**Exhibit
      99.1**




**YM
          BIOSCIENCES INC.**
 
 **ANNUAL
          INFORMATION FORM**
 
 **YEAR
          ENDED JUNE 30, 2007**
 
 
 
  
 
 
 
 
 
 **September
          24, 2007**
   **YM
            BIOSCIENCES INC.**
 
 **ANNUAL
            INFORMATION FORM**
 
 
 
 **TABLE
            OF CONTENTS**
 
 DOCUMENTS
                      INCORPORATED BY REFERENCE
                  
                  
                  2GLOSSARY
                      OF TERMS AND PROPER NAMES
                  
                  
                  3FORWARD
                      LOOKING STATEMENTS
                  
                  
                  6CORPORATE
                      STRUCTURE
                  
                  
                  6GENERAL
                      DEVELOPMENT OF THE BUSINESS
                  
                  
                  7NARRATIVE
                      DESCRIPTION OF THE BUSINESS
                  
                  
                  8DIVIDENDS
                  
                  
                  37CAPITAL
                      STRUCTURE
                  
                  
                  38COMMON
                      SHARES
                  
                  
                  38MARKET
                      FOR SECURITIES
                  
                  
                  38DIRECTORS
                      AND OFFICERS
                  
                  
                  39AUDIT
                      FEES
                  
                  
                  46LEGAL
                      PROCEEDINGS
                  
                  
                  46TRANSFER
                      AGENT AND REGISTRAR
                  
                  
                  46MATERIAL
                      CONTRACTS
                  
                  
                  46INTERESTS
                      OF EXPERTS
                  
                  
                  47ADDITIONAL
                      INFORMATION
                  
                  
                  47
 
 **DOCUMENTS
            INCORPORATED BY REFERENCE**
  YM
            BioSciences’ “Management’s Discussion and Analysis of Financial Condition and
            Results of Operations” (the “MD&A”) and the audited consolidated balance
            sheets as at June 30, 2007 and June 30, 2006 and the audited consolidated
            statements of earnings and retained earnings and changes in financial
            position
            for each of the years in the three year period ended June 30, 2007 (the
            “Financial Statements”) previously filed.
  The
            MD&A and the Financial Statements, in their entirety, are incorporated by
            reference in, and form part of, this Annual Information Form.
  All
            of the documents referred to above have been filed via SEDAR (System
            for
            Electronic Document Analysis and Retrieval) and are available to the
            public at
            SEDAR’s website, *www.sedar.com*.  Further information may also
            be found on the Corporation’s website
*www.ymbiosciences.com*.
  
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                  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)
  Amgen
            - Amgen Incorporated
  ASCO
            - The American Society of Clinical Oncology
  AstraZeneca
            - AstraZeneca PLC
  BMS
            - Bristol Myers Squibb Company
  Cancer
            Vaccine - Vaccines or candidate vaccines designed to treat cancer
  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
            BioSciences - CIMYM BioSciences Inc., an 80% owned subsidiary of YM
  CR
            - Complete Response, the disappearance of a tumour
  CTA
            - Clinical Trial Application - previously known as an Investigational
            New Drug
            application which must be filed and accepted by the regulatory agency
            of Health
            Canada before each phase of human clinical trials may begin
  Cyclophosphamide
            - Approved chemotherapeutic agent
  Cytoprotective
            - Having the capacity to protect cells
  Cytotoxic
            - Having capacity to kill cells
  DEA
            - Drug Enforcement Administration (United States)
  DELEX
            - DELEX Therapeutics Inc., a wholly-owned subsidiary of YM which was
            wound up on
            April 30, 2006 into the Corporation
  Doxorubicin
            - Approved chemotherapeutic agent
  DSMB
            - Data Safety Monitoring Board
  EGFr
            - A protein known as Epidermal Growth Factor Receptor
  Eli
            Lilly - Eli Lilly and Company
  EMEA
            - The Europe Agency for the Evaluation of Medicinal Products - the European
            health regulatory authority
 
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                  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
            - United States Food and Drug Administration
  Fusion
            protein - Two or more proteins genetically engineered to be produced
            as a single
            protein
  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 United States, to be used
            as a
            standard in accordance with the World Health Organization's Certification
            Scheme
            on the quality of pharmaceutical products
  GnRH
            - Gonadotrophin Releasing Hormone; controlling the circulating levels
            of the sex
            hormones
  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
  ISIS
            - ISIS Pharmaceuticals
  Ligand
            - Used herein to describe a protein or peptide that binds to a particular
            receptor
  Lorus
            - Lorus Therapeutics Inc.
  Merck
            - Merck KGaA
  Metastatic
            - A term used to describe a cancer where tumor cells have migrated from
            the
            primary tumor to a secondary site (e.g. from prostate to bone)
  Monoclonal
            antibody (“MAb”) - Antibodies of exceptional purity and specificity derived from
            hybridoma cells
  Murine
            - adjective for mouse
  NCE
            - A new chemical entity
  Neoplastic
            - New and abnormal growth of tissue (neoplasm), which may be benign or
            cancerous
  
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                  4
                  -
 
 NSCLC
            - Non Small Cell Lung Cancer
  OFAC
            - Office of Foreign Assets Control of the United States Department of
            the
            Treasury
  Oncoscience
            - Oncoscience AG of Germany
  Orange
            Book - A reference to the Hatch/Waxman Act
  Orphan
            Drug - A drug aimed at treating a condition with an incidence of less
            than
            200,000 per year in the United States (often given a seven year market
            exclusivity by the FDA
  OSI
            - OSI Pharmaceuticals, Inc.
  Overall
            Survival - For patients who have died, overall survival was calculated
            in months
            from the day of randomization to date of death. Otherwise, survival was
            censored
            at the last day the patient is known alive
  PR
            - Partial Response, the shrinkage of a tumour 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 Tumours, a US standard
  Roche
            - F.Hoffmann-LaRoche Ltd.
  SD
            - Stable Disease
  TAP
            - TAP Pharmaceuticals
  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
  YM
            (USA) - YM BioSciences USA Inc., a wholly-owned subsidiary of YM
  YM
            US Operations - YM BioSciences US Operations Inc., an indirect wholly-owned
            subsidiary of YM
  
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                  5
                  -
 
 **FORWARD
            LOOKING STATEMENTS**
  Statements
            contained in this annual information form that are not based on historical
            fact,
            including without limitation statements containing the words "believes,"
            "may,"
“likely,” "plans," "will," "estimate," "continue," "anticipates," "intends,"
            "expects" and similar expressions, constitute "forward-looking statements"
            within the meaning of the United States Private Securities Litigation
            Reform Act
            of 1995. Such forward-looking statements involve known and unknown risks,
            uncertainties and other factors that may cause the actual results, events
            or
            developments to be materially different from any future results, events
            or
            developments expressed or implied by such forward-looking statements.
            Such
            factors include, without limitation, changing market conditions, our
            ability to
            obtain patent protection and protect our intellectual property rights,
            commercialization limitations imposed by intellectual property rights
            owned or
            controlled by third parties, intellectual property liability rights and
            liability claims asserted against us, the successful and timely completion
            of
            clinical studies, the impact of competitive products and pricing, new
            product
            development, uncertainties related to the regulatory approval process,
            product
            development delays, our ability to attract and retain business partners
            and key
            personnel, future levels of government funding, our ability to obtain
            the
            capital required for research, operations and marketing and other risks
            detailed
            elsewhere in this annual information form and in the documents incorporated
            by
            reference herein.  These forward-looking statements are based on our
            beliefs and expectations on the date the statements are made, and subject
            to the
            requirements of applicable securities laws, we undertake no obligation
            to
            publicly update or revise any forward-looking statements, whether as
            a result of
            new information, future events or otherwise. In light of these risks,
            uncertainties and assumptions, the forward-looking events discussed in
            this
            annual information form might not occur and you should not place undue
            reliance
            on forward-looking statements.  Forward-looking statements are subject
            to known and unknown risks, uncertainties and other factors that may
            cause our
            actual results, level of activity, performance or achievements to be
            materially
            different from those expressed or implied by such forward-looking statements,
            including:
 •
                  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 regulatory approvals and, ultimately, product
                      launches
 •
                  dependence
                      on third parties for successful commercialization of our
                      products
 •
                  insufficient
                      quota of active ingredient supply 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
 •
                  the
                      uncertainty of recovery of advances to joint venture
                      subsidiaries
 •
                  other
                      factors discussed under “Risk
                      Factors”.
  Unless
            otherwise indicated, or the context requires otherwise, the information
            appearing in this annual information form is stated as at June 30, 2007
            and
            references in this annual information form to “$” or “dollars” are to Canadian
            dollars. Information contained on our website is not part of this annual
            information form.
  In
            this annual information form, “YM BioSciences”, “YM”, “we”, “us”, “our” and the
“Corporation” refer to YM BioSciences Inc. and its subsidiaries.
  **CORPORATE
            STRUCTURE**
  YM
            BioSciences Inc. was incorporated under the laws of the Province of Ontario
            on
            August 17, 1994 under the name “York Medical Inc.”. On February 7, 2001 we
            changed our name to “YM BioSciences Inc.” and on December 11, 2001 were
            continued into the Province of Nova Scotia under the Nova Scotia *Companies
            Act*.
  Our
            head office and principal place of business is 5045 Orbitor Drive, Building
            11,
            Suite 400, Mississauga, Ontario, L4W 4Y4. Our registered head office
            is 1959
            Upper Water Street, Suite 800, Halifax, Nova Scotia, B3J 2X2
  **Organizational
            Structure**
  We
            currently have three material subsidiaries, shown in the following
            diagram:
  
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                  6
                  -
 
 
  
  (1)
                    20%
                        owned by CIMAB S.A.
 (2)
                    US
                        operating subsidiary (formerly Eximias Pharmaceutical
                        Corporation)
  On
            June 30, 2006 CIMYM Inc., an Ontario company was amalgamated under the
            laws of
            Ontario with CIMYM Inc., a Barbados company to form CIMYM BioSciences
            Inc
            (CIMYM). CIMYM is 80% owned by the Corporation and 20% owned by
            CIMAB.
  On
            May 2, 2005, the Corporation acquired all of the issued and outstanding
            shares
            of capital stock of DELEX Therapeutics Inc.  YM issued to the DELEX
            shareholders common shares of YM in consideration for their DELEX shares
            and
            additional shares of YM in consideration for working capital in
            DELEX.  On April 30, 2006 DELEX was dissolved and wound
            up.
  YM
            BioSciences USA Inc. (YM USA) was incorporated on November 23, 2005 under
            the
            laws of Delaware. YM US Operations was incorporated on April 10, 2006
            under the
            laws of Delaware. On May 9, 2006 YM US Operations was merged with Eximias
            Pharmaceutical Corporation.
  Unless
            otherwise noted, “YM BioSciences”, “YM”, and the “Corporation” includes YM
            BioSciences Inc. and its subsidiaries.
  **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.
  In
            1995, we secured our first drug licenses and our initial financing. We
            initially
            licensed a range of drug products 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 United
            States,
            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 licensed certain drug products that
            were
            pre-clinical. See “Narrative Description of the Business - Products in Clinical
            Development” and “-- Products in Pre-Clinical Development”.
  We
            have three product candidates currently in the clinical stage of
            development:
  
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                  -
 
 
  o
            NIMOTUZUMAB (previously known as TheraCIM hR3), a humanized monoclonal
            antibody,
            targeting the protein known as Epidermal Growth Factor Receptor ("EGFr"),
            is
            designed to treat epithelial cancers and to be administered prior to,
            simultaneously with, or subsequent to, chemotherapy and radiotherapy.
            In various
            Phase II trials, the drug has 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, Columbia, and India.
            Certain
            of our rights to nimotuzumab have been sub-licensed to Daiichi-Sankyo
            Co. Ltd in
            Japan, Oncoscience AG in Europ, to Kuhnil Pharmaceutical Company for
            Korea and
            to Innogene Kalbiotech Ltd. of Singapore for certain Pacific-rim countries
            and
            certain African countries.
  o
            AeroLEFTM, a proprietary formulation of both free and liposome-encapsulated
            fentanyl administered by pulmonary inhalation, is being developed for
            the
            treatment of severe and moderate acute pain including cancer
            pain.  AeroLEFTM has been developed to provide both rapid onset and
            extended relief of 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 in 2007 to commence a US trial.
  o
            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
            351 events indicated it was very unlikely significant differences in
            the overall
            survival rate would be shown between treatment arms. In a previous Phase
            III
            trial, tesmilifene was administered with doxorubicin and demonstrated
            a greater
            than 50% increase in survival in women with metastatic and recurrent
            breast
            cancer compared with the patients treated with doxorubicin alone. As
            at June 30,
            2007, tesmilifene continues to be studied in a cooperative trial together
            with
            Sanofi-Aventis in which tesmilifene is added to Taxotere regimen for
            the
            treatment of women with metastatic breast cancer and we have announced
            the
            intention of conducting no additional 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.
  **NARRATIVE
            DESCRIPTION OF THE BUSINESS**
  We
            are a biopharmaceutical company engaged in the development of products
            primarily
            for the treatment of patients with cancer (see “Business Overview”). We own or
            in-license substances designed for anti-cancer use 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 United States, 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 clinical development includes two anti-cancer
            agents (a monoclonal antibody and a small molecule) in a number of formulations
            currently targeting more than ten 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 in pre-clinical development. We principally
            intend
            to license the rights to manufacture and market our drug products to
            other
            pharmaceutical companies in exchange for license fees and royalty payments
            and
            to continue to seek other in-licensing opportunities in pursuing our
            business
            strategy. 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.
  
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 **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 in this Annual Information Form, 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
            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, have
            received regulatory approval for sale in any jurisdiction in which we
            have an
            economic interest in a product. Accordingly, we have not generated any
            revenues
            from the product sales. A significant 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.
  **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.**
  Up
            to June 30, 2007, we recognized as revenue approximately $6.3 million
            from a
            number of licensing agreements including the July 2004 agreement signed
            with
            Tarcanta Inc. (a subsidiary of Cancervax Corporation, now Micromet Inc.)
            with
            respect to products relating to HER-1 and TGFa; 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; a January 2006 agreement
            with Innogene Kalbiotech Private Limited to which the Company licensed
            the
            commercial rights for nimotuzumab for several countries in Asia and Africa;
            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, 2007, we have
            an
            accumulated deficit of $118.3 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 offset increases in expenditures and the accumulated
            deficit
            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 license
            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, AeroLEFTM technology was developed at Dalhousie
            University.
  
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  **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 manufacture, 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 shall supply commercial quantities or will source such supply
            if, as
            and when approval for sale has been granted. The formulation of AeroLEFTM is
            manufactured for us by Dalton Pharma Services in Toronto, Canada in quantities
            sufficient for clinical trials. Tesmilifene is manufactured for us by
            Abraxis
            Bioscience Inc. in Chicago, Illinois in quantities sufficient for clinical
            trials.
  **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. 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 United States 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 has been suspended until such time,
            if at all,
            that there is a default under the agreement with Tarcanta. Under the
            terms of
            the new agreement and in consideration for the suspension of the 2001
            CIMYM
            License, we were entitled to receive an aggregate payment of $1,000,000
            payable
            in four equal instalments, with the final payment being made on December
            31,
            2005. In addition, under the new agreement we may receive 35% of an aggregate
            of
            $16,350,000 in milestone payments to be paid by Tarcanta upon the successful
            completion of certain research and development activities. We have no
            continuing
            involvement in these research and development activities and have no
            future
            obligations under the development plan established by the out-licensing
            arrangement between CIMAB and Tarcanta. Finally, we retain an interest
            in the
            revenues from the manufacture, marketing and sub-licensing of the
            drugs.
  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 US$14.5 million and will 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.
  
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  **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.
  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. Tesmilifene (which is licensed to
            us) and
            AeroLEFTM (which is owned by us) have been manufactured, finished and filled in
            small quantities for testing by third parties. The manufacturing processes
            for
            these drugs are such that we expect that commercial quantities of these
            drugs
            can be manufactured. If current suppliers cannot manufacture commercial
            quantities or we otherwise experience a problem with current suppliers,
            it will
            be necessary for us to obtain these drugs from new suppliers. We do not
            have
            supply agreements with the third party suppliers of tesmilifene or AeroLEFTM, but
            suppliers have produced quantities for us to specification on purchase
            order. We
            expect that we could find new suppliers for AeroLEFTM, 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 will be successful.  All manufacturing facilities must
            comply with applicable regulations in their jurisdiction or where products
            are
            to be sold. In addition, production of the licensed and owned products
            may
            require raw materials for which the sources and amount of supply are
            limited. An
            inability to obtain adequate supplies of such raw materials could significantly
            delay the development, regulatory approval and marketing of our licensed
            and
            owned products.
  **We
            are dependent on devices from third parties in order to successfully
            commercialize AeroLEFTM.**
  Third-party
            devices will be an important element for successful commercialization
            of
            AeroLEFTM in both the inpatient and outpatient settings.
  We
            have selected the AeroEclipse(R) inhalation device for our Phase II clinical
            studies for the inpatient indications for AeroLEFTM and anticipate using the
            AeroEclipse(R) for our planned Phase III clinical studies for the inpatient
            market opportunity. Material changes to the AeroEclipse(R) device by
            the
            manufacturer or a decision to switch to an alternative inhalation device
            would
            likely delay the initiation of Phase III clinical trials. Switching after
            the
            initiation of Phase III studies, however, would require additional clinical
            trials and could significantly delay the commercialization of AeroLEFTM.
            Currently DELEX purchases the AeroEclipse(R) and it does not have a defined
            supply agreement.
  While
            inpatient use of AeroLEFTM, in the hospital or hospice setting, is accomplished
            with existing equipment such as the AeroEclipse(R), outpatient use will
            require
            a portable nebulization device. Several devices currently exist and are
            available for use with approved respiratory agents (bronchodilators,
            antibiotics, steroids).  We have an active development program to
            evaluate and identify the best devices for use with AeroLEFTM and other pipeline
            products. Although we would prefer to access these devices on 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.
  
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  **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 regulates chemical compounds as Schedule I, II, III, IV and V substances,
            with Schedule I substances considered to present the highest risk of
            substance
            abuse and Schedule V substances the lowest risk. Certain active ingredients
            in
            AeroLEFTM, such as fentanyl, are listed by the DEA as Schedule II under the
*Controlled Substances Act of 1970*. Consequently, their manufacture,
            research, shipment, storage, sale and use are subject to a high degree
            of
            oversight and regulation. For example, all Schedule II drug prescriptions
            must
            be signed by a physician, physically presented to a pharmacist and may
            not be
            refilled without a new prescription. Further, the amount of Schedule
            II
            substances we can obtain for clinical trials and commercial distribution
            is
            limited by the DEA and our quota may not be sufficient to complete clinical
            trials or meet commercial demand. There is a risk that DEA regulations
            may
            interfere with the supply of the drugs used in our clinical trials, and,
            in the
            future, our ability to produce and distribute our products in the volume
            needed
            to meet commercial demand.
  **We
            are dependent on licenses from third parties and the maintenance of licenses
            is
            necessary for our success.**
  We
            have obtained our rights to the licensed products under license agreements
            from
            various third party licensors as follows:
  (a)           License
            Agreement between CIMAB and us dated May 3, 1995 as amended with respect
            to
            nimotuzumab; and
  (b)           License
            Agreement between our Corporation, 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 AeroLEFTM, we do not have to license it.
  We
            depend upon the license rights to the licensed products and 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 United States and the Republic
            of Cuba.
            There can be no assurance that a court judgment or order obtained in
            one
            jurisdiction will be enforceable in another. In international venture
            undertakings it is standard practice to attorn to a neutral jurisdiction
            to seek
            remedy for unresolved commercial disputes. These arrangements are usually
            negotiated as part of the original business agreement. In the case of
            the
            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
            developed 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.
  
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  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 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 be able to force CIMAB to comply with any judgment if CIMAB or the
            Government of Cuba refuses to comply.
  **We
            have advanced funds to our joint venture subsidiaries which we are only
            entitled
            to recover when the joint venture's net income exceeds the amount of
            cumulative
            advances.**
  YM
            and CIMAB entered into a funding agreement with CIMYM (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, subject to 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 any revenue or
            profit sharing arrangements under the 1995 CIMYM License.
  As
            at June 30, 2007, we have advanced $26.5 million to CIMYM BioSciences
            and we
            have expensed the total amount. Any reimbursement of such advances would
            be
            considered to be income by us.
  **We
            are reliant on licensors 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 business internationally and are subject to laws and regulations
            of
            several countries which may affect our ability to access regulatory agencies
            and
            may affect the enforceability and value of our licenses.**
  Clinical
            trials on our products in development have been conducted by us in more
            than 20
            countries including Canada, the United Kingdom, Japan, Germany, India,
            Russia
            and the United States 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.
  
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  **We
            also conduct our business 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 an academic
            institute in Cuba. The United States has maintained an embargo against
            Cuba,
            administered by the United States 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 United States 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 United States unless the United States
            Department of Treasury issues a license or the embargo is lifted.
  The
            Helms-Burton Act authorizes private lawsuits for damages against anyone
            who
            "traffics" in property confiscated, without compensation, by the Government
            of
            Cuba from persons who at the time were, or have since become, nationals
            of the
            United States. 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 United States. However, there can be no assurance that
            this is
            correct.
  Risks
            Related To Our Financial Results And Need For Financing
  **We
            may be a "passive foreign investment company" which could result in adverse
            US
            tax consequences for US investors.**
  We
            may be deemed to be a "passive foreign investment company" ("PFIC").
            A PFIC is a
            non-US corporation that meets an income test and/or an asset test. The
            income
            test is met if 75% or more of 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. The asset test is met
            if at least
            50% of the average value of our assets produce, or are held for the production
            of, passive income. Based on our current income, assets and activities,
            we may
            be a PFIC. As a result, a US holder of our common shares could be subject
            to
            increased tax liability, possibly including an interest charge, upon
            the sale or
            other disposition of the US holder's common shares or upon the receipt
            of
            "excess distributions".
  **We
            may not be able to obtain necessary funding from sales or license fees
            or
            royalties and, as a result, may need to try to obtain future capital
            through the
            public market or private financing which may not be available on acceptable
            terms or at all.**
  We
            may 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 drug products, further develop those products
            by
            progressing the products toward regulatory approval by conducting and
            managing
            clinical trials, and finally to out-license rights to manufacture and/or
            market
            resulting drug products to other pharmaceutical firms in exchange for
            royalties
            and license fees. Due to the in- and out-licensing arrangements and 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, 2007 we had cash and short-term
            deposits totalling $75.6 million and payables of $3.3 million.
  
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  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 may be necessary to reconsider
            whether to
            continue existing projects or enter into new projects, or it may be necessary
            to
            access either the public markets or private financings whenever 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.
  **Our
            operating results and stock price may fluctuate
            significantly.**
  The
            trading price of our common shares, as with many emerging biopharmaceutical
            companies, is likely to be highly volatile. Factors such as the efficacy
            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, our common shares are highly volatile since
            it may
            take years before any of our licensed products will receive final regulatory
            approval to be marketed in Canada, the United States or other
            territories.
  **There
            is no assurance that an active trading market in our 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 Inc.,
            AstraZeneca PLC, Bristol-Myers Squibb Company, F. Hoffmann-LaRoche Ltd.,
            Genentech, Genmab A/S, ImClone Systems Inc. Merck KGaA, and OSI Pharmaceuticals,
            Inc. with respect to nimotuzumab. The main competitors, to our knowledge,
            for
            the AeroLEFTM 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.
  
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  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 United States,
            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,
            and in the United States it is the FDA. Other national regulatory agencies
            have
            similar regulatory approval processes, but each is slightly different.
            Approval
            in either Canada or the United States does not assure approval by other
            national
            regulatory agencies, although often test results from one country may
            be used in
            applications for regulatory approval in another country.
  Prior
            to obtaining final regulatory approval to market a drug product, every
            national
            regulatory agency has a variety of statutes and regulations which govern
            the
            principal development activities. These laws require controlled research
            and
            testing of products, government review and approval of a submission containing
            pre-clinical and clinical data establishing the safety and efficacy of
            the
            product for each use sought, approval of manufacturing facilities including
            adherence to 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 approvals to develop
            and
            test our products. Nimotuzumab has been approved for testing in the US,
            Canada,
            Europe, Japan, Korea, and Indonesia/Malaysia/Singapore and has been designated
            as an orphan drug in Europe and the United States. It is in Phase II
            and III
            trials in certain of those territories. Trials of AeroLEFTM 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, Europe, Japan and other Southeast
            Asian
            countries sub-licensed by YM is also being separately developed or tested
            in
            India, China, Argentina, Columbia, and Cuba. The US established an embargo
            against Cuba in 1961, reinforced by the Helms-Burton Act in 1996 and
            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 Corporation will be able to complete clinical testing
            in the
            United States or obtain final regulatory approval in order to successfully
            commercialize our nimotuzumab in the United States. 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.
  
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  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,
            Germany,
            the United States 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.
  
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                  17
                  -
 
  We
            maintain patents in connection with nimotuzumab, AeroLEFTM and tesmilifene. The
            following is a description of our key current and pending patents in
            connection
            with these drug products.
  ***Nimotuzumab***
  CIMYM
            is the exclusive licensee for particular territories including the United
            States
            under a patent estate that includes composition of matter coverage for
            nimotuzumab, and further includes coverage for nimotuzumab-based formulations
            and end-uses in the treatment of EGFr-dependent cancers. The
            composition-of-matter patents are granted in the United States, in Europe,
            are
            allowable in Japan, and are pending in Canada.
  CIMYM's
            key US patent, US 5,891,996 expires in November 2015, and term extensions
            of up
            to five years may be available under the Patent Term Restoration Act.
            The same
            term and extension apply also to the key European patent, EP
            712863.
  We
            are aware of US 5,770,195, 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 US 6,217,866 which includes claims
            to any
            antibody targeting the EGFr administered with any anti-neoplastic agent.
            We
            believe that the Rorer patents are 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 have been 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”). A
            September 19, 2006 decision in the United States 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 United
            States.  In addition, we are aware of a separate series of national
            patent applications filed by ImClone, and represented by EP1080113, claiming
            the
            anti-cancer use of radiation in combination with any inhibitor of any
            receptor
            tyrosine kinase that is involved in the genesis of tumours.  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. We plan on virgorously
            challenging ImClone’s claims in respect of the radiation-related patent
            applications by having filed additional prior art in the EU 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.
  The
            manufacturing of nimotuzumab may fall within the scope of process patents
            owned
            by Protein Design Labs 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.
  There
            may also be risks related to nimotuzumab as our license originates from
            Cuba.  Cuba is a socialist country and, under the current patent law,
            ownership of the inventions of the Cuban inventors for which patent applications
            have been filed rests with the State. The material license agreement
            for our
            Cuban sourced products is a license agreement between us and CIMAB, dated
            May 3,
            1995, as awarded, with respect to nimotuzumab. There is no guarantee
            that, in
            the event of a change in the political regime, the Cuban government will
            continue to honour such license agreement.
  
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                  18
                  -
 
  ***AeroLEFTM***
  The
            AeroLEFTM 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.
  We
            are aware of US patents owned by Phares Pharmaceutical Research NV related
            to a
            method of manufacturing liposome compositions. These patents expire in
            2008 and
            are not expected to adversely affect our commercial activities.
  ***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
            United States, Europe, Japan, Canada and Australia. US patent 5,859,065
            broadly
            claims the use of tesmilifene and structurally related analogs in combination
            with any chemotherapeutic for the treatment of any cancer. Although the
            twenty-year term of this patent expires in December 2010, we plan to
            take full
            advantage of patent terms extensions of up to five additional years granted
            under the Patent Term Restoration Act in the United States. Other issued
            patents
            US 6,284,799 and US 5,747,543 expire in 2014 and 2015 respectively.
  In addition to these granted patents, 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 of the Orange Book provisions in the United States 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.
  **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.
  
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                  -
 
  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,
            United States.**
  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.
  **Business
            Overview**
  Overview
  We
            are a biopharmaceutical company engaged in the development of products
            primarily
            for the treatment of patients with cancer. We generally in-license, or
            acquire,
            substances designed to be marketed for anti-cancer use 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 United States, 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 significant investment
            of time and
            capital that is generally required before a compound is identified in
            clinical
            trials. We have in-licensed certain preclinical products which have been
            related
            to our clinical programs. We both conduct and out-source clinical trials,
            and
            out-source the manufacture of clinical materials to third parties.
  Our
            current portfolio of products in clinical development includes two anti-cancer
            agents (a monoclonal antibody and a small molecule) in a number of formulations
            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 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 license rights to promising
            products or acquire such products, further develop those products by
            conducting
            and managing clinical research and 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.
  
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                  -
 
 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.
  ***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 United States corporation, one product in Japan, one
            product
            in several jurisdictions in South East Asia and Africa and two products
            in South
            Korea. See "Business - 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 (April 2003) more than 10 million people
            are
            diagnosed with cancer every year. The organization projects a 50% increase
            in
            cancer rates from year 2000 to 2020 to reach 15 million new cases being
            diagnosed annually. According to the American Cancer Society, there were
            approximately 1.4 million new cancer cases diagnosed in the United States
            in
            2006. 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 the principal markets for
            cancer
            therapies because of the established healthcare and payor systems.
  
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                  -
 
 The
            principal types of cancer in the United States, accounting for approximately
            57%
            of the incidence of all cancers, based on management's analysis, are
            prostate
            (17%), breast (15%), lung (12%) and colorectal (11%). These four types
            of cancer
            are also responsible for the highest combined mortality, accounting for
            over 50%
            of all cancer deaths in the United States. Bladder, ovarian, brain and
            oral
            cancer, as well as lymphoma, leukemia and melanoma account for the majority
            of
            the balance of cancer deaths. The incidence of a particular cancer varies
            greatly between continents, principally because of diet and habit.
  Surgery,
            radiation and chemotherapy remain the principal effective treatments
            for cancer.
            Although there is an ongoing debate about the value of chemotherapeutics
            with
            regards to prolongation of life, their palliative value has resulted
            in
            significant improvements in quality of life for cancer sufferers. In
            addition,
            although the reason is not clearly understood, current cancer drugs are
            effective in only a subpopulation of individuals with the same disease.
            Notwithstanding this, revenues across seven major oncology markets were
            reported
            to be approximately US$34.6 billion in 2005 (Datamonitor, 2006) and are
            expected
            to increase to over US$45 billion by 2011. The use of cancer therapies
            is
            forecast to increase as diagnostic methods improve (as already demonstrated
            in
            prostate cancer) and, particularly, as more effective treatments are
            developed.
  Numerous
            new approaches to cancer are currently in clinical trials. As targets
            become
            validated and technologies improve, research is beginning to yield therapeutic
            approaches that appear to be more effective than existing ones. Monoclonal
            antibodies were first described in 1978, and are now beginning to yield
            commercially viable therapeutic products, such as Rituxan(R), the first
            monoclonal treatment for cancer, approved by the FDA in 1998. The Corporation
            is
            aware of only six naked monoclonal antibodies approved in the United States
            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(R), was approved in 1999
            in
            Canada.
  We
            are also developing a novel formulation of the opioid, fentanyl, for
            the
            treatment of severe and moderate pain, including cancer pain. In the
            United
            States cancer pain is suffered by more than 1.5 million patients. We
            are aware
            of 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”).
  Products
            In Clinical Development
  Our
            current portfolio of products in clinical development includes two anti-cancer
            agents (a monoclonal antibody and a small molecule) in a number of formulations
            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 in pre-clinical development. A number of
            the
            Corporation’s products involve newer approaches to the treatment of cancer and
            include a 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 clinical failure in 2007
            makes its
            effect uncertain. Our principal targets are of the most ubiquitous cancer
            indications, including breast, 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 all of our clinical stage candidates beyond their respective
            initial
            indications except for tesmilifene for which no additional clinical development
            is planned.
  ***Nimotuzumab***
  Background:
  Nimotuzumab
            is a humanized MAb targeting EGF Receptor (EGF-R). The EGF-R 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 have been reported when EGF-R
            targeting
            agents are combined with other anti-cancer treatments. Our EGF-R MAb
            is being
            developed to be administered alone, or in combination with other anti-cancer
            treatments.
  
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                  -
 
 Clinical
            Experience And Development
            Plans:
  Nimotuzumab
            is reported to have been administered to more than 900 cancer patients
            worldwide
            and shown to be well tolerated. The product has been approved for use
            in
            numerous clinical trials by various regulatory agencies including the
            EMEA,
            Health Canada and the FDA. 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;
  b)
                  Phase
                      II clinical trial in patients with locally advanced head-and-neck
                      cancer
                      designed to evaluate safety and efficacy in this indication.
                      Complete
                      tumour 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;
  c)
                  Phase
                      II randomized trial of nimotuzumab + radiation vs. radiation
                      alone
                      designed to evaluate efficacy and safety in 78 patients with
                      hormone
                      refractory prostate cancers, conducted by
                      CIMAB;
  d)
                  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
  e)
                  Phase
                      I safety, PK/PD and MTD trial in 15 patients with breast cancer
                      receiving
                      nimotuzumab + chemotherapy, conducted by
                      CIMAB;
  f)
                  Phase
                      I PK/PD trial in 10 patients with head-and neck cancers receiving
                      nimotuzumab + radiation, conducted by
                      CIMAB;
  g)
                  Phase
                      II/III randomized trial in 148 patients with uterine cervix
                      cancers
                      conducted by CIMAB. The study is designed to assess efficacy
                      and safety in
                      patients receiving either nimotuzumab + radiation + chemotherapy
                      or
                      radiation + chemotherapy;
  h)
                  Phase
                      II/III randomized trial in patients with head-and-neck cancers
                      conducted
                      by CIMAB. The study is designed to assess local control, safety
                      and
                      survival in 112 patients receiving either nimotuzumab + radiation
                      or
                      radiation alone;
  i)
                  Phase
                      II randomized trial of nimotuzumab + radiation vs. radiation
                      alone in 30
                      patients with brain metastases from NSCLC, conducted by
                      CIMAB;
  j)
                  Phase
                      III 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;
  k)
                  Phase
                      I/II trial in patients with 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 expected with radiation
                      alone;
  l)
                  Phase
                      I safety, PK/PD and MTD trial of nimotuzumab + chemotherapy
                      in up to 24
                      patients with transarterial immunochemoembolization in hepatocellular
                      carcinoma conducted by CIMAB;
  m)
                  Phase
                      I/II safety, PK/PD and MTD trial of nimotuzumab plus chemotherapy
                      in up to
                      24 patients with liver metastasis from colorectal cancer conducted
                      by
                      CIMAB;
  n)
                  Phase
                      II study in pediatric patients with 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 have ever been
                      documented.
  
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                  -
  o)
                  Phase
                      III study in which nimotuzumab and the current standard of
                      care is
                      compared to the current standard of care in 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.
 
 p)
                  Phase
                      II/III study in patients with locally advanced or metastatic
                      pancreatic
                      cancer who will be treated with either gemcitabine plus nimotuzumab
                      or
                      gemcitabine plus placebo conducted by Oncoscience and CIMYM.  The
                      primary end-points for this trial are time to tumour progression
                      and
                      overall survival with quality of life and response rate among
                      the
                      secondary endpoints. We anticipate we will extend the European
                      trial in
                      pancreatic cancer into Canada by submitting the protocol to
                      Canadian
                      health regulatory authorities and adding Canadian sites to
                      accelerate
                      recruitment.
 
 q)
                  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;
  r)
                  Phase
                      I pharmaco-dynamic study by CIMYM in patients with solid tumors.
                      The study
                      is investigating EGFR-related signaling 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;
  s)
                  Phase
                      I/II trial in Canada and Korea in patients with stage IIB,
                      III and IV
                      NSCLC, who are not sufficiently fit to be able to tolerate
                      the standard
                      chemotherapy regimen, conducted by CIMYM. Study designed to
                      assess safety
                      response rate and survival in these
                      patients.
  t)
                  Phase
                      III single arm trial of nimotuzumab in combination with radiation
                      in
                      children newly diagnosed with diffuse brain stem glioma. The
                      trial is
                      conducted by Oncoscience in several European countries and
                      intended to
                      serve as a registration trial in EMEA
                      countries;
  u)
                  A
                      Phase II randomized 4-arm safety and efficacy trial in 92 patients
                      with
                      head-and-neck cancers comparing nimotuzumab + chemotherapy
                      + radiation to
                      chemotherapy + radiation and nimotuzumab + radiation to + radiation, 
                      conducted by Biocon Biopharm Pvt.
                      Ltd.;
  v)
                  Phase
                      I clinical trial of nimotuzumab monotherapy for the treatment
                      of solid
                      tumours conducted by Daiichi Sankyo Inc in Japan. The study
                      will enroll a
                      maximum of 20 patients with various solid tumours and will
                      evaluate safety
                      of nimotuzumab in Japanese
                      population.
  w)
                  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 will include eight leading US pediatric
                      clinical
                      centers. The single-arm trial will enrol 44 patients with DIPG
                      who will be
                      treated with nimotuzumab as
                      monotherapy.
  x)
                  Phase
                      II trial investigating nimotuzumab in colorectal cancer patients
                      who have
                      failed previous irinotecan-containing regimens. The single-arm
                      trial
                      conducted by CIMYM will enroll approximately 100 patients in
                      Canada who
                      will be treated with irinotecan plus nimotuzumab. Equal cohorts
                      investigating two dosing schedules will be
                      enrolled.
  Several
            more trials are in planning stage but have not yet received regulatory
            approval.
  In
            July 2004, nimotuzumab was designated an orphan drug by EMEA.
  
 -
                  24
                  -
 
 In
            November 2004, nimotuzumab was designated an orphan drug by the FDA in
            the
            United States.
  In
            April 2005, we were advised that nimotuzumab was approved for sale in
            China.
  In
            May 2005, study results on 24 evaluable adult patients treated with antibody
            and
            radiation for high-grade malignant gliomas were presented at the 2005
            Annual
            Meeting of ASCO.  Reported complete response was achieved by 16.7% and
            partial response by 20.8% of patients. 66.8% of patients were reported
            to have
            achieved disease stabilization for a total 87.5% clinical benefit
            rate.
  In
            August 2005, Health Canada approved a Clinical Trial Application (CTA)
            for a
            multi-center Phase I/II trial with nimotuzumab. The randomized NSCLC
            trial will
            compare the effects of the combination of nimotuzumab with radiation
            against
            radiation alone in patients with stage IIB, III and IV disease, who are
            not
            sufficiently fit to be able to tolerate the standard chemotherapy regimen.
            The
            lead-in dose escalation part of this study was initiated in Canada and
            has been
            extended to Korea, where YM’s licensee Kuhnil Pharmaceutical Co. will fund the
            development of nimotuzumab for this territory. The randomized phase of
            the trial
            is expected to enroll approximately 100 patients and complete recruitment
            in
            approximately 18 months after initiation. The endpoint of the Phase II
            trial is
            an increase in local tumor control. First patient of the lead-in part
            of this
            study was enrolled in March 2006.
  In
            March 2006, the FDA approved 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.
  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. Biocon Biopharmaceuticals Ltd, a joint venture
            between
            Biocon (NSE:BIOCON) and CIMAB, has rights to the drug from CIMAB for
            the Indian
            sub-continent.
  In
            September 2006, YM USA received a Special License from OFAC for the importation
            of nimotuzumab for a US trial in pediatric pontine glioma.
  In
            June 2007, final data for the Phase II trial of nimotuzumab as a monotherapy
            in
            children with high-grade glioma, were presented at the 2007 Annual Meeting
            of
            ASCO.  Of 45 evaluable patients with various forms of glioma at the
            end of the six week induction phase, 21 were reported to have diffuse
            intrinsic
            pontine glioma (DIPG). Eight of the DIPG patients were reported to have
            clinical
            benefit (1 PR, 7 SD). Those eight patients continued on to maintenance
            treatment
            and were reassessed at week 21 at which point three patients were reported
            to
            have PR and one SD.
  In
            June 2007, Oncoscience reported that final data at the 2007 Annual Meeting
            of
            ASCO Phase II trial of nimotuzumab in children with high-grade glioma,
            as a
            monotherapy achieved its clinical endpoint and that six of 17 evaluable
            patients
            (35.3%) demonstrated a clinical benefit.  Data from that trial were
            presented at the European High-Grade Glioma Meeting in February 2005.
            The
            primary endpoint is progression-free survival.
  In
            July 2007, we initiated a trial in colorectal cancer in Canada. The single-arm
            trial will enroll approximately 100 patients in Canada. The trial is
            designed to
            enroll two 50-patient cohorts consecutively, with the first cohort receiving
            irinotecan on one of the conventional dosing schedules with weekly dosing
            of
            nimotuzumab and the second cohort receiving irinotecan on one of the
            conventional dosing schedules with nimotuzumab every two weeks.
  In
            August 2007, Oncoscience announced completion of enrollment in a Phase
            III
            single arm trial of nimotuzumab in combination with radiation in children
            with
            diffuse pontine glioma initiated in March 2006. The clinical trial was
            also
            reviewed by the EMEA and is designed as a prospectively registrable study
            on the
            basis of a single arm trial, because of the absence of treatment options
            for
            children suffering from pontine glioma. It is anticipated that marketing
            authorization subsequent to a successful trial would be sought under
            the EMEA
            centralized procedure. The trial enrolled 40 children with diffuse pontine
            glioma who will be treated concomitantly with radiation and nimotuzumab.
            The
            primary clinical endpoints in the trial will be Progression-Free Survival
            at six
            months with Median Survival as secondary endpoint. Clinical sites were
            located
            in Germany, Italy, Belarus and Russia.
  
 -
                  25
                  -
 
 In
            August 2007, Oncoscience advises completion of recruitment. Based on
            the
            historical median survival for this form of cancer of approximately 8.5
            months,
            the trial could be completed in the third quarter of 2008.
  In
            August 2007, Oncoscience advised that it had initiated a Phase IIa/IIIb
            trial in
            patients with metastatic pancreatic cancer and a Phase III trial in adult
            glioma
            patients.
  In
            August 2007, the FDA cleared an IND for a Phase II clinical trial for
            the
            treatment with nimotuzumab of children with progressive pediatric pontine
            glioma.
  In
            September 2007, preliminary data on the use of nimotuzumab in NSCLC was
            contained in a poster at the 12th World
            Conference on
            Lung Cancer. Preliminary results were as follows: of the six patients
            enrolled
            in the 1st cohort (100mg), four partial responses and two stable diseases
            were
            reported. Median overall survival of the group was 41.5 weeks. Of the
            seven
            patients enrolled in the second cohort (200mg) of the study, two partial
            responses and five stable diseases were reported. Median overall survival
            of the
            group has not been reached but as at September 4th, 2007
            exceeded 25
            weeks.
  Manufacturing:
  Currently,
            CIMAB supplies nimotuzumab in quantities sufficient 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
            approved for use in a clinical trial in Canada and Europe. The plant
            operates
            according to GMP principles and its cGMP compliance status has been reviewed
            on
            behalf of the Corporation by industry experts and was inspected and approved
            by
            the Paul Erlich Institute that is responsible for approvals of biological
            manufacturing facilities in Germany. The approval covers 300, 500 and
            1000 litre
            ferementers. The manufacturing facility has to continue to meet GMP standards in
            order to supply product for commercial use. In 1999, CIMAB’s process of 500
            litres was accepted by Health Canada for commercial scale
            manufacturing.
  Our
            license agreement for nimotuzumab contemplates manufacturing of the product
            by
            CIMAB or a supplier contracted by CIMAB. Should CIMAB agree to alternative
            manufacturing arrangements, such as a sub-licensee of CIMYM manufacturing
            the
            product, the loss of manufacturing benefits to CIMAB may be reflected
            in a lower
            license fee and royalty payable to CIMYM than if manufacturing remains
            with
            CIMAB. See "Business - Licensing Arrangements".
  Marketing:
  Nimotuzumab
            is licensed by us from a Cuban source, CIMAB, and as such is likely to
            be
            prohibited from sale in the United States unless OFAC issues a license
            or the US
            embargo against Cuba is lifted. YM USA has received a Special License
            from OFAC
            to the importation of nimotuzumab for a clinical trial that has been
            cleared by
            the FDA to proceed.
  Intellectual
            Property:
  CIMYM
            is the exclusive licensee for the major market territories, including
            the United
            States.  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.  These patents are granted in the United States, Europe,
            Canada, and Japan.   The patents US 5,891,966 and US 6,506,883
            expire November 2015.
  
 -
                  26
                  -
 
 We
            are aware of the patent US 5,770,195, a patent granted to Genentech,
            for the
            anti-cancer use antibodies directed toward the her1 receptor in combination
            with
            cytotoxic factors.  We are also aware of other US patents granted to
            others in this field.  In April 2001, Rhone-Poulenc Rorer
            International ("Rorer") was issued US patent 6,217,866 claiming any antibody
            targeting the EGFr administered in combination with any anti-neoplastic
            agent. A
            counterpart application was granted in Europe.  We have filed an
            opposition to the grant of the European patent citing prior art and other
            factors related to the lack of written description for the claimed subject
            matter. The opposition proceedings have been suspended pending the outcome
            of
            court cases filed by Yeda Research and Development Corp. in multiple
            jurisdictions claiming ownership of the Rorer patent. A September 19,
            2006
            decision in the United States District Court of Southern New York granted
            sole
            inventorship of the patent to scientists from Weizmann Institute of Science
            (Rehovet, Israel) represented by Yeda. Yeda now has the right to grant
            non-exclusive licenses to patent 6,217,866 in the United States. We are
            aware of
            national patent applications filed by Imclone claiming the use of tyrosine
            kinase receptor inhibitors in combination with radiation.  The
            European application EP1080113 was recently withdrawn due to prior
            art.  We plan on taking appropriate actions in additional
            jurisdictions as needed.   Imclone has also filed patent
            applications claiming the use of EGFr antibodies to treat refractory
            tumors. We
            are monitoring these applications and will take the appropriate actions
            as
            needed.  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 application.
  We
            are aware of certain patents and patent applications related to the manufacture
            of humanized monoclonal antibodies owned by Genentech, Protein Design
            Lab, and
            Medical Research Council.  Several of these patents expire prior to
            our anticipated market entry.  In addition, certain of these process
            patents are currently being challenged by companies other than us.  In
            the event that any of the applicable product by process claims are upheld,
            we
            believe that non-exclusive licenses under such patents can be obtained
            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 KGaA.
  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 United States 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).
            TarcevaTM has
            been approved in the United States for NSCLC. See "-- Competition".
  Erbitux(R),
            developed by ImClone/BMS and Merck, is approved in the United States,
            Canada,
            Germany, Austria and Switzerland for metastatic colorectal cancer in
            combination
            with irinotecan in irinotecan-refractory patients. Management understands
            that
            Erbitux(R) is under review by other regulatory agencies including EMEA
            for this
            and additional indications.
  
 -
                  27
                  -
 
 
  ***Aero**LEF**TM***
  Background:
  AeroLEFTM
            is a proprietary
            formulation of fentanyl, an opioid analgesic, that is administered by
            inhalation
            and permits self-titration by patients. The development of AeroLEFTM 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.  AeroLEFTM is
            being developed
            to provide both rapid and extended opioid analgesic levels for patients
            with
            severe and moderate acute pain and breakthrough cancer pain.
  Clinical
            Experience:
  The
            clinical experience with AeroLEFTM 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 AeroLEFTM 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 AeroLEFTM 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 AeroLEFTM 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 permission from Health Canada to initiate
            a
            randomized Phase IIb study with AeroLEF, the first patient was recruited
            in
            January 2006, and the final patient in March 2007. The trial succeeded
            in
            meeting its primary endpoint - the Summed Pain Relief plus Pain Intensity
            Difference (SPRID).
  Manufacturing:
  The
            AeroLEFTM
            formulation is manufactured through a controlled process that has been
            developed
            to produce a targeted ratio of liposome encapsulated fentanyl along with
            free
            fentanyl.   AeroLEFTM 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.  AeroLEFTM drug
            product
            produced at the Canadian manufacturer  was used to support the Phase
            IIb trial, and is expected to be used for future clinical trials and
            other
            development activities.  As AeroLEFTM advances
            to Phase
            III trials, we are seeking a second manufacturing source in the United
            States to
            provide pivotal trial material and future commercial
            supply.  Fentanyl, the active pharmaceutical ingredient in the
            AeroLEFTM
            formulation, is commercially available from multiple vendors holding
            Drug Master
            Files (DMF) with the FDA, and licensed to synthesize controlled
            substances.
  Intellectual
            Property:
  The
            AeroLEFTM
            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.
  
 -
                  28
                  -
 
 We
            are aware of US patents owned by Phares Pharmaceutical Research NV related
            to
            liposome compositions.  These patents expire in 2008 and are not
            expected to hamper our commercial activities.
  Competitive
            Position:
  The
            opioid analgesic market which includes products based on morphine, fentanyl,
            oxycodone, or hydromorphone is currently dominated by several pharmaceuticals
            companies such as Johnson & Johnson Inc., Abbott Laboratories, Baxter
            International Inc., AstraZeneca PLC, Purdue Pharma L.P., Cephalon, Inc.,
            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.
  Competition:
  The
            biopharmaceutical industry is intensely competitive. Many companies,
            including
            other biopharmaceutical companies and biotechnology companies, are actively
            engaged in activities similar to ours, including research and development
            of
            drugs for the treatment of cancer. More specifically, competitors for
            the
            development of new therapeutic products to treat cancer also focus on
            MAb-based
            cancer therapeutics, cancer vaccines and other approaches that are based
            on both
            active and passive immunotherapies and small molecule discovery and development.
            A 2001 survey by the Pharmaceutical Research and Manufacturers of America
            ("PhRMA") listed 399 new treatments for cancer that are currently being
            tested
            by researchers.
  To
            our knowledge, other companies that are involved in the development of
            monoclonal antibody cancer therapeutics directly related to our efforts
            include
            Amgen, Genmab, ImClone, and Merck. 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. Iressa(R) has been approved
            in twenty
            countries, including Japan and the United States for third line monotherapy
            of
            NSCLC. OSI reported that is has positive survival data in a phase III
            monotherapy study in treatment refractory NSCLC. TarcevaTM has
            been approved
            in the United States for NSCLC. Erbitux(R) is approved in United States,
            Austria, Canada, Germany and Switzerland for metastatic colorectal in
            combination with irinotecan in irinotecan-refractory patients. Erbitux(R)
            is
            under review by other regulatory agencies including EMEA the European
            regulatory
            agency.
  Several
            competitors are developing non-invasive alternatives for enhanced delivery
            of
            fentanyl, including 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.
  We
            expect to encounter significant competition for the pharmaceutical products
            we
            are developing and plan to develop in future. Many of our competitors
            have
            substantially greater financial and other resources, larger research
            and
            development capabilities and more extensive marketing and manufacturing
            organizations than we have. In addition, some such companies have considerable
            experience in pre-clinical testing, clinical trials and other regulatory
            approval procedures. There are also academic institutions, governmental
            agencies
            and other research organizations which are conducting research in areas
            in which
            we are working and they may also market commercial products, either on
            their own
            or through collaborative efforts. If any of these competitors were to
            complete
            clinical trials, obtain required regulatory approvals and commence commercial
            sales of their products before us they may achieve a significant competitive
            advantage.
  
 -
                  29
                  -
 
 ***Norelin
            TM and
            Products
            in Preclinical Development from the University of
            Saskatchewan***
  During
            fiscal 2007 licenses for Norelin and the preclinical products licensed
            from the
            University of Saskatchewan were returned to the University.
  ***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.
  Clinical
            Experience:
  On
            January 30, 2007 we announced that the independent DSMB for the pivotal
            Phase
            III trial of tesmilifene in patients with metastatic or recurrent breast
            cancer
            completed its third planned safety and efficacy analysis.  The DSMB
            advised the Company to stop the trial based on an interim analysis of
            351
            events, indicating it was very unlikely significant differences in overall
            survival would be shown between treatment arms as the data matured. The
            trial
            was not stopped due to safety concerns relating to the product.  We
            plan to submit data from this trial to an appropriate medical meeting
            after we
            complete our review.
  The
            pivotal Phase III trial compared the survival of patients treated with
            tesmilifene combined with epirubicin/cyclophosphamide to
            epirubicin/cyclophosphamide alone in women with rapidly progressing metastatic
            and/or recurrent breast cancer. The study, which completed enrollment
            of 723
            patients in September, 2005, was the subject of a Special Protocol Assessment
            and a Fast Track designation for advanced breast cancer by the FDA.
  The
            trial was conducted according to a sequential design that permitted a
            number of
            planned interim analyses while the trial continued until one of two specific
            statistical conditions was satisfied. At each analysis, survival for
            the
            tesmilifene-containing treatment arm and the control arm was calculated
            and then
            reviewed by the DSMB.  The trial was to be concluded if either the
            tesmilifene-containing treatment arm was superior to the control by a
            specified
            margin or it was determined that such evidence was not going to be
            found.  After the third planned analysis, the DSMB concluded that the
            trial was highly unlikely to achieve a pre-specified survival
            benefit.
  In
            March 2004, we entered into a Clinical Research Services Agreement with
            Pharm-Olam International (“POI”), a clinical research organization ("CRO"), to
            conduct this Phase III trial internationally. POI has received the majority
            of
            its entitlement under the contract and immaterial amounts remain payable
            on
            completion of certain remaining reports.
  In
            January 2005, we formed a joint development team with Shin Poong Pharmaceutical
            Company of Seoul, Korea (“Shin Poong”) to oversee the expansion of the
            development program for tesmilifene into gastric cancer with the clinical
            failure of tesmilifene it is expected that this expansion program will
            terminate.
  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 completing enrollment;
            pharmcokinetics data are anticipated by calendar year-end 2007 and overall
            survival data by calendar year-end 2008.
  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 United States, Europe, Japan, Canada and Australia.
  
 -
                  30
                  -
 
 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 trail 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.
  In
            addition to patents, we intend to rely on the available term of data
            exclusivity
            in the US and other countries given that tesmilifene qualifies as a
            NCE.  Furthermore, full advantage will be taken of the Orange Book
            provisions in the United States and equivalent provision in Canada and
            other
            countries, as a means for delaying generic competition.
  **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
            conducts,
            or has 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
            have
            received regulatory approvals for clinical trials in a number of countries,
            including in Canada, the United States, the United Kingdom, Europe and
            South
            Africa from Phase I through Phase III. Some basic research is conducted
            at the
            facilities of 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 United States, Japan,
            Australia, Taiwan, Singapore, Thailand, Hong Kong, South Korea, Malaysia,
            Indonesia and the Philippines. As a term of the 1995 CIMYM License, YM
            has a
            right of first refusal with respect to licensing any other products derived
            from
            the EGF and EGFr programs of CIMAB except its anti-EGFr monoclonal antibody
            for
            psoriasis in Europe.
  Pursuant
            to the 1995 CIMYM License, in 1995 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.
  
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                  31
                  -
 
 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.
  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 a 20% equity interest in CIMYM BioSciences
            and is entitled to receive 10% of net revenues received by CIMYM.
  ***Licenses
            For  AeroLEF***TM
 
 The
            technology related to AeroLEFTM 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 Corporation 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. Under the terms of this license agreement, we have paid
            US$300,000 over the years 2000, 2001 and 2002 for sponsored research.
            We must
            make reasonable efforts to ensure that the licensed product is efficiently
            marketed and distributed by November 2005. 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.
  
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 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:
  o
                  obtaining
                      long term revenue streams from royalty payments on the sale
                      of the
                      products;
  o
                  providing
                      access to the resources and experience of large pharmaceutical
                      companies;
  o
                  obtaining
                      up-front payments for product sub-licensing rights;
                      and
  o
                  minimizing
                      development expenditures through cost sharing programmes (especially
                      late-stage clinical trials and regulatory approval
                      applications).
  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.
  YM
            does 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.
  ***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.
  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.
  
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                  -
 
 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.
  Regulatory
            Approval
 
 Securing
            final regulatory approval for the manufacture and sale of human therapeutic
            products in Canada and our other territories, including the United States,
            is a
            long and costly process that is controlled by that particular territory's
            national regulatory agency. The national regulatory agency in Canada
            is Health
            Canada, and in the United States it is the FDA. Other national regulatory
            agencies have similar regulatory approval processes, but each national
            regulatory agency has its own approval processes. Approval in either
            Canada or
            the United States does not assure approval by other national regulatory
            agencies, although often test results from one country may be used in
            applications for regulatory approval in another country.
  Prior
            to obtaining final regulatory approval to market a drug product, every
            national
            regulatory agency has a variety of statutes and regulations which govern
            the
            principal development activities. These laws require controlled research
            and
            testing of products, government review and approval of a submission containing
            pre-clinical and clinical data establishing the safety and efficacy of
            the
            product for each use sought, approval of manufacturing facilities including
            adherence to GMP during production and storage, and control of marketing
            activities, including advertising and labeling.
  None
            of 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 United
            States,
            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 United
            States.
            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.
  
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                  -
 
 ***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.
  A
            Clinical Trial Application must be filed and accepted by either the Therapeutic
            Products Directorate ("TPD") or the Biologics and Genetic Therapies Directorate
            ("BGTD") of Health Canada before each phase of human clinical trials
            may begin.
            The CTA application must contain specified information including the
            results of
            the pre-clinical or clinical tests completed at the time of the CTA application.
            In addition, since the method of manufacture may affect the efficacy
            and safety
            of a drug, information on chemistry and manufacturing methods must be
            presented.
            Health Canada conducts inspections to determine compliance with GMP.
            Good
            manufacturing practices and quality control procedures must be in
            place.
  Upon
            completion of all clinical studies, the results are submitted to the
            TPD or BGTD
            as part of a New Drug Submission ("NDS"). A notice of compliance ("NOC")
            which
            permits marketing of the product typically takes between 12 and 24 months
            from
            the date a NDS is submitted.
  Even
            after marketing approval has been obtained, further studies may be required
            to
            provide additional data on safety and efficacy in order to gain approval
            for the
            use of a drug as a treatment for clinical indications other than those
            for which
            the product was initially tested. Also, Health Canada conducts post-market
            surveillance programmes to monitor a product's side effects. Results of
            post-marketing programmes may limit or expand the further marketing of
            products.
            A serious safety or efficacy problem involving an approved drug or medical
            device may result in Health Canada action requiring withdrawal of the
            product
            from the market.
  ***United
            States Approval Process***
  In
            the United States, the FDA, a federal government agency, is responsible
            for the
            drug approval process. The FDA's mission is to ensure that all medications
            on
            the market are safe and are effective. The FDA's approval process examines
            potential drugs; only those that meet strict requirements are
            approved.
  The
            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.
  
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                  -
 
 ***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.
  *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 and Approval***Following Phase III, the pharmaceutical
            company prepares reports of all studies conducted on the drug and submits
            the
            reports to the FDA in a New Drug Application ("NDA"). The FDA reviews
            the
            information in the NDA to determine if the drug is safe and effective
            for its
            intended use. Occasionally, the FDA will ask experts for their opinion
            of the
            drug; this occurs at advisory committee meetings. If the FDA determines
            that the
            drug is safe and effective, the drug will be approved.
  ***Stage
            4: Marketing***After the FDA has approved the experimental drug, the
            pharmaceutical company can make it available to physicians and their
            patients. A
            company may also continue to conduct research to discover new uses for
            the drug.
            Each time a new use for a drug is discovered, the drug is once again
            subject to
            the entire FDA approval process before it an be marketed for that
            purpose.
  Arrangements
            With Subsidiaries
  YM
            and CIMAB entered into 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.
  
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 YM
            and CIMAB, contemporaneously with the assignment of the 1995 CIMYM License,
            entered into a joint-venture shareholders agreement (the "Shareholders
            Agreement") with CIMYM relating to its operation. Pursuant to the Shareholders
            Agreement, CIMYM is required to include nominees of CIMAB both as board
            members
            and as members of operating management. The Shareholder Agreement provides
            that:
            (i) issued and outstanding shares of CIMYM may not be sold or transferred
            without the consent of both YM and CIMAB; (ii) the issue of additional
            shares of
            CIMYM shall first be offered to each of YM and CIMAB in proportion to
            their
            holdings, and thereafter, with the consent of both YM and CIMAB, to any
            other
            person; and (iii) the boards of directors of CIMYM will consist of five
            directors, three of whom are nominees of YM and two of whom are nominees
            of
            CIMAB. All material and out-of-the-ordinary-course-of-business contracts
            of
            CIMYM, including those relating to the borrowing of money, issuing guarantees,
            entering into non arm's-length agreements, paying dividends and pledging
            of
            property, must be approved by four-fifths of the Board of
            Directors.
  CIMYM
            (Barbados) was incorporated in Barbados in May 1996 to market the licensed
            products under the 1995 CIMYM License outside of Canada. On June 30,
            2006, CIMYM
            (Barbados) was amalgamated with CIMYM to form CIMYM BioSciences
            Inc.
  Property,
            Plants And Equipment
  ***Facilities***
  We
            currently occupy 5,800 square feet of space in Mississauga, Ontario pursuant
            to
            a sub-lease agreement dated July 31, 1997 (the "Sub-Lease") and a lease
            amending
            and extension agreement dated February 1, 2003 (the "Lease Amending Agreement"),
            such Lease Amending Agreement extended the initial terms of the Sub-Lease
            for a
            term of five years commencing on February 1, 2003 and expiring on January
            31,
            2008. The average annual costs, including operating expenses, are approximately
            $120,000.
  We
            also occupy 7,200 square feet of space at 6535 Millcreek Drive in Mississauga,
            Ontario pursuant to a lease amending and extension agreement dated February
            28,
            2007. The term of the lease is based on a month to month tenancy and
            expires on
            February 28, 2008. Either the lessor or lessee may terminate this lease
            at least
            90 days written notice. The annual cost, including operating expenses
            is
            approximately $71,000 under this lease.
  YM
            USA currently occupies 9,000 square feet of space in Wayne, Pennsylvania
            pursuant to a lease agreement dated July 27, 2006 and expiring on February
            15,
            2012. Average annual fixed rent, excluding operating costs is approximately
            US$228,000.
  There
            are no environmental issues associated with any of our facilities and
            we
            currently have no plans to construct, expand or improve our
            facilities.
  ***Equipment
            And Other Property***
 
 As
            at June 30, 2007, we owned tangible fixed assets with a book value of
            approximately $325,000 consisting primarily of office and lab
            equipment.
  ***Employees***
 
 As
            of June 30, 2007, 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.
  **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.
  
 -
                  37
                  -
 
 **CAPITAL
            STRUCTURE**
  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 at June 30, 2007, there were 58,216,309 common shares (including
            2,380,953 common shares held in escrow for contingent additional payment
            related
            to the acquisition of Delex), no Class A non-voting common shares and
            no
            preferred shares outstanding.
  **Common
            Shares**
  All
            of the common shares rank equally as to voting rights, participation
            in a
            distribution of our assets on a liquidation, dissolution or winding-up
            and the
            entitlement to dividends. The holders of the common shares are entitled
            to
            receive notice of all meetings of shareholders and to attend and vote
            the common
            shares at the meetings. Each common share carries with it the right to
            one
            vote.
  In
            the event of the liquidation, dissolution or winding-up of 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 the Corporation, 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 sinking or purchase
            funds.
  **Stock
            Option Plan**
  We
            have a stock option plan (the “Plan”) pursuant to which stock options to
            purchase our common shares (“Options”) may be granted to eligible persons,
            including officers, directors, employees and service providers of the
            Corporation. The aggregate number of common shares reserved for issuance
            upon
            the exercise of all Options granted under the Plan is a “rolling” amount which,
            under the current Plan, may not exceed 12.5% of the issued and outstanding
            common shares of the Corporation as at the date of each grant. We consider
            the
            granting of stock options important to attract and maintain the most
            qualified
            directors, senior management and other employees in the Canadian and
            US
            healthcare technology industry.  In our view, the ability to grant
            stock options is an important means of compensating such persons for
            their
            contributions to the Corporation’s overall financial performance. The number of
            Common Shares that may be reserved for issuance to our insiders (as defined
            in
            the *Securities Act* (Ontario)) and any affiliate or 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. Terms and vesting provisions in respect of the
            Options
            may be decided at the date of grant but, unless otherwise specified,
            Options are
            exercisable for a period of 10 years from the date of grant and vest
            over a
            period of five years, at 20% per year. Recently, we made certain house-keeping
            amendments to the Plan in order to permit “cashless exercise” by
            Optionholders.
 
 **MARKET
            FOR SECURITIES**
  Our
            common shares have been listed on the Toronto Stock Exchange (“TSX”) and the
            Alternative Investment Market (“AIM”) operated by the London Stock Exchange
            since June 11, 2002. Initially, we listed our Class B Preferred Shares,
            Series 1
            on those stock exchanges. On June 12, 2003, the Class B Preferred Shares, Series
            1, were automatically converted on a one-for-one basis into our common
            shares,
            which became listed on the TSX and AIM on that date.
  Our
            common shares have traded on the TSX since June 12, 2003 under the symbol
“YM”,
            were admitted to trading on the AIM on June 12, 2003 under the symbol
“YMBA” and
            have been traded on the American Stock and Options Exchange (“AMEX”) since
            October 1, 2004 under the symbol “YMI”.
  The
            following table shows the high and low sale prices and the trading volume
            of our
            common shares on the TSX on a monthly basis during fiscal 2007:
  
 -
                  38
                  -
 
 
  Price
                      RangeHigh
                  Low
                  VolumeJune
                      2006
                  5.86
                  3.90
                  1,350,186July
                      2006
                  4.40
                  3.40
                  768,379August
                      2006
                  4.09
                  2.91
                  1,995,022September
                      2006
                  4.01
                  3.47
                  1,302,722October
                      2006
                  3.81
                  2.98
                  1,148,992November
                      2006
                  3.90
                  3.26
                  1,026,694December
                      2006
                  3.50
                  3.11
                  1,431,491January
                      2007
                  4.88
                  1.84
                  10,566,222February
                      2007
                  2.13
                  1.63
                  3,578,901March
                      2007
                  2.04
                  1.55
                  1,546,035April
                      2007
                  2.39
                  1.80
                  1,970,243May
                      2007
                  2.23
                  1.77
                  1,347,370June
                      2007
                  2.25
                  1.84
                  1,795,473
 
 The
            closing price of our common shares on the TSX on June 30, 2007 was $1.91
            per
            share and, as at September 21, 2007, was $1.62 per share.
  **DIRECTORS
            AND OFFICERS**
  Name
                  Position
                  Period
                      ServedDavid
                      G.P. Allan
                    Toronto,
                      Canada
                  Chairman,
                      Chief Executive Officer and Director
                  Since
                      1994Thomas
                      I.A. Allen (1)(2)(3)
                    Toronto,
                      Canada
                  Director
                  Since
                      1996James
                      Barrett(3)
                    Germantown,
                      USA
                  Director
                  Since
                      May 2006Lisa
                      DeLuca
                    Berwyn,
                      USA
                  Officer
                  Since
                      May 2006Mark
                      Entwistle (3)
                    Ottawa,
                      Canada
                  Director
                  Since
                      1997Gary
                      Floyd
                    Berwyn,
                      USA
                  Officer
                  Since
                      May 2006John
                      Friedman(3)
                    New
                      York, USA
                  Director
                  Since
                      2004Henry
                      Friesen (1)
                    Winnipeg,
                      Manitoba
                  Director
                  Since
                      2001Paul
                      M. Keane
                    Mississauga,
                      Ontario
                  Officer
                  Since
                      1996Diana
                      Pliura
                    Mississauga,
                      Ontario
                  Officer
                  Since
                      2005Vincent
                      Salvatori
                    Victoria,
                      British Columbia
                  Officer
                  Since
                      2002Leonard
                      Vernon
                    Nobleton,
                      Ontario
                  Officer
                  Since
                      1997Julius
                      Vida (2)
                    Greenwich,
                      USA
                  Director
                  Since
                      2001Gilbert
                      Wenzel(1)
                    Zurich,
                      Switzerland
                  Director
                  Since
                      2001Tryon
                      M. Williams (1)(2)
                    London,
                      England
                  Director
                  Since
                      1995
  (1)           Member
            of Audit Committee.
 (2)          
            Member of Corporate Governance and Nominating Committee.
 (3)           Member
            of Compensation Committee.
 
 
 -
                  39
                  -
 
 **Share
            Ownership Of Directors And Executive Officers**
  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, 2007, 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
                      DateDavid
                      G.P. Allan
                  789,6591
                  1.2%
                  900,000
                  $1.75
                      - $4.50
                  2007
                      - 2016Thomas
                      I.A. Allen
                  -
                  -
                  73,160
                  $1.75
                      - $4.50
                  2007
                      - 2016James
                      Barrett
                  1,349,130
                      2
                  2.4%2
                  0Lisa
                      DeLuca
                  -
                  -
                  70,000
                  US$
                      5.74
                  2016Mark
                      Entwistle
                  -
                  -
                  98,160
                  $1.75
                      - $4.50
                  2007
                      - 2016Gary
                      Floyd
                  -
                  -
                  70,000
                  US$
                      5.74
                  2016John
                      Friedman
                  294,999
                  *
                  67,500
                  $2.10
                      - $3.61
                  2014
                      - 2016Henry
                      Friesen
                  -
                  -
                  98,160
                  $1.75
                      - $4.50
                  2011
                      - 2016Paul
                      M. Keane
                  72,500
                  *
                  128,100
                  $1.75
                      - $4.50
                  2007
                      - 2016Diana
                      Pliura
                  -
                  -
                  300,000
                  $3.15
                      - $4.36
                  2015
                      - 2016Vincent
                      Salvatori
                  -
                  -
                  220,000
                  $1.75
                      - $4.36
                  2008
                      - 2016Gail
                      Schulze
                  -
                  -
                  266,667
                  US$5.74
                  2008Igor
                      Sherman
                  -
                  -
                  70,000
                  $2.75
                      - $4.36
                  2014
                      - 2016Sean
                      Thompson
                  6,500
                  *
                  165,375
                  $1.75
                      - $4.50
                  2010
                      - 2016Leonard
                      Vernon
                  -
                  -
                  243,000
                  $1.75
                      - $4.50
                  2008
                      - 2016Julius
                      Vida
                  -
                  -
                  93,160
                  $1.75
                      - $4.50
                  2011
                      - 2016Gilbert
                      Wenzel
                  -
                  -
                  93,160
                  $1.75
                      - $4.50
                  2011
                      - 2016Tryon
                      M. Williams
                  20,100
                  *
                  138,098
                  $1.75
                      - $4.50
                  2010
                      - 2016
 *
            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.
  Note
            2: Shares are owned
            by
            New Enterprise Associates 11, Limited Partnership.  Dr. Barrett is a
            manager of NEA 11 GP, LLC which is the general partner of NEA Partners
            11,
            Limited Partnership which is the general partner of New Enterprise Associates
            11, Limited Partnership.
  
 -
                  40
                  -
 
 As
            of the date of hereof, the directors and senior officers of YM BioSciences
            as a
            group beneficially owned or controlled, directly or indirectly, 2,604,888
            common
            shares of YM, representing approximately 4.477% of the issued and outstanding
            voting shares of the Corporation.
  ***David
            G.P. Allan - Chairman, Chief Executive Officer And
            Director***
  Mr.
            Allan has been Chief Executive Officer of the Corporation since April
            1998 and
            Chairman of the board of directors of the Corporation since 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, the Awards Selection Committee for the
            Networks of
            Centres of Excellence in Canada and of the Board of Trustees for the
            Ontario
            College of Art and Design. Mr. Allan is currently a member of BioteCanada’s
            Emerging Companies Advisory Board.
  ***Thomas
            I.A. Allen, Q.C., F.C.I.Arb - Director***
  Mr.
            Allen is counsel to Ogilvy Renault, a Canadian law firm, and Chairman
            of
            Westwind Capital Corporation, the parent of an institutional investment
            dealer
            with offices in Canada and England. 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
            Finavera Renewables Inc., Terra Nova Gold Inc., Mundoro Mining Inc.,
            Middlefield
            Bancorp Limited and Longview Capital Partners Incorporated.  Mr. Allen
            recently actied as Chairman of the Task Force to Modernize Securities
            Legislation in Canada.
  ***James
            Barrett - Director***
  Dr.
            Barrett is a General Partner at New Enterprise Associates, a leading
            venture
            capital firm, where he specializes in biotechnology and other healthcare
            investments. Dr. Barrett is a director of GlycoMimetics, Inc., Inhibitex,
            Inc.,
            Iomai Corporation, MedImmune, Inc., Peptimmune, Pharmion, Inc. and Targacept,
            Inc.
  ***Lisa
            Deluca - Vice-President Of Global Regulatory Affairs***
  Dr.
            DeLuca has more than 15 years of experience in the pharmaceutical industry,
            including her roles as Vice President of Regulatory Affairs at
            Eximias  (joining in 2004) and Director of Regulatory Affairs at
            AstraZeneca, from 1999 to 2004, where she was responsible for the regulatory
            launch of IRESSA(R). She has also held regulatory positions at Centocor
            and
            Wyeth (1993-1999) and drug discovery positions at SmithKline Beecham
            (now
            GlaxoSmithKline) and The Upjohn Company (now Pfizer, Inc.) (1990-1993).
            Dr.
            DeLuca received a PhD in biochemistry from the University of Toledo in
            1988.
  
 -
                  41
                  -
 
 ***Mark
            Entwistle, M.A. - Director***
  Prior
            to founding his own consulting practice in 1997 in international trade,
            political business intelligence and strategic communications, Mr. Entwistle
            was
            an Ambassador for Canada in the Caribbean from 1993 to 1997. Mr. Entwistle
            was
            previously a career diplomat with the Canadian Department of Foreign
            Affairs and
            International Trade in a variety of embassy positions from 1982 to 1997,
            and
            served as Press Secretary and Director of Communications to the Prime
            Minister
            of Canada from 1991-1993. He is a Fellow of the Canadian Defence and
            Foreign
            Affairs Institute. Mr. Entwistle has been a director of the Corporation
            since
            October 1997.
  ***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, 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
  ***John
            Friedman - Director***
  Mr.
            Friedman launched the Easton Capital Group (“Easton”) in 1993, with Easton
            Capital Corporation. In 1999, Easton Hunt Capital Partners was added
            to the
            Group. Prior to Easton, Mr. Friedman was a founder of Atrium Capital
            Corporation, which he helped manage from 1991-1993, and also the founder
            and
            Managing General Partner of Security Pacific Capital Investors from 1989
            through
            1991. Security Pacific Capital Investors was a $200-million private equity
            fund
            geared towards expansion financings and recapitalizations. Prior to joining
            Security Pacific, Mr. Friedman was a Managing Director and Partner at
            E.M.
            Warburg, Pincus & Co., Inc., where he spent eight and a half years from
            1981-1989. Prior thereto, he worked at Shearson Loeb Rhoades and was
            an attorney
            with Sullivan and Cromwell from 1978 through 1980. He holds a JD degree
            from
            Yale Law School and a BA degree from Yale College. Mr. Friedman currently
            serves
            on the Boards of Renovis, Trellis Bioscience, and Assistive Technology,
            and is
            on the President's Council at the Cold Spring Harbor Laboratory. Mr.
            Friedman
            has been a director of the Corporation since April 2004.
  ***Henry
            Friesen, 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 Institute of Health Research, an organization with
            an annual
            budget of over $650 million per year dedicated to supporting Canadian
            researchers as well as industry participants. Dr. Friesen is noted for
            his
            discoveries about the human hormone prolactin and as Head of the Department
            of
            Physiology and Distinguished Professor Emeritus of Medicine at the University
            of
            Manitoba. Dr. Friesen is a Fellow of the Royal Society of Canada, a Companion
            of
            the Order of Canada and also sits on the board of directors of Sanofi
            Pasteur
            Canada and Spectral Diagnostics Inc. Dr. Friesen has been a director
            of the
            Corporation since November 2001.
  ***Paul
            M. Keane, M.D., F.R.C.P.C., F.A.C.P., F.R.C. Path - Director, Medical
            Affairs***
  Dr.
            Keane has been an officer of the Corporation since January 1996. Dr.
            Keane was
            Director of Clinical Research at Miles Canada Inc. (now Bayer Canada)
            from 1989
            to 1995, prior to which he was Professor of Medicine at University of
            Calgary
            and Professor of Pathology at McMaster University. Dr. Keane has authored
            numerous scientific publications in peer review journals, has acted as
            a
            reviewer of research proposals for the Medical Research Council of Canada
            and
            has acted in an editorial capacity for a number of scientific
            journals.
  
 -
                  42
                  -
 
 ***Diana
            Pliura, Ph.D. - Executive Vice President, AeroLEFTM***
  Dr.
            Pliura has over 25 years of experience in the pharmaceutical, biopharmaceutical
            and venture capital sectors.  Since June 2001, she has served as the
            founding President and CEO of DELEX Therapeutics.  From 1998 through 2001,
            she served as Company Creator for the Eastern Technology Seed Investment
            Fund,
            responsible for assessment of biotechnology investment opportunities
            and serving
            in executive management roles for selected investments.  In 1997, she
            founded a consulting firm focused on providing scientific and management
            expertise to biotechnology companies and their investors.  Previously Dr.
            Pliura was a Scientific Advisor to MDS Health Ventures from 1996 to 1997
            and
            Vice-President Research at Hemosol Inc. from 1992 through 1995.  Prior to
            that, she held various positions at Syntex (Canada) Inc. from 1981 to
            1991
            including serving as Head of the Division of General Biochemistry in
            the drug
            discovery unit from 1989-1991.  Dr. Pliura is a co-inventor or co-author on
            numerous patents and peer-reviewed articles.  She received her doctoral
            degree in Chemistry from the University of Toronto and completed post-doctoral
            training at Harvard University.
  ***Vincent
            Salvatori, Ph.D. - Executive Vice President, President And CEO, CIMYM
            Biosciences***
  Dr.
            Salvatori has been an officer of the Corporation since December 2002.
            Dr.
            Salvatori is an experienced drug development executive with an accomplished
            background in the pharmaceutical and biotechnology industry. He has more
            than 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.
  ***Gail
            Schulze - Director***
  Ms.
            Schulze has more than 25 years of pharmaceutical industry experience.
            She was
            Chief Executive Officer of Eximas Pharmaceutical Corporation from 2005
            until its
            acquisition by YM in May 2006.  Thereafter she served as President of
            YM and Chief Executive Officer of YM (USA) until February 2007. Prior
            to joining
            Eximias, she was with Aventis Behring, one of the world’s leading pharmaceutical
            companies, from 1997 to 2004. She joined Aventis Behring as Senior Executive
            Vice President and Chief Marketing Officer in 1997 and became COO of
            one of its
            joint ventures in 2001. Ms. Schulze received a BS in Psychobiology from
            the
            University of California, was an NIH Fellow in Neurophysiology at the
            University
            of Wisconsin and received an MBA from Stanford’s Graduate School of
            Business.
  ***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 Cancer Research Networks’ Industry Advisory Board and a Board member for
            Variation Biotechnologies Inc. Mr. Thompson holds a Bachelor of Science
            degree
            from the University of Waterloo.
  
 -
                  43
                  -
 
 ***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.
  ***Julius
            Vida, Ph.D., M.B.A. - Director***
  Dr.
            Vida has been the President of Vida International Pharmaceutical Consultants,
            a
            consulting firm advising pharmaceutical and biotechnology companies,
            since 1993.
            Previously Dr. Vida was Director of Licensing and subsequently Vice President,
            Business Development, Licensing and Strategic Planning at Bristol-Myers
            Squibb,
            from 1975 to 1993. Dr. Vida is a director of a number of biotechnology
            firms
            including Medarex, Inc., FibroGen, Inc., Spectrum Pharmaceuticals Inc.
            and
            Chemical Synthesis Services Albachem (UK). Dr. Vida has been a director
            of the
            Corporation since September 2001.
  ***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 Corporation
            since March 2001.
  ***Tryon
            M. Williams, B.Sc. (Math) - Director***
  Mr.
            Williams is the Chairman, CEO and director of CellStop Systems, Inc.,
            an
            automobile security device manufacturer, and CEO and director of Bingo.com,
            Ltd., an internet technology company. Since 1993, Mr. Williams has been
            Adjunct
            Professor, Sauder School of Business, The University of British Columbia. 
Mr. Williams is also a director of  several other private corporations. Mr.
            Williams has been a director of the Corporation since November
            1995.
  **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:
  ***Lorne
            J. Brandes, B.Sc., M.D., C.R.C.P.C.***
  Professor,
            Departments of Medicine and Pharmacology/Therapeutics, University of
            Manitoba,
            Winnipeg, Manitoba, Canada; Section of Hematology/Oncology, CancerCare
            Manitoba,
            Winnipeg, Manitoba, Canada. Dr. Brandes has been an advisor since November
            2000.
  
 -
                  44
                  -
 
 ***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,
            United States; Attending Physician, Memorial Hospital for Cancer and
            Allied
            Diseases, New York, New York, United States. Dr. Saltz has been an advisor
            since
            March, 2006.
  ***Niclas
            Stiernholm, Ph.D.***
  Chief
            Executive Officer, Trillium Therapeutics Inc., Toronto, Ontario, Canada.
            Dr.
            Stiernholm was an executive vice-president of the Corporation until he
            resigned
            in December 2002 at which time he became an advisor.
  ***Mark
            Vincent, M.D., M.R.C.P., F.R.C.P.C. - Chair***
  Associate
            Professor, Department of Oncology, University of Western Ontario, London,
            Ontario, Canada; Staff Medical Oncologist, London Regional Cancer Centre,
            London, Ontario, Canada. Dr. Vincent has been an advisor since October
            1998.
  ***Daniel
            D. Von Hoff, M.D., F.A.C.P.***
  Professor
            of Medicine, University of Arizona and Executive Vice President, Translational
            Genomics Research Institute and Director, Translational Drug Development
            Program, Tucson, Arizona, United States. Dr. Von Hoff has been an advisor
            since
            July 2001.
  **Audit
            Committee**
  The
            members of the Corporation's Audit Committee are Thomas I.A. Allen, Henry
            Friesen, Tryon M. Williams, and Gilbert Wenzel.
  The
            principal functions of the Audit Committee are to appoint, compensate
            and
            oversee the external auditors; to review and approve annual and quarterly
            financial statements and all legally required continuous and public disclosure
            documents containing financial information about the Corporation before
            they are
            submitted to the Board of Directors for approval; to review and approve
            the
            adequacy of internal accounting controls and the quality of financial
            reporting
            procedures and systems; to examine the presentation and impact of key
            financial
            and other significant risks that may be material to the Corporation's
            financial
            reporting; and to review and approve the nature and scope of the annual
            audit
            and review the results of the external auditor's examination. The Audit
            Committee reports its findings with respect to such matters to the Board
            of
            Directors.
  **Corporate
            Governance And Nominating Committee**
  The
            members of the Corporation's Corporate Governance and Nominating Committee
            are
            Thomas I.A. Allen, Julius Vida and Tryon M. Williams.
  The
            mandate of the Corporation's Corporate Governance and Nominating Committee
            is to
            develop and monitor the Corporation's system of corporate governance
            in the
            context of the Toronto Stock Exchange Report on Corporate Governance,
            and the
            rules and regulations promulgated by the Ontario Securities Commission
            and the
            Securities and Exchange Commission, including reviewing the mandate of
            the Board
            of Directors and its committees; periodically reviewing and evaluating
            the
            performance of all directors, committees and the Board as a whole; selecting
            new
            candidates for Board memberships, making recommendations to the Board
            and
            ensuring that appropriate orientation and education programmes are available
            for
            new Board members; establishing procedures to ensure that the Board may
            meet
            independent of Management and reviewing annually the membership and chairs
            of
            all committees.   All members of this Committee are unrelated and
            non-executive directors of the Corporation.
  
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                  45
                  -
 
 **Compensation
            Committee**
  The
            members of the Corporation's Compensation Committee are Thomas I.A. Allen,
            James
            Barrett, John Friedman and Mark Entwistle.
  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 programmes are designed to motivate senior managers to
            achieve or
            exceed corporate objectives and to enhance shareholder value and to ensure
            that
            there is reasonable consistency in the application of the compensation
            policies.
            The 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 Corporation on the recommendation of the Chief
            Executive Officer, establishing incentive compensation programmes and
            monitoring
            their effectiveness and developing and documenting the compensation policy
            and
            philosophy of the Corporation for approval by the Board of
            Directors.  All members of this Committee are unrelated and
            non-executive directors of the Corporation.
  **AUDIT
            FEES**
  During
            the years ended June 30, 2006 and 2005, we were billed the following
            fees by our
            external auditors, KPMG LLP:
  **Fees
                      Incurred****Service**
                  **2007**
                  **2006**Audit
                      and Audit-Related Fees
                  $260,000
                  $420,000Tax
                      Fees
                  $82,200
                  $50,600All
                      Other Fees
                  Nil
                  Nil**Total
                      Fees Paid**
                  **342,200**
                  **$470,600**
 
 The
            Board of Directors have established a written mandate for the audit committee,
            a
            copy of which is attached hereto as Schedule “A”. The Audit Committee follows
            the policies and procedures for the pre-approval of services to be provided
            by
            our external auditors set out in the mandate.
  **LEGAL
            PROCEEDINGS**
  We
            are not a party to any material pending legal or arbitration proceedings
            and is
            not aware of any material contemplated legal proceedings to which we
            may be a
            party.
  **TRANSFER
            AGENT AND REGISTRAR**
  The
            registrar and transfer agent for our common shares in Canada is CIBC
            Mellon
            Trust Company at its principal offices in Toronto, Canada and in the
            United
            States is Mellon Investor Services LLC at its principal offices in Ridgefield
            Park, New Jersey.
  **MATERIAL
            CONTRACTS**
  Except
            for contracts entered into in the ordinary course of business, the only
            material
            contract which we entered into prior to the date hereof is anEscrow Agreement
            dated as of May 2, 2005 among YM, the Business Development Bank of Canada,
            New
            Generation Biotech (Equity) Fund Inc., Eastern Technology Seed Investment
            Fund
            Limited Partnership and Equity Transfer Services Inc., pursuant to which
            certain
            common shares of YM are held in escrow for the benefit of the former
            DELEX
            shareholders to be released in tranches over time and upon completion
            of certain
            milestones.  See “General Development of the Business”.
  
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                  46
                  -
 
 In
            the ordinary course of our business, we enter into licenses for products
            which
            we develop and out-license. The licenses for these products are more
            fully
            described in this annual information form under the heading “Business Overview -
            Licensing Arrangements”.
  **INTERESTS
            OF EXPERTS**
  KPMG
            LLP, the Corporation’s external auditor, has reported on the consolidated
            financial statements of the Corporation for each of the years in the
            three-year
            period ended June 30, 2007. KPMG LLP is independent of the Corporation
            in
            accordance with the applicable Rules of Professional Conduct/Code of
            Ethics of
            the Institute of Chartered Accountants of Ontario, and within the meaning
            of the
            Securities Acts administered by the United States Securities and Exchange
            Commission and the requirements of the Independence Standards
            Board.
  **ADDITIONAL
            INFORMATION**
  Additional
            information, including directors’ remuneration and indebtedness, principal
            holders of the Corporation’s securities, options to purchase securities and
            interests of insiders in material transactions, if any, is contained
            in the
            Corporation’s information circular for its most recent annual meeting of
            shareholders that involved the election of directors and that additional
            financial information is provided in the Corporation’s comparative financial
            statements for its most recently completed year.
  When
            securities of the Corporation are in the course of distribution pursuant
            to a
            short form prospectus, or when a preliminary short form prospectus has
            been
            filed in respect of the Corporation’s securities, the Corporation will provide
            the following documents to any person or company upon request to the
            Corporate
            Secretary of the Corporation:
  1.
                  a
                      copy of this annual information form, together with a copy
                      of any document
                      or the pertinent pages of any document incorporated by reference
                      in this
                      annual information form;
  2.
                  a
                      copy of our Financial Statements, together with the accompanying
                      auditors’
                      report as well as copies of any subsequent interim financial
                      statements
                      that we have filed;
  3.
                  a
                      copy of our information circular in respect of our most recent
                      annual
                      meeting of shareholders that involved the election of directors;
                      and
  4.
                  a
                      copy of any other document that is incorporated by reference
                      into the
                      preliminary short form prospectus or the short form
                      prospectus.
  At
            any other time, a copy of the documents referred to in subsections 1,
            2, 3 and 4
            above may be obtained from our Corporate Secretary, however, a reasonable
            fee
            may be charged if the request is made by a person or company who is not
            a
            shareholder of YM.  These documents and additional information may
            also be found at www.sedar.com.
  All
            requests for the above-mentioned documents must be addressed to:
  YM
            BioSciences Inc.
 5045
            Orbitor Drive
 Building
            11, Suite 400
 Mississauga,
            Ontario
 L4W
            4Y4
   -
                47
                -
 
 Attention:       Secretary
 Telephone: 
(905)
            629-9761
 Fax:                   (905)
            629-4959
 e-mail:               ir@ymbiosciences.com
 Web
            Page:       www.
            ymbiosciences.com
 
 -
                  48
                  -
 
 Schedule
            “A”
 
 **YM
            BIOSCIENCES INC.**
 
 **AUDIT
            COMMITTEE MANDATE**
 
 **1.           General**
 
 The
            board of directors (the “Board”) of YM BioSciences Inc. (the “Corporation”) has
            delegated the responsibilities, authorities and duties described below
            to the
            audit committee (the “Audit Committee”). For the purpose of these terms of
            reference, the term “Corporation” shall include the Corporation and its
            subsidiaries.
  The
            Audit Committee shall be directly responsible for overseeing the accounting
            and
            financial reporting processes of the Corporation and audits of the financial
            statements of the Corporation, and the Audit Committee shall be directly
            responsible for the appointment, compensation, and oversight of the work
            of any
            registered external auditor employed by the Corporation (including resolution
            of
            disagreements between management of the Corporation and the external
            auditor
            regarding financial reporting) for the purpose of preparing or issuing
            an audit
            report or related work. In so doing, the Audit Committee will comply
            with all
            applicable Canadian and United States securities laws, rules and guidelines,
            any
            applicable stock exchange requirements or guidelines and any other applicable
            regulatory rules.
  **2.           Members**
 
 The
            Audit Committee shall be composed of a minimum of three members. Members
            of the
            Audit Committee shall be appointed by the Board. Each member shall serve
            until
            such member’s successor is appointed, unless that member resigns or is removed
            by the Board or otherwise ceases to be a director of the Corporation.
            The Board
            shall fill any vacancy if the membership of the Committee is less than
            three
            directors. The Chair of the Committee may be designated by the Board or, if it
            does not do so, the members of the Committee may elect a Chair by vote
            of a
            majority of the full Committee membership.
  All
            members of the Audit Committee must satisfy the independence, financial
            literacy
            and experience requirements of applicable Canadian and United States
            securities
            laws, rules and guidelines, any applicable stock exchange requirements
            or
            guidelines and any other applicable regulatory rules. In
            particular:
  (a)
                  each
                      member shall be “independent” and “financially literate” within the
                      meaning of Multilateral Instrument 52-110 “Audit
                      Committees”;
  (b)
                  at
                      least one member must be “financially sophisticated” under the rules of
                      the American Stock Exchange; and
  (c)
                  at
                      least one member must be an “audit committee financial expert” within the
                      meaning of that term under the United States Securities Exchange
                      Act of
                      1934, as amended, and the rules adopted by the United States
                      Securities
                      and Exchange Commission thereunder.
  **3.           Meetings**
 
 The
            Audit Committee shall meet at least quarterly at such times and at such
            locations as the Chair of the Audit Committee shall determine, provided
            that
            meetings shall be scheduled so as to permit the timely review of the
            Corporation’s quarterly and annual financial statements and related management
            discussion and analysis. The external auditor or any two members of the
            Audit
            Committee may also request a meeting of the Audit Committee. The Chair
            of the
            Audit Committee shall hold in camera sessions of the Audit Committee,
            without
            management present, at every meeting.
  
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                  49
                  -
 
 The
            Audit Committee shall submit the minutes of all meetings to the Board,
            and when
            requested to, shall discuss the matters discussed at each Audit Committee
            meeting with the Board.
  **4.           Committee
            Charter**
 
 The
            Audit Committee shall have a written charter that sets out its mandate
            and
            responsibilities and the Audit Committee shall review and reassess the
            adequacy
            of such charter at least annually or otherwise, as it deems appropriate,
            and
            propose recommended changes to the Board.
  **5.           Duties
            of the Audit Committee:**
 
 The
            Audit Committee shall have the following duties:
  ***Financial
            Information and Reporting***
 
 1.
                  The
                      Audit Committee shall review with management and the external
                      auditor, and
                      recommend to the Board for approval, the annual and interim
                      financial
                      statements of the Corporation and related financial reporting,
                      including
                      management’s discussion and analysis and earnings press
                      releases.
  2.
                  The
                      Audit Committee shall review with management and the external
                      auditor, and
                      recommend to the Board for approval, any financial statements
                      of the
                      Corporation which have not previously been approved by the
                      Board and which
                      are to be included in a prospectus or other public disclosure
                      document of
                      the Corporation.
  3.
                  The
                      Audit Committee shall consider and be satisfied that adequate
                      policies and
                      procedures are in place for the review of the Corporation’s disclosure of
                      financial information extracted or derived from the Corporation’s
                      financial statements (other than disclosure referred to in
                      clause (a)(i)
                      above), and periodically assess the adequacy of such
                      procedures.
  ***Internal
              Controls***
 
 4.
                  The
                      Audit Committee shall review, as appropriate, the Corporation’s internal
                      system of audit controls and the results of internal
                      audits.
  5.
                  The
                      Audit Committee shall establish procedures for the receipt,
                      retention and
                      treatment of any complaint regarding accounting, internal accounting
                      controls or auditing matters; and the confidential, anonymous
                      submissions
                      by employees of concerns regarding questionable accounting
                      or auditing
                      matters.
  ***External
            Auditors***
 
 6.
                  The
                      Audit Committee shall be directly responsible for overseeing
                      the work of
                      the external auditor engaged for the purpose of preparing or
                      issuing an
                      auditor’s report or performing other audit, review or attest services
                      for
                      the Corporation, including the resolution of disagreements
                      between
                      management and the external auditor regarding financial
                      reporting.
  7.
                  The
                      external auditor shall report directly to the Audit Committee
                      and the
                      Audit Committee should have a clear understanding with the
                      external
                      auditor that such external auditor must maintain an open and
                      transparent
                      relationship with the Audit Committee, and that the ultimate
                      accountability of the external auditor is to the shareholders
                      of the
                      Corporation.
  8.
                  The
                      Audit Committee shall recommend to the Board the external auditor
                      to be
                      nominated for the purpose of preparing or issuing an auditor’s report or
                      performing other audit, review or attest services for the Corporation;
                      and
                      the compensation of the external
                      auditor.
  
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                  50
                  -
 
 
  9.
                  The
                      Audit Committee will ensure the rotation of partners on the
                      audit
                      engagement team of the external auditor in accordance with
                      applicable
                      law.
  10.
                  The
                      Audit Committee shall meet with the external auditor, as the
                      Audit
                      Committee may deem appropriate, to consider any matter which
                      the Audit
                      Committee or external auditor believes should be brought to
                      the attention
                      of the Board or the shareholders of the
                      Corporation.
  11.
                  The
                      Audit Committee shall meet with the external auditor, as the
                      Audit
                      Committee may deem appropriate, to review and discuss a report
                      from the
                      external auditor at least quarterly
                      regarding:
  (a)
                  all
                      critical accounting policies and practices to be
                      used
  (b)
                  all
                      alternative treatments within generally accepted accounting
                      principles for
                      policies and practices related to material items that have
                      been discussed
                      with management, including the ramifications of the use of
                      such
                      alternative disclosures and treatments, and the treatment preferred
                      by the
                      external auditor, and
  (c)
                  other
                      material written communications between the external auditor
                      and
                      management, such as any management letter or schedule of unadjusted
                      differences.
  ***Pre
            Approval of Non-Audit Services***
 
 12.
                  The
                      Audit Committee shall pre-approve all non-audit services to
                      be provided to
                      the Corporation or its subsidiary entities by the Corporation’s external
                      auditor.
  ***Complaints
            procedure***
 
 13.
                  The
                      Audit Committee shall establish procedures for the receipt,
                      retention and
                      treatment of complaints received by the Corporation regarding
                      accounting,
                      internal accounting controls, or auditing matters; and the
                      confidential,
                      anonymous submission by employees of the Corporation of concerns
                      regarding
                      questionable accounting or auditing
                      matters.
  14.
                  The
                      Audit Committee shall review and approve the Corporation’s hiring policies
                      regarding partners, employees and former partners and employees
                      of the
                      present and former external auditor of the
                      Corporation.
  ***Reporting***
 
 15.
                  The
                      Audit Committee shall report regularly to the Board about any
                      issues that
                      arise with respect to the quality or integrity of the Corporation’s
                      financial statements, the Corporation’s compliance with legal or
                      regulatory requirements, the performance and independence of
                      the external
                      auditor, or the internal audit
                      function.
  **6.           Authority
            to engage independent counsel and advisors**
 
 The
            Audit Committee has the authority to engage independent counsel and other
            advisors as it determines necessary to carry out its duties, to set and
            pay the
            compensation for any advisors employed by the audit committee, and to
            communicate directly with the internal and external auditors.
  The
            Corporation shall provide appropriate funding, as determined by the Audit
            Committee, in its capacity as a committee of the board of directors,
            for payment
            of compensation (a) to the external auditors employed by the issuer for
            the
            purpose of rendering or issuing an audit report, and (b) to any advisers
            employed by the Audit Committee.
  
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