayer identification number (generally on Form W-9),
      (b) furnishes an incorrect US taxpayer identification number, (c) is
      notified by the IRS that such US Holder has previously failed to properly report
      items subject to backup withholding tax, or (d) fails to certify, under
      penalty of perjury, that such US Holder has furnished its correct US taxpayer
      identification number and that the IRS has not notified such US Holder that
      it
      is subject to backup withholding tax. However, US Holders that are corporations
      generally are excluded from these information reporting and backup withholding
      tax rules. Any amounts withheld under the US backup withholding tax rules will
      be allowed as a credit against a US Holder’s US federal income tax liability, if
      any, or will be refunded, if such US Holder furnishes required information
      to
      the IRS. Each US Holder should consult its own tax advisor regarding the
      information reporting and backup withholding tax rules.




***Passive
      Foreign Investment Company Rules***




The
      Company generally will be a “passive foreign investment company” under
      Section 1297(a) of the Code (a “PFIC”) if, for a taxable year, (a) 75%
      or more of the gross income of the Company for such taxable year is passive
      income or (b) on average, 50% or more of the assets held by the Company
      either produce passive income or are held for the production of passive income,
      based on the fair market value of such assets (or on the adjusted tax basis
      of
      such assets, if the Company is not publicly traded and either is a “controlled
      foreign corporation” or makes an election). “Gross income” means, generally,
      sales revenues less the cost of goods sold. “Passive income” includes, for
      example, dividends, interest, certain rents and royalties, certain gains from
      the sale of stock and securities, and certain gains from commodities
      transactions.




For
      purposes of the PFIC income test and asset test described above, if the Company
      owns, directly or indirectly, 25% or more of the total value of the outstanding
      shares of another foreign corporation, the Company will be treated as if it
      (a) held a proportionate share of the assets of such other foreign
      corporation and (b) received directly a proportionate share of the income
      of such other foreign corporation. In addition, for purposes of the PFIC income
      test and asset test described above, “passive income” does not include any
      interest, dividends, rents, or royalties that are received or accrued by the
      Company from a “related person” (as defined in Section 954(d)(3) of the
      Code), to the extent such items are properly allocable to the income of such
      related person that is not passive income.




The
      Company may have been a PFIC for one or more prior taxable years, and based
      on
      current business plans and financial projections, the Company expects that
      it
      will be a PFIC for the current taxable year. The determination of whether the
      Company was, or will be, a PFIC for a taxable year depends, in part, on the
      application of complex US federal income tax rules, which are subject to various
      interpretations. In addition, whether the Company will be a PFIC for the current
      taxable year ending depends on the assets and income of the Company over the
      course of each such taxable year and, as a result, cannot be predicted with
      certainty as of the date of this annual report. Accordingly, there can be no
      assurance that the IRS will not challenge the determination made by the Company
      concerning its PFIC status.




*Default
      PFIC Rules Under Section 1291 of the Code*




If
      the
      Company is a PFIC, the US federal income tax consequences to a US Holder of
      the
      acquisition, ownership, and disposition of our common shares will depend on
      whether such US Holder makes an election to treat the Company as a “qualified
      electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”)
      or a mark-to-market election under Section 1296 of the Code (a
“Mark-to-Market Election”). A US Holder that does not make either a QEF Election
      or a Mark-to-Market Election will be referred to in this summary as a
“Non-Electing US Holder.”




A
      Non-Electing US Holder will be subject to the rules of Section 1291 of the
      Code with respect to (a) any gain recognized on the sale or other taxable
      disposition of our common shares and (b) any excess distribution received
      on our common shares. A distribution generally will be an “excess distribution”
to the extent that such distribution (together with all other distributions
      received in the current taxable year) exceeds 125% of the average distributions
      received during the three preceding taxable years (or during a US Holder’s
      holding period for our common shares, if shorter).





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Under
      Section 1291 of the Code, any gain recognized on the sale or other taxable
      disposition of our common shares, and any excess distribution received on our
      common shares, must be ratably allocated to each day in a Non-Electing US
      Holder’s holding period for our common shares. The amount of any such gain or
      excess distribution allocated to prior years of such Non-Electing US Holder’s
      holding period for our common shares (other than years prior to the first
      taxable year of the Company beginning after December 31, 1986 for which the
      Company was not a PFIC) will be subject to US federal income tax at the highest
      tax rate applicable to ordinary income in each such prior year. A Non-Electing
      US Holder will be required to pay interest on the resulting tax liability for
      each such prior year, calculated as if such tax liability had been due in each
      such prior year. Such a Non-Electing US Holder that is not a corporation must
      treat any such interest paid as “personal interest,” which is not deductible.
      The amount of any such gain or excess distribution allocated to the current
      year
      of such Non-Electing US Holder’s holding period for our common shares will be
      treated as ordinary income in the current year, and no interest charge will
      be
      incurred with respect to the resulting tax liability for the current
      year.




If
      the
      Company is a PFIC for any taxable year during which a Non-Electing US Holder
      holds our common shares, the Company will continue to be treated as a PFIC
      with
      respect to such Non-Electing US Holder, regardless of whether the Company ceases
      to be a PFIC in one or more subsequent taxable years. A Non-Electing US Holder
      may terminate this deemed PFIC status by electing to recognize gain (which
      will
      be taxed under the rules of Section 1291 of the Code discussed above) as if
      such common shares were sold on the last day of the last taxable year for which
      the Company was a PFIC.




In
      addition, if the Company is a PFIC and owns shares of another foreign
      corporation that also is a PFIC (a “Subsidiary PFIC”), under certain indirect
      ownership rules, a disposition by the Company of the shares of such Subsidiary
      PFIC or a distribution received by the Company from such Subsidiary PFIC
      generally will be treated as an indirect disposition by a US Holder or an
      indirect distribution received by a US Holder, subject to the rules of Section
      1291 of the Code discussed above. To the extent that gain recognized on the
      actual disposition by a US Holder of our common shares or income recognized
      by a
      US Holder on an actual distribution received on our common shares was previously
      subject to US federal income tax under these indirect ownership rules, such
      amount generally should not be subject to US federal income tax.




*QEF
      Election*




The
      procedure for making a QEF Election, and the US federal income tax consequences
      of making a QEF Election, will depend on whether such QEF Election is timely.
      A
      QEF Election generally will be “timely” if it is made for the first year in a US
      Holder’s holding period for our common shares in which the Company is a PFIC. In
      this case, a US Holder may make a timely QEF Election by filing the appropriate
      QEF Election documents with such US Holder’s US federal income tax return for
      such first year. However, if the Company was a PFIC in a prior year in a US
      Holder’s holding period for our common shares, then in order to be treated as
      making a “timely” QEF Election, such US Holder must elect to recognize gain
      (which will be taxed under the rules of Section 1291 of the Code discussed
      above) as if our common shares were sold on the qualification date for an amount
      equal to the fair market value of our common shares on the qualification date.
      The “qualification date” is the first day of the first taxable year in which the
      Company was a QEF with respect to such US Holder. In addition, under very
      limited circumstances, a US Holder may make a retroactive QEF Election if such
      US Holder failed to file the QEF Election documents in a timely
      manner.




A
      QEF
      Election will apply to the taxable year for which such QEF Election is made
      and
      to all subsequent taxable years, unless such QEF Election is invalidated or
      terminated or the IRS consents to revocation of such QEF Election. If a US
      Holder makes a QEF Election and, in a subsequent taxable year, the Company
      ceases to be a PFIC, the QEF Election will remain in effect (although it will
      not be applicable) during those taxable years in which the Company is not a
      PFIC. Accordingly, if the Company becomes a PFIC in another subsequent taxable
      year, the QEF Election will be effective and the US Holder will be subject
      to
      the QEF rules described above during any such subsequent taxable year in which
      the Company qualifies as a PFIC. In addition, the QEF Election will remain
      in
      effect (although it will not be applicable) with respect to a US Holder even
      after such US Holder disposes of all of such US Holder’s direct and indirect
      interest in our common shares. Accordingly, if such US Holder reacquires an
      interest in the Company, such US Holder will be subject to the QEF rules
      described above for each taxable year in which the Company is a
      PFIC.





-
            79
            -




A
      US
      Holder that makes a timely QEF Election generally will not be subject to the
      rules of Section 1291 of the Code discussed above. For example, a US Holder
      that makes a timely QEF Election generally will recognize capital gain or loss
      on the sale or other taxable disposition of our common shares.




However,
      for each taxable year in which the Company is a PFIC, a US Holder that makes
      a
      QEF Election will be subject to US federal income tax on such US Holder’s pro
      rata share of (a) the net capital gain of the Company, which will be taxed
      as long-term capital gain to such US Holder, and (b) and the ordinary
      earnings of the Company, which will be taxed as ordinary income to such US
      Holder. Generally, “net capital gain” is the excess of (a) net long-term
      capital gain over (b) net short-term capital loss, and “ordinary earnings”
are the excess of (a) “earnings and profits” over (b) net capital
      gain. A US Holder that makes a QEF Election will be subject to US federal income
      tax on such amounts for each taxable year in which the Company is a PFIC,
      regardless of whether such amounts are actually distributed to such US Holder
      by
      the Company. However, a US Holder that makes a QEF Election may, subject to
      certain limitations, elect to defer payment of current US federal income tax
      on
      such amounts, subject to an interest charge. If such US Holder is not a
      corporation, any such interest paid will be treated as “personal interest,”
which is not deductible.




A
      US
      Holder that makes a QEF Election generally (a) may receive a tax-free
      distribution from the Company to the extent that such distribution represents
      “earnings and profits” of the Company that were previously included in income by
      the US Holder because of such QEF Election and (b) will adjust such US
      Holder’s tax basis in our common shares to reflect the amount included in income
      or allowed as a tax-free distribution because of such QEF Election.




US
      Holders should be aware that there can be no assurances that the Company will
      satisfy the record keeping requirements that apply to a QEF, or that the Company
      will supply US Holders with the information that such US Holders require to
      report under the QEF rules, in the event that the Company is a PFIC and a US
      Holder wishes to make a QEF Election. Each US Holder should consult its own
      tax
      advisor regarding the availability of, and procedure for making, a QEF
      Election.




*Mark-to-Market
      Election*




A
      US
      Holder may make a Mark-to-Market Election only if our common shares are
      marketable stock. Our common shares generally will be “marketable stock” if our
      common shares are regularly traded on a qualified exchange or other market.
      For
      this purpose, a “qualified exchange or other market” includes (a) a
      national securities exchange that is registered with the Securities and Exchange
      Commission, (b) the national market system established pursuant to section
      11A of the Securities and Exchange Act of 1934, or (c) a foreign securities
      exchange that is regulated or supervised by a governmental authority of the
      country in which the market is located, provided that (i) such foreign
      exchange has trading volume, listing, financial disclosure, surveillance, and
      other requirements designed to prevent fraudulent and manipulative acts and
      practices, remove impediments to and perfect the mechanism of a free, open,
      fair, and orderly market, and protect investors (and the laws of the country
      in
      which the foreign exchange is located and the rules of the foreign exchange
      ensure that such requirements are actually enforced) and (ii) the rules of
      such foreign exchange effectively promote active trading of listed stocks.
      If
      our common shares are traded on such a qualified exchange or other market,
      our
      common shares generally will be “regularly traded” for any calendar year during
      which our common shares are traded, other than in de minimis quantities, on
      at
      least 15 days during each calendar quarter.




A
      Mark-to-Market Election applies to the taxable year in which such Mark-to-Market
      Election is made and to each subsequent taxable year, unless our common shares
      cease to be “marketable stock” or the IRS consents to revocation of such
      election. Each US Holder should consult its own tax advisor regarding the
      availability of, and procedure for making, a Mark-to-Market
      Election.




-
            80
            -





A
      US
      Holder that makes a Mark-to-Market Election generally will not be subject to
      the
      rules of Section 1291 of the Code discussed above. However, if a US Holder
      makes a Mark-to-Market Election after the beginning of such US Holder’s holding
      period for our common shares and such US Holder has not made a timely QEF
      Election, the rules of Section 1291 of the Code discussed above will apply
      to certain dispositions of, and distributions on, our common
      shares.




A
      US
      Holder that makes a Mark-to-Market Election will include in ordinary income,
      for
      each taxable year in which the Company is a PFIC, an amount equal to the excess,
      if any, of (a) the fair market value of our common shares as of the close
      of such taxable year over (b) such US Holder’s adjusted tax basis in such
      common shares. A US Holder that makes a Mark-to-Market Election will be allowed
      a deduction in an amount equal to the lesser of (a) the excess, if any, of
      (i) such US Holder’s adjusted tax basis in our common shares over
      (ii) the fair market value of such common shares as of the close of such
      taxable year or (b) the excess, if any, of (i) the amount included in
      ordinary income because of such Mark-to-Market Election for prior taxable years
      over (ii) the amount allowed as a deduction because of such Mark-to-Market
      Election for prior taxable years.




A
      US
      Holder that makes a Mark-to-Market Election generally will adjust such US
      Holder’s tax basis in our common shares to reflect the amount included in gross
      income or allowed as a deduction because of such Mark-to-Market Election. In
      addition, upon a sale or other taxable disposition of our common shares, a
      US
      Holder that makes a Mark-to-Market Election will recognize ordinary income
      or
      loss (not to exceed the excess, if any, of (a) the amount included in
      ordinary income because of such Mark-to-Market Election for prior taxable years
      over (b) the amount allowed as a deduction because of such Mark-to-Market
      Election for prior taxable years).




*Other
      PFIC Rules*




Under
      Section 1291(f) of the Code, the IRS has issued proposed Treasury
      Regulations that, subject to certain exceptions, would cause a US Holder that
      had not made a timely QEF Election to recognize gain (but not loss) upon certain
      transfers of our common shares that would otherwise be tax-deferred (such as
      gifts and exchanges pursuant to tax-deferred reorganizations under Section
      368
      of the Code). However, the specific US federal income tax consequences to a
      US
      Holder may vary based on the manner in which common shares are
      transferred.




Certain
      additional adverse rules will apply with respect to a US Holder if the Company
      is a PFIC, regardless of whether such US Holder makes a QEF Election. For
      example under Section 1298(b)(6) of the Code, a US Holder that uses common
      shares as security for a loan will, except as may be provided in Treasury
      Regulations, be treated as having made a taxable disposition of such common
      shares.




The
      PFIC
      rules are complex, and each US Holder should consult its own tax advisor
      regarding the PFIC rules and how the PFIC rules may affect the US federal income
      tax consequences of the acquisition, ownership, and disposition of our common
      shares.




**G**
            **Dividends
                and Paying Agents**




***Dividends***




We
      have
      not paid any dividends since its incorporation. We will consider paying
      dividends in future as our operational circumstances may permit having regard
      to, among other things, our earnings, cash flow and financial requirements.
      It
      is the current policy of our Board of Directors to retain all earnings to
      finance our business plan.




**H**
            **Statements
                by Experts******




Not
      applicable.




**I**
            **Documents
                on Display**




We
      are
      subject to the informational requirements of the Exchange Act and file reports
      and other information with the SEC. You may read and copy any of our reports
      and
      other information at, and obtain copies upon payment of prescribed fees from,
      the Public Reference Room maintained by the SEC at 100 F Street, N.E.,
      Washington, D.C. 20549. In addition, the SEC maintains a Web site that contains
      reports, proxy and information statements and other information regarding
      registrants that file electronically with the SEC at http://www.sec.gov. The
      public may obtain information on the operation of the Public Reference Room
      by
      calling the SEC at 1-800-SEC-0330.




-
            81
            -





We
      are
      required to file reports and other information with the securities commissions
      in all provinces of Canada. You are
      invited to read and copy any reports, statements or other information, other
      than confidential filings, that we file with the provincial securities
      commissions. These filings are also electronically available from the Canadian
      System for Electronic Document Analysis and Retrieval (“SEDAR”)
      (http://www.sedar.com), the Canadian equivalent of the SEC’s electronic document
      gathering and retrieval system.




We
      “incorporate by reference” information that we file with the SEC, which means
      that we can disclose important information to you by referring you to those
      documents. The information incorporated by reference is an important part of
      this Form 20-F and more recent information automatically updates and supersedes
      more dated information contained or incorporated by reference in this Form
      20-F.




As
      a
      foreign private issuer, we are exempt from the rules under the Exchange Act
      prescribing the furnishing and content of proxy statements to
      shareholders.




We
      will
      provide without charge to each person, including any beneficial owner, to whom
      a
      copy of this Annual Report has been delivered, on the written or oral request
      of
      such person, a copy of any or all documents referred to above which have been
      or
      may be incorporated by reference in this Annual Report (not including exhibits
      to such incorporated information that are not specifically incorporated by
      reference into such information). Requests for such copies should be directed
      to
      us at the following address: YM Biosciences, 5045 Orbiter Drive, Suite 400,
      Building 11, Mississauga, Ontario, Canada, L4W 4Y4, Attention: Secretary.
      Telephone: (905) 629-9761. Facsimile (905) 629-4959 EMAIL:
      ir@ymbiosciences.com.




**J**
            **Subsidiary
                Information**




Our
      subsidiaries are detailed under Item 4.C, “Organizational
      Structure”.




**Item
                11:**
            **Quantitative
                and Qualitative Disclosures About Market
                Risk**




Information
      relating to quantitative and qualitative disclosures about market risk is
      detailed in Item *5.*




**Item
                12:**
            **Description
                of Securities Other Than Equity
                Securities**




**A**
            **Debt
                Securities**




Not
      applicable.




**B**
            **Warrants
                and Rights**




On
      December 15, 2003 the Company issued 5,129,919 warrants at an exercise price
      of
      $2.50 and 562,346 warrants at an exercise price of $1.75. The warrants expire
      on
      December 15, 2008.




On
      February 7, 2006 the Company issued 17,500 warrants at an exercise price of
      $4.42. The warrants expire on February 7, 2009.




**C**
            **Other
                Securities**




Not
      applicable.




**D**
            **American
                Depository Shares**




Not
      applicable.





-
            82
            -




**PART
      II**




**Item
                13:**
            **Defaults,
                Dividend Arrearages and
                Delinquencies**




**Item
                14:**
            **Material
                Modification to the Rights of Security Holders and Use of
                Proceeds**




Not
      applicable.




**Item
                15:**
            **Controls
                and Procedures**




(a)
            Disclosure
                Controls and Procedures.
                As of the end of our fiscal year ended June 30, 2008, an evaluation
                of the
                effectiveness of our “disclosure controls and procedures” (as such term is
                defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange
                Act of
                1934, as amended (the “Exchange Act”)) was carried out by our management
                with the participation of the principal executive officer and principal
                financial officer. Based upon that evaluation, our principal executive
                officer and principal financial officer have concluded that as of
                the end
                of that fiscal year, our disclosure controls and procedures are effective
                to ensure that information required to be disclosed by us in reports
                that
                we file or submit under the Exchange Act is (i) recorded, processed,
                summarized and reported within the time periods specified in SEC
                rules and
                forms and (ii) accumulated and communicated to our management, including
                our principal executive officer and principal financial officer,
                to allow
                timely decisions regarding required
                disclosure.




It
      should
      be noted that while our principal executive officer and principal financial
      officer believe that our disclosure controls and procedures provide a reasonable
      level of assurance that they are effective, they do not expect that our
      disclosure controls and procedures or internal control over financial reporting
      will prevent all errors and fraud. A control system, no matter how well
      conceived or operated, can provide only reasonable, not absolute, assurance
      that
      the objectives of the control system are met.




(b)
            Management’s
                Report on Internal Control Over Financial Reporting.




The
      management of YM is responsible for establishing and maintaining adequate
      internal control over financial reporting (“ICFR”), as such term is defined in
      Exchange Act Rules 13a-15(f). ICFR includes those policies and procedures that
      (i) pertain to the maintenance of records that in reasonable detail
      accurately and fairly reflect the transactions and dispositions of the assets
      of
      the company; (ii) provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that our receipts
      and expenditures are being made only in accordance with the authorizations
      of
      our management and our directors; and (iii) provide reasonable assurance
      regarding prevention or timely detection of unauthorized acquisition, use or
      disposition of our assets that could have a material effect on our financial
      statements. Because of its inherent limitations, ICFR may not prevent or detect
      misstatements.




Our
      management team assessed ICFR as of June 30, 2008 using the criteria established
      in the Internal Control - Integrated Framework issued by the Committee of
      Sponsoring Organizations of the Treadway Commission (“COSO”). In management’s
      opinion our ICFR is effective, based on the assessment completed as at June
      30,
      2008.




KPMG
      LLP,
      an independent public accounting firm registered with the PCAOB, has issued
      a
      report on the effectiveness of our ICFR, which is included with our consolidated
      financial statements appearing beginning on page F-4 of this Annual Report
      on
      Form 20-F.




(c)
            Changes
                in Internal Control Over Financial Reporting.
                During the fiscal year ended June 30, 2008, there were no changes
                in our
                internal control over financial reporting that have materially affected,
                or are reasonably likely to materially affect, our internal control
                over
                financial reporting.




-
            83
            -




**Item 16A:**
            **Audit
                Committee Financial Expert**




Our
      Board
      of Directors has determined that Tryon M. Williams, a member of the Company’s
      audit committee, qualifies as an “audit committee financial expert” 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 satisfies
      the specified criteria for being “independent” under the rules of the American
      Stock Exchange.




**Item 16B:**
            **Code
                of Ethics**




On
      October 19, 2004, we adopted a Code of Ethics that applies to our principal
      executive officer, principal financial officer, principal accounting officer
      or
      controller, and persons performing similar functions. The Company undertakes
      to
      provide to any person, without charge, upon request, a copy of the Code of
      Ethics. Requests for such copies should be directed, either orally or in
      writing, to: Secretary, Suite 400, Building 11, 5045 Orbitor Drive, Mississauga,
      Ontario, Canada L4W 4Y4, phone number (905) 629-9761.




Since
      the
      adoption of the Code of Ethics, there have not been any amendments to the Code
      of Ethics or waivers, including implicit waivers, from any provision of the
      Code
      of Ethics.




**Item 16C:**
            **Principal
                Accounting Fees and
                Services**




During
      the years ended June 30, 2007 and 2008, the following are the fees from our
      external auditors:




**Fees
                Billed****Service**
            
            **2007**
            
            **2008**Audit
                Fees
            
            $
            260,000
            
            $
            352,500Audit
                Related Fees
            
            
            —
            
            
            —Tax
                Fees
            
            $
            82,200
            
            $
            49,500All
                Other Fees
            
            
            —
            
            
            —**Total
                Fees Billed**
            
            **$**
            **342,200**
            
            **$**
            **402,000**




Audit
      fees consist of fees for the audit of the registrant’s annual financial
      statements or services that are normally provided in connection with statutory
      and regulatory filings or engagements.




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




None
      of
      the services provided by the external auditors during the years ended June
      30,
      2007 and 2008 were provided pursuant to a de minimis exemption from the SEC’s
      pre-approval rules.




***Pre-Approval
      Policies and Procedures***




The
      audit
      committee of the Company’s board of directors has adopted a policy regarding the
      provision of services by the Company’s external auditors. This policy requires
      audit committee pre-approval of all permitted audit, audit-related and non-audit
      services.




Under
      the
      policy, all permitted services to be provided by the 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.





-
            84
            -




Of
      the
      fees reported under “Principal Accounting Fees and Services” above, none of the
      fees billed by the external auditors were approved by the audit committee of
      the
      board of directors of the Company pursuant to the de minimis exception provided
      by Section (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.




**Item 16D:**
            **Exemptions
                from the Listing Standards for Audit
                Committee**




Not
      applicable.




**Item 16E:**
            **Purchases
                of Equity Securities by the Issuer and Affiliated
                Purchases**




Not
      applicable.





-
            85
            -




**PART
      III**




**Item
                17:**
            **Financial
                Statements**




We
      have
      elected to provide financial statements pursuant to Item 18.




**Item
                18:**
            **Financial
                Statements**




The
      financial statements appear on pages F-1 through F-44.




**Item
                19:**
            **Exhibits**




See
      the
      Exhibit Index to this annual report on Form 20-F appearing on page
      EX-1.




**SIGNATURES**




The
      registrant hereby certifies that it meets all of the requirements for filing
      on
      Form 20-F and that it has duly caused and authorized the undersigned to sign
      this annual report on its behalf.




Date:  September
      22, 2008




YM
                BIOSCIENCES INC.By:
            *"David
                G.P. Allan”*David
                G. P. AllanChairman
                and Chief Executive Officer





-
            86
            -




**INDEX
      TO FINANCIAL STATEMENTS**




PageReport
                of Independent Registered Public Accounting Firm
            
            F-2Report
                of Independent Registered Public Accounting Firm on Internal Control
                Over
                Financial Reporting
            
            F-4Consolidated
                Balance Sheets as at June 30, 2008 and 2007
            
            F-6Consolidated
                Statements of Operations and Comprehensive Loss and Deficit for the
                years
                ended June 30, 2008, 2007 and 2006
            
            F-7Consolidated
                Statements of Cash Flows for the years ended June 30, 2008, 2007
                and
                2006
            
            F-8Notes
                to the Consolidated Financial Statements
            
            F-9





F-1









**KPMG
                LLP**
            Telephone
            (416)
                228-7000**Chartered
                Accountants**Fax
            (416)
                228-7123Yonge
                Corporate Centre Internet
            www.kpmg.ca4100
                Yonge Street Suite 200Toronto
                ON M2P 2H3Canada





**REPORT
      OF INDEPENDENT REGISTERED**


**PUBLIC
      ACCOUNTING FIRM**




To
      the
      Shareholders and Board of Directors of YM Biosciences Inc.




We
      have
      audited the accompanying consolidated balance sheets of YM Biosciences Inc.
      (the "Company") and subsidiaries as at June 30, 2008 and 2007 and the
      related consolidated statements of operations and comprehensive loss and deficit
      and cash flows for each of the years in the three-year period ended June 30,
      2008. These consolidated financial statements are the responsibility of the
      Company's management. Our responsibility is to express an opinion on these
      consolidated financial statements based on our audits.




We
      conducted our audits in accordance with Canadian generally accepted auditing
      standards. With respect to the consolidated financial statements for the year
      ended June 30, 2008, we also conducted our audit in accordance with the
      standards of the Public Company Accounting Oversight Board (United States).
      Canadian generally accepted auditing standards and the standards of the Public
      Company Accounting Oversight Board (United States) require that we plan and
      perform an audit to obtain reasonable assurance whether the financial statements
      are free of material misstatement. An audit includes examining, on a test basis,
      evidence supporting the amounts and disclosures in the financial statements.
      An
      audit also includes assessing the accounting principles used and significant
      estimates made by management, as well as evaluating the overall financial
      statement presentation. We believe that our audits provide a reasonable basis
      for our opinion.




In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of the Company and subsidiaries
      as at June 30, 2008 and 2007 and the results of their operations and their
      cash
      flows for each of the years in the three-year period ended June 30, 2008 in
      conformity with Canadian generally accepted accounting principles.




Canadian
      generally accepted accounting principles vary in certain significant respects
      from U.S. generally accepted accounting principles. Information relating to
      the
      nature and effect of such differences is presented in note 17 to the
      consolidated financial statements.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. As discussed in note 1 to the
      consolidated financial statements, the Company has no net earnings, minimal
      revenue and negative operating cash flows that raise substantial doubt about
      its
      ability to continue as a going concern. The consolidated financial statements
      do
      not include any adjustments that might result from the outcome of this
      uncertainty.





F-2




As
      discussed in note 2(p) to the consolidated financial statements, effective
      July
      1, 2007, the Company adopted The Canadian Institute of Chartered Accountants
      ("CICA") Handbook Section 1530, Comprehensive Income, Section 3251, Equity,
      Section 3855, Financial Instruments - Recognition and Measurement, and Section
      3865, Hedges. Effective June 30, 2008, the Company adopted CICA Handbook
      Section 1535, Capital Disclosures, Section 3862, Financial Instruments -
      Disclosures, and Section 3863, Financial Instruments -
      Presentation.




We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the Company's internal control over financial
      report as of June 30, 2008, based on the criteria established in Internal
      Control - Integrated Framework issued by the Committee of Sponsoring
      Organizations of the Treadway Commission (COSO) and our report dated
      September 15, 2008 expressed an unqualified opinion on the effectiveness of
      the Company's internal control over financial reporting.









Chartered
      Accountants, Licensed Public Accountants




Toronto,
      Canada




September
      15, 2008





F-3










**kpmg**LLP**Chartered
                Accountants**
            Telephone
                (416) 228-7000Yonge
                Corporate Centre
            Telefax
                (416) 228-71234100
                Yonge Street, Suite 200
            www.kpmg.caNorth
                York, ON M2P 2H3




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC**


**ACCOUNTING
      FIRM**




To
      the
      Shareholders and Board of Directors of YM BioSciences Inc.




We
      have
      audited YM BioSciences Inc. ("the Company")’s internal control over financial
      reporting as of June 30, 2008, based on the criteria established in Internal
      Control—Integrated Framework issued by the Committee of Sponsoring Organizations
      of the Treadway Commission (COSO). The Company's management is responsible
      for
      maintaining effective internal control over financial reporting and for its
      assessment of the effectiveness of internal control over financial reporting
      included in the accompanying Management’s Report on Internal Control Over
      Financial Reporting. Our responsibility is to express an opinion on the
      Company's internal control over financial reporting based on our
      audit.




We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, assessing the risk that a material weakness exists, and
      testing and evaluating the design and operating effectiveness of internal
      control based on the assessed risk. Our audit also included performing such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.




A
      company's internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company's internal control
      over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company's
      assets that could have a material effect on the financial statements.





F-4




Because
      of its inherent limitations, internal control over financial reporting may
      not
      prevent or detect misstatements. Also, projections of any evaluation of
      effectiveness to future periods are subject to the risk that controls may become
      inadequate because of changes in conditions, or that the degree of compliance
      with the policies or procedures may deteriorate.




In
      our
      opinion, the Company maintained, in all material respects, effective internal
      control over financial reporting as of June 30, 2008, based on the criteria
      established in Internal Control—Integrated Framework issued by the Committee of
      Sponsoring Organizations of the Treadway Commission (COSO).




We
      also
      have conducted our audits on the consolidated financial statements in accordance
      with Canadian generally accepted auditing standards. With respect to the
      consolidated financial statements for the year ended June 30, 2008, we also
      have
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Our report dated September 15,
      2008,
      expressed an unqualified opinion on those ** consolidated ** financial
      statements.









Chartered
      Accountants, Licensed Public Accountants




Toronto,
      Canada




September
      15, 2008





F-5




**YM
      BIOSCIENCES INC.**


Consolidated
      Balance Sheets


(Amounts
      in Canadian dollars, unless otherwise noted)





June
      30,
      2008 and 2007







2008
            
            2007AssetsCurrent
                assets:Cash
                and cash equivalents (note 4)
            
            $
            3,119,189
            
            $
            5,847,351Short-term
                deposits (note 4)
            
            
            54,981,737
            
            
            69,724,438Accounts
                receivable
            
            
            403,371
            
            
            370,011Prepaid
                expenses
            
            
            375,133
            
            
            347,01058,879,430
            
            
            76,288,810Property
                and equipment (note 5)
            
            
            128,400
            
            
            325,040Intangible
                assets (note 6)
            
            
            4,065,409
            
            
            5,125,950$
            63,073,239
            
            $
            81,739,800Liabilities
                and Shareholders' EquityCurrent
                liabilities:Accounts
                payable
            
            $
            307,588
            
            $
            1,169,211Accrued
                liabilities
            
            
            1,715,024
            
            
            2,103,755Deferred
                revenue (note 12)
            
            
            4,623,340
            
            
            4,702,1326,645,952
            
            
            7,975,098Deferred
                revenue (note 12)
            
            
            4,414,256
            
            
            8,929,900Shareholders'
                equity:Share
                capital (note 8)
            
            
            172,921,153
            
            
            172,921,153Share
                purchase warrants (note 9)
            
            
            3,150,539
            
            
            4,553,308Contributed
                surplus (note 10)
            
            
            9,123,824
            
            
            5,657,082Deficit
            
            
            (133,182,485
            )
            
            (118,296,741
            )52,013,031
            
            
            64,834,802Basis
                of presentation (note 1)Commitments
                (note 13)$
            63,073,239
            
            $
            81,739,800




See
      accompanying notes to consolidated financial statements.




On
      behalf
      of the Board:





/s/
                Tryon Williams
            Director/s/
                David G.P. Allan
            Director





F-6




**YM
      BIOSCIENCES INC.**


Consolidated
      Statements of Operations and Comprehensive Loss and Deficit


(Amounts
      in Canadian dollars, unless otherwise noted)







Years
                ended June 30,2008
            
            2007
            
            2006Out-licensing
                revenue (note 12)
            
            $
            4,859,085
            
            $
            4,407,890
            
            $
            1,151,135Interest
                income
            
            
            2,584,080
            
            
            3,239,540
            
            
            1,397,5587,443,165
            
            
            7,647,430
            
            
            2,548,693Expenses:General
                and administrative
            
            
            6,831,955
            
            
            6,978,336
            
            
            7,951,470Licensing
                and product development
            
            
            15,631,550
            
            
            28,758,469
            
            
            20,188,577Impairment
                of intangible assets (note 6)
            
            
            –
            
            
            1,829,538
            
            
            –22,463,505
            
            
            37,566,343
            
            
            28,140,047Loss
                before the undernoted
            
            
            (15,020,340
            )
            
            (29,918,913
            )
            
            (25,591,354
            )Gain
                (loss) on foreign exchange
            
            
            32,463
            
            
            (142,552
            )
            
            (220,630
            )Realized
                gain on short-term deposits
            
            
            126,588
            
            
            –
            
            
            –Unrealized
                gain on short-term deposits
            
            
            45,688
            
            
            –
            
            
            –Loss
                on marketable securities
            
            
            –
            
            
            –
            
            
            (2,623
            )Loss
                on disposal of property and equipment
            
            
            (70,143
            )
            
            –
            
            
            –Loss
                before income taxes
            
            
            (14,885,744
            )
            
            (30,061,465
            )
            
            (25,814,607
            )Income
                taxes (note 14)
            
            
            –
            
            
            1,668,775
            
            
            –Loss
                and comprehensive lossfor
                the year
            
            
            (14,885,744
            )
            
            (31,730,240
            )
            
            (25,814,607
            )Deficit,
                beginning of year
            
            
            (118,296,741
            )
            
            (86,566,501
            )
            
            (60,751,894
            )Deficit,
                end of year
            
            $
            (133,182,485
            )
            $
            (118,296,741
            )
            $
            (86,566,501
            )Basic
                and diluted loss percommon
                share
            
            $
            (0.27
            )
            $
            (0.57
            )
            $
            (0.59
            )Weighted
                average number ofcommon
                shares outstanding
            
            
            55,835,356
            
            
            55,804,674
            
            
            43,755,160Excludes
                common shares held inescrow
                for contingent additionalpayment
                related to the acquisitionof
                Delex Therapeutics Inc. (note 8)
            
            
            2,380,953
            
            
            2,380,953
            
            
            2,380,953





See
      accompanying notes to consolidated financial statements.





F-7





**YM
      BIOSCIENCES INC.**


Consolidated
      Statements of Cash Flows


(Amounts
      in Canadian dollars, unless otherwise noted)







Years
                ended June 30,2008
            
            2007
            
            2006Cash
                provided by (used in):Operating
                activities:Loss
                for the year
            
            $
            (14,885,744
            )
            $
            (31,730,240
            )
            $
            (25,814,607
            )Items
                not involving cash:Depreciation
                of property andequipment
            
            
            125,271
            
            
            107,107
            
            
            61,017Amortization
                of intangible assets
            
            
            1,060,541
            
            
            1,913,040
            
            
            1,269,158Impairment
                of intangible assets
            
            
            –
            
            
            1,829,538
            
            
            –Loss
                on disposal of property andequipment
            
            
            70,143
            
            
            –
            
            
            –Loss
                on sale of marketable securities
            
            
            –
            
            
            –
            
            
            2,623Stock-based
                compensation
            
            
            2,063,973
            
            
            1,716,913
            
            
            2,588,413Stock–based
                consideration
            
            
            –
            
            
            –
            
            
            100,000Warrants-based
                consideration
            
            
            –
            
            
            –
            
            
            54,775Change
                in non-cash operatingworking
                capital:Accounts
                receivable and prepaidexpenses
            
            
            (61,483
            )
            
            1,816,092
            
            
            (672,639
            )Accounts
                payable, accrued liabilitiesand
                deferred revenue
            
            
            (5,844,790
            )
            
            11,604,460
            
            
            (1,599,032
            )(17,472,089
            )
            
            (12,743,090
            )
            
            (24,010,292
            )Financing
                activities:Issuance
                of common shareson
                exercise of options
            
            
            –
            
            
            11,232
            
            
            851,322Issuance
                of common shareson
                exercise of warrants
            
            
            –
            
            
            89,375
            
            
            3,627,430Net
                proceeds from issuance ofshares
                and warrants
            
            
            –
            
            
            –
            
            
            42,622,618–
            
            
            100,607
            
            
            47,101,370Investing
                activities:Short-term
                deposits, net
            
            
            14,742,701
            
            
            15,881,679
            
            
            (55,529,720
            )Proceeds
                on sale of marketable securities
            
            
            –
            
            
            –
            
            
            2,211Additions
                to property and equipment
            
            
            (37,770
            )
            
            (127,162
            )
            
            (54,791
            )Proceeds
                on sale of property andequipment
            
            
            38,996
            
            
            –
            
            
            –14,743,927
            
            
            15,754,517
            
            
            (55,582,300
            )Increase
                (decrease) in cash and cashequivalents
            
            
            (2,728,162
            )
            
            3,112,034
            
            
            (32,491,222
            )Net
                cash assumed on acquisition
            
            
            –
            
            
            –
            
            
            34,540,166Cash
                and cash equivalents,beginning
                of year
            
            
            5,847,351
            
            
            2,735,317
            
            
            686,373Cash
                and cash equivalents, end of year
            
            $
            3,119,189
            
            $
            5,847,351
            
            $
            2,735,317Non-cash
                items:Issuance
                of common shares onDelex
                acquisition (note 8)
            
            $
            –
            
            $
            –
            
            $
            1,464,284Issuance
                of common shares onEximias
                acquisition (note 3)
            
            
            –
            
            
            –
            
            
            35,063,171Issuance
                of common shares inexchange
                for licensed patents
            
            
            –
            
            
            –
            
            
            100,000





See
      accompanying notes to consolidated financial statements.





F-8


**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006







YM
      Biosciences Inc. (the "Company" or "YM") was incorporated on August 17,
      1994 under the laws of the Province of Ontario and was continued under the
      laws
      of the Province of Nova Scotia on December 11, 2001. In prior years, the
      Company had been considered a development stage company. It has entered into
      licensing agreements with certain biotechnology, pharmaceutical and medical
      institutes or has acquired technology originated in such institutes. The
      acquisitions of licenses provide exclusive rights for certain territories for
      certain products or families of products developed and rights of first refusal
      on additional territories, additional products or extensions to existing
      products. During fiscal 2006, the Company acquired Eximias Pharmaceutical
      Corporation ("Eximias") of Berwyn, Pennsylvania, a privately held pharmaceutical
      company engaged in the acquisition, development and commercialization of
      products for the treatment of cancer and cancer-related disorders (note 3).
      During fiscal 2005, the Company acquired Delex Therapeutics Inc. ("Delex").
      The
      Company is developing certain therapeutic products for patients with cancer
      and
      an inhalation delivered fentanyl product to treat acute and breakthrough pain,
      including cancer pain.




**1.**
              **Basis
                  of presentation:**




The
      consolidated financial statements presented have been prepared on a
      going-concern basis, which assumes that the Company will continue in operation
      for the foreseeable future and, accordingly, will be able to realize on its
      assets and discharge its liabilities in the normal course of operations. Since
      inception, the Company has concentrated on licensing, acquisition and product
      development. It has had no net earnings, minimal revenue and negative operating
      cash flows, and has financed its activities through the issuance of equity.
      The
      Company's ability to continue as a going concern is dependent on obtaining
      additional investment capital and the achievement of profitable operations.
      There can be no assurance that the Company will be successful in increasing
      revenue or raising additional investment capital to generate sufficient cash
      flows to continue as a going concern. These consolidated financial statements
      do
      not reflect the adjustments that might be necessary to the carrying amount
      of
      reported assets, liabilities, revenue and expenses and the balance sheet
      classification used if the Company were unable to continue operation in
      accordance with this assumption.




Taking
      into consideration the restricted and unrestricted cash and short-term deposits
      detailed in note 4 to the consolidated financial statements, management believes
      that the Company has sufficient cash resources to fund its future operations
      beyond the next 12 months.





F-9




**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies:**




The
      accompanying consolidated financial statements are prepared in accordance with
      accounting principles generally accepted in Canada ("Canadian GAAP") which,
      except as described in note 17, conform in all material respects to accounting
      principles generally accepted in the United States ("United States GAAP").
      Significant accounting policies are summarized below:




(a)
            Basis
                of consolidation:




The
      consolidated financial statements include the assets and liabilities and results
      of operations of all subsidiaries and variable interest entities ("VIEs") where
      the Company is the primary beneficiary, after elimination of intercompany
      transactions and balances.




During
      the year ended June 30, 2006, Delex was amalgamated with a YM subsidiary and
      its
      assets, obligations and operations are included in the consolidated financial
      statements. CIMYM Inc. (Ontario) and CIMYM Inc. (Barbados) were amalgamated
      to form CIMYM BioSciences Inc., an 80% owned joint venture incorporated in
      Canada for which the Company is the primary beneficiary, and its assets,
      obligations and operations are included in the consolidated financial
      statements. YM BioSciences U.S.A. Inc. and YM BioSciences U.S. Operations Inc.
      were merged during the year ended June 30, 2008 and its assets, obligations
      and
      operations are included in the consolidated financial statements.




(b)
            Consolidation
                of variable interest entity:




The
      Company consolidates all VIEs of which it is the primary beneficiary in
      accordance with Canadian GAAP. VIEs are entities in which equity investors
      do
      not have controlling financial interest or the equity at risk is not sufficient
      to permit the entity to finance its activities without additional subordinated
      financial support by other parties. The Company's only VIE is CIMYM BioSciences
      Inc. and it is fully consolidated in the Company's financial
      statements.




(c)
            Foreign
                currency translation:




Foreign
      currency transactions entered into by the Company and financial statements
      of
      integrated foreign operations are translated into Canadian dollars using the
      temporal method. Under this method, monetary assets and liabilities are
      translated at year-end rates of exchange, non-monetary assets and liabilities
      are translated at historic rates of exchange and income statement items are
      translated at actual rates prevailing during the year. Exchange gains and losses
      are of a current nature and are included in income.





F-10




**YM
          BIOSCIENCES INC.**
 Notes
          to
          Consolidated Financial Statements (continued)
 (Amounts
          in Canadian dollars, unless otherwise noted)
  Years
          ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




(d)
            Revenue
                recognition:




Revenue
      is deemed to be realized and earned when persuasive evidence of an arrangement
      exists, delivery has occurred or services have been rendered, the Company's
      price to the customer is fixed or determinable, and collectibility is reasonably
      assured.




Contingent
      revenue attributable to the achievement of regulatory or developmental
      milestones is recognized only on the achievement of the applicable milestone.
      Non-refundable, up-front fees for access to the Company's proprietary technology
      in connection with certain research and development collaborations are deferred
      and recognized as revenue on a systematic basis over the term of the related
      collaboration. Currently, the Company has license agreements that specify that
      certain royalties are earned by the Company on sales of licensed products in
      the
      licensed territories. Licensees report sales and royalty information in the
      90
      days after the end of the quarter in which the activity takes place and
      typically do not provide the Company with forward estimates or current-quarter
      information. Because the Company is not able to reasonably estimate the amount
      of royalties earned during the period in which these licensees actually ship
      products, royalty revenue is not recognized until the royalties are reported
      to
      the Company and the collection of these royalties is reasonably
      assured.




(e)
            Cash
                and cash equivalents:




Cash
      and
      cash equivalents are recorded at fair value. Cash equivalents consist of highly
      liquid bankers' acceptances issued by Canadian Schedule A banks, with terms
      extending up to 90 days from the date of acquisition.




(f)
            Short-term
                deposits:




Short-term
      deposits are recorded at fair value and consist of highly liquid bankers'
      acceptances issued by Canadian Schedule A banks, held to maturity with terms
      extending beyond 90 days from the date of acquisition.





F-11





**YM
          BIOSCIENCES INC.**
 Notes
          to
          Consolidated Financial Statements (continued)
 (Amounts
          in Canadian dollars, unless otherwise noted)
  Years
          ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




(g)
            Property
                and equipment:




Property
      and equipment are stated at cost less accumulated depreciation. Depreciation
      is
      provided to amortize the cost of property and equipment over their estimated
      useful lives using the straight-line method over the following
      periods:





Computer
                equipment
            3
                yearsFurniture
                and equipment
            5
                yearsLeasehold
                improvements
            Term
                of lease




(h)
            Intangible
                assets:




Intangible
      assets consist of acquired technologies and are amortized on a straight-line
      basis over the estimated time to market of seven years.




(i)
            Impairment
                of long-lived assets:




The
      Company reviews the carrying value of intangible assets with finite lives and
      property and equipment for existence of facts or changes in circumstances that
      might indicate a condition of impairment. An impairment loss would be recognized
      when estimates of undiscounted future cash flows expected to result from the
      use
      of an asset and its eventual disposition are less than the carrying amount.




(j)
            Development
                costs:




To
      date,
      all development costs incurred have been expensed. Development costs include
      costs associated with product development activities, including salaries of
      scientific and technical staff and payments to third parties for development
      activities. Development costs that meet specific stringent criteria related
      to
      technical, market and financial feasibility are capitalized. To date, none
      of
      the development costs has met such criteria.





F-12




**YM
          BIOSCIENCES INC.**
 Notes
          to
          Consolidated Financial Statements (continued)
 (Amounts
          in Canadian dollars, unless otherwise noted)
  Years
          ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




(k)
            Government
                assistance:




Government
      assistance, including investment tax credits relating to development costs,
      is
      recorded as a reduction of the development costs when there is reasonable
      assurance that the assistance will be received.




(l)
            Income
                taxes:




The
      Company uses the asset and liability method of accounting for income taxes.
      Under the asset and liability method, future tax assets and liabilities are
      recognized for the future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax bases. Future tax assets and liabilities are measured
      using
      enacted or substantively enacted tax rates expected to apply to taxable income
      in the years in which those temporary differences are expected to be recovered
      or settled. The effect on future tax assets and liabilities of a change in
      tax
      rates is recognized in income in the year that includes the date of enactment
      or
      substantive enactment.




In
      assessing the realizability of future income tax assets, management considers
      whether it is more likely than not that some portion or all of the future income
      tax assets will be realized. The ultimate realization of future income tax
      assets is dependent upon the generation of future taxable income during the
      period in which the temporary differences are deductible. Management considers
      the scheduled reversals of future income tax liabilities, the character of
      the
      future income tax asset and tax planning strategies in making this assessment.
      To the extent that management believes that the realization of future income
      tax
      assets does not meet the more-likely-than-not realization criteria, a valuation
      allowance is recorded against the future income tax assets.





F-13




**YM
          BIOSCIENCES INC.**
 Notes
          to
          Consolidated Financial Statements (continued)
 (Amounts
          in Canadian dollars, unless otherwise noted)
  Years
          ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




(m)
            Stock-based
                compensation:




The
      Company has a stock option plan for directors, officers, employees and service
      providers. All stock options issued under the plan have an exercise price equal
      to the fair market value of the underlying shares on the date of the grant.
      The
      Company applies the fair value-based method to all options granted to service
      providers and to employee stock options granted on or after July 1, 2002. Under
      the fair value-based method, compensation cost is measured at the fair value
      of
      the award at the date of grant using the Black-Scholes option pricing model.
      Forfeitures are accounted for on an estimated basis based on historical trends.
      Compensation cost is expensed over the service period for non-employee and
      employee awards. The settlement method was used to account for employee stock
      options granted before July 1, 2002. Under the settlement method, no
      compensation cost was recognized at the date of grant or recognized over the
      vesting period. Any consideration paid by employees on the exercise of stock
      options or purchase of stock is credited to share capital.




(n)
            Basic
                and diluted loss per common share:




Basic
      loss per common share is computed by dividing loss for the period by the
      weighted average number of common shares outstanding during the reporting
      period. Diluted loss per common share is computed similarly to basic loss per
      common share, except that the weighted average number of shares outstanding
      is
      increased to include additional shares from the assumed exercise of stock
      options and warrants, if dilutive. The number of additional shares is calculated
      by assuming that outstanding stock options and warrants were exercised and
      that
      proceeds from such exercises were used to acquire shares of common stock at
      the
      average market price during the reporting period. These common equivalent shares
      are not included in the calculation of the weighted average number of shares
      outstanding for diluted loss per common share when the effect would be
      anti-dilutive.





F-14





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




(o)
            Use
                of estimates:




The
      preparation of financial statements requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenue and expenses during the years.
      Actual results could differ from those estimates.




(p)
            New
                accounting pronouncements:




Changes
      in accounting policies:




(i)
            Accounting
                changes:




On
      July
      1, 2007, the Company adopted the new recommendations of The Canadian Institute
      of Chartered Accountants' ("CICA") Handbook Section 1506, Accounting Changes.
      Under these new recommendations, voluntary changes in accounting policy are
      permitted only when they result in the financial statements providing reliable
      and more relevant information. These recommendations also require:
      (i) changes in accounting policy to be applied retrospectively unless doing
      so is impracticable; (ii) prior period errors to be corrected retrospectively;
      (iii) enhanced disclosures about the effects of changes in accounting policies,
      estimates and errors on the financial statements; and (iv) the disclosure of
      new
      primary sources of generally accepted accounting principles that have been
      issued but are not yet effective.





F-15





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




(ii)
            Financial
                instruments:




On
      July
      1, 2007, the Company adopted the recommendations of CICA Handbook
      Section 1530, Comprehensive Income, Section 3251, Equity, Section
      3855, Financial Instruments - Recognition and Measurement, and Section 3865,
      Hedges. These new Handbook sections, which apply to fiscal years beginning
      on or
      after October 1, 2006, provide requirements for the recognition and measurement
      of financial instruments, as well as standards on when and how hedge accounting
      may be applied. Section 1530 also establishes standards for reporting and
      displaying comprehensive income. Comprehensive income is defined as the change
      in equity from transactions and other events from non-owner sources. Other
      comprehensive income refers to items recognized in comprehensive income, but
      that are excluded from net income calculated in accordance with generally
      accepted accounting principles.




Under
      Section 3855, all financial instruments are to be classified into one of the
      following five categories: held-for-trading, held-to-maturity investments,
      loans
      and receivables, available-for-sale financial assets or other financial
      liabilities. All financial instruments, including derivatives, are included
      in
      the consolidated balance sheet and are measured at fair value with the exception
      of held-to-maturity investments, loans and receivables and other financial
      liabilities, which are measured at amortized cost, using the effective interest
      method. Subsequent measurement and recognition of changes in fair value of
      financial instruments depend on their initial classification. Held-for-trading
      investments are measured at fair value and all gains and losses are included
      in
      net income in the period in which they arise. Available-for-sale financial
      assets are measured at fair value with revaluation gains and losses included
      in
      other comprehensive income until the asset is derecognized or
      impaired.




As
      a
      result of the adoption of these new standards, the Company has classified its
      cash and cash equivalents and short-term deposits as held-for-trading.
      Receivables are classified as loans and receivables. Accounts payable and
      accruals are classified as other financial liabilities. The Company has not
      recognized any amounts through comprehensive income for years ended June 30,
      2008, 2007 and 2006.





F-16





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




Adoption
      of these standards was on a retrospective basis without restatement of prior
      periods and had no impact on the Company's opening balances.




Derivatives
      embedded in other financial instruments or contracts are separated from their
      host contracts and accounted for as derivatives when their economic
      characteristics and risks are not closely related to those of the host contract;
      the terms of the embedded derivatives are the same as those of a free standing
      derivative; and the combined instrument or contract is not measured at fair
      value. These embedded derivatives are measured at fair value with changes
      therein recognized in net income.




The
      Company selected July 1, 2002 as the transition date for embedded derivatives.
      Accordingly, only contracts or financial instruments entered into or modified
      after this date were examined for embedded derivatives. As at July 1, 2007,
      the
      Company identified embedded derivatives in foreign currency product
      out-licensing contracts that were based on a foreign currency that was not
      the
      functional currency of the Company or the third parties associated with the
      contracts. However, such embedded derivatives have been determined to be of
      nominal value and, therefore, have not been measured at fair value in the
      Company's financial statements.




(iii)
            Financial
                instruments - disclosure:




On
      June
      30, 2008, the Company adopted CICA Handbook Section 3862, Financial Instruments
      - Disclosures, which provides standards for disclosures about financial
      instruments, including disclosures about fair value and the credit, liquidity
      and market risks associated with the financial instruments. Note 16 has been
      added to the Company's consolidated financial statements regarding these
      disclosures.




(iv)
            Financial
                instruments - presentation:




On
      June
      30, 2008, the Company adopted CICA Handbook Section 3863, Financial Instruments
      - Presentation, which provides standards for the presentation of financial
      instruments and non-financial derivatives. The adoption of this standard does
      not have an impact on the presentation of the Company's financial instrument
      disclosures.





F-17





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**2.**
            **Significant
                accounting policies
                (continued):**




(v)
            Capital
                disclosures:




On
      June
      30, 2008, the Company adopted CICA Handbook Section 1535, Capital Disclosures,
      which requires disclosure of the objectives, policies and processes for managing
      capital and compliance with any capital requirements and, in case of
      non-compliance, the consequences of such non-compliance. Note 15 has been added
      to the Company's consolidated financial statements regarding these
      disclosures.




Recent
      accounting pronouncements issued and not yet effective are as
      follows:




(vi)
            General
                standards on financial statement
                presentation:




CICA
      Handbook Section 1400, General Standards on Financial Statement Presentation,
      has been amended to include requirements to assess and disclose an entity's
      ability to continue as a going concern. The changes are effective for the
      Company for interim and annual financial statements beginning on or after
      July 1, 2008. The Company does not expect the adoption of these changes to
      have an impact on its consolidated financial statements.




(vii)
            Goodwill
                and intangible assets:




In
      February 2008, the CICA issued Section 3064, Goodwill and Intangible Assets,
      which replaces Section 3062, Goodwill and Intangible Assets, and Section 3450,
      Research and Development Costs. This new section establishes standards for
      the
      recognition, measurement and disclosure of goodwill and intangible assets and
      is
      effective for annual and interim financial statements relating to fiscal years
      beginning on or after October 1, 2008, specifically July 1, 2009 for the
      Company. The Company is currently assessing the impact of this section on its
      intangible asset recognized on the acquisition of Delex.




(viii)
            International
                financial reporting standards:




The
      CICA
      plans to converge Canadian GAAP with International Financial Reporting Standards
      ("IFRS") over a transition period expected to end in 2011. The impact of the
      transition to IFRS on the Company's consolidated financial statements is not
      yet
      determinable.





F-18





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**3.**
            **Acquisition
                of Eximias:**




On
      May 9,
      2006, the Company completed the acquisition of the common shares of Eximias,
      a
      privately held development stage company in the United States. The acquisition
      was accounted for as a purchase of assets. The assets and liabilities of Eximias
      have been included in the consolidated financial statements of the Company
      from
      May 9, 2006, the date of acquisition. The Company has assessed the fair values
      as of the date of acquisition as follows:





Assets
                acquired:Cash
            
            $
            38,037,072Short-term
                deposits
            
            
            193,925Property
                and equipment
            
            
            84,513Prepaid
                expenses
            
            
            109,101Workforce
            
            
            2,927,261Future
                tax assets (net of valuation allowance of $26,885,000)
            
            
            –41,351,872Liabilities
                assumed:Accrued
                expenses
            
            
            (2,432,679
            )Obligations
                under capital leases
            
            
            (9,116
            )(2,441,795)Net
                assets acquired
            
            $
            38,910,077Consideration
                given:5,630,648
                common shares
            
            $
            35,063,171Cash
            
            
            3,496,906Acquisition
                costs
            
            
            350,000$
            38,910,077




Of
      the
      total purchase price paid, $3,300,000, comprised of 474,657 common shares valued
      at $3,000,000 and $300,000 in cash, were held in escrow until May 9, 2007,
      to satisfy any claims arising out of the representations and warranties made
      by
      Eximias in the transaction. As no claims arose relating to those shares referred
      to above, the full amount was released from escrow on May 9, 2007.





F-19





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**3.**
            **Acquisition
                of Eximias (continued):**




The
      fair
      value of the Company's common shares issued is based on the average closing
      price of the common shares two days before, the day of, and two days after
      May
      9, 2006, the closing date of the acquisition.




**4.**
            **Cash
                and cash equivalents and short-term
                deposits:**




As
      a
      condition of the February 16, 2006 issuance of common shares, the Company will
      use the net proceeds of $42,622,618 raised to fund drug development activities
      not related to Cuba or for general corporate purposes not related to the Cuban
      licensed products and technologies. As at June 30, 2008, the remaining
      restricted proceeds were $1,370,992.




Management
      believes that the unrestricted cash and short-term deposits at June 30, 2008
      of
      $56,729,934 are sufficient to fund future activities during and beyond the
      next
      year.




As
      at
      June 30, 2008, the Company held nil (2007 - $4,510,285) of cash equivalents,
      all
      of which are denominated in Canadian dollars. Cash equivalents are short-term
      deposits with terms extending up to 90 days from the date of
      acquisition.




The
      Company's short-term deposits are bankers' acceptances issued by Canadian
      Schedule A banks, maturing in less than one year.




**5.**
            **Property
                and equipment:**





Accumulated
            
            Net
                bookJune
                30, 2008
            
            Cost
            
            depreciation
            
            valueComputer
                equipment
            
            $
            378,289
            
            $
            278,449
            
            $
            99,840Furniture
                and equipment
            
            
            80,172
            
            
            76,765
            
            
            3,407Leasehold
                improvements
            
            
            52,539
            
            
            27,386
            
            
            25,153$
            511,000
            
            $
            382,600
            
            $
            128,400





F-20





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**5.**
            **Property
                and equipment (continued):**





June
                30, 2007
            
            Cost
            
            Accumulated
              depreciation
            
            Net
                  book
              valueComputer
                equipment
            
            $
            357,499
            
            $
            201,286
            
            $
            156,213Furniture
                and equipment
            
            
            307,506
            
            
            170,769
            
            
            136,737Leasehold
                improvements
            
            
            80,809
            
            
            48,719
            
            
            32,090$
            745,814
            
            $
            420,774
            
            $
            325,040




**6.**
            **Intangible
                assets:**





Accumulated
            
            Net
                bookJune
                30, 2008
            
            Cost
            
            amortization
            
            Impairment
            
            valueAcquired
                technologies
            
            $
            7,348,185
            
            $
            3,282,776
            
            $
            –
            
            $
            4,065,409





Accumulated
            
            Net
                bookJune
                30, 2007
            
            Cost
            
            amortization
            
            Impairment
            
            valueAcquired
                technologies
            
            $
            7,348,185
            
            $
            2,222,235
            
            $
            –
            
            $
            5,125,950Workforce
            
            
            2,927,261
            
            
            1,097,723
            
            
            1,829,538
            
            
            –$
            10,275,446
            
            $
            3,319,958
            
            $
            1,829,538
            
            $
            5,125,950




Impairment:




On
      May 9,
      2006, the Company identified the workforce as an intangible asset as part of
      the
      Eximias acquisition because of the expected future benefits that could be
      derived with respect to their involvement with the Company's leading product,
      tesmilifene.




On
      January 30, 2007, based on the recommendation of the Data Safety Monitoring
      Board, the Company stopped the phase III tesmilifene clinical trial based on
      an
      interim analysis of 351 events. As a result, the workforce intangible asset
      was determined to be impaired based on an analysis of the carrying value and
      projected future cash flows of the asset. The impairment analysis resulted
      in a
      write-down of $1,829,538, the net book value of the asset on the day of
      impairment.





F-21





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**7.**
            **Consolidation
                of variable interest
                entity:**




The
      Company determined that its investment in its joint venture is a VIE and the
      Company is the primary beneficiary since inception of the entity.




The
      Company proportionately consolidated its joint venture and has made provisions
      for any advances to the joint venture that did not eliminate on consolidation,
      such that the Company has recorded 100% of the results of operations and cash
      flows of this entity since its inception.




The
      consolidated financial statements include the revenue and expenses of an
      incorporated joint venture as follows:





Years
                ended June 30,2008
            
            2007
            
            2006Revenue
            
            $
            4,802,291
            
            $
            4,236,398
            
            $
            858,210Expenses:General
                andadministrative
            
            
            5,677,860
            
            
            2,458,547
            
            
            3,252,091Licensing
                andproduct
                development
            
            
            8,277,154
            
            
            8,913,425
            
            
            1,444,27713,955,014
            
            
            11,371,972
            
            
            4,696,368Loss
                before income taxes
            
            
            (9,152,723
            )
            
            (7,135,574
            )
            
            (3,838,158
            )Income
                taxes
            
            
            –
            
            
            1,622,695
            
            
            –Loss
                for the period
            
            $
            (9,152,723
            )
            $
            (8,758,269
            )
            $
            (3,838,158
            )





F-22





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**8.**
            **Share
                capital:**




Authorized:


500,000,000
      Class A preferred shares


500,000,000
      Class B preferred shares, Series 1


500,000,000
      Class A non-voting common shares


500,000,000
      common shares




Issued:





Number
                ofshares
            
            AmountCommon
                shares:Balance,
                June 30, 2005
            
            
            38,584,288
            
            $
            87,487,802Issued
                on exercise of options
            
            
            395,967
            
            
            1,286,170Issued
                on exercise of warrants
            
            
            1,311,008
            
            
            4,397,499Issued
                from escrow pursuant to Delexacquisition
                agreement
            
            
            396,825
            
            
            1,464,284Issued
                pursuant to licensing agreement
            
            
            26,316
            
            
            100,000Issued
                pursuant to public offering, February 2006
            
            
            9,436,471
            
            
            42,622,618Issued
                on acquisition of Eximias, May 9, 2006
            
            
            5,630,648
            
            
            35,413,171Balance,
                June 30, 2006
            
            
            55,781,523
            
            
            172,771,544Issued
                on exercise of options
            
            
            3,333
            
            
            15,554Issued
                on exercise of warrants
            
            
            50,500
            
            
            134,055Balance,
                June 30, 2007 and 2008
            
            
            55,835,356
            
            $
            172,921,153




At
      June
      30, 2008, 2,380,953 (2007 - 2,380,953) common shares are held in escrow for
      contingent payments related to the Delex acquisition. These escrowed shares
      will
      be valued based upon their fair market value at the time of resolution of the
      related milestone contingency: 634,921 common shares upon entering a
      collaboration or other licensing arrangement; 1,111,112 common shares upon
      initiation of the first Phase III clinical trial; and 634,920 common shares
      upon
      initiation of the second Phase III clinical trial. Upon receipt of United States
      regulatory approval to market a product using Delex's technology, the Company
      will make an additional payment of $4,750,000 in cash or common shares, or
      a
      combination of both, at its option, to the former Delex
      shareholders.




On
      February 16, 2006, the Company issued 9,436,471 shares at U.S. $4.25 per common
      share for total gross proceeds of U.S. $40,105,002. Net proceeds after issuance
      costs amounted to Cdn. $42,622,618.





F-23





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**9.**
            **Share
                purchase warrants:**




The
      Company has issued warrants for the purchase of common shares for a specified
      price for a specific period of time. Nominal value was ascribed to the warrants
      issued prior to June 30, 2002. Warrants issued after that date have been
      valued on a relative basis using the Black-Scholes fair value option pricing
      model. The following table contains information regarding the warrants to
      acquire common shares outstanding as of June 30, 2008. As of June 30, 2008,
      all
      outstanding warrants were exercisable.





WeightedaverageNumber of
            
            exercisewarrants
            
            price
            
            AmountOutstanding,
                June 30, 2005
            
            
            10,745,007
            
            $
            2.93
            
            $
            5,313,283Expired
            
            
            (369,444
            )
            
            4.33
            
            
            –Exercised
            
            
            (1,370,286
            )
            
            2.92
            
            
            (770,070
            )Issued
                in settlement of obligation
            
            
            17,500
            
            
            4.42
            
            
            54,775Outstanding,
                June 30, 2006
            
            
            9,022,777
            
            
            2.88
            
            
            4,597,988Exercised
            
            
            (50,500
            )
            
            1.77
            
            
            (44,680
            )Outstanding,
                June 30, 2007
            
            
            8,972,277
            
            
            2.89
            
            
            4,553,308Expired
            
            
            (3,262,512
            )
            
            3.69
            
            
            (1,402,769
            )Outstanding,
                June 30, 2008
            
            
            5,709,765
            
            
            2.43
            
            $
            3,150,539




As
      at
      June 30, 2008:





WeightedaverageremainingNumber
            
            contractualExercise prices
            
            Expiry date
            
            outstanding
            
            life (years)$1.75
            
            December 15, 2008
            
            
            562,346
            
            
            0.46$2.50
            
            December 15, 2008
            
            
            5,129,919
            
            
            0.46$4.42
            
            February 7, 2009
            
            
            17,500
            
            
            0.61





F-24





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**10.**
            **Contributed
                surplus:**





Balance,
                June 30, 2005
            
            $
            1,790,928Stock-based
                compensation
            
            
            2,588,413Exercise
                of options
            
            
            (434,849
            )Balance,
                June 30, 2006
            
            
            3,944,492Stock-based
                compensation
            
            
            1,716,913Exercise
                of options
            
            
            (4,323
            )Balance,
                June 30, 2007
            
            
            5,657,082Stock-based
                compensation
            
            
            2,063,973Expiry
                of warrants
            
            
            1,402,769Balance,
                June 30, 2008
            
            $
            9,123,824




**11.**
            **Stock-based
                compensation:**




The
      Company has granted stock options pursuant to a stock option plan. Under the
      plan, options to purchase common shares may be granted to directors, officers,
      employees and service providers of the Company. The option exercise prices
      range
      from $1.25 to $5.74.




Compensation
      cost recognized as an expense during the year for stock-based employee
      compensation awards was $2,063,973 (2007 - $1,716,913; 2006 - $2,301,431).
      Compensation cost recognized related to non-employee options granted during
      the
      year was nil (2007 - nil; 2006 - $286,982).




As
      of
      June 30, 2008, total compensation cost related to non-vested awards not yet
      recognized is $832,308 and the weighted average period over which it is expected
      to be recognized is 1.27 years.





F-25





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**11.**
            **Stock-based
                compensation (continued):**




The
      fair
      value of each option granted was estimated on the date of grant using the
      Black-Scholes fair value option pricing model with the following
      assumptions:





Issue
                date
            
            2008
            
            2007
            
            2006Number
                of options issued
            
            
            2,110,290
            
            
            165,000
            
            
            2,268,000Risk-free
                interest rate
            
            
            3.2%
                - 4.4
            %
            
            3.9%
                - 4.1
            %
            
            4.0%
                - 4.6
            %Volatility
                factor
            
            
            72%
                - 74
            %
            
            51%
                - 73
            %
            
            55%
                - 120
            %Contractual
                life of options
            
            
            10
                years
            
            
            10
                years
            
            
            1
                -
                10 yearsVesting
                period (months)
            
            
            immediately to 24
            
            
            immediately to 24
            
            
            immediately to 24Weighted
                average fair value ofoptions
                granted
            
            $
            1.13
            
            $
            1.41
            
            $
            2.00Fair
                value of options
            
            $
            2,374,465
            
            $
            232,931
            
            $
            4,542,930




The
      following tables reflect the activity under the stock option plan for the years
      ended June 30, 2008, 2007 and 2006 and the share options outstanding at the
      end
      of the year:





2008
            
            2007
            
            2006Weighted
            
            
            
            Weighted
            
            
            
            Weightedaverage
            
            
            
            average
            
            
            
            averageexercise
            
            
            
            exercise
            
            
            
            exerciseNumber
            
            price
            
            Number
            
            price
            
            Number
            
            priceOutstanding,
                beginning of year
            
            
            4,196,205
            
            $
            3.63
            
            
            4,779,789
            
            $
            3.78
            
            
            3,169,330
            
            $
            2.92Granted
            
            
            2,110,290
            
            
            1.51
            
            
            165,000
            
            
            3.49
            
            
            2,268,000
            
            
            4.69Cancelled/forfeited
            
            
            (673,393
            )
            
            3.96
            
            
            (745,251
            )
            
            4.53
            
            
            (256,465
            )
            
            3.71Exercised
            
            
            –
            
            
            –
            
            
            (3,333
            )
            
            3.37
            
            
            (401,076
            )
            
            2.21Outstanding,
                end of year
            
            
            5,633,102
            
            
            2.80
            
            
            4,196,205
            
            
            3.63
            
            
            4,779,789
            
            
            3.78Exercisable,
                end of year
            
            
            4,342,733
            
            $
            3.17
            
            
            3,587,176
            
            $
            3.55
            
            
            3,058,820
            
            $
            3.39




As
      at
      June 30, 2008:




Options
                outstanding
            
            Options
                exercisableWeighted
            
            
            
            
            
            Weightedaverage
            
            Weighted
            
            
            
            average
            
            Weightedremaining
            
            average
            
            
            
            remaining
            
            averageRange of
            
            Number
            
            contractual
            
            exercise
            
            Number
            
            contractual
            
            exerciseexercise prices
            
            outstanding
            
            life (years)
            
            price
            
            exercisable
            
            life (years)
            
            price$0.00
                - $1.74
            
            
            1,911,064
            
            
            9.3
            
            $
            1.51
            
            
            649,031
            
            
            9.29
            
            $
            1.51$1.75
                - $2.74
            
            
            913,095
            
            
            4.9
            
            
            1.83
            
            
            913,095
            
            
            4.93
            
            
            1.83$2.75
                - $3.74
            
            
            1,293,610
            
            
            6.5
            
            
            3.34
            
            
            1,266,941
            
            
            6.42
            
            
            3.34$3.75
                - $4.74
            
            
            1,360,333
            
            
            5.8
            
            
            4.41
            
            
            1,358,666
            
            
            5.80
            
            
            4.41$4.75
                - $5.75
            
            
            155,000
            
            
            7.9
            
            
            5.74
            
            
            155,000
            
            
            7.86
            
            
            5.74$0.00
                - $5.75
            
            
            5,633,102
            
            
            7.1
            
            
            2.80
            
            
            4,342,733
            
            
            6.39
            
            
            3.17





F-26





**YM
        BIOSCIENCES INC.**
 Notes
        to
        Consolidated Financial Statements (continued)
 (Amounts
        in Canadian dollars, unless otherwise noted)
  Years
        ended June 30, 2008, 2007 and 2006




**12.**
            **Out-licensing
                agreements:**





Deferred revenue
            
            Revenue recognizedDate of
            
            
            
            
            
            Initial
            
            as at June 30,
            
            for years ended June 30,agreement
            
            Product
            
            license fee
            
            2008
            
            2007
            
            2008
            
            2007
            
            2006November
                3, 2006
            
            
            Tesmilifene
            
            $
            230,400
            
            $
            154,000
            
            $
            180,800
            
            $
            26,800
            
            $
            49,600
            
            $
            –July
                25, 2006
            
            
            Nimotuzumab
            
            
            16,226,950
            
            
            8,451,538
            
            
            12,508,273
            
            
            4,056,735
            
            
            3,718,677
            
            
            –January
                20, 2006
            
            
            Nimotuzumab
            
            
            1,152,788
            
            
            192,131
            
            
            576,394
            
            
            384,262
            
            
            384,263
            
            
            192,132August
                30, 2005
            
            
            Nimotuzumab
            
            
            441,792
            
            
            64,428
            
            
            161,071
            
            
            96,643
            
            
            133,458
            
            
            147,263January
                26, 2005
            
            
            Tesmilifene
            
            
            620,311
            
            
            175,499
            
            
            205,494
            
            
            29,995
            
            
            121,892
            
            
            206,770July
                13, 2004
            
            
            Nimotuzumab
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            –
            
            
            604,970Royalty
                revenue
            
            
            Nimotuzumab
            
            
            –
            
            
            –
            
            
            –
            
            
            264,650
            
            
            –
            
            
            –18,672,241
            
            
            9,037,596
            
            
            13,632,032
            
            
            4,859,085
            
            
            4,407,890
            
            
            1,151,135Less
                current portion
            
            
            
            
            
            –
            
            
            4,623,340
            
            
            4,702,132
            
            
            –
            
            
            –
            
            
            –$
            18,672,241
            
            $
            4,414,256
            
            $
            8,929,900
            
            $
            4,859,085
            
            $
            4,407,890
            
            $
            1,151,135




Under
      the
      terms of the agreements, the Company continues to be involved in the development
      of its products and is not required to fund any development in the licensed
      territory. The agreements also entitle the Company to receive milestone payments
      on the occurrence of regulatory approval and royalties on the commercial sale
      of
      the developed product. Initial license fee revenue is non-refundable and is
      deferred and recognized over the estimated period of collaboration
      required.





F-27




**13.**
            **Commitments:**




In
      June
      2005, the Company entered into a contract for Clinical Research Organization
      ("CRO") services relating to a pharmacokinetic clinical trial to evaluate
      tesmilifene with taxotere at a cost of approximately $477,000 (U.S. $468,000).
      Of this amount, approximately $290,000 has been incurred as at June 30, 2008
      and
      the obligation to pay the remaining $187,000 is yet to be incurred. Either
      party
      may cancel the contract within 30 days' notice. If the Company cancels, it
      is
      obligated for services rendered by CRO through to the effective date of
      termination and a penalty equal to 10% of the remainder of the contract price.




In
      May
      2007, the Company entered into a contract for CRO services relating to a
      colorectal clinical trial for nimotuzumab at a cost of approximately $1,323,000,
      of which approximately $834,000 has been incurred as at June 30, 2008 and the
      obligation to pay the remaining $489,000 is yet to be incurred. The Company
      may
      cancel the contract with 30 days' notice and is obligated for services rendered
      by CRO through to the effective date of termination and for any close-out
      services furnished by CRO after the termination of the agreement.




In
      November 2007, the Company entered into a contract for CRO services relating
      to
      a pediatric pontine glioma clinical trial for nimotuzumab in the United States
      at a cost of approximately $1,322,000 (U.S. $1,297,000), of which
      approximately $452,000 has been incurred as at June 30, 2008 and the
      obligation to pay the remaining $870,000 is yet to be incurred. The Company
      may
      cancel the contract with 30 days' notice and is obligated for services rendered
      by CRO through to the effective date of termination and for any close-out
      services furnished by CRO after the termination of the agreement.




In
      addition to the above contracts, the Company has entered into many additional
      contracts for pre-clinical and other studies, none of which individually exceeds
      $1,000,000, totalling approximately $5,030,000, of which approximately
      $2,128,000 has been incurred as at June 30, 2008 and the obligation to pay
      the
      remaining $2,902,000 is yet to be incurred. Any early termination penalties
      cannot exceed the amount of the contract commitment.





F-28




**13.**
            **Commitments
                (continued):**




As
      at
      June 30, 2008, the approximate future minimum rental payments relating to
      operating leases for premises are as follows:





2009
            
            $
            307,0002010
            
            
            315,0002011
            
            
            324,0002012
            
            
            237,000Thereafter
            
            
            46,000$
            1,229,000




**14.**
            **Income
                taxes:**




(a)
            The
                major components of income tax expense and the income tax rates for
                the
                year ended June 30 are as follows:





2008
            
            2007
            
            2006Current
                tax expense
            
            $
            –
            
            $
            1,668,775
            
            $
            –Future
                income taxes
            
            
            –
            
            
            –
            
            
            –Income
                tax expense
            
            $
            –
            
            $
            1,668,775
            
            $
            –Average
                Canadianincome
                tax rate
            
            
            34.82
            %
            
            36.12
            %
            
            36.12
            %





F-29




**14.**
            **Income
                taxes (continued):**




Reconciliations
      of the income tax provisions at the above rates with the amounts shown in the
      consolidated statements of operations and comprehensive loss are as
      follows:





2008
            
            2007
            
            2006Loss
                before income taxes
            
            $
            (14,885,744
            )
            $
            (30,061,465
            )
            $
            (25,814,607
            )Income
                tax expense calculatedat
                average Canadian incometax
                rates
            
            $
            (5,183,330
            )
            $
            (10,858,201
            )
            $
            (9,324,236
            )Change
                in income taxesresulting
                from:Tax
                effect of changes in rates
            
            
            7,304,555
            
            
            –
            
            
            –Differences
                in rates applicableto
                subsidiary in foreignjurisdiction
            
            
            186,000
            
            
            (298,859
            )
            
            (225,984
            )Withholding
                taxes
            
            
            –
            
            
            1,668,775
            
            
            –Other
                non-deductible items
            
            
            734,775
            
            
            586,813
            
            
            936,913Change
                in valuation allowance
            
            
            (3,042,000
            )
            
            10,570,247
            
            
            8,613,307Income
                tax expense
            
            $
            –
            
            $
            1,668,775
            
            $
            –





F-30




**14.**
            **Income
                taxes (continued):**




(b)
            The
                tax effects of temporary differences that give rise to significant
                portions of future tax assets and future tax liabilities as at June
                30 are
                as follows:





2008
            
            2007Future
                tax assets:Property
                and equipment
            
            $
            4,806,000
            
            $
            7,012,000Financing
                costs
            
            
            186,000
            
            
            505,000Deferred
                revenue
            
            
            2,621,000
            
            
            4,430,000Capital
                loss carryforward
            
            
            173,000
            
            
            194,000Eligible
                capital expenditures
            
            
            41,000
            
            
            65,000Non-capital
                losses - United States
            
            
            27,338,000
            
            
            27,011,000Non-capital
                losses - Canada
            
            
            18,885,000
            
            
            18,585,000Scientific
                research and experimentaldevelopment
                expenses and credits
            
            
            11,162,000
            
            
            10,939,00065,212,000
            
            
            68,741,000Future
                tax liabilities:Acquired
                technologies
            
            
            (1,179,000
            )
            
            (1,666,000
            )64,033,000
            
            
            67,075,000Less
                valuation allowance
            
            
            64,033,000
            
            
            67,075,000Net
                future tax asset
            
            $
            –
            
            $
            –





F-31




**14.**
            **Income
                taxes (continued):**




(c)
            The
                Company has available Canadian and United States non-capital loss
                carryforwards totalling approximately $65,121,000 and $64,617,000,
                respectively. These losses expire as
                follows:





Canada
            
            United
                States2009
            
            $
            3,683,000
            
            $
            –2010
            
            
            3,789,000
            
            
            –2014
            
            
            7,307,000
            
            
            –2015
            
            
            16,788,000
            
            
            –2018
            
            
            –
            
            
            1,0002019
            
            
            –
            
            
            28,0002020
            
            
            –
            
            
            85,0002021
            
            
            –
            
            
            2,604,0002022
            
            
            –
            
            
            4,610,0002023
            
            
            –
            
            
            3,045,0002024
            
            
            –
            
            
            3,148,0002025
            
            
            –
            
            
            6,370,0002026
            
            
            13,260,000
            
            
            37,142,0002027
            
            
            10,235,000
            
            
            4,898,0002028
            
            
            10,059,000
            
            
            2,686,000$
            65,121,000
            
            $
            64,617,000




(d)
            The
                Company has approximately $15,722,000 (2007 - $16,015,000) of unclaimed
                development costs that may be claimed against future taxable
                income.




(e)
            The
                Company has accumulated net capital losses for tax purposes of
                approximately $1,191,000, which may be carried forward and used to
                reduce
                taxable capital gains in future
                years.





F-32




**14.**
            **Income
                taxes (continued):**




(f)
            The
                Company performs certain activities that result in investment tax
                credits
                ("ITC") that can be used to offset future Canadian and United States
                federal taxes payable and Ontario innovation tax credits ("OITC")
                that are
                payable in cash from the Province of Ontario. The Company does not
                accrue
                the federal ITC as it can only be used to offset future taxes payable
                and
                the Company has not recorded the benefit of any tax assets to date.
                The
                ITCs expire as follows:





Canada
            
            United
                States2010
            
            $
            25,000
            
            $
            –2011
            
            
            261,000
            
            
            –2012
            
            
            370,000
            
            
            –2013
            
            
            328,000
            
            
            2,0002014
            
            
            284,000
            
            
            8,0002015
            
            
            1,004,000
            
            
            113,0002016
            
            
            679,000
            
            
            76,0002017
            
            
            1,103,000
            
            
            196,0002018
            
            
            937,000
            
            
            177,0002019
            
            
            –
            
            
            199,0002020
            
            
            –
            
            
            335,0002021
            
            
            –
            
            
            22,0002022
            
            
            –
            
            
            204,000$
            4,991,000
            
            $
            1,332,000




The
      Company accrues and records cash refundable OITC amounts directly against
      development expenses where there is reasonable assurance that the assistance
      will be realized. During the year, the Company repaid cash refundable OITC
      claims related to fiscal years 2004, 2005 and 2006 in the amount of $18,326.
      At
      June 30, 2008, OITC's receivable amounted to $158,742 (2007 - $143,049;
      2006 - $437,233).





2008
            
            2007
            
            2006Gross
                development expenses
            
            $
            15,613,224
            
            $
            28,758,469
            
            $
            20,388,577OITC
                repaid (refunds)
            
            
            18,326
            
            
            –
            
            
            (200,000
            )Licensing
                and product developmentexpenses
            
            $
            15,631,550
            
            $
            28,758,469
            
            $
            20,188,577





F-33




**15.**
            **Capital
                management:**




The
      Company's primary objective when managing capital is to ensure that it has
      sufficient cash resources to fund its development and commercialization activity
      and to maintain its ongoing operations. To secure the additional capital
      necessary to pursue these plans, the Company may attempt to raise additional
      funds through the issuance of equity or by securing strategic
      partners.




The
      Company includes cash and cash equivalents, short-term deposits, accounts
      payable and accrued liabilities in the definition of capital.




The
      Company is not subject to externally imposed capital requirements, other than
      the restriction on cash, and there has been no change with respect to the
      overall capital management strategy during the 12 months ended June 30,
      2008.




**16.**
            **Financial
                instruments:**




(a)
            Categories
                of financial assets and
                liabilities:




Under
      CICA Section 3862, Financial Instruments -
      Disclosures, the Company is required to provide disclosures regarding its
      financial instruments. Financial instruments are either measured at amortized
      cost or fair value. Accounts receivable, accounts payable and accrued
      liabilities are measured at amortized cost. Cash and cash equivalents and short-term
      deposits are measured at fair value and all changes to fair value are included in
      loss
      for the year in which they arise.




2008
            
            2007Carrying
            
            Fair
            
            Carrying
            
            Fairamount
            
            value
            
            amount
            
            valueCash
                and cashequivalents
            
            $
            3,119,189
            
            $
            3,119,189
            
            $
            5,847,351
            
            $
            5,956,550Short-term
                deposits
            
            
            54,981,737
            
            
            54,981,737
            
            
            69,724,438
            
            
            69,661,386Accounts
                receivable
            
            
            403,371
            
            
            403,371
            
            
            370,011
            
            
            370,011Accounts
                payable
            
            
            (307,588
            )
            
            (307,588
            )
            
            (1,169,211
            )
            
            (1,169,211
            )Accrued
                liabilities
            
            
            (1,715,024
            )
            
            (1,715,024
            )
            
            (2,103,755
            )
            
            (2,103,755
            )$
            56,481,685
            
            $
            56,481,685
            
            $
            72,668,834
            
            $
            72,714,981




The
      Company has determined the estimated fair values of its financial instruments
      based on appropriate valuation methodologies; however, considerable judgment
      is
      required to develop
      these estimates. The carrying values of current monetary assets and liabilities approximate
      their fair values due to their relatively short periods to
      maturity.





F-34




**16.**
            **Financial
                instruments (continued):**




(b)
            Risks
                arising from financial instruments and risk
                management:




The
      Company's activities expose it to a variety of financial risks: market risk
      (including foreign exchange and interest rate risks), credit risk and liquidity
      risk. Risk management is the responsibility of the Company's finance function
      which identifies, evaluates and, where appropriate, mitigates financial
      risks.




(i)
            Foreign
                exchange risk:




The
      Company operates in Canada and the United States and has relationships with
      entities in other countries. Foreign exchange risk arises
      because the cost of transactions denominated in foreign currencies may vary
      due
      to changes in exchange rates ("transaction exposures") and because the United
      States subsidiary financial statements denominated
      in U.S. dollars may vary on consolidation into Canadian dollars.




Balances
      in foreign currencies at June 30, 2008 are approximately:





U.S.
                dollars
            
            Euros
            
            British
                poundsCash
                and cash equivalents
            
            $
            639,000
            
            €
            –
            
            ₤
            –Accounts
                payable andaccrued
                liabilities
            
            
            (343,000
            )
            
            –
            
            
            (57,000
            )Accounts
                receivable
            
            
            201,000
            
            
            16,000
            
            
            –$
            497,000
            
            €
            16,000
            
            ₤
            (57,000
            )




Fluctuations
      in the U.S. dollar exchange rate may potentially have a significant impact
      on
      the Company's results of operations.




(ii)
            Interest
                rate risk:




The
      Company is exposed to interest rate risk to the extent that short-term deposits
      are at a fixed
      rate of interest and their market value can vary with the change in market
      interest rates.
      The Company's maximum exposure to interest rate risk is
      based
      on the effective interest
      rate and the current carrying value of these assets. The Company monitors market
      interest rates and mitigates against interest rate risk by
      not
      investing in deposits longer
      that 18 months.





F-35




**16.**
            **Financial
                instruments (continued):**




Based
      on
      the Company's current short-term deposits, a 1% change in market interest rates
      would have an impact of approximately $55,000 on the Company's loss before
      income taxes.




(iii)
            Credit
                risk:




Accounts
      receivable are subject to normal credit risk. The maximum exposure to credit risk is
      equal
      to the carrying value of the accounts receivable. The Company regularly assesses
      the amounts in receivable and takes action to collect the amounts or provide adequate
      reserves against doubtful accounts. The Company currently has no reserve against
      doubtful accounts as there have been no bad debts to date.




(iv)
            Liquidity
                risk:




Liquidity
      risk is the risk that the current financial obligations exceed the cash
      available to satisfy those obligations at any point in time. The Company's
      objective in managing liquidity risk is to maintain sufficient readily available
      cash in order to meet its liquidity requirements. The Company achieves this
      by
      maintaining sufficient cash and cash equivalents.





F-36




**17.**
            **Canadian
                and United States accounting policy
                differences:**




The
      Company's consolidated financial statements are prepared in accordance with
      Canadian GAAP, which differ in certain respects from those applied in the United
      States. The following items present the impact of material differences between
      Canadian GAAP and United States GAAP on the Company's consolidated financial
      statements.




(a)
            Consolidated
                statements of operations and comprehensive loss and
                deficit:




The
      following table reconciles loss for the year as reported in the consolidated
      statements of operations and comprehensive loss and deficit reported under
      Canadian GAAP to what would have been reported had the statements been prepared
      in accordance with United States GAAP:





2008
            
            2007
            
            2006Loss
                for the year based onCanadian
                GAAP
            
            $
            (14,885,744
            )
            $
            (31,730,240
            )
            $
            (25,814,607
            )Reversal
                of capitalization ofacquired
                technologies (i)
            
            
            –
            
            
            –
            
            
            (1,562,284
            )Amortization
                of acquiredtechnologies
                (i)
            
            
            1,060,541
            
            
            1,059,255
            
            
            1,025,220Loss
                for the year andcomprehensive
                loss basedon
                United States GAAP
            
            $
            (13,825,203
            )
            $
            (30,670,985
            )
            $
            (26,351,671
            )





2008
            
            2007
            
            2006Basic
                and diluted loss per share (ii)
            
            $
            (0.25
            )
            $
            (0.55
            )
            $
            (0.60
            )Weighted
                average number ofcommon
                shares outstanding
            
            
            55,835,356
            
            
            55,804,674
            
            
            43,755,160Excludes
                common shares heldin
                escrow for contingent additionalpayment
                related to the acquisitionof
                Delex Therapeutics Inc. (note 8)
            
            
            2,380,953
            
            
            2,380,953
            
            
            2,380,953





F-37




**17.**
            **Canadian
                and United States accounting policy differences
                (continued):**




(i)
            Under
                United States GAAP, the Company's acquired technologies, which are
                primarily comprised of patents and technologies which require regulatory
                approval to be commercialized and which have no proven alternative
                future
                uses, are considered in-process research and development and are
                immediately expensed upon acquisition in accordance with FASB Statement
                No. 2, Accounting for Research and Development Costs. The Company's
                acquired technologies do not have an alternative future use given
                their
                specialized nature and limited alternative use. Under Canadian GAAP,
                the
                acquired technologies are considered to be development assets which
                are
                capitalized and amortized over their expected useful lives.




(ii)
            Loss
                per common share has been calculated using the weighted average number
                of
                common shares outstanding during the year. The potential effect of
                share
                options and share purchase warrants is not dilutive to the loss per
                common
                share.




(b)
            Consolidated
                statement of changes in shareholders'
                equity:




United
      States GAAP requires the inclusion of a consolidated statement of changes in
      shareholders' equity for each year a statement of income is presented.
      Shareholders' equity under United States GAAP is as follows:





AdditionalShare
            
            
            
            paid-inWarrants
            
            capital
            
            Deficit
            
            capital
            
            TotalTotal
                shareholders' equityunder
                U.S. GAAP,June
                30, 2005
            
            $
            5,313,283
            
            $
            87,487,802
            
            $
            (64,581,701
            )
            $
            29,816
            
            $
            28,249,200Issued
                on exercise of options
            
            
            –
            
            
            1,286,170
            
            
            –
            
            
            (398,727
            )
            
            887,443Issued
                on exercise of warrants
            
            
            (715,295
            )
            
            4,397,499
            
            
            –
            
            
            –
            
            
            3,682,204Issued
                from escrow pursuantto
                Delex acquisitionagreement
            
            
            –
            
            
            1,464,284
            
            
            –
            
            
            –
            
            
            1,464,284Issued
                pursuant tolicensing
                agreement
            
            
            –
            
            
            100,000
            
            
            –
            
            
            –
            
            
            100,000Issued
                from equity financing
            
            
            –
            
            
            42,622,618
            
            
            –
            
            
            –
            
            
            42,622,618Issued
                from acquisitionof
                Eximias
            
            
            –
            
            
            35,413,171
            
            
            –
            
            
            –
            
            
            35,413,171Stock-based
                compensation
            
            
            –
            
            
            –
            
            
            –
            
            
            2,552,291
            
            
            2,552,291Loss
                for the year
            
            
            –
            
            
            –
            
            
            (26,351,671
            )
            
            –
            
            
            (26,351,671
            )Total
                shareholders' equityunder
                U.S. GAAP,June
                30, 2006
            
            
            4,597,988
            
            
            172,771,544
            
            
            (90,933,372
            )
            
            2,183,380
            
            
            88,619,540Issued
                on exercise of options
            
            
            –
            
            
            15,554
            
            
            –
            
            
            (4,323
            )
            
            11,231Issued
                on exercise of warrants
            
            
            (44,680
            )
            
            134,055
            
            
            –
            
            
            –
            
            
            89,375Stock-based
                compensation
            
            
            –
            
            
            –
            
            
            –
            
            
            1,716,913
            
            
            1,716,913Loss
                for the year
            
            
            –
            
            
            –
            
            
            (30,670,985
            )
            
            –
            
            
            (30,670,985
            )Total
                shareholders' equityunder
                U.S. GAAP,June
                30, 2007
            
            
            4,553,308
            
            
            172,921,153
            
            
            (121,604,357
            )
            
            3,895,970
            
            
            59,766,074





F-38




**17.**
            **Canadian
                and United States accounting policy differences
                (continued):**





AdditionalShare
            
            
            
            paid-inWarrants
            
            capital
            
            Deficit
            
            capital
            
            TotalTotal
                shareholders' equityunder
                U.S. GAAP,June
                30, 2007
            
            
            4,553,308
            
            
            172,921,153
            
            
            (121,604,357
            )
            
            3,895,970
            
            
            59,766,074Expiry
                of warrants
            
            
            (1,402,769
            )
            
            –
            
            
            –
            
            
            1,402,769
            
            
            –Stock-based
                compensation
            
            
            –
            
            
            –
            
            
            –
            
            
            2,063,973
            
            
            2,063,973Loss
                for the year
            
            
            –
            
            
            –
            
            
            (13,825,203
            )
            
            –
            
            
            (13,825,203
            )Total
                shareholders' equityunder
                U.S. GAAP,June
                30, 2008
            
            
            3,150,539
            
            
            172,921,153
            
            
            (135,429,560
            )
            
            7,362,712
            
            
            48,004,844Stock-based
                compensationexpense
            
            
            –
            
            
            –
            
            
            (1,818,334
            )
            
            1,761,112
            
            
            (57,222
            )In-process
                research anddevelopment
                acquired
            
            
            –
            
            
            –
            
            
            7,348,185
            
            
            –
            
            
            7,348,185Amortization
                of in-processresearch
                and developmentacquired
            
            
            –
            
            
            –
            
            
            (3,282,776
            )
            
            –
            
            
            (3,282,776
            )Total
                shareholders' equityunder
                Canadian GAAP,June
                30, 2008
            
            $
            3,150,539
            
            $
            172,921,153
            
            $
            (133,182,485
            )
            $
            9,123,824
            
            $
            52,013,031




United
      States GAAP requires the disclosures of a consolidated statement of
      comprehensive income. Comprehensive income generally encompasses all changes
      in
      shareholders' equity, except those arising from transactions with shareholders.
      There have been no material transactions that would have been included in
      comprehensive income had the statements been prepared in accordance with United
      States GAAP.





F-39




**17.**
            **Canadian
                and United States accounting policy differences
                (continued):**




(c)
            Investment
                tax credits:




Canadian
      GAAP requires that investment tax credits relating to development costs be
      accounted for as a reduction of development costs. United States GAAP requires
      such amounts to be accounted for as a reduction of income tax expense. There
      is
      no impact on the loss for the year as a result of this GAAP difference.
      Investment tax credits recognized are as follows:





Years
                ended June 30,2008
            
            2007
            
            2006$
            –
            
            $
            –
            
            $
            133,779




(d)
            Income
                taxes:




Canadian
      GAAP requires that future income taxes be calculated using enacted income tax
      rates or, where they exist, substantively enacted income tax rates. United
      States GAAP does not permit the use of substantively enacted rates. As a full
      valuation allowance has been recorded against all future tax assets, the future
      tax assets and valuation allowances are also different as a result of
      Canadian/United States GAAP loss differences.




The
      future tax assets and related valuation allowances as would have been calculated
      using United States GAAP are approximately $65,212,000, $68,741,000 and
      $59,530,000, respectively, for the years ended June 30, 2008, 2007 and
      2006.





F-40




**17.**
            **Canadian
                and United States accounting policy differences
                (continued):**




(e)
            Acquisitions:




The
      following pro forma financial information reflects the results of operations
      of
      the Company as if the acquisition of Eximias had taken place on July 1, 2005.
      The pro forma financial information is not necessarily indicative of the results
      as it would have been if the acquisition had been effected on the assumed date
      and is not necessarily indicative of future results.





2006Pro
                forma revenue
            
            $
            4,180,287Pro
                forma loss
            
            
            (35,778,180
            )Pro
                forma basic anddiluted
                loss per share
            
            
            (0.74
            )




(f)
            New
                accounting pronouncements:




In
      June
      2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
      Income Taxes ("FIN 48"), which is an interpretation of SFAS 109, Accounting
      for
      Income Taxes. This interpretation prescribes a recognition threshold and
      measurement attribute for the financial statement recognition and measurement
      of
      a tax position taken or expected to be taken in a tax return and also provides
      guidance on derecognizing, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition.




The
      Company adopted the provisions of FIN 48 on July 1, 2007. The implementation
      of
      FIN 48 did not result in any adjustment to the Company's beginning tax
      positions. The Company continues to fully recognize its tax benefits, which
      are
      offset by a valuation allowance to the extent that it is more likely than not
      that the deferred tax assets will not be realized. The Company does not expect
      any significant changes in its unrecognized tax benefits for the next 12
      months.





F-41




**17.**
            **Canadian
                and United States accounting policy differences
                (continued):**




The
      parent company and its Canadian subsidiary each file a Canadian federal and
      Ontario income tax return. Gene rally,
      the Company is no longer subject to federal and provincial income tax
      examinations by Canadian tax authorities for year ends prior to June 30, 2004.
      However, years 2001 to 2008 remain open with respect to related party
      transactions.




The
      Company's U.S. subsidiaries file a consolidated U.S. federal income tax return
      and consolidated and separate company income tax returns in many U.S. state
      jurisdictions. Generally, the Company is no longer subject to federal and state
      income tax examinations by U.S. tax authorities for years prior to
      2004.




The
      Company recognizes any interest accrued related to unrecognized tax benefits
      in
      interest expense and penalties in operating expenses. During the year ended
      June 30, 2008, there were no such interest or penalties.




(g)
            Recently
                issued accounting pronouncements not yet
                adopted:




In
      September 2006, the FASB issued FASB Statement No. 157 ("SFAS 157"), Fair Value
      Measurements, which defines fair value, establishes a framework for measuring
      fair value under GAAP, and expands disclosures about fair value measurements.
      SFAS 157 applies to other accounting pronouncements that require or permit
      fair
      value measurements. The new statement is effective for financial statements
      issued for fiscal years beginning after November 15, 2007, and for interim
      periods within those fiscal years, specifically July 1, 2008 for the
      Company. The Company is currently evaluating the potential impact, if any,
      of
      the adoption of SFAS 157 on the consolidated financial position, results of
      operations and cash flows.





F-42




**17.**
            **Canadian
                and United States accounting policy differences
                (continued):**




In
      February 2007, the FASB issued FASB Statement No. 159 ("SFAS 159"), The Fair
      Value Options for Financial Assets and Financial Liabilities, which permits
      entities to choose to measure many financial instruments and certain warranty
      and insurance contracts at fair value on a contract-by-contract basis. SFAS
      159
      applies to all reporting entities, including not-for-profit organizations,
      and
      contains financial statement presentation and disclosure requirements for assets
      and liabilities reported at fair value as a consequence of the election. SFAS
      159 is effective as of the beginning of an entity's first year that begins
      after
      November 15, 2007, specifically July 1, 2008 for the Company. Early adoption
      is
      permitted subject to certain conditions; however an early adopter must also
      adopt FASB Statement No. 157 at the same time. The Company does not expect
      the
      adoption of SFAS 159 to have an impact on its consolidated financial position,
      results of operations or cash flows.




In
      December 2007, the FASB issued Statement No. 141R ("SFAS 141R"), Business
      Combinations, which requires most identifiable assets, liabilities,
      non-controlling interests and goodwill acquired in a business combination to
      be
      recorded at full fair value. SFAS 141R applies to all business
      combinations, including combinations among mutual entities and combinations
      by
      contract alone. Under SFAS 141R, all business combinations will be accounted
      for
      by applying the acquisition method. SFAS 141R is effective for business
      combinations for which the acquisition date is on or after the beginning of
      the
      first annual reporting period beginning on or after December 15, 2008,
      specifically July 1, 2009 for the Company.




In
      December 2007, the FASB issued Statement No. 160 ("SFAS 160"), Non-controlling
      Interests in Consolidated Financial Statements, which will require
      non-controlling interests (previously referred to as minority interests) to
      be
      treated as a separate component of equity, not as a liability or other item
      outside permanent equity. SFAS 160 applies to the accounting for non-controlling
      interests and transactions with non-controlling interest holders in consolidated
      financial statements. SFAS 160 is effective for annual periods beginning on
      or
      after December 15, 2008, specifically July 1, 2009 for the Company. Earlier
      application is prohibited. SFAS 160 will be applied prospectively to all
      non-controlling interests, including any that arose before the effective date,
      except that comparative period information must be recast to classify
      non-controlling interests in equity, attribute net income and other
      comprehensive income to non-controlling interests and provide other disclosures
      required by SFAS 160. The Company does not expect the adoption of SFAS 160
      to
      have an impact on its consolidated financial statements.





F-43




**17.**
            **Canadian
                and United States accounting policy differences
                (continued):**




In
      March
      2008, the FASB issued Statement No. 161 ("SFAS 161"), Disclosures about
      Derivative Instruments and Hedging Activities, which requires enhanced
      disclosures about an entity's derivative and hedging activities and thereby
      improves the transparency of financial reporting. Mainly, entities are required
      to provide enhanced disclosures about (i) how and why an entity uses
      derivative instruments, (ii) how derivative instruments and related hedged
      items
      are accounted for under Statement 133 and its related interpretations, and
      (iii)
      how derivative instruments and related hedged items affect an entity's financial
      position, financial performance, and cash flows. SFAS 161 is effective for
      financial statements issued for fiscal years beginning after November 15, 2008,
      specifically July 1, 2009 for the Company. SFAS 161 encourages, but does
      not require, comparative disclosures for earlier periods at initial adoption.
      The Company does not expect the adoption of SFAS 161 to have an impact on its
      consolidated financial position, financial performance or cash flows.




In
      May
      2008, the FASB issued Statement No. 162 ("SFAS 162"), The Hierarchy of Generally
      Accepted Accounting Principles. SFAS 162 identifies the sources of generally accepted
      accounting principles and provides a framework, or hierarchy, for selecting
      the principles
      to be used in preparing U.S. GAAP financial statements for non-governmental entities.
      SFAS 162 makes the GAAP hierarchy explicitly and directly applicable to preparers
      of financial statements, a step that recognizes preparers' responsibilities
      for selecting
      the accounting principles for their financial statements. SFAS 162 is effective
      60 days following the Securities and Exchange Commission's approval of the
      Public Company Accounting Oversight Board (United States)'s related amendments
      to AU Section
      411, The Meaning of Present Fairly in Conformity with Generally Accepted
      Accounting Principles. The Company does not expect the adoption of SFAS 162
      to
      have an impact on its consolidated financial position, financial performance
      or
      cash flows.




F-44





**Form
      20-F Exhibit List**




**Exhibit**
            **Description**1.1
            Certificate
                of Continuance dated December 11, 2001 (incorporated by reference
                to
                Exhibit 1.1 to the Form 20F of YM BioSciences Inc., filed on May
                18, 2004
                (File No. 1-32186)).1.2
            Certificate
                of Registration dated December 11, 2001 (incorporated by reference
                to
                Exhibit 1.2 to the Form 20F of YM BioSciences Inc., filed on May
                18, 2004
                (File No. 1-32186)).1.3
            Memorandum
                of Association dated December 11, 2001(incorporated by reference
                to
                Exhibit 1.3 to the Form 20F of YM BioSciences Inc., filed on May
                18, 2004
                (File No. 1-32186)).1.4
            Articles
                of Association dated December 11, 2001(incorporated by reference
                to
                Exhibit 1.4 to the Form 20F of YM BioSciences Inc., filed on May
                18, 2004
                (File No. 1-32186)).1.5
            Directors
                resolution re creation and issuance of Class B Preferred Shares,
                Series 1
                (incorporated by reference to Exhibit 1.5 to the Form 20F of YM
                BioSciences Inc., filed on May 18, 2004 (File No.
                1-32186)).2.1
            Form
                of the Corporation’s Canadian common share purchase warrant (incorporated
                by reference to Exhibit 2.1 to the Form 20F of YM BioSciences Inc.,
                filed
                on May 18, 2004 (File No. 1-32186)).2.2
            Form
                of the Corporation’s United States common share purchase warrant
                (incorporated by reference to Exhibit 2.2 to the Form 20F of YM
                BioSciences Inc., filed on May 18, 2004 (File No.
                1-32186)).2.3
            Form
                of the Corporation’s Canadian placement agent warrant (incorporated by
                reference to Exhibit 2.3 to the Form 20F of YM BioSciences Inc.,
                filed on
                May 18, 2004 (File No. 1-32186)).2.4
            Form
                of the Corporation’s United States placement agent warrant (incorporated
                by reference to Exhibit 2.4 to the Form 20F of YM BioSciences Inc.,
                filed
                on May 18, 2004 (File No. 1-32186)).2.5
            Form
                of warrant certificate granted by the Corporation to Scott McLean
                dated
                February 7, 2006.4.1
            Licensing
                Bonus Pool Plan dated March 31, 2004(incorporated by reference to
                Exhibit
                4.8 to the Form 20F of YM BioSciences Inc., filed on May 18, 2004
                (File
                No. 1-32186)).4.2
            Amended
                and Restated Stock Option Plan dated November 28,
                2007.





EX-1




4.3
            Shareholder
                Rights Plan Agreement dated as of October 22, 2007 (incorporated
                by
                reference to Exhibit 2.1 to the Form 8A of YM BioSciences Inc., filed
                on
                December 11, 2007 (File No. 1-32186)).4.4
            License
                Agreement between YM BioSciences Inc. (formerly known as York Medical
                Inc.), University of Manitoba and The Manitoba Cancer Treatment and
                Research Foundation, carrying on its undertaking as Cancercare Manitoba,
                dated November 2, 2000 (incorporated by reference to Exhibit 4.4
                to the
                Form 20F of YM BioSciences Inc., filed on May 18, 2004 (File No.
                1-32186)).4.5
            License
                Agreement between CIMYM Inc. and CIMAB SA, January 24, 2001(incorporated
                by reference to Exhibit 4.5 to the Form 20F of YM BioSciences Inc.,
                filed
                on May 18, 2004 (File No. 1-32186)).4.6
            License
                Agreement between YM BioSciences Inc. (formerly known as Yorkton
                Medical
                Inc.) and CIMAB SA, dated May 3, 1995(incorporated by reference to
                Exhibit
                4.6 to the Form 20F of YM BioSciences Inc., filed on May 18, 2004
                (File
                No. 1-32186)).4.7
            Joint
                Venture Shareholders’ Agreement between YM Biosciences Inc. (formerly
                known as York Medical Inc.), CIMYM Inc. (an Ontario Corporation)
                and CIMAB
                S.A dated November 14, 1995 (incorporated by reference to Exhibit
                4.10 to
                the Form 20F of YM BioSciences Inc., filed on May 18, 2004 (File
                No.
                1-32186)).4.8
            Assignment
                and Assumption Agreement between YM Biosciences Inc. (formerly known
                as
                York Medical Inc.), and CIMYM Inc. dated November 22, 1995 (incorporated
                by reference to Exhibit 4.11 to the Form 20F of YM BioSciences Inc.,
                filed
                on May 18, 2004 (File No. 1-32186)).4.9
            Letter
                from YM Biosciences Inc. (formerly known as York Medical Inc.) to
                CIMYM
                Inc. dated November 23, 1995 (incorporated by reference to Exhibit
                4.12 to
                the Form 20F of YM BioSciences Inc., filed on May 18, 2004 (File
                No.
                1-32186)).4.10
            Joint
                Venture Shareholders’ Agreement between YM BioSciences Inc. (formerly
                known as York Medical Inc.), CIMYM Inc. (a Barbados Corporation)
                and CIMAB
                S.A. dated May 16, 1996 (incorporated by reference to Exhibit 4.14
                to the
                Form 20F of YM BioSciences Inc., filed on May 18, 2004 (File No.
                1-32186)).4.11
            Amended
                and Restated Development and License Agreement between CIMYM Inc.,
                CIMAB
                SA and Oncoscience AG, dated August 15, 2007.4.12
            Lease
                Agreement between Chesterbrook Partners, L.P. and YM BioSciences
                USA, Inc.
                dated July 27, 2006.4.13
            Lease
                Amending and Extension Agreement between 1411029 Ontario Limited
                and YM
                BioSciences Inc. dated December 4, 2007.4.14
            Merger
                Agreement among YM BioSciences Inc., 2069044 Ontario Limited, DELEX
                Therapeutics Inc., Business Development Bank of Canada, New Generation
                Biotech (Equity) Fund Inc., and Eastern Technology Seed Investment
                Fund
                Limited Partnership dated April 12, 2005 (incorporated by reference
                to
                Exhibit 99.2 to the Form 6K of YM BioSciences Inc., filed on May
                3, 2005
                (File No. 1-32186)).





EX-2




4.15
            Amalgamation
                Agreement among YM BioSciences Inc., 2069044 Ontario Limited and
                DELEX
                Therapeutics Inc. dated May 2, 2005 (incorporated by reference to
                Exhibit
                99.3 to the Form 6K of YM BioSciences Inc., filed on May 3, 2005
                (File No.
                1-32186)).4.16
            Escrow
                Agreement between YM BioSciences Inc. and Equity Transfer Services
                Inc.
                dated May 2, 2005 (incorporated by reference to Exhibit 99.4 to the
                Form
                6K of YM BioSciences Inc., filed on May 3, 2005 (File No.
                1-32186)).4.17
            Placement
                Agent Agreement between YM BioSciences Inc., and SG Cowen & Co., LLC,
                Dundee Securities Corporation and Canaccord Capital Corporation as
                placement agents dated February 13, 2006 (incorporated by reference
                to
                Exhibit 99.1 to the Form 6K of YM BioSciences Inc., filed on February
                17,
                2007 (File No. 1-32186)).4.18
            Agreement
                and Plan of Merger by and among YM BioSciences Inc., YM Biosciences
                USA
                Inc., YM Biosciences U.S. Operations Inc., Eximias Pharmaceutical
                Corporation, and Orbimed Advisors, LLC, as Stockholder Representative
                dated April 13, 2006.4.19
            Clinical
                Research Services Agreement between YM BioSciences Inc. and Pharm-Olam
                International Ltd. dated as of February 22, 2005.4.20
            Clinical
                Research Services Agreement between YM BioSciences Inc. and All-Phase
                Clinical Research Inc. dated as of April 2, 2007.4.21
            Clinical
                Research Services Agreement between YM BioSciences Inc. and AAI Pharma
                Inc. dated as of November 9, 2007.12.1
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14 of
                the
                Securities Exchange Act of 1934.12.2
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14 of
                the
                Securities Exchange Act of 1934.13.1
            Certification
                of Chief Executive Officer pursuant to 18 U.S.C. Section
                1350.13.2
            Certification
                of Chief Financial Officer pursuant to 18 U.S.C. Section
                1350.15.1
            Consent
                of KPMG LLP





EX-3