40-F

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 40-F

(Check One)

¨  Registration statement pursuant to Section 12 of the Securities Exchange Act of 1934

or

x  Annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 2012

Commission file number 1-32186

YM BIOSCIENCES INC.

(Exact name of registrant as specified in its charter)

Nova Scotia, Canada
(Province or other jurisdiction of incorporation or organization) 2836
(Primary Standard Industrial
Classification Code Number (if applicable)) Not applicable
(I.R.S. Employer
Identification Number (if Applicable))

Suite 400, Building 11, 5045 Orbitor Drive, Mississauga, Ontario, Canada L4W 4Y4
(905) 629-9761
(Address and Telephone Number of Registrant’s Principal Executive Offices)

DL Services Inc., 701 Fifth Avenue, Suite 6100, Seattle, Washington 98104

(206) 903-5448

(Name, Address (Including Zip Code) and Telephone Number
(Including Area Code) of Agent For Service in the United States)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class
Common Shares Name of each exchange on which registered
NYSE MKT

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

For annual reports, indicate by check mark the information filed with this Form:

x  Annual Information Form x  Audited Annual Financial Statements

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 157,546,793.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.

Yes  x No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (s.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ¨ No  ¨

FORM 40-F

Principal Documents

The following documents, filed as Exhibits 99.1 through 99.3 hereto, are hereby incorporated by reference into this Annual Report on Form 40-F of YM BioSciences Inc. (the “Company”):

(a) Annual Information Form for the fiscal year ended June 30, 2012;

(b) Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended June 30, 2012; and

(c) Consolidated Financial Statements for the fiscal year ended June 30, 2012, prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

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ADDITIONAL DISCLOSURE

Certifications and Disclosure Regarding Controls and Procedures.

(a) Certifications. See Exhibits 99.4, 99.5, 99.6 and 99.7 to this Annual Report on Form 40-F.

(b) Disclosure Controls and Procedures. As of the end of the Company’s fiscal year ended June 30, 2012, an evaluation of the effectiveness of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was carried out by the Company’s management with the participation of the principal executive officer and principal financial officer. Based upon that evaluation, the Company’s principal executive officer and principal financial officer have concluded that as of the end of that fiscal year, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

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

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

The required disclosure is included in the “Management’s Annual Report on Internal Control Over Financial Reporting” that accompanies the Company’s Consolidated Financial Statements for the fiscal year ended June 30, 2012, filed as Exhibit 99.3 to this Annual Report on Form 40-F.

(d) Attestation Report of the Registered Public Accounting Firm.

The required disclosure is included in the “Report of Independent Registered Public Accounting Firm” that accompanies the Company’s Consolidated Financial Statements for the fiscal year ended June 30, 2012, filed as Exhibit 99.3 to this Annual Report on Form 40-F.

(e) Changes in Internal Control Over Financial Reporting. During the fiscal year ended June 30, 2012, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Notices Pursuant to Regulation BTR.

None.

Audit Committee Financial Expert.

The required disclosure is included under the heading “Directors and Senior Management–Committees of the Board of Directors—Audit Committee” in the Company’s Annual Information Form for the fiscal year ended June 30, 2012, filed as Exhibit 99.1 to this Annual Report on Form 40-F.

Code of Ethics.

On December 19, 2004, the Company adopted a “code of ethics” (as that term is defined in Form 40-F) that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions, and such code of ethics was amended on September 22, 2006 (such code of ethics, as amended, the “Code of Ethics”). The Code of Ethics was filed as Exhibit 99.9 to the Company’s Annual Report on Form 40-F for the fiscal year ended June 30, 2011. In addition, the Company undertakes to provide to any person, without charge, upon request, a copy of the Code of Ethics. Requests for such copies should be directed, either orally or in writing, to: Secretary, Suite 400, Building 11, 5045 Orbitor Drive, Mississauga, Ontario, Canada L4W 4Y4, phone number (905) 629-9761.

Except as disclosed above, since the adoption of the Code of Ethics there have not been any amendments to the Code of Ethics or waivers, including implicit waivers, from any provision of the Code of Ethics.

Principal Accountant Fees and Services.

The required disclosure is included under the heading “Audit Fees” in the Company’s Annual Information Form for the fiscal year ended June 30, 2012, filed as Exhibit 99.1 to this Annual Report on Form 40-F.

Pre-Approval Policies and Procedures.

The required disclosure is included under the heading “Audit Fees—Pre-Approval Policies and Procedures” in the Company’s Annual Information Form for the fiscal year ended June 30, 2012, filed as Exhibit 99.1 to this Annual Report on Form 40-F.

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Off-Balance Sheet Arrangements.

The Company fully consolidates a joint venture (CIMYM BioSciences Inc.) in which the Company is considered the primary beneficiary; and as such, the Company has recognized 100% of the cost of operations and cash flows of this entity.

In addition, the Company is party to certain licensing agreements that require the Company to pay a proportion of any fees that the Company may receive from sublicensees in the future. As of June 30, 2012, nil amounts were owing and the amount of future fees thereon, if any, is not determinable.

The Company has entered into various contracts for clinical, preclinical and other studies, none of which individually exceeds Cdn.$1,000,000, totalling an aggregate of Cdn.$11,046,952, of which Cdn.$6,078,851 had been incurred as at June 30, 2012 and the remaining Cdn.$4,968,101 had yet to be incurred as of that date. Any early termination penalties under these contracts cannot exceed the amount of the contract commitment.

On September 20, 2012, the noon rate of exchange, as reported by the Bank of Canada, of United States dollars for one Canadian dollar was: Cdn.$1.00 = U.S.$0.9774.

Tabular Disclosure of Contractual Obligations.

($ 000’s Canadian)		Payment due by period
Contractual Obligations	Total	Less than 1 Year	1 to 3 Years	3 to 5 Years	More than 5 Years
Office Lease – Mississauga, Ontario	46,397	46,397	--	--	--

Identification of the Audit Committee.

The registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of the audit committee are: Thomas I. A. Allen, Dr. Henry Friesen, Nicole Onetto and Tryon M. Williams.

Mine Safety Disclosure.

Not applicable.

NYSE MKT Statement of Governance Differences.

As a Canadian corporation listed on the NYSE MKT, the Company is not required to comply with most of the NYSE MKT corporate governance standards, so long as the Company complies with Canadian corporate governance practices. In order to claim such an exemption, however, the Company must disclose the significant differences between its corporate governance practices and those required to be followed by U.S. domestic issuers under the NYSE MKT’s corporate governance standards. The Company has included a description of such significant differences in corporate governance practices on its website, which may be accessed at www.ymbiosciences.com.

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UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A. Undertaking.

The Company undertakes to make available, in person or by telephone, representatives to respond to inquiries made by the Securities and Exchange Commission staff, and to furnish promptly, when requested to do so by the Securities and ExchangeCommission staff, information relating to: the securities registered pursuant to Form 40-F; the securities in relation to which the obligation to file an annual report on Form 40-F arises; or transactions in said securities.

B. Consent to Service of Process.

The Company has previously filed a Form F-X in connection with the class of securities in relation to which the obligation to file this report arises.

Any change to the name or address of the agent for service of process of the Company shall be communicated promptly to the Securities and Exchange Commission by an amendment to the Form F-X referencing the file number of the relevant registration statement.

SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant certifies that it meets all of the requirements for filing on Form 40-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized, on September 21, 2012.

YM BioSciences Inc.
By:	/s/ Leonard Vernon
Name:	Leonard Vernon
Title:	Vice President, Finance and Administration

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EXHIBIT INDEX

Exhibit	Description
99.1	Annual Information Form for the fiscal year ended June 30, 2012
99.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended June 30, 2012
99.3	Consolidated Financial Statements for the fiscal year ended June 30, 2012
99.4	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
99.5	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14 of the Securities Exchange Act of 1934
99.6	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
99.7	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
99.8	Consent of KPMG LLP

EX-99.1

Exhibit 99.1 

ANNUAL INFORMATION FORM

YEAR ENDED JUNE 30, 2012

September 21, 2012

TABLE OF CONTENTS

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

DOCUMENTS INCORPORATED BY REFERENCE

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

· the audited consolidated balance sheets as at June 30, 2011 and June 30, 2012 and the audited consolidated statements of earnings and retained earnings and changes in financial position for each of the years in the three year period ended June 30, 2012 (collectively, the “Financial Statements”); and

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

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

BASIS OF PRESENTATION

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

FORWARD-LOOKING STATEMENTS

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

· our expected expenditure and accumulated deficit levels;

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

· production quantities;

· our ability to obtain sufficient supplies of our products;

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

· the locations of our clinical trials;

· our intention to license products from multiple jurisdictions;

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

· our potential sources of funding;

· our business strategy;

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· our drug development plans;

· our ability to obtain licenses on commercially reasonable terms;

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

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

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

· our plans for generating revenue;

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

· our strategy for protecting our intellectual property;

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

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

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

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

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

· general economic, business and market conditions;

· our ability to successfully and timely complete clinical studies;

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

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

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

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

· the extent of any future losses;

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

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

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

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

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

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· our ability to obtain patent protection and protect our intellectual property rights;

· commercialization limitations imposed by intellectual property rights owned or controlled by third parties;

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

· the uncertainty of recovery of advances to subsidiaries;

· the impact of competitive products and pricing;

· future levels of government funding; and

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

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

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GLOSSARY OF TERMS AND PROPER NAMES

This glossary contains general terms used in the discussion of the biopharmaceutical industry, as well as specific technical terms used in the descriptions of our technology and business.

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

Amgen: Amgen Incorporated

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

ASCO: The American Society of Clinical Oncology

ASH: The American Society of Hematology

AstraZeneca: AstraZeneca PLC

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

Board: Board of directors of YM

BMS: Bristol Myers Squibb

Cancer Therapeutics CRC: Cancer Therapeutics CRC Pty Ltd.

CIM: Centro de Immunología Molecular (Cuba)

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

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

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

Cisplatin: A platinum-containing chemotherapy drug

CNS: Central nervous system

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

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

Cytotoxic: Having capacity to kill cells

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

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

EGFR: A protein known as epidermal growth factor receptor

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

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

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

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

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

FDA: U.S. Food and Drug Administration

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

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

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

Genentech: Genentech Incorporated

Genmab: Genmab A/S

Glioma: A form of brain cancer involving the malignant transformation of a glial cell

GMP: good manufacturing practices, i.e. guidelines established by the governments of various countries, including Canada and the U.S., used as a standard in accordance with the World Health Organization’s Certification Scheme on the quality of pharmaceutical products

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

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

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

Incyte: Incyte Corporation

IND: Investigational New Drug application which must be filed and accepted by the FDA before each phase of human clinical trials may begin

Irinotecan: An approved chemotherapeutic agent

In vivo: In the living body or organism. A test performed on a living organism

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

JAK1 and JAK2: Members of the four-member Janus kinase (JAK) family and main components of the JAK-STAT pathway

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

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

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

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

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

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

Merck: Merck KGaA

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

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

MTD: Maximum tolerated dose

Murine: Relating to or produced by the mouse species

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

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

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

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

Novartis: Novartis International AG and subsidiaries

NSCLC: Non-small-cell lung cancer

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

Oncoscience: Oncoscience AG of Germany

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

OSI: OSI Pharmaceuticals, Inc. (now Astellas)

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

Oxaliplatin: A platinum-containing chemotherapy drug

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

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Passive Immunotherapy: Immunologically active material transferred into the patient as a passive recipient. Monoclonal antibodies are considered Passive Immunotherapy since antibodies are generated outside the body and given to the patient

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

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

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

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

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

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

Roche: F.Hoffmann-LaRoche Ltd.

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

Splenomegaly: An enlargement of the spleen

SUNY: Research Foundation of State University of New York

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

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

U.S.: United States of America

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

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

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

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

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CORPORATE STRUCTURE

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

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

We currently have the following subsidiaries:

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

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

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

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

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

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

GENERAL DEVELOPMENT OF THE BUSINESS

Business Overview

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

We principally intend to co-develop and/or license the rights to manufacture or market our products in development to other pharmaceutical companies in exchange for license fees and royalty payments. We do not currently intend to manufacture or market products although we may, if the opportunity is available on terms that are considered attractive, participate in ownership of manufacturing facilities or retain marketing rights to specific products in certain market regions. We intend to continue to seek other in-licensing or acquisition opportunities in pursuing our business strategy.

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

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

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

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

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

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

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

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

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

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

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

Business Strategy

We are principally focused on the development of products for the treatment of hematological and cancer or cancer-related conditions. Our strategy is to in-license rights to promising products or to acquire such products, and further develop those products by conducting and managing clinical research trials and progressing the products toward regulatory approval. We principally intend to co-develop and/or license the rights to manufacture or market our products in development to other pharmaceutical companies in exchange for license fees and royalty payments. We do not currently intend to manufacture or market products although we may, if the opportunity is available on terms that are considered attractive, participate in ownership of manufacturing facilities or retain marketing rights to specific products in certain market regions. We intend to continue to seek other in-licensing or acquisition opportunities in pursuing our business strategy.

The main elements of our business strategy are described below:

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

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In-Licensing or Acquisition: Upon identifying a promising biopharmaceutical product candidate, we seek to negotiate the acquisition of the product candidate or the company owning the product candidate or license the rights for the product candidate from the holder of those rights, the developer or researcher. The terms of such licenses vary, but generally our goal is to secure licenses that permit us to engage in further development, clinical trials, intellectual property protection (on behalf of the licensor or otherwise) and further licensing of manufacturing and marketing rights to any resulting products. This process of securing license rights to products is commonly known as “in-licensing”.

Further Development: Upon in-licensing or acquiring a product candidate, our strategy is to apply our skills and expertise to progress the products toward regulatory approval and commercial production and sale in major markets. These activities include implementing intellectual property protection and registration strategies, performing, or having performed for us, pre-clinical research and testing, product optimization, formulating or reformulating drug products, manufacturing and scale-up of manufacturing, making regulatory submissions, performing or managing clinical trials in target jurisdictions and undertaking or managing the collection, collation and interpretation of clinical and field data and the submission of such data to the relevant regulatory authorities in compliance with applicable protocols and standards.

Out-Licensing and Commercialization: We generally plan to further license manufacturing and marketing rights to our licensed products to other pharmaceutical firms. This is commonly known as “out-licensing”. Under our business model, licensees would be expected, to the extent necessary, to participate wholly or partially in the remaining clinical and ancillary development required to obtain final regulatory approval for the product. The sharing of development expenses between the licensee and licensor is commonly known as “co-development”. We expect that out-licensing/co-development would result in a pharmaceutical company or other licensee marketing or manufacturing the product in return for licensing fees in addition to royalties on any sales of the product. Management believes this model is consistent with current biotechnology and pharmaceutical industry licensing practices. In addition, although out-licensing is a primary strategy of ours, we may retain certain co-development or marketing rights to particular products, indications or territories. To date, we have out-licensed the development and marketing rights to nimotuzumab in Europe, South Korea, Japan and several jurisdictions in South East Asia and Africa to four separate companies. We have also licensed certain rights to early stage drug discovery preclinical programs to three organizations and have retained rights of first refusal to in-license back these programs upon the accomplishment of pre-specified milestones. See “Business Overview - Licensing Arrangements - Out-Licensing”.

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

Cancer and the Cancer Therapeutic Market

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

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

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

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

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

Product Portfolio

CYT387

Overview

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

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

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Preclinical data

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

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

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

Clinical Development

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

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

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

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

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Phase II BID Study

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

Regulatory Matters

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

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

Intended Market and Commercialization Status

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

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

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

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

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Competitive Position

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

Nimotuzumab

Overview

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

Clinical Experience and Development Pathway

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

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

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

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

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

Marketing

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

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

Regulatory Matters

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

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

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

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

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

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

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

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

Competitive Position

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

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

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

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

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

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

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

Manufacturing

Overview

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

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

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

CYT387 manufacturing:

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

Nimotuzumab manufacturing:

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

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

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

CIMAB, or a supplier contracted by CIMAB, manufactures and supplies the product to CIMYM. YM has been advised by CIMAB that should CIMAB agree to alternative manufacturing arrangements, such as a sub-licensee of CIMYM manufacturing the product, the loss of manufacturing benefits to CIMAB may be reflected in a lower license fee and royalty payable to CIMYM than if manufacturing remains with CIMAB. See “Business - Licensing Arrangements”.

Licensing Arrangements

In-Licensing

Licenses for CYT387

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

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Licenses for Nimotuzumab

In May 1995, CIMYM entered into an exclusive, sub-licensable license (as amended, the “1995 CIMYM License”) from CIMAB, acting on behalf of CIM, to products for passive immunotherapy of cancer directed toward EGF and EGFR as targets, including hR3, a humanized mAb targeting EGFR. CIMAB is the company responsible for the commercialization of products developed at CIM. The 1995 CIMYM License is in respect of Western and Eastern Europe, North America, and Japan, as well as Australia, New Zealand, Israel and certain Asian and African countries.. As a term of the 1995 CIMYM License, CIMYM has a right of first refusal with respect to licensing any other products derived from the EGF and EGFR programs of CIMAB except its anti-EGFR monoclonal antibody for psoriasis in Europe.

Pursuant to the 1995 CIMYM License, in 1995 we incorporated CIMYM and assigned the 1995 CIMYM License to CIMYM. Pursuant to the terms of the 1995 CIMYM License, CIMAB acquired a 20% equity interest in CIMYM as partial consideration for the 1995 CIMYM License. In addition, YM and CIMYM, pursuant to the terms of the 1995 CIMYM License, paid US$2,750,000 for certain product development costs for nimotuzumab and US$330,000 for certain product development costs for RadioTheraCIM.

The terms of the 1995 CIMYM License provide for CIMYM to conduct or cause to be conducted pre-clinical and clinical trials to evaluate the licensed products and to work with CIMAB to select sites, develop protocols and instruct investigators for pre-clinical and clinical trials. CIMYM is to decide after the end of each stage of trials whether to proceed with further development or to terminate the 1995 CIMYM License with respect to that product. In addition, the 1995 CIMYM License provides that, where commercially reasonable, CIMYM shall file applications for regulatory approval to market the licensed products in the applicable territory. Pursuant to the 1995 CIMYM License, CIMAB has the right, subject to certain terms and conditions, to supply the related drug substances (i.e. nimotuzumab) for commercial sale. CIMAB shall sell the product manufactured by it in Cuba to CIMYM at 85% of the sales price that CIMYM sets for the sale of the product to sub-licensees, thereby entitling CIMYM to the 15% difference. CIMYM shall use commercially reasonable efforts to obtain a sub-license agreement in which CIMAB retains the right to manufacture the product. The CIMYM License shall be in force as long as any patents thereunder are valid, or until such time as the license agreement is terminated by either party because of a default by the other party, or by CIMYM with written notice within 90 days after the end of a stage of pre-clinical trials or after each stage of clinical trials.

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

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

Nimotuzumab Sublicenses

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

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

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

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

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

Licenses for Early Stage Drug Discovery and Preclinical Programs

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

Out-Licensing

We principally intend to co-develop and/or license the rights to manufacture or market our products in development to other pharmaceutical companies in exchange for license fees and royalty payments. We do not currently intend to manufacture or market products although we may, if the opportunity is available on terms that are considered attractive, participate in ownership of manufacturing facilities or retain marketing rights to specific products in certain market regions. We believe this model is consistent with current biotechnology and pharmaceutical industry licensing practices.

Our objectives in seeking to out-license products include:

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

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

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

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

We believe that out-licensing arrangements could be attractive to pharmaceutical corporations because they would provide the prospective partner with access to new products without the initial research risk or earlier clinical development costs. Since partners are expected to be sought only at the later stages of a product’s development, we anticipate that prospective licensees would view our products as having a reduced risk of failure to achieve regulatory approval.

Regulatory Approval

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

Prior to obtaining final regulatory approval to market a drug product, each regulatory agency has a variety of statutes and regulations which govern the principal development activities. These laws require controlled research and testing of products, government review and approval of a submission containing pre-clinical and clinical data establishing the safety and efficacy of the product for each use sought, approval of manufacturing facilities including adherence to GMP during production and storage, and control of marketing activities, including advertising and labelling.

None of our products has been completely developed or tested and, therefore, we are not yet in a position to seek final regulatory approval to market any of our products. To date we have obtained various regulatory approvals to develop and test our in-licensed products. CYT387 and nimotuzumab have been designated as orphan drugs in Europe and the U.S. for certain indications. See “Products in Clinical Development”.

U.S. Approval Process

In the U.S., the FDA, a federal government agency, is responsible for the drug approval process. The FDA’s mission is to ensure that all medications on the market are safe and are effective. The FDA’s approval process examines potential drugs; only those that meet strict requirements are approved.

The U.S. food and drug regulations require licensing of manufacturing facilities, carefully controlled research and testing of products, governmental review and approval of test results prior to marketing of therapeutic products, and adherence to GMP, as defined by each licensing jurisdiction, during production.

The drug approval process begins with the discovery of a potential drug. Pharmaceutical companies then test the drug extensively. A description of the different stages in the drug approval process in the U.S. follows.

Stage 1: Preclinical Research. After an experimental drug is discovered, research is conducted to help determine its potential for treating or curing an illness. This is called preclinical research. Animal studies are conducted to determine if there are any harmful effects of the drug and to help understand how the drug works. Information from these experiments is submitted to the FDA in an Investigational New Drug Application. Animal studies are conducted in accordance to GLP (good laboratory practices). The FDA reviews information in an IND Application and decides if the drug is safe to study in humans.

Stage 2: Clinical Research. In Stage 2, the experimental drug is studied in humans. The studies are known as clinical trials. Clinical trials are carefully designed and controlled experiments in which the experimental drug is administered to patients to test its safety and to determine the effectiveness of an experimental drug. The four general phases of clinical research are described below.

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Phase I Clinical Studies. Phase I clinical studies are generally conducted with healthy volunteers who are not taking other medicines; patients with the illness that the drug will treat are not necessarily tested at this stage. Ultimately, Phase I studies demonstrate how an drug candidate affects the body of a healthy individual. Phase I consists of a series of small studies typically consisting of “tens” of volunteers. Tests are done on each volunteer throughout the study to see how the person’s body processes, responds to and is affected by the drug. Low doses and high doses of the drug are usually studied, resulting in the determination of the safe dosage range in volunteers by the end of Phase I. This information will determine whether the drug proceeds to Phase II.

Phase II Clinical Studies. Phase II clinical studies are generally conducted in order to determine how an experimental drug affects people who have the disease to be treated. Phase II usually consists of a limited number of studies that help determine the drug’s short-term safety, side effects and general effectiveness. The studies in Phase II are often controlled investigations, involving comparison between the experimental drug and a placebo, or between the experimental drug and an existing drug. Information gathered in Phase II studies will determine whether the drug proceeds to Phase III.

Phase III Clinical Studies. Phase III clinical studies are expanded controlled and uncontrolled trials that are used to more fully investigate the safety and effectiveness of the drug. These trials differ from Phase II trials because a larger number of patients are studied (sometimes in the thousands) and because the studies are usually of longer duration. As well, Phase III studies can include patients who have more than one illness and are taking medications in addition to the experimental drug used in the study. The patients in Phase III studies thus more closely reflect the general population. If Phase III clinical trials are successful, the information from these trials forms the basis for most of the drug’s initial labelling, which will guide physicians on how to use the drug.

Stage 3: FDA Review for Approval. Following Phase III clinical studies, the pharmaceutical company prepares reports of all studies conducted on the drug and a complete dossier on the manufacturing of the product and submits the reports to the FDA in a New Drug Application (“NDA”). The FDA reviews the information in the NDA to determine if the drug is safe and effective for its intended use. Occasionally, the FDA will ask experts for their opinion of the drug; this occurs at advisory committee meetings. If the FDA determines that the drug is safe and effective, the drug will be approved.

Stage 4: Marketing. After the FDA has approved the experimental drug, the pharmaceutical company can make it available to physicians and their patients. A company may also continue to conduct research to discover new uses for the drug. Each time a new use for a drug is discovered, the drug is once again subject to the entire FDA approval process before it can be marketed for that purpose.

Phase IV Clinical Studies. Phase IV clinical studies are conducted after a drug is approved. Companies often conduct Phase IV studies to more fully understand how their drug compares to other drugs. Also, the FDA may require additional studies after the drug is approved. FDA-required Phase IV studies often investigate the drug in specific types of patients that may not have been included in the Phase III clinical studies. FDA-required Phase IV studies can also involve very large numbers of patients to further assess the drug’s safety.

Arrangements with CIMYM

YM and CIMAB entered into a funding agreement with CIM in November 1995 in connection with the 1995 CIMYM License. The Funding Agreement provides that YM will arrange on behalf of CIMYM for the appropriate studies and clinical trials for the licensed products held by CIMYM and will fund the cost of such studies and trials, provided that doing so would not, at YM’s sole discretion, be commercially or scientifically unreasonable. Accordingly, YM makes the final determination as to whether or not a clinical trial expense is justified with respect to any given product. YM is entitled to be reimbursed for all funds we provide pursuant to the Funding Agreement out of revenue generated from the exploitation of the relevant license, subject to adequate generation of revenue.

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YM and CIMAB, contemporaneously with the assignment of the 1995 CIMYM License, entered into a shareholders agreement (the “Shareholders Agreement”) with CIMYM relating to its operations. Pursuant to the Shareholders Agreement, CIMYM is required to include nominees of CIMAB both as board members and as members of operating management. The Shareholder Agreement provides that: (i) issued and outstanding shares of CIMYM may not be sold or transferred without the consent of both YM and CIMAB; (ii) the issue of additional shares of CIMYM shall first be offered to each of YM and CIMAB in proportion to their holdings, and thereafter, with the consent of both YM and CIMAB, to any other person; and (iii) the board of directors of CIMYM will consist of five directors, three of whom are nominees of YM and two of whom are nominees of CIMAB. All material and out-of-the-ordinary-course-of-business contracts of CIMYM, including those relating to the borrowing of money, issuing guarantees, entering into non arm’s-length agreements, paying dividends and pledging of property, must be approved by four-fifths of the Board of Directors.

Intellectual Property

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

CYT387 and CYT997

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

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

Nimotuzumab

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

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We are aware of US5,770,195, a patent granted to Genentech, for the anti-cancer use of EGFR MAbs in combination with a cytotoxic agent. We are also aware of U.S. patents granted to others in this field. In April 2001 Rorer International (Overseas) Inc. (“Rorer”) was issued US6,217,866 (the “866 patent”) which includes claims to any antibody targeting the EGFR administered with any anti-neoplastic agent. We believe that the Rorer patents were exclusively licensed to ImClone (now Eli Lilly). A counterpart patent has been granted in Europe. The European patent has now expired. On the related U.S. patent a September 19, 2006 decision in the U.S. District Court of Southern New York granted sole inventorship of the 866 patent to scientists from Weizmann Institute of Science (Rehovet, Israel) represented by Yeda Research & Development Company Limited. Yeda now has the right to grant, and has granted, non-exclusive licenses in the U.S. In addition, we are aware of a separate series of national patent applications filed by ImClone, and represented by EP1080113, claiming the anti-cancer use of radiation in combination with any inhibitor of any receptor tyrosine kinase that is involved in the genesis of tumours. In Europe, Japan, and Canada, and in other countries, this application has been withdrawn in response to prior art brought to the attention of the respective patent examiners by YM. YM continues to monitor a counterpart application filed in the United States. ImClone also filed U.S. and PCT applications covering the use of EGFR MAbs to treat patients having tumours that are refractory to treatment with conventional therapies. We continue to monitor pending patent applications by Eli Lilly. We plan on vigorously challenging claims by Eli Lilly ImClone’s in respect of any patent applications that are material to our business.  The outcome of these challenges cannot be predicted and there can be no assurance that we will succeed in challenging the validity or scope of patent claims by Eli Lilly or any other patent applicant.   If our challenges are not successful, this may have a material adverse effect on our business. We are also aware of a European patent, EP1058562, granted to the University of Pennsylvania and relating to compositions and methods for treating tumours. CIMYM’s European sub-licensee, OSAG, and others have filed oppositions to the grant of this patent. The European opposition board has recently revoked this patent in its entirety. An appeal has been lodged by the University of Pennsylvania, and YM is monitoring its progression. YM is also aware that the University of Pennsylvania has been granted a counterpart patent in the United States, as US 7625558.

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

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

Property, Plant and Equipment

Facilities

We currently occupy 7,070 square feet of space in Mississauga, Ontario pursuant to a sub-lease agreement dated July 31, 1997 (the “Sub-Lease”) and a lease amending and extension agreement dated February 1, 2008 (the “Lease Amending Agreement”). The Lease Amending Agreement extended the initial terms of the Sub-Lease for a term of five years commencing on February 1, 2008 and expiring on January 31, 2013. Average annual fixed rent, excluding operating costs, is approximately $75,000.

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

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Employees

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

RISK FACTORS

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

Risks Related To Our Business

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

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

We deal with products that are in the early stages of development and, as a result, are unable to predict whether we will be able to profitably commercialize our products.

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

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

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

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

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

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We are not able to predict the results of pre-clinical and clinical testing of our drug products. It is not possible to predict, based on studies or testing in laboratory conditions or in animals, whether a drug product will prove to be safe or effective in humans. Further, pre-clinical data may not be sufficient for regulators to accept positive clinical data for approval to commercialize a product. Pre-clinical data must have been conducted to high regulatory standards and may be found, on review by health regulatory authorities, to be of insufficient quality to support an application for commercialization of our products. In addition, success in one stage of testing is not necessarily an indication that the particular drug product will succeed in later stages of testing and development. There can be no assurance that the pre-clinical or clinical testing of our products will yield satisfactory results that will enable us to progress toward commercialization of such products. Unsatisfactory results may have a material adverse effect on our business, financial condition or results of operations as they could result in us having to reduce or abandon future testing or commercialization of particular drug products. Clinical trials require the enrolment of patients and we may experience difficulties identifying and enroling suitable human subjects for ongoing and future trials of our products. This could be as a result of a number of factors including, but not limited to, design protocol, the size of the available patient population, the eligibility criteria for participation in the clinical trials, and the availability of clinical trial sites.

We are subject to extensive government regulation that increases the cost and uncertainty associated with gaining final regulatory approval of our product candidates.

Securing final regulatory approval for the manufacture and sale of human therapeutic products in Canada and our other markets, including the U.S., is a long and costly process that is controlled by each such country’s regulatory agency. The applicable regulatory agency in Canada is Health Canada, in Europe it is the EMA and in the United States it is the FDA. Other applicable regulatory agencies have similar regulatory approval processes, but each is different. Approval in Canada, Europe or the United States does not assure approval by other applicable regulatory agencies, although often test results from one country may be used in applications for regulatory approval in another country.

Prior to obtaining final regulatory approval to market a drug product, every jurisdiction has a variety of statutes and regulations which govern the principal development activities. These laws require controlled research and testing of products, government review and approval of a submission containing pre-clinical and clinical data establishing the safety and efficacy of the product for each use sought, approval of manufacturing facilities including adherence to good manufacturing practices during production and storage and control of marketing activities, including advertising and labelling. We have no assurance that a viable, economic path to regulatory approval for our products in the United States and other regulatory jurisdictions can be negotiated with the applicable regulatory authorities. Clinical requirements imposed by the FDA and other regulators to obtain approval for our products may not be achievable within the resources and capabilities available to us.

None of our products has been completely developed or tested and, therefore, we are not yet in a position to seek final regulatory approval to market any of our products. To date, we have obtained various regulatory clearances to develop and test our products. CYT387 has been approved for use in clinical trials by the FDA and Health Canada. The FDA or other regulatory authority may require additional extensive clinical trials or impose other regulatory process requirements which may delay or prevent us from continuing to develop our products.

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

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

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

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

We have, or have had, licenses with, or clinical trials at, various academic organizations, hospitals and companies in Australia, Canada, Cuba, India, Italy, Japan, Korea, Germany, the U.S., the United Kingdom, countries in Southeast Asia and other countries and we depend upon the validity of our licenses and access to the data for the timely completion of clinical research in those jurisdictions. Any changes in the drug development regulatory environment or shifts in political attitudes of a government are beyond our control and may adversely affect our business.

Our business may also be affected in varying degrees by such factors as government regulations with respect to intellectual property, regulation or export controls. Such changes remain beyond our control and the effect of any such changes cannot be predicted.

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

If our competitors develop and market products that are more effective than our existing product candidates or any products that we may develop, or obtain marketing approval before we do, our products may be rendered obsolete or uncompetitive.

Technological competition from pharmaceutical companies, biotechnology companies and universities is intense and is expected to increase. Many of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we have. Our future success depends in part on our ability to maintain a competitive position, including our ability to further progress our products, licensed or owned, through the necessary pre-clinical and clinical trials towards regulatory approval for sale and commercialization. Other companies may succeed in commercializing products earlier than we are able to commercialize our products or they may succeed in developing products that are more effective than our products. Moreover, we have no assurance that clinical investigators and key opinion leaders will continue to want to work with our products and remain favourable to their prospects.

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

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

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

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

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

We depend upon others for the manufacture, development and sale of our products. If we are unable to establish or manage collaborations in the future, there could be a delay in the manufacture, development and sale of our products.

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

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

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

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We lack experience in commercial manufacturing of our products and may encounter problems or delays in making arrangements for products to be commercially manufactured, which could result in delayed development, regulatory approval and marketing.

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

Nimotuzumab is required to be manufactured in quantities sufficient for clinical testing by CIMAB or a related party, subject to certain terms and conditions of the licensing agreements between us and CIMAB. Currently these expectations are being met. There can be no assurance, however, that such entities will be able to develop adequate manufacturing capabilities for sufficient commercial scale quantities in a commercially reasonable manner. In addition, there are risks that we cannot control regarding the CIMAB manufacturing plant, including amongst others, events such as weather, fire and other natural disasters as well as political risks. All manufacturing facilities must comply with applicable regulations in their jurisdiction and where products are to be sold. In addition, production of the licensed and owned products may require raw materials for which the sources and amount of supply are limited. An inability to obtain adequate supplies of such raw materials could significantly delay the development, regulatory approval and marketing of our licensed and owned products.

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

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

We conduct our development internationally and are subject to laws and regulations of several countries which may affect our ability to access regulatory agencies and may affect the enforceability and value of our licenses.

Clinical trials on our development products have been conducted by us and our sub-licensees in more than 20 jurisdictions including Australia, Canada, the United Kingdom, the European Union, Japan, India, Indonesia, Korea, Russia and the U.S., and we intend to, and may, conduct future clinical trials in these and other jurisdictions. There can be no assurance that any sovereign government, including Canada’s, will not establish laws or regulations that will be deleterious to our interests. There is no assurance that we, as a Canadian corporation, will continue to have access to the regulatory agencies in any jurisdiction where we might want to conduct clinical trials or obtain final regulatory approval, and there can be no assurance that we will be able to enforce our licenses in foreign jurisdictions or obtain and maintain the necessary regulatory approvals for our products. Governments have, from time to time, established foreign exchange controls which could have a material adverse effect on our business and financial condition, since such controls may limit our ability to flow funds into a particular country to meet our obligations under in-licensing agreements, and to flow funds which we may be entitled to, in the form of royalty and milestone payments, under out-licensing agreements out of a particular country In addition, the value of our licenses will depend upon the absence of punitive or prohibitive legislation in respect of biological materials.

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

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

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

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

Risk Related To Intellectual Property And Litigation

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

Our success depends, in part, upon our ability and our licensors’ ability to obtain patents, maintain trade secrets protection and operate without infringing on the proprietary rights of third parties or having third parties circumvent our rights. Certain licensors, the institutions that they represent and, in certain cases, us on behalf of the licensors and the institutions that they represent, have filed and are actively pursuing certain applications for Canadian and foreign patents. The patent position of pharmaceutical and biotechnology firms is uncertain and involves complex legal and financial questions for which, in some cases, certain important legal principles remain unresolved. There can be no assurance that the patent applications made in respect of the owned or licensed products will result in the issuance of patents, that the term of a patent will be extendable after it expires in due course, that the licensors or the institutions that they represent will develop additional proprietary products that are patentable, that any patent issued to the licensors or us will provide us with any competitive advantages, that the patents of others will not impede our ability to do business or that third parties will not be able to circumvent or successfully challenge the patents obtained in respect of the licensed products. The cost of obtaining and maintaining patents is high. Furthermore, there can be no assurance that others will not independently develop similar products which duplicate any of the licensed products or, if patents are issued, design around the patent for the product. There can be no assurance that our processes or products or those of our licensors do not or will not infringe upon the patents of third parties or that the scope of our patents or those of our licensors will successfully prevent third parties from developing similar and competitive products.

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

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We maintain patents in connection with our products including nimotuzumab. There may also be risks related to nimotuzumab as our license originates from Cuba. Cuba is a formally socialist country and, under the current patent law, ownership of the inventions of the Cuban inventors for which patent applications have been filed rests with the State. The material license agreement for our Cuban sourced products is the 1995 CIMYM License with respect to nimotuzumab. There is no guarantee that, with any future changes in the political regime, the Cuban government would continue to honour such a license agreement.

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

Our future success and competitive position depend in part upon our ability to maintain our intellectual property portfolio. There can be no assurance that any patents will be issued on any existing or future patent applications. Even if such patents are issued, there can be no assurance that any patents issued or licensed to us will not be challenged. Our ability to establish and maintain a competitive position may be achieved in part by prosecuting claims against others who we believe are infringing our rights and by defending claims brought by others who believe that we are infringing their rights. In addition, enforcement of our patents in foreign jurisdictions will depend on the legal procedures in those jurisdictions. Even if such claims are found to be invalid, our involvement in intellectual property litigation could have a material adverse effect on our ability to out-license any products that are the subject of such litigation. In addition, our involvement in intellectual property litigation could result in significant expense, which could materially adversely affect the use or licensing of related intellectual property and divert the efforts of our valuable technical and management personnel from their principal responsibilities, whether or not such litigation is resolved in our favour. (See “General Development of the Business – Business Strategy” and “Product Portfolio”)

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

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

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

We depend upon the license rights to certain products for commercialization. While we believe we are in compliance with our obligations under these licenses, they may be terminated or converted to non-exclusive licenses by the licensors if there is a breach of the terms of the licenses. There can be no assurance that a license is enforceable or will not be terminated or converted. The termination or conversion of the licenses or our inability to enforce our rights under the licenses would have a material adverse effect on our business as we would not have the rights to certain of the products that we are developing. To the extent that management considers a particular license to be material to our undertaking, we have entered into a signed license agreement for that license. The in-license agreements to which we are currently a party require us to maintain and defend the patent rights that we in-license against third parties.

Not all of our current licenses are governed by the laws of Ontario and therefore, the enforcement of certain of them may necessitate pursuing legal proceedings and obtaining orders in other jurisdictions, including the U.S. and Cuba. There can be no assurance that a court judgment or order obtained in one jurisdiction will be enforceable in another. In international venture undertakings it is standard practice to attorn to a neutral jurisdiction to seek remedy for unresolved commercial disputes. These arrangements are usually negotiated as part of the original business agreement. In the case of the license agreements with us, the parties have agreed that the law governing the agreements is Ontario law and the parties will attorn to the courts of Ontario or the Federal Court of Canada to resolve any dispute regarding the agreements.

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

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

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

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

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

The Helms-Burton Act authorizes private lawsuits for damages against anyone who “traffics” in property confiscated, without compensation, by the Government of Cuba from persons who at the time were, or have since become, nationals of the U.S. We do not own any real property in Cuba and, to the best of our knowledge, and based upon the advice of the Cuban government, none of the properties of the scientific centers of the licensors in which the licensed products were developed and are or may be manufactured was confiscated by the Government of Cuba from persons who at the time were, or have since become, nationals of the U.S. However, there can be no assurance that this is correct.

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

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

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

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

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

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

Product liability claims are an inherent risk of our business, and if our clinical trial and product liability insurance prove inadequate, product liability claims may harm our business.

Human therapeutic products involve an inherent risk of product liability claims and associated adverse publicity. We currently maintain clinical trial liability insurance with an ultimate net loss value of up to C$10,000,000 per claim and a policy aggregate of C$10,000,000. We currently have no other product liability insurance and there can be no assurance that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. An inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could have a material adverse effect on our business by preventing or inhibiting the commercialization of our products, licensed and owned, if a product is withdrawn or a product liability claim is brought against us.

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

We are susceptible to general economic conditions.

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

Although all of the funds advanced to our joint venture subsidiaries have been expensed, we are only entitled to recover those expenditures when the joint venture’s net income exceeds the amount of cumulative advances.

YM and CIMAB entered into a funding agreement with CIMYM in November 1995 in connection with the 1995 CIMYM License with respect to nimotuzumab. The funding agreement provides that we will arrange for the appropriate studies and clinical trials for the licensed products held by CIMYM and will fund the cost of such studies and trials provided that doing so would not be commercially or scientifically unreasonable. Accordingly, we make the final determination as to whether or not a clinical trial expense is justified with respect to any given product.

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

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

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

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

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

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

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

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Our operating results and stock price may fluctuate significantly.

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

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

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

Our share price is volatile.

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

We have not paid dividends.

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

Our outstanding common shares could be subject to dilution.

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

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

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

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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, U.S.

The material differences between the Nova Scotia Companies Act (the “NSCA”) as compared to the Delaware General Corporation Law (“DGCL”) which may be of most interest to shareholders include the following: (i) for material corporate transactions (such as amalgamations, other extraordinary corporate transactions, amendments to the memorandum of association and amendments to the articles of association) the NSCA generally requires three quarters of the votes of shareholders who cast votes (a “Special Resolution”) (and, in addition, especially where the holders of a class of shares is being affected differently from others, approval will be required by holders of two-thirds of the shares of such class voting in a meeting called for the purpose), whereas DGCL generally only requires a majority vote of shareholders for similar material corporate transactions; (ii) quorum for shareholders meetings is not prescribed under the NSCA and is only 5% under our articles of association, whereas under DGCL, quorum requires the holders of a majority of the shares entitled to vote to be present; and (iii) our articles of association require a Special Resolution and the Corporations Miscellaneous Provisions Act (Nova Scotia) requires three-quarters of the votes of shareholders that, in aggregate, represent the majority of the shares issued and outstanding at the time, to pass a resolution for one or more directors to be removed, whereas DGCL only requires the affirmative vote of a majority of the shareholders.

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

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

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

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

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DIRECTORS AND SENIOR MANAGEMENT

Directors

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

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

Notes:

(1) Member of Audit Committee.

(2) Member of Corporate Governance and Nominating Committee.

(3) Member of Compensation Committee.

David G.P. Allan - Chairman and Director

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

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

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

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

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

Mark Entwistle, M.A. - Director

Mr. Entwistle is Director and Special Advisor to Acasta Capital, and has maintained his own boutique consulting practice in Cuba business since 1997. He was Ambassador of Canada to Cuba from 1993 to 1997, and previously a career diplomat with the Canadian Department of Foreign Affairs and International Trade in a variety of embassy positions from 1982 to 1997. Mr. Entwistle served as Press Secretary and Director of Communications to the Prime Minister of Canada from 1991-1993. He is a Fellow of the Canadian Defence and Foreign Affairs Institute. Mr. Entwistle has been a director of the Company since October 1997.

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

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

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

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

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Catherine J. Mackey, Ph.D. - Director

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

Nicole Onetto, M.D. - Director

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

François Thomas, M.D. - Director

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

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

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

Officers

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

Name	Age	Position
Wendy Chapman Erin, Ontario, Canada	47	Vice-President, Clinical Operations
Nick Glover Salt Spring Island, British Columbia, Canada	43	President and Chief Executive Officer
Mark Kowalski Winchester, Massachussetts, U.S.	57	Chief Medical Officer and Vice-President, Regulatory Affairs

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

Wendy Chapman – Vice-President, Clinical Operations

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

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

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

James Smith – Vice-President, Corporate Communications

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

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

Mr. Vernon has been an officer of the Company since 1997. He has held senior financial positions with a number of organizations both public and private. Prior to joining YM as an officer in July 1997, Mr. Vernon was an independent consultant working with senior management in a variety of industries. Prior to 1992 he was Vice-President, Finance and Administration of Unitel Inc., now Allstream Inc., a major Canadian telecommunications company. Mr. Vernon earned a B.Sc. in 1968 and was awarded his C.A. in 1972 with Clarkson Gordon & Co. (now Ernst & Young llp).

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Ernest Wong – Vice-President, Business Development

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

Cease Trade Orders, Bankruptcies, Penalties or Sanctions

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

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

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

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

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

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

Committees of the Board of Directors

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

Audit Committee

The Audit Committee is directly responsible for overseeing our accounting and financial reporting processes and audits of our financial statements, and for the appointment, compensation and oversight of the work of any registered external auditor employed by us (including resolution of disagreements between management of the Company and the external auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. In so doing, the Audit Committee will comply with all applicable Canadian and U.S. securities laws, rules and guidelines, any applicable stock exchange requirements or guidelines and any other applicable regulatory rules.

The Audit Committee is composed of a minimum of three members. Members of the Audit Committee shall be appointed by the Board. Each member shall serve until such member’s successor is appointed, unless that member resigns or is removed by the Board or otherwise ceases to be a director of the Company. The Board shall fill any vacancy if the membership of the Committee is less than three directors. The Chair of the Committee may be designated by the Board or, if it does not do so, the members of the Committee may elect a Chair by vote of a majority of the full Committee membership. All members of the Audit Committee must satisfy the independence, financial literacy and experience requirements of applicable Canadian and U.S. securities laws, rules and guidelines, any applicable stock exchange requirements or guidelines and any other applicable regulatory rules. In particular:

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

(b) at least one member must be “financially sophisticated” under the rules of the NYSE MKT; and

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

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

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

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

Compensation Committee

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

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Nominating and Corporate Governance Committee

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

Share Ownership

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

Name	Number of Common Shares		Percentage of Common Shares Outstanding		Common Shares Held Under Option		Exercise Price		Expiration Date
David G.P. Allan		417,180		*		1,689,502		$0.50-$4.36	30/04/2013 – 30/09/2021
Thomas I.A. Allen		-		-		376,635		$0.50-$3.61	30/04/2013 –30/09/2021
Wendy Chapman		-		-		100,834		$1.37-$1.72	25/8/2020 - 30/09/2021
Mark Entwistle		-		-		364,440		$0.50-$3.61	30/04/2013- 30/09/2021
Henry Friesen		-		-		304,745		$0.50-$3.61	30/09/2011 – 30/09/2021
Philip Frost		6,000		*		241,585		$0.50-$1.72	29/07/2017 – 30/09/2021
Nick Glover		-		-		595,000		$1.39-$1.72	03/06/2020 – 30/09/2021
Mark Kowalski		-		-		180,000		$1.53-$1.72	09/09/2020 - 30/09/2021
Catherine Mackey		-		-		75,000		$1.72	22/11/2021

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Name	Number of Common Shares		Percentage of Common Shares Outstanding		Common Shares Held Under Option		Exercise Price		Expiration Date
Nicole Onetto		-		-		75,000		$1.72	22/11/2021
James Smith		-		-		104,000		$1.72-$2.33	08/02/2021 - 30/09/2021
Francois Thomas		-		-		155,000		$1.58-$1.72	29/09/2017 – 30/09/2021
Leonard Vernon		-		-		612,126		$0.50-$4.36	30/04/2013 –
Tryon M. Williams		275,540		*		245,000		$0.50-$3.61	30/04/2013 – 30/09/2021
Ernest Wong		-		-		131,250		$1.53-$1.72	09/09/2020 - 30/09/2021

* Less than one percent

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

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

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

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

Interests of Management and Others in Material Transactions

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

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

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Market Price

	TSX (C$)						NYSE MKT (US$)
Calendar period	High		Low		Daily Avg. Volume		High		Low		Daily Avg. Volume
May 2011	$	3.61	$	2.90		67,727	$	3.65	$	3.02		998,073
June 2011	$	3.58	$	2.38		50,681	$	3.67	$	2.44		1,322,848
July 2011	$	2.83	$	2.24		27,038	$	2.96	$	2.35		480,022
August 2011	$	2.28	$	1.66		59,069	$	2.44	$	1.70		882,353
September 2011	$	2.04	$	1.72		17,075	$	2.05	$	1.68		710,186
October 2011	$	1.94	$	1.69		12,710	$	1.89	$	1.62		792,767
November 2011	$	1.85	$	1.14		42,413	$	1.85	$	1.11		1,644,869
December 2011	$	1.76	$	1.39		40,304	$	1.69	$	1.35		1,516,226
January 2012	$	2.05	$	1.56		65,118	$	2.02	$	1.57		767,584
February 2012	$	2.40	$	2.00		87,097	$	2.39	$	2.00		1,859,378
March 2012	$	1.98	$	1.82		66,100	$	2.00	$	1.83		1,123,381
April 2012	$	1.83	$	1.63		20,618	$	1.84	$	1.62		719,787
May 2012	$	2.19	$	1.74		57,525	$	2.14	$	1.75		1,007,203
June 2012	$	2.10	$	1.90		45,049	$	2.04	$	1.85		712,449
July 2012	$	2.28	$	1.95		43,430	$	2.22	$	1.92		781,581
August 2012	$	2.00	$	1.84		41,551	$	2.03	$	1.84		438,545
September 1–20, 2012	$	1.93	$	1.71		68,755	$	1.94	$	1.75		648,466

Volatility of Common Shares

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

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Share Capital

Authorized Capital

Our authorized share capital consists of 500,000,000 common shares without nominal or par value, 500,000,000 Class A non-voting common shares without nominal or par value, 500,000,000 Class A preferred shares without nominal or par value and 500,000,000 Class B preferred shares, issuable in series, without nominal or par value. As of September 20, 2012, there were 157,546,793 common shares, no Class A non-voting common shares and no Class A or Class B preferred shares outstanding.

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

Common Shares

All of the common shares rank equally as to voting rights, participation in a distribution of the assets of our Company on a liquidation, dissolution or winding-up of our Company and the entitlement to dividends. The holders of our common shares are entitled to receive notice of all meetings of shareholders and to attend and vote the common shares at the meetings. Each common share carries with it the right to one vote.

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

Class A Preferred Shares and Class B Preferred Shares

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

Stock Option Plan

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

· The Company has no security purchase agreement plan.

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

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

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

Shareholder Rights Plan

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

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

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

Term

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

Distribution of Rights

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

Exercise of Rights

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

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

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

Certificates and Transferability

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

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Rights of Rights Holders

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

Flip-in Event

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

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

Beneficial Ownership

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

Acquiring Person

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

Exercise Price and Anti-Dilution Adjustments

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

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

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

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

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

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

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

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

Permitted Bids and Competing Permitted Bids

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

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

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

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

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

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

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

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

Redemption and Waiver

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

Shareholder Approval

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

Amendment

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

AUDIT FEES

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

	Fees Billed
Service	2012		2011
Audit Fees	$	449,500	$	618,000
Audit-Related Fees	$	62,000		48,500
Tax Fees	$	40,000	$	80,500
All Other Fees	$	Nil		Nil
Total Fees Billed	$	551,500	$	747,000

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

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

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

Pre-Approval Policies and Procedures

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

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

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

INDEPENDENCE OF EXPERTS

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

LEGAL PROCEEDINGS

We are not a party to any material pending legal or arbitration proceedings and is not aware of any material contemplated legal proceedings to which we may be a party.

TRANSFER AGENT AND REGISTRAR

The registrar and transfer agent for our common shares in Canada is CIBC Mellon Trust Company at its principal offices in Toronto, Canada and in the United States is Mellon Investor Services LLC at its principal offices in Ridgefield Park, New Jersey.

MATERIAL CONTRACTS

Except for contracts entered into in the ordinary course of business, there are no material contracts entered into by the Company since the beginning of the financial year ending ended June 30, 2012, that are still in effect.

In the ordinary course of our business, we enter into licenses for products which we develop; however, because of the immateriality of such licenses to us, they are not referenced here. The licenses for these products are more fully described in this annual information form under the heading “Business Overview - Licensing Arrangements”.

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ADDITIONAL INFORMATION

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

When securities of the Company are in the course of distribution pursuant to a short form prospectus, or when a preliminary short form prospectus has been filed in respect of the Company’s securities, the Company will provide the following documents to any person or company upon request to the Corporate Secretary of the Company:

1. a copy of this annual information form, together with a copy of any document or the pertinent pages of any document incorporated by reference in this annual information form;

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

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

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

5. a copy of any other document that is incorporated by reference into the preliminary short form prospectus or the short form prospectus.

At any other time, a copy of the documents referred to in subsections 1, 2, 3, 4 and 5 above may be obtained from our Corporate Secretary, however, a reasonable fee may be charged if the request is made by a person or company who is not a shareholder of YM.

All requests for the above-mentioned documents must be addressed to:

YM BioSciences Inc.

5045 Orbitor Drive

Building 11, Suite 400

Mississauga, Ontario

L4W 4Y4

Attention:	Secretary
Telephone:	(905) 629-9761
Fax:	(905) 629-4959
e-mail:	ir@ymbiosciences.com
Web Page:	www. ymbiosciences.com

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SCHEDULE A

AUDIT COMMITTEE MANDATE

1. General

The board of directors (the “Board”) of YM BioSciences Inc. (the “Corporation”) has delegated the responsibilities, authorities and duties described below to the audit committee (the “Audit Committee”). For the purpose of these terms of reference, the term “Corporation” shall include the Corporation and its subsidiaries.

The Audit Committee shall be directly responsible for overseeing the accounting and financial reporting processes of the Corporation, the fraud programs and controls, and audits of the financial statements of the Corporation. The Audit Committee shall also, in its capacity as a committee of the Board, be directly responsible for the appointment, compensation, and oversight of the work of any registered external auditor employed by the Corporation (including resolution of disagreements between management of the Corporation and the external auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. In so doing, the Audit Committee will comply with all applicable Canadian and United States securities laws, rules and guidelines, any applicable stock exchange requirements or guidelines and any other applicable regulatory rules.

2. Members

The Audit Committee shall be composed of a minimum of three members. Members of the Audit Committee shall be appointed by the Board. Each member shall serve until such member’s successor is appointed, unless that member resigns or is removed by the Board or otherwise ceases to be a director of the Corporation. The Board shall fill any vacancy if the membership of the Committee is less than three directors. The Chair of the Committee may be designated by the Board or, if it does not do so, the members of the Committee may elect a Chair by vote of a majority of the full Committee membership.

All members of the Audit Committee must satisfy the independence, financial literacy and experience requirements of applicable Canadian and United States securities laws, rules and guidelines, any applicable stock exchange requirements or guidelines, and any other applicable regulatory rules. In particular, but without limitation:

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

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

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

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

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

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

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3. Meetings

The Audit Committee shall meet at least quarterly at such times and at such locations as the Chair of the Audit Committee shall determine, provided that meetings shall be scheduled so as to permit the timely review of the Corporation’s quarterly and annual financial statements and related management discussion and analysis. The external auditor or any two members of the Audit Committee may also request a meeting of the Audit Committee. The Chair of the Audit Committee shall hold in camera sessions of the Audit Committee, without management present, at every meeting.

The Audit Committee shall submit the minutes of all meetings to the Board, and when requested to, shall discuss the matters discussed at each Audit Committee meeting with the Board.

4. Committee Charter

The Audit Committee shall review and reassess the adequacy of this Mandate at least annually, and propose recommended changes to the Board.

5. Duties of the Audit Committee:

The Audit Committee shall have the following duties:

Financial Information and Reporting

1. The Audit Committee shall review with management and the external auditor, and recommend to the Board for approval, the annual and interim financial statements of the Corporation and related financial reporting contained in all public disclosure documents, including all press releases, annual reports, annual information forms, management’s discussion and analysis and offering documents containing such financial results.

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

3. The Audit Committee shall consider and be satisfied that adequate policies and procedures are in place for the review of the Corporation’s disclosure of financial information extracted or derived from the Corporation’s financial statements (other than disclosure referred to in clause (a)(i) above), and periodically assess the adequacy of such procedures.

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

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Internal Controls

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

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

External Auditors

7. The Audit Committee shall be directly responsible for overseeing the work of the external auditor engaged for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Corporation, including the resolution of disagreements between management and the external auditor regarding financial reporting.

8. The external auditor shall report directly to the Audit Committee and the Audit Committee should have a clear understanding with the external auditor that such external auditor must maintain an open and transparent relationship with the Audit Committee, and that the ultimate accountability of the external auditor is to the shareholders of the Corporation.

9. The Audit Committee shall recommend to the Board the external auditor to be nominated for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the Corporation; and the compensation of the external auditor.

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

11. The Audit Committee shall meet with the external auditor, as the Audit Committee may deem appropriate, to consider any matter which the Audit Committee or external auditor believes should be brought to the attention of the Board or the shareholders of the Corporation.

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

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

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

15. The Audit Committee shall meet with the external auditor, as the Audit Committee may deem appropriate, to review and discuss a report from the external auditor at least quarterly regarding:

(a) all critical accounting policies and practices to be used;

(b) all alternative treatments within generally accepted accounting principles ;that have been discussed with management, including the ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the external auditor, and

(c) other material written communications between the external auditor and management, such as any management letter or schedule of unadjusted differences.

Pre Approval of Non-Audit Services

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

Complaints procedure

17. The Audit Committee shall establish procedures for the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal accounting controls, or auditing matters; and the confidential, anonymous submission by employees of the Corporation of concerns regarding questionable accounting or auditing matters.

18. The Audit Committee shall review and approve the Corporation’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Corporation.

Reporting

19. The Audit Committee shall report regularly to the Board about any issues that arise with respect to the quality or integrity of the Corporation’s financial statements, the Corporation’s compliance with legal or regulatory requirements, the performance and independence of the external auditor, or the internal audit function.

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

Compliance Oversight

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

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

6.            Authority to engage independent counsel and advisors

The Audit Committee has the authority to engage independent counsel and other advisors as it determines necessary to carry out its duties, to set and pay the compensation for any advisors employed by the audit committee, and to communicate directly with the internal and external auditors.

The Corporation shall provide appropriate funding, as determined by the Audit Committee, for payment of compensation (a) to the external auditors employed by the issuer for the purpose of rendering or issuing an audit report, and (b) to any advisors employed by the Audit Committee.

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EX-99.2

Exhibit 99.2 

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the year and three months ended June 30, 2012 compared to the year and three months ended June 30, 2011.

The following Management’s Discussion and Analysis (“MD&A”) should be read in conjunction with the audited consolidated financial statements for the years ended June 30, 2012 and 2011, and notes thereto.

The consolidated financial statements and comparative information have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) and “First-time Adoption of IFRSs”, and as issued by the International Accounting Standards Board (“IASB”). Previously, the Company prepared Annual Consolidated Financial Statements in accordance with Canadian Generally Accepted Accounting Principles (“Canadian GAAP”) up to June 30, 2011. Accordingly, the Company has prepared condensed consolidated interim financial statements which comply with IAS 34, “Interim Financial Reporting” applicable for periods beginning on or after July 1, 2011 as described in the accounting policies. In preparing the condensed consolidated interim financial statements, the opening consolidated statement of financial position was prepared as at July 1, 2010, the Company's date of transition to IFRS. Note 17 to the June 30, 2012 audited consolidated financial statements, and this MD&A under the heading “Transition to IFRS”, explain the principal adjustments made by the Company in restating its Canadian GAAP consolidated statement of financial position as at July 1, 2010, and its previously published Canadian GAAP consolidated financial statements for the year ended June 30, 2011, to be in compliance with IFRS. All amounts presented are in Canadian dollars unless otherwise stated. In this report, “the Company”, “YM”, “we”, “us”, and “our” refer to YM BioSciences Inc. and its consolidated subsidiaries. This document is current in all material respects as of September 20, 2012.

FORWARD-LOOKING STATEMENTS

Statements contained in this MD&A 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 product development, operations and marketing and other risks detailed elsewhere 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 MD&A 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:

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

· general economic, business and market conditions;

· our ability to complete clinical studies successfully and within planned timelines;

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

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

· our inability to profitably commercialize our products;

· the extent of any future losses;

· our inability to establish or manage manufacturing, development or marketing collaborations;

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

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

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

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

· our ability to obtain patent protection and protect our intellectual property rights;

· commercialization limitations imposed by intellectual property rights owned or controlled by third parties;

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

· the uncertainty of recovery of advances to subsidiaries;

· the impact of competitive products and pricing;

· future levels of government funding; and

· other factors discussed under “Risks and Uncertainties” and on Schedule A to this MD&A.

OVERVIEW OF BUSINESS

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

We principally intend to co-develop and/or license the rights to manufacture or market our products in development to other pharmaceutical companies in exchange for license fees and royalty payments. We do not currently intend to manufacture or market products although we may, if the opportunity is available on terms that are considered attractive, participate in ownership of manufacturing facilities or retain marketing rights to specific products in certain market regions. We intend to continue to seek other in-licensing or acquisition opportunities in pursuing our business strategy.

A brief description of our product portfolio follows below, along with a summary of recent developments:

CYT387

CYT387 is an orally-administered selective inhibitor of the JAK1 and JAK2 kinases, which have been implicated in a number of disorders including myeloproliferative neoplasms (MPNs), inflammatory diseases and certain cancers. We are initially developing CYT387 for the treatment of patients with myelofibrosis, a chronic, debilitating and potentially fatal disease of blood production, in which a patient’s bone marrow is replaced by scar tissue often rendering the patient anemic and suffering from significant symptoms.

A first-in-man Phase I/II clinical trial evaluating CYT387 in myelofibrosis was initiated at Mayo Clinic in November 2009 and subsequently expanded to include centers in the US, Canada and Australia. In September 2011, enrolment was completed in the trial with 166 patients recruited. Patients who complete the nine months of dosing in the Core Phase I/II trial are able to continue receiving CYT387 in an extension trial. Interim data for the first 60 patients who were enrolled in the study were reported in an oral presentation delivered at the Annual Meeting of the American Society of Hematology (ASH) in December 2010 and updated interim data for these 60 patients were reported in an oral poster session at the Annual Meeting of the American Society of Clinical Oncology (ASCO) in June 2011. Interim data demonstrated that CYT387 was generally safe, well tolerated and was able to reduce spleen size and improve constitutional symptoms in patients with a degree of efficacy comparable to other JAK targeting molecules in late-stage development. These early data also indicated that, unlike other JAK-targeting molecules, CYT387 enabled more than half of the patients with myelofibrosis who were initially dependent on transfusions to become transfusion independent for clinically relevant periods of time, an effect that potentially differentiates CYT387 from other drugs in its class.

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In December 2011, interim results for all 166 patients enrolled in the trial were reported in a poster session at the 53rd Annual ASH Meeting. In this multicenter setting, CYT387 continued to indicate an ability to render and maintain patients with myelofibrosis transfusion independent for clinically-relevant periods of time. CYT387 also continued to produce significant and durable reductions in the splenomegaly and improvements of constitutional symptoms for many patients. In addition, MRI results obtained from a subset of subjects confirmed the meaningful reductions in splenomegaly as measured by palpation. CYT387 was also safe and well tolerated, with daily dosing up to and exceeding two and a half years. In June 2012, all eligible patients completed the Phase I/II trial by receiving drug for nine months. Many of these patients continue treatment with CYT387 in an ongoing extension trial.

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

Nimotuzumab

Nimotuzumab is a humanized monoclonal antibody targeting EGFR with an enhanced side-effect profile over currently marketed EGFR-targeting antibodies. Nimotuzumab is licensed to YM’s majority-owned joint venture, CIMYM BioSciences Inc., an Ontario corporation, for Western and Eastern Europe, North America, and Japan, as well as Australia, New Zealand, Israel and certain Asian and African countries. Certain of CIMYM’s rights to nimotuzumab have been sub-licensed to Daiichi-Sankyo Co. Ltd in Japan, Oncoscience AG in Europe, to Kuhnil Pharmaceutical Company for Korea and to Innogene Kalbiotech Ltd. of Singapore for certain Pacific-rim countries and certain African countries. These sub-licensees are evaluating nimotuzumab in various Phase II and Phase III programs.

CYT997

CYT997 is a small molecule microtubule polymerisation inhibitor for the treatment of solid and other tumours in cancer patients. A single-arm intravenous Phase Ib/II study in patients with relapsed glioblastoma multiforme was closed to enrolment in February 2011. Subsequent preclinical work was recently completed involving the examination of repeated low doses of CYT997, the envisioned optimal dosing regimen for this drug, in a breast cancer mouse model. Based on the results obtained in this preclinical model, in conjunction with the earlier clinical trial data, YM has decided not to pursue further clinical development of CYT997 at this time, as we continue to focus our resources primarily on our lead drug.

The Company also has several preclinical programs underway with candidates from its library of novel compounds identified through internal research conducted at YM BioSciences Australia.

SELECTED FINANCIAL INFORMATION (as reported under IFRS)

	For the year ended June 30,
	2012			2011
Out-licensing revenue	$	1,070,665		$	1,033,239
Operating expenses:
Licensing and product development	$	26,643,838		$	23,821,980
General and administrative	$	6,175,132		$	7,739,857
Net finance income (costs)	$	11,431,566		$	(10,338,609	)
Net loss for the year	$	(20,316,739	)	$	(40,867,207	)
Deficit, beginning of year	$	(213,141,438	)	$	(172,274,231	)
Deficit, end of year	$	(233,458,177	)	$	(213,141,438	)
Basic and diluted loss per common share	$	(0.16	)	$	(0.42	)
Total assets	$	135,652,772		$	87,825,146

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RESULTS OF OPERATIONS

Year ended June 30, 2012 compared to year ended June 30, 2011

Out-licensing Revenue

Revenue from out-licensing was consistent at $1.071 million for the year ended June 30, 2012 compared to $1.033 million for the year ended June 30, 2011.

Finance Income and costs

Net finance income was a gain of $11.432 million for the year ended June 30, 2012 compared to a loss of $10.339 million for the year ended June 30, 2011. Under IFRS, warrants denominated in a currency other than the Company’s functional currency must be classified as a financial liability and measured at fair value, with changes reflected in profit or loss. The change in the fair value adjustment for US dollar warrants was a gain of $7.256 million for the year ended June 30, 2012 compared to a loss of $9.411 million on the revaluation of the warrants for the year ended June 30, 2011. Interest income increased by $248 thousand to $717 thousand for the year ended June 30, 2012 compared to $469 thousand in the previous year due mainly to the increase in cash from the February 2012 equity financing. Net foreign exchange was a gain of $3.459 million compared to a loss of $1.408 million for the year ended June 30, 2011.

Licensing and Product Development Expenses

Licensing and product development expenses for the year ended June 30, 2012 increased by $2.822 million to $26.644 million compared to the year ended June 30, 2011. In addition to the changes described under each product below, core expenses for licensing and product development decreased by $624 thousand to $12.532 million, for the year ended June 30, 2012 compared to $13.156 million for the year ended June 30, 2011. This decrease was mainly due to reduced salary expense after the reorganization termination payments in 2011.

CYT387

Costs associated with development activities for CYT387 increased by $5.216 million to $12.130 million for the year ended June 30, 2012 compared to $6.914 million for the year ended June 30, 2011. The increase in costs was primarily attributable to the extension of the Phase I/II clinical trial in myelofibrosis, the start-up costs associated with the new BID (twice-daily dosing) study, pre-clinical development activities, and the manufacturing of drug for these programs.

Nimotuzumab

Costs associated with development activities for nimotuzumab decreased by $1.673 million to $1.201 million for the year ended June 30, 2012, compared to $2.874 million for the year ended June 30, 2011. The decrease was due mainly to lower costs for both Phase II clinical trials, which have been closed.

Other Molecules

Costs associated with development activities related to CYT997, YMBA3, and other small molecules in the library were $781 thousand for the year ended June 30, 2012 compared to $843 thousand for the year ended June 30, 2011.

General and Administrative Expenses

General and administrative expenses have decreased by $1.565 million to $6.175 million for the year ended June 30, 2012 primarily due to the reduced salary expense after the reorganization termination payments in 2011.

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Fourth Quarter – Three months ended June 30, 2012 compared to three months ended June 30, 2011

Out-licensing Revenue

Out-licensing revenue increased by $109 thousand to $330 thousand for the three months ended June 30, 2012 compared to $221 thousand for the three months ended June 30, 2011 mainly due to an increase in royalty revenue.

Finance Income and Costs

Net finance income was a gain of $2.169 million for the three months ended June 30, 2012 compared to a loss of $518 thousand for the three months ended June 30, 2011. The change in the fair value adjustment for US dollar warrants was a gain of $409 thousand compared to the loss of $786 thousand on the revaluation of the warrants for the three months ended June 30, 2011. Interest income increased by $69 thousand to $229 thousand for the three months ended June 30, 2012 compared to $160 thousand in the previous year due to the increase in cash from the recent equity financing. Net foreign exchange gain increased by $1.423 million to $1.531 million for the three months ended June 30, 2012 compared to the $108 thousand net foreign exchange gain in the same quarter last year.

Licensing and Product Development Expenses

Licensing and product development expenses for the three months ended June 30, 2012 were consistent at $7.140 compared to $7.424 the three months ended June 30, 2011. In addition to the changes described under each product below, core expenses for licensing and product development decreased by $746 thousand to $2.896 million, for the three months ended June 30, 2012 compared to $3.643 million for the three months ended June 30, 2011. This decrease was mainly due to reduced salary expense after the reorganization termination payments in 2011.

CYT387

Costs associated with development activities for CYT387 increased by $882 thousand to $3.903 million for the three months ended June 30, 2012 compared to $3.021 million for the three months ended June 30, 2011. The increased costs are attributable to the new BID (twice-daily dosing) study.

Nimotuzumab

Costs associated with development activities for nimotuzumab decreased by $160 thousand to $262 thousand for the three months ended June 30, 2012, compared to $422 thousand for the three months ended June 30, 2011. The decrease is due to lower costs because both Phase II clinical trials have been closed.

Other

Costs associated with development activities related to CYT997, YMBA3, and other small molecules in the library were $78 thousand for the three months ended June 30, 2012 compared to $339 thousand for the three months ended June 30, 2011. The decrease in costs is due to a reduction in expenditures relating to CYT997.

General and Administrative Expenses

General and administrative expenses increased by $248 thousand to $1.427 million for the three months ended June 30, 2012, compared to the three months ended June 30, 2011. This increase is mainly due to an increase in legal and audit services for the quarter and non-cash share-based compensation expense.

SUMMARY OF QUARTERLY RESULTS

	Out-licensing revenue		Net finance income/(costs)			Net loss			Basic and diluted loss per common share
As reported under IFRS:
June 30, 2012	$	330,713	$	2,169,246		$	(6,067,113	)	$	(0.04	)
March 31, 2012	$	109,107	$	282,273		$	(6,797,158	)	$	(0.05	)
December 31, 2011	$	380,117	$	1,477,469		$	(6,557,778	)	$	(0.06	)
September 30, 2011	$	250,728	$	7,502,578		$	(894,690	)	$	(0.01	)
June 30, 2011	$	221,977	$	(517,846	)	$	(8,898,698	)	$	(0.08	)
March 31, 2011	$	217,489	$	(1,471,925	)	$	(8,344,995	)	$	(0.08	)
December 31, 2010	$	251,417	$	(4,592,713	)	$	(12,305,277	)	$	(0.14	)
September 30, 2010	$	342,356	$	(3,756,125	)	$	(11,318,237	)	$	(0.14	)

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Licensing revenue results primarily from recognition, over time, of non-refundable up-front payments from out-licensing agreements plus milestone payments. The Company’s policy is to recognize non-refundable up-front payments from out-licensing agreements over the estimated period of collaboration until the milestone associated with commercial approval of the first indication in the licensee’s territory has been satisfied and the relevant payment received. There have been no new out-licensing agreements signed since fiscal 2007. Revenue has steadily decreased as all but one deferred revenue contract have been fully recognized. Revenue for the three months ended December 31, 2011 and June 30, 2012 increased because of royalties received from an out-licensing partner.

The volatility of net loss is primarily caused by the requirement to adjust liabilities such as USD warrants and stock appreciation rights to fair value at each measurement date, with changes being reflected in net loss for the quarter. Excluding the revaluation of US dollar denominated warrants, the expenditures have generally increased over the eight quarters as described under the ‘Results of Operations’.

TREND INFORMATION

Historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and therefore liquidity and capital resources vary substantially from period to period depending on the pre-clinical and clinical studies being undertaken and the availability of funding from investors and prospective commercial partners.

Other than as discussed above, the Company is not aware of any material trends related to the Company’s business of product development, patents and licensing.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed the evaluation, licensing, acquisition and further development of its products principally through equity issuances. Since the Company does not have net earnings from its operations, the Company’s long-term liquidity depends on its ability to out-license its products or to access the capital markets, both of which will depend substantially on results of product development programs.

The Company’s cash requirements will be affected by the extent of its clinical trials, the results of its regulatory submissions, the achievement of commercialization agreements, the costs associated with obtaining and protecting the patents for products in development, and its general operating expenses.

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

On February 29, 2012 the Company completed a prospectus offering of 40,250,000 shares for gross proceeds of U.S. $80,500,000 (Cdn $79,421,300) resulting in net cash proceeds of U.S. $75,243,165 (Cdn $74,232,207).

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On December 17 and 23, 2010, the Company completed a prospectus offering of 25,000,000 and 3,750,000 shares, respectively, for gross proceeds of US $46,000,000 (Cdn. $46,493,000), resulting in net cash proceeds of US $42,874,672 (Cdn. $43,334,523).

On April 23, 2010, the Company entered into a Sales Agreement under which it may, at its discretion, from time to time, sell up to a maximum of 7,750,000 of its common shares through an "at-the-market" equity offering program known as a Controlled Equity Offering. As at the expiry of this agreement, October 16, 2011, 5,775,000 common shares had been sold under this agreement for net proceeds of $13.375 million (Cdn).

On March 10, 2010, the Company completed a prospectus offering of 14,583,000 units for gross proceeds of US$17,499,600 (Cdn $17,895,081) and net proceeds after cash issuance costs of US $15,712,614 (Cdn $16,067,710). Each unit consisted of one common share and one-half common share purchase warrant. In connection with the financing, the Company issued 874,980 broker warrants having an aggregate fair value of US$171,496 (Cdn $175,371) estimated using the Black-Scholes option pricing model. Each whole common share purchase warrant and each broker warrant entitles the warrant holder to acquire one common share at an exercise price of US$1.60 per share at any time from September 10, 2010 to its expiry on March 10, 2015. As a condition of the above offering, the Company agreed to restrict the use of $144.361 million of the net proceeds raised to fund drug development activities not related to Cuban originated products or for general corporate purposes not related to the Cuban licensed products and technologies, except for those activities expressly consented to under the licenses granted by the Office of Foreign Assets Control (OFAC). Of the $132.450 million in cash and short-term deposits as at June 30, 2012, approximately $43.565 million is unrestricted and can be used for any purpose and approximately $88.885 million can be used for any purpose other than activities related to the Cuban products, as outlined above.

As at June 30, 2012, the Company had cash and short-term deposits totalling $132.450 million and accounts payables and accrued liabilities totalling $3.066 million compared to $79.659 million and $4.371 million respectively, at June 30, 2011. Cash and cash equivalents comprise cash balances. Short-term deposits comprise term deposits with original maturities of 12 months or less. The Company has classified its cash and cash equivalents and short-term deposits as loans and receivables.

Management believes that the cash and short-term deposits at June 30, 2012 are sufficient to fund the Company’s operations beyond the next 12 months.

FINANCIAL INSTRUMENTS

	As at June 30, 2012		As at June 30, 2011		As at July 1, 2010
Financial Assets
Cash and cash equivalents		87,140,020		32,046,630		19,460,141
Short-term investments		45,310,288		47,611,922		26,184,991
Accounts receivable		252,884		205,900		161,184
Financial Liabilities
Accounts payable		803,421		1,718,893		699,277
Accrued liabilities		2,262,972		2,652,511		2,085,824

COMMITMENTS AND OFF-BALANCE SHEET ARRANGEMENTS

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

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The Company is party to certain licensing agreements that require the Company to pay a proportion of any fees that the Company may receive from sub-licensees in the future. As of June 30, 2012, no amounts were owing and the amount of future fees thereon, if any, was not determinable.

The Company has entered into many contracts for pre-clinical and other studies for CYT387, nimotuzumab, and CYT997, none of which individually exceeds $1 million, totaling approximately $11.047 million of which approximately $6.079 million has been incurred as at June 30, 2012 and the remaining $4.968 million has not yet been incurred. Any early termination penalties cannot exceed the amount of the contract commitment.

The Company plans to expend funds to continue the development of CYT387. There are also ongoing activities directed at out-licensing commercial rights for CYT387, as well as in evaluating new products for potential in-licensing.

RELATED PARTY TRANSACTIONS

The key management personnel of the Company are the Directors, the President and Chief Executive Officer, the Chief Medical Officer, and all the Vice-Presidents.

Compensation for key management personnel of the Company for the year ended June 30 was as follows:

	2012		2011
Short-term employee benefits	$	2,782,450	$	2,430,289
Termination benefits		290,222		1,612,408
Share-based compensation		1,330,602		1,314,113
Total key management personnel expenses	$	4,403,274	$	5,356,810

Key management personnel participate in the stock option plan and executive officers participate in the Company’s health plan. Directors receive annual and meeting fees for their services. As at June 30, 2012, the key management personnel control less than 1% of the voting shares of the Company.

Occasionally, directors will provide assistance to management on a consulting basis to evaluate new opportunities or provide guidance for drug development activities. The fees incurred during the year ended June 30, 2012 totaled $125,122 (2011 - $91,513). Amounts due to related parties, including amounts due to key management personnel, at year end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

RISKS AND UNCERTAINTIES

Prospective investors should give careful consideration to the risk factors contained under “Risk Factors” in the Form 40-F filed as the Annual Information Form dated September 20, 2012 in respect of the fiscal year ended June 30, 2012, as well as those discussed in Schedule A of this MD&A. These risk factors include:

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

ii. We deal with products that are in the early stages of development and, as a result, are unable to predict whether we will be able to profitably commercialize our products.

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

iv. We are subject to extensive government regulation that increases the cost and uncertainty associated with gaining final regulatory approval of our product candidates.

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

vi. 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.

vii. 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.

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

ix. We conduct our development internationally and are subject to laws and regulations of several countries which may affect our ability to access regulatory agencies and may affect the enforceability and value of our licenses.

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

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

xii. 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.

xiii. 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 is appropriate to do so.

xiv. We lack experience in commercial manufacturing of our products and may encounter problems or delays in making arrangements for products to be commercially manufactured, which could result in delayed development, regulatory approval and marketing.

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

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

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

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

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

xx. 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.

xxi. We are susceptible to general economic conditions.

xxii. Although all of the funds advanced to our joint venture subsidiaries have been expensed, we are only entitled to recover those expenditures when the joint venture’s net income exceeds the amount of cumulative advances.

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

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

xxv. Our operating results and stock price may fluctuate significantly.

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

xxvii. Our share price is volatile.

xxviii. We have not paid dividends.

xxix. Our outstanding common shares could be subject to dilution.

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

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

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

xxxiii. We are governed by the corporate laws in Nova Scotia, Canada which in some cases have a different effect on shareholders than the corporate laws in Delaware, U.S.

OUTLOOK

CYT387

Having reported positive interim data in December 2011 from a 166 patient Phase I/II trial of CYT387 in myelofibrosis, YM conducted productive discussions with regulatory authorities in the US and Europe which have affirmed the range of options available for the pivotal program for CYT387. YM is now preparing for pivotal trials under scenarios where the drug is developed either with or without another company.

The Company is currently focused on exploring potential opportunities to further develop and/or commercialize the drug with other companies. The US$80.5 million raised in February 2012 significantly strengthens the Company’s balance sheet, providing YM with the flexibility to weigh any opportunities that arise against the prospect of retaining full control over commercial economics by advancing CYT387 further into pivotal trials on its own.

Further data from the ongoing 166 patient Core Phase I/II trial and Extension trial, as well as initial data from the Phase II BID trial, are expected to be reported by the end of calendar 2012.

Nimotuzumab

Daiichi Sankyo Co., Ltd., CIMYM’s sub-licensee for nimotuzumab in Japan, is reportedly evaluating the drug in a Phase II gastric cancer program together with Kuhnil Pharma Co. Ltd., CIMYM’s sub-licensee in South Korea, and in a Phase II non-small cell lung cancer (NSCLC) program. Oncoscience AG (OSAG), CIMYM’s sub-licensee for Europe, is reportedly evaluating nimotuzumab in Phase III glioma and pancreatic cancer programs. Innogene Kalbiotech PTE Ltd. (IGK), a CIMYM sub-licensee, is reportedly evaluating nimotuzumab in Phase II and III head and neck cancer programs and a Phase II cervical cancer program. YM will announce any material advancement in these programs as they are reported.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses during the reporting period. The estimates and assumptions reflect the facts and circumstances available at that time, historical experience, the general economic conditions and trends, and Company’s assessments of probable future outcomes of these matters. Actual results could differ from those estimated. Estimates and assumptions are reviewed regularly. Revisions are recognized in the period in which the estimates and assumptions are revised and in any future periods affected.

The Company’s significant accounting policies and estimates can be found in Note 3 of the Company’s annual audited consolidated financial statements. The following is a summary of the Company’s most critical accounting estimates.

Share-based payments

The Company uses the Black-Scholes option-pricing model to value warrants, stock options and share appreciation rights. The use of this pricing model requires management to make assumptions regarding the expected life of the warrants, stock options and share appreciation rights, estimated forfeitures, the price volatility of the Company’s stock over a relevant timeframe, the determination of a relevant risk-free interest rate and an assumption regarding the Company’s dividend policy in the future.

Intangible assets

Intangible assets that are acquired separately and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognized in profit or loss as incurred. Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use in the manner intended by management. The period that the technology acquired in the January 2010 Cytopia acquisition is available for use is estimated at three years which reflects management's intent about partnering the assets.

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Revenue recognition

Revenue is recognised when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Company; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Contingent revenue attributable to the achievement of regulatory or developmental milestones is recognized only on the achievement of the applicable milestone and when collectability is probable.

Non-refundable, up-front fees for access to the Company's proprietary technology in connection with certain research and development collaborations are deferred and recognized as revenue on a systematic basis over the estimated term of the related collaboration until the milestone associated with commercial approval of the first indication in the licensee's territory has been satisfied and the milestone payment received, or until it is determined that no further collaboration is required. The estimated term is based on a drug development plan as discussed with licensees.

In determining the appropriate period over which to recognize revenue from an up-front non-refundable payment, management reviews the deliverables as identified in the collaboration arrangements and makes assumptions regarding the time to commercialization. These assumptions are reviewed each reporting period.

The Company has license agreements that specify that certain royalties are earned by the Company on sales of licensed products in the licensed territories. Licensees report sales and royalty information in the 90 days after the end of the quarter in which the activity takes place and typically do not provide the Company with forward estimates or current-quarter information. Because the Company is not able to reasonably estimate the amount of royalties earned during the period in which these licensees actually ship products, royalty revenue is not recognized until the royalties are reported to the Company and the collection of these royalties is probable.

STANDARDS ISSUED BUT NOT YET EFFECTIVE

Standards issued but not yet effective up to the date of issuance of the Company's consolidated financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective. The following pronouncements are being assessed to determine their impact on the Company's results and financial position:

IFRS 7, Financial Instruments: Disclosures-Enhanced Derecognition Disclosure Requirements

The amendment requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the Company’s consolidated financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risk associated with, the Company’s continuing involvement in those derecognized assets. The amendment becomes effective for annual periods beginning on or after July 1, 2013. The amendment affects disclosure only and the Company does not expect the amendments to have material impact on the consolidated financial statements because of the nature of the Company’s operations and the types of financial assets that it holds.

IFRS 9, Financial Instruments: Classification and Measurement

IFRS 9 reflects the first phase of IASB’s work on the replacement of IAS 39, Financial Instruments: Recognition and Measurement, and deals with the classification and measurement of financial assets and financial liabilities. This standard establishes two primary measurement categories for financial assets, amortized cost and fair value, and eliminates the existing categories of held-to-maturity, available-for-sale, and loans and receivables. The new classification will depend on the entity's business model and the contractual cash flow characteristics of the financial asset. The standard is effective for annual periods beginning on or after January 1, 2015.

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IFRS 10, Consolidated Financial Statements

The amendment establishes a single control model that applies to all entities. These changes will require management to exercise significant judgement to determine which entities are controlled, and, therefore, are required to be consolidated by a parent, compared with the former requirements. The amendment becomes effective for annual periods beginning on or after January 1, 2013.

IFRS 11, Joint Arrangements

The amendment replaces IAS 31, Interests in Joint Ventures, and SIC-13, Jointly Controlled Entity - Non-monetary Contributions by Venturers, and addresses only two forms of joint arrangements (joint operations and joint ventures) where there is joint control and removes the option to account for jointly controlled entities using proportionate consolidation. The amendment becomes effective for annual periods beginning on or after January 1, 2013.

IFRS 12, Disclosure of Interest in other Entities (“IFRS 12”)

IFRS 12 establishes disclosure requirements for interests in other entities such as subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interest in other entities. IFRS 12 replaces the previous disclosure requirements included in IAS 27, IAS 31 and IAS 28, Investment in Associates and Joint Ventures. The effective date of this amendment is for annual periods beginning or after January 1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

IFRS 13, Fair Value Measurement

In May 2011, the IASB published IFRS 13, Fair Value Measurement, which is effective prospectively for annual periods beginning on or after January 1, 2013. IFRS 13 replaces the fair value measurement guidance contained in individual IFRS with a single source of fair value measurement guidance. It defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e., an exit price. The standard also establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements to provide information that enables financial statement users to assess the methods and inputs used to develop fair value measurements and, for recurring fair value measurements that use significant unobservable inputs (Level 3), the effect of the measurements on profit or loss or other comprehensive income. IFRS 13 explains "how" to measure fair value when it is required or permitted by other IFRS.

IAS 12 – Income Taxes

In December 2010, the International Accounting Standards Board (“IASB”) amended IAS 12 for the recovery of underlying assets measured at fair value and the impact on deferred taxes. The amendments provide a solution to the problem of assessing whether recovery would be through use or through sale when the asset is measured at fair value under IAS 40, Investment Property, by adding the presumption that the recovery would normally be through sale. The amendment also incorporates the remaining guidance in SIC-21, Income Taxes – Recovery of Revalued Non-depreciable Assets, as SIC-21 has been withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1, 2012.

IAS 28 – Investments in Associates and Joint Ventures

The IASB amended IAS 28, an existing standard, to include joint ventures in its scope and to address the changes in IFRS 10, 11 and 12. The effective date of this amendment is for annual periods beginning or after January 1, 2013.

IAS 1 – Presentation of Financial Statements

The IASB amended IAS 1 by revising how certain items are presented in other comprehensive income (“OCI”). Items with OCI that may be reclassified to profit and loss will be separated from items that will not. The standard is effective for financial years beginning on or after July 1, 2012, with early adoption permitted.

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CHANGES IN ACCOUNTING POLICIES

Transition to IFRS

In February 2008, the Accounting Standards Board of Canada announced that the accounting framework under which the financial statements are prepared for all publicly accountable companies will be replaced by IFRS for fiscal years beginning on or after January 1, 2011.

The consolidated financial statements for the year ended June 30, 2012 provide the following reconciliations from Canadian GAAP to IFRS for the consolidated:

· statement of financial position, including equity as at July 1, 2010;

· statement of financial position, including equity as at June 30, 2011;

· statement of net loss and comprehensive loss for the year ended June 30, 2011.

Elected exemptions from full retrospective application

IFRS 1, First-time Adoption of International Financial Reporting Standards requires first-time adopters to retrospectively apply all effective IFRS as of the reporting date. However, it also provides for certain optional exemptions and certain mandatory exceptions for first time IFRS adopters. In preparing the audited consolidated financial statements in accordance with IFRS 1, the Company has applied the mandatory exceptions of IFRS. The Company has also applied the following optional exemptions from full retrospective application of IFRS to its opening statement of financial position as at July 1, 2010:

Share-based payment transactions

The Company may elect not to apply IFRS 2, Share-based Payments, to equity instruments which vested before the Company’s date of transition to IFRS. The Company elected to avail itself of the exemption provided under IFRS 1 and only applied IFRS 2 to equity instruments granted after November 7, 2002 that had not vested by its transition date.

Business Combinations

The Company has applied the business combination exemption in IFRS 1 to not apply IFRS 3, Business Combinations retrospectively to past business combinations. Accordingly, the Company has not restated business combinations that took place prior to the transition date.

Consolidated and Separate Financial Statements

In accordance with IFRS 1, if a company elects to apply IFRS 3, Business Combinations prospectively, IAS 27, Consolidated and Separate Financial Statements, as amended in 2008 must also be applied prospectively. As the Company elected to apply IFRS 3 prospectively, the Company has also elected to apply IAS 27 prospectively

Significant differences between Canadian GAAP and IFRS

In preparing its opening IFRS statement of financial position, the Company has adjusted amounts reported previously in the consolidated financial statements prepared in accordance with Canadian generally accepted accounting principles (“GAAP”). An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s financial position and financial performance is set in note 18 of the annual audited consolidated financial statements as at and for the year ended June 30, 2012. The transition from Canadian GAAP to IFRS has not had a material impact on the statement of cash flows. The reconciling items between Canadian GAAP and IFRS presentation have no net effect on the cash flows generated.

Warrants

Under Canadian GAAP, the Company recognized its outstanding shareholder and broker warrants as part of shareholder’s equity; however, under IFRS, warrants denominated in a different currency than the Company’s functional currency must be classified as a financial liability and measured at fair value, with changes reflected in profit or loss upon initial recognition and subsequent measurement. The impact of this difference on the opening statement of financial position as at July 1, 2010 was an increase in deficit of $4.885 million, a decrease of $1.473 million to share purchase warrants under shareholder’s equity, and an increase of $6.358 million in liabilities.

Stock Options

Both Canadian GAAP and IFRS require the fair value of stock options granted to be expensed over the vesting period. YM stock options generally vest one third immediately and one third on each of the first and second anniversaries. Under Canadian GAAP, the Company treated each option grant as one contract, and expensed one third of the compensation cost immediately and the remaining compensation cost on a straight-line basis over 24 months. Under IFRS, the Company is required to treat each tranche with a different vesting date as a separate contract and therefore expenses one third of the compensation cost immediately, one third equally over 12 months, and one third equally over 24 months. The impact on the opening statement of financial position as at July 1, 2010 was an increase in deficit of $144 thousand with a corresponding increase in contributed surplus.

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Share Appreciation Rights (SARs)

Under Canadian GAAP, the Company used the intrinsic value method to measure the value of SARs. IFRS requires that the SARs be valued using the fair value method. Under IFRS the Company uses the Black Scholes option-pricing model to determine the fair value of the SARs at the balance sheet date taking any difference into income. The SARs plan was started in September 2010 so there was no impact to the opening statement of financial position as at July 1, 2010.

DISCLOSURE CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief Financial Officer, after evaluating the effectiveness of the Company’s "disclosure controls and procedures" (as defined in National Instrument 52-109 Certification of Disclosure in Issuer's Annual and Interim Filings) as of June 30, 2012 (the "Evaluation Date") have concluded that as of the Evaluation Date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under Canadian securities laws is recorded, processed, summarized and reported within the time periods specified by those rules, and that material information relating to our Company and any consolidated subsidiaries is made known to management, including the chief executive officer and chief financial officer, particularly during the period when our periodic reports are being prepared to allow timely decisions regarding required disclosure.

In connection with the evaluation referred to in the foregoing paragraph, we have identified no change in our disclosure controls and procedures that occurred during the year ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, our disclosure controls over financial reporting.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Management assessed the design and effectiveness of internal control over financial reporting as at June 30, 2012, and based on that assessment determined that internal control over financial reporting was designed and operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS as published by the IASB. No changes were made to the design of the Company’s internal control over financial reporting during the year ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, the design of our internal control over financial reporting.

INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS

The Company’s management, including the chief executive officer and chief financial officer, do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Internal control over financial reporting can also be circumvented by collusion or improper management override. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls’ effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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OTHER MD&A REQUIREMENTS

As at June 30, 2012:

	Amount		Number
Share Capital	$	340,173,078		157,546,793

	Fair Value		Number
Warrants	$	7,221,040		7,366,418

Note 1: If all warrants were to be exercised, 7,366,418 shares would be issued for total proceeds of $11,786,269 USD.

Additional information relating to the Company, including the Company’s Annual Information Form, is available on SEDAR at www.sedar.com.

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Schedule A

RISK FACTORS

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

Risks Related To Our Business

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

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

We deal with products that are in the early stages of development and, as a result, are unable to predict whether we will be able to profitably commercialize our products.

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

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

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

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

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

We are not able to predict the results of pre-clinical and clinical testing of our drug products. It is not possible to predict, based on studies or testing in laboratory conditions or in animals, whether a drug product will prove to be safe or effective in humans. Further, pre-clinical data may not be sufficient for regulators to accept positive clinical data for approval to commercialize a product. Pre-clinical data must have been conducted to high regulatory standards and may be found, on review by health regulatory authorities, to be of insufficient quality to support an application for commercialization of our products. In addition, success in one stage of testing is not necessarily an indication that the particular drug product will succeed in later stages of testing and development. There can be no assurance that the pre-clinical or clinical testing of our products will yield satisfactory results that will enable us to progress toward commercialization of such products. Unsatisfactory results may have a material adverse effect on our business, financial condition or results of operations as they could result in us having to reduce or abandon future testing or commercialization of particular drug products. Clinical trials require the enrolment of patients and we may experience difficulties identifying and enroling suitable human subjects for ongoing and future trials of our products. This could be as a result of a number of factors including, but not limited to, design protocol, the size of the available patient population, the eligibility criteria for participation in the clinical trials, and the availability of clinical trial sites.

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We are subject to extensive government regulation that increases the cost and uncertainty associated with gaining final regulatory approval of our product candidates.

Securing final regulatory approval for the manufacture and sale of human therapeutic products in Canada and our other markets, including the U.S., is a long and costly process that is controlled by each such country’s regulatory agency. The applicable regulatory agency in Canada is Health Canada, in Europe it is the EMA and in the United States it is the FDA. Other applicable regulatory agencies have similar regulatory approval processes, but each is different. Approval in Canada, Europe or the United States does not assure approval by other applicable regulatory agencies, although often test results from one country may be used in applications for regulatory approval in another country.

Prior to obtaining final regulatory approval to market a drug product, every jurisdiction has a variety of statutes and regulations which govern the principal development activities. These laws require controlled research and testing of products, government review and approval of a submission containing pre-clinical and clinical data establishing the safety and efficacy of the product for each use sought, approval of manufacturing facilities including adherence to good manufacturing practices during production and storage and control of marketing activities, including advertising and labelling. We have no assurance that a viable, economic path to regulatory approval for our products in the United States and other regulatory jurisdictions can be negotiated with the applicable regulatory authorities. Clinical requirements imposed by the FDA and other regulators to obtain approval for our products may not be achievable within the resources and capabilities available to us.

None of our products has been completely developed or tested and, therefore, we are not yet in a position to seek final regulatory approval to market any of our products. To date, we have obtained various regulatory clearances to develop and test our products. CYT387 has been approved for use in clinical trials by the FDA and Health Canada. The FDA or other regulatory authority may require additional extensive clinical trials or impose other regulatory process requirements which may delay or prevent us from continuing to develop our products.

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

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

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

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

We have, or have had, licenses with, or clinical trials at, various academic organizations, hospitals and companies in Australia, Canada, Cuba, India, Italy, Japan, Korea, Germany, the U.S., the United Kingdom, countries in Southeast Asia and other countries and we depend upon the validity of our licenses and access to the data for the timely completion of clinical research in those jurisdictions. Any changes in the drug development regulatory environment or shifts in political attitudes of a government are beyond our control and may adversely affect our business.

Our business may also be affected in varying degrees by such factors as government regulations with respect to intellectual property, regulation or export controls. Such changes remain beyond our control and the effect of any such changes cannot be predicted.

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

If our competitors develop and market products that are more effective than our existing product candidates or any products that we may develop, or obtain marketing approval before we do, our products may be rendered obsolete or uncompetitive.

Technological competition from pharmaceutical companies, biotechnology companies and universities is intense and is expected to increase. Many of our competitors and potential competitors have substantially greater product development capabilities and financial, scientific, marketing and human resources than we have. Our future success depends in part on our ability to maintain a competitive position, including our ability to further progress our products, licensed or owned, through the necessary pre-clinical and clinical trials towards regulatory approval for sale and commercialization. Other companies may succeed in commercializing products earlier than we are able to commercialize our products or they may succeed in developing products that are more effective than our products. Moreover, we have no assurance that clinical investigators and key opinion leaders will continue to want to work with our products and remain favourable to their prospects.

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

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

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.

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

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

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

We depend upon others for the manufacture, development and sale of our products. If we are unable to establish or manage collaborations in the future, there could be a delay in the manufacture, development and sale of our products.

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

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

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

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We lack experience in commercial manufacturing of our products and may encounter problems or delays in making arrangements for products to be commercially manufactured, which could result in delayed development, regulatory approval and marketing.

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

Nimotuzumab is required to be manufactured in quantities sufficient for clinical testing by CIMAB or a related party, subject to certain terms and conditions of the licensing agreements between us and CIMAB. Currently these expectations are being met. There can be no assurance, however, that such entities will be able to develop adequate manufacturing capabilities for sufficient commercial scale quantities in a commercially reasonable manner. In addition, there are risks that we cannot control regarding the CIMAB manufacturing plant, including amongst others, events such as weather, fire and other natural disasters as well as political risks. All manufacturing facilities must comply with applicable regulations in their jurisdiction and where products are to be sold. In addition, production of the licensed and owned products may require raw materials for which the sources and amount of supply are limited. An inability to obtain adequate supplies of such raw materials could significantly delay the development, regulatory approval and marketing of our licensed and owned products.

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

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

We conduct our development internationally and are subject to laws and regulations of several countries which may affect our ability to access regulatory agencies and may affect the enforceability and value of our licenses.

Clinical trials on our development products have been conducted by us and our sub-licensees in more than 20 jurisdictions including Australia, Canada, the United Kingdom, the European Union, Japan, India, Indonesia, Korea, Russia and the U.S., and we intend to, and may, conduct future clinical trials in these and other jurisdictions. There can be no assurance that any sovereign government, including Canada’s, will not establish laws or regulations that will be deleterious to our interests. There is no assurance that we, as a Canadian corporation, will continue to have access to the regulatory agencies in any jurisdiction where we might want to conduct clinical trials or obtain final regulatory approval, and there can be no assurance that we will be able to enforce our licenses in foreign jurisdictions or obtain and maintain the necessary regulatory approvals for our products. Governments have, from time to time, established foreign exchange controls which could have a material adverse effect on our business and financial condition, since such controls may limit our ability to flow funds into a particular country to meet our obligations under in-licensing agreements, and to flow funds which we may be entitled to, in the form of royalty and milestone payments, under out-licensing agreements out of a particular country In addition, the value of our licenses will depend upon the absence of punitive or prohibitive legislation in respect of biological materials.

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

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

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

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

Risk Related To Intellectual Property And Litigation

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

Our success depends, in part, upon our ability and our licensors’ ability to obtain patents, maintain trade secrets protection and operate without infringing on the proprietary rights of third parties or having third parties circumvent our rights. Certain licensors, the institutions that they represent and, in certain cases, us on behalf of the licensors and the institutions that they represent, have filed and are actively pursuing certain applications for Canadian and foreign patents. The patent position of pharmaceutical and biotechnology firms is uncertain and involves complex legal and financial questions for which, in some cases, certain important legal principles remain unresolved. There can be no assurance that the patent applications made in respect of the owned or licensed products will result in the issuance of patents, that the term of a patent will be extendable after it expires in due course, that the licensors or the institutions that they represent will develop additional proprietary products that are patentable, that any patent issued to the licensors or us will provide us with any competitive advantages, that the patents of others will not impede our ability to do business or that third parties will not be able to circumvent or successfully challenge the patents obtained in respect of the licensed products. The cost of obtaining and maintaining patents is high. Furthermore, there can be no assurance that others will not independently develop similar products which duplicate any of the licensed products or, if patents are issued, design around the patent for the product. There can be no assurance that our processes or products or those of our licensors do not or will not infringe upon the patents of third parties or that the scope of our patents or those of our licensors will successfully prevent third parties from developing similar and competitive products.

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

We maintain patents in connection with our products including nimotuzumab. There may also be risks related to nimotuzumab as our license originates from Cuba. Cuba is a formally socialist country and, under the current patent law, ownership of the inventions of the Cuban inventors for which patent applications have been filed rests with the State. The material license agreement for our Cuban sourced products is the 1995 CIMYM License with respect to nimotuzumab. There is no guarantee that, with any future changes in the political regime, the Cuban government would continue to honour such a license agreement.

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

Our future success and competitive position depend in part upon our ability to maintain our intellectual property portfolio. There can be no assurance that any patents will be issued on any existing or future patent applications. Even if such patents are issued, there can be no assurance that any patents issued or licensed to us will not be challenged. Our ability to establish and maintain a competitive position may be achieved in part by prosecuting claims against others who we believe are infringing our rights and by defending claims brought by others who believe that we are infringing their rights. In addition, enforcement of our patents in foreign jurisdictions will depend on the legal procedures in those jurisdictions. Even if such claims are found to be invalid, our involvement in intellectual property litigation could have a material adverse effect on our ability to out-license any products that are the subject of such litigation. In addition, our involvement in intellectual property litigation could result in significant expense, which could materially adversely affect the use or licensing of related intellectual property and divert the efforts of our valuable technical and management personnel from their principal responsibilities, whether or not such litigation is resolved in our favour. (See “General Development of the Business – Business Strategy” and “Product Portfolio”)

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

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

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

We depend upon the license rights to certain products for commercialization. While we believe we are in compliance with our obligations under these licenses, they may be terminated or converted to non-exclusive licenses by the licensors if there is a breach of the terms of the licenses. There can be no assurance that a license is enforceable or will not be terminated or converted. The termination or conversion of the licenses or our inability to enforce our rights under the licenses would have a material adverse effect on our business as we would not have the rights to certain of the products that we are developing. To the extent that management considers a particular license to be material to our undertaking, we have entered into a signed license agreement for that license. The in-license agreements to which we are currently a party require us to maintain and defend the patent rights that we in-license against third parties.

Not all of our current licenses are governed by the laws of Ontario and therefore, the enforcement of certain of them may necessitate pursuing legal proceedings and obtaining orders in other jurisdictions, including the U.S. and Cuba. There can be no assurance that a court judgment or order obtained in one jurisdiction will be enforceable in another. In international venture undertakings it is standard practice to attorn to a neutral jurisdiction to seek remedy for unresolved commercial disputes. These arrangements are usually negotiated as part of the original business agreement. In the case of the license agreements with us, the parties have agreed that the law governing the agreements is Ontario law and the parties will attorn to the courts of Ontario or the Federal Court of Canada to resolve any dispute regarding the agreements.

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

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

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

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

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

The Helms-Burton Act authorizes private lawsuits for damages against anyone who “traffics” in property confiscated, without compensation, by the Government of Cuba from persons who at the time were, or have since become, nationals of the U.S. We do not own any real property in Cuba and, to the best of our knowledge, and based upon the advice of the Cuban government, none of the properties of the scientific centers of the licensors in which the licensed products were developed and are or may be manufactured was confiscated by the Government of Cuba from persons who at the time were, or have since become, nationals of the U.S. However, there can be no assurance that this is correct.

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

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

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

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

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

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

Product liability claims are an inherent risk of our business, and if our clinical trial and product liability insurance prove inadequate, product liability claims may harm our business.

Human therapeutic products involve an inherent risk of product liability claims and associated adverse publicity. We currently maintain clinical trial liability insurance with an ultimate net loss value of up to C$10,000,000 per claim and a policy aggregate of C$10,000,000. We currently have no other product liability insurance and there can be no assurance that we will be able to obtain or maintain product liability insurance on acceptable terms or with adequate coverage against potential liabilities. Such insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. An inability to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims could have a material adverse effect on our business by preventing or inhibiting the commercialization of our products, licensed and owned, if a product is withdrawn or a product liability claim is brought against us.

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

We are susceptible to general economic conditions.

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

Although all of the funds advanced to our joint venture subsidiaries have been expensed, we are only entitled to recover those expenditures when the joint venture’s net income exceeds the amount of cumulative advances.

YM and CIMAB entered into a funding agreement with CIMYM in November 1995 in connection with the 1995 CIMYM License with respect to nimotuzumab. The funding agreement provides that we will arrange for the appropriate studies and clinical trials for the licensed products held by CIMYM and will fund the cost of such studies and trials provided that doing so would not be commercially or scientifically unreasonable. Accordingly, we make the final determination as to whether or not a clinical trial expense is justified with respect to any given product.

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

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

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

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

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

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

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

Our operating results and stock price may fluctuate significantly.

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

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

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

Our share price is volatile.

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

We have not paid dividends.

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

Our outstanding common shares could be subject to dilution.

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

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

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

Risks Related To Being A Canadian Entity

We are governed by the corporate laws in Nova Scotia, Canada which in some cases have a different effect on shareholders than the corporate laws in Delaware, U.S.

The material differences between the Nova Scotia Companies Act (the “NSCA”) as compared to the Delaware General Corporation Law (“DGCL”) which may be of most interest to shareholders include the following: (i) for material corporate transactions (such as amalgamations, other extraordinary corporate transactions, amendments to the memorandum of association and amendments to the articles of association) the NSCA generally requires three quarters of the votes of shareholders who cast votes (a “Special Resolution”) (and, in addition, especially where the holders of a class of shares is being affected differently from others, approval will be required by holders of two-thirds of the shares of such class voting in a meeting called for the purpose), whereas DGCL generally only requires a majority vote of shareholders for similar material corporate transactions; (ii) quorum for shareholders meetings is not prescribed under the NSCA and is only 5% under our articles of association, whereas under DGCL, quorum requires the holders of a majority of the shares entitled to vote to be present; and (iii) our articles of association require a Special Resolution and the Corporations Miscellaneous Provisions Act (Nova Scotia) requires three-quarters of the votes of shareholders that, in aggregate, represent the majority of the shares issued and outstanding at the time, to pass a resolution for one or more directors to be removed, whereas DGCL only requires the affirmative vote of a majority of the shareholders.

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

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

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

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

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EX-99.3

Exhibit 99.3 

Consolidated Financial Statements

(Expressed in Canadian dollars)

ym biosciences inc.

Years ended June 30, 2012 and 2011

Management's Annual Report on

Internal Control Over Financial Reporting.

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

The Company's management has assessed the effectiveness of the Company's ICFR as of June 30, 2012. In making its assessment, management used the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded that the Company's ICFR was effective as of June 30, 2012.

The effectiveness of the Company's internal control over financial reporting as of June 30, 2012, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which follows hereafter.

/s/ Dr. Nicholas Glover	/s/ Len Vernon
Dr. Nicholas Glover	Len Vernon, CA
President & Chief Executive Officer	Vice President of Finance and Administration

September 20, 2012

KPMG LLP	Telephone	(416) 777-8500
Chartered Accountants	Fax	(416) 777-8818
Bay Adelaide Centre	Internet	www.kpmg.ca
333 Bay Street Suite 4600
Toronto ON  M5H 2S5
Canada

Independent auditors' Report

To the Shareholders of YM BioSciences Inc.

We have audited the accompanying consolidated financial statements of YM BioSciences Inc., and its subsidiaries, which comprise the consolidated statements of financial position as at June 30, 2012, June 30, 2011 and July 1, 2010, the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years ended June 30, 2012 and June 30, 2011, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG

network of independent member firms affiliated with KPMG International Cooperative

(“KPMG International”), a Swiss entity.

KPMG Canada provides services to KPMG LLP.

Page 2

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of YM BioSciences Inc. and its subsidiaries as at June 30, 2012, June 30, 2011 and July 1, 2010, and its consolidated financial performance and its consolidated cash flows for the years ended June 30, 2012 and June 30, 2011 in accordance with International Financial Reporting Standards, as issued by the International Accounting Standards Board.

Other Matter

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), YM BioSciences Inc.'s internal control over financial reporting as of June 30, 2012, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated September 20, 2012 expressed an unmodified opinion on the effectiveness of YM BioSciences Inc.'s internal control over financial reporting.

Chartered Accountants, Licensed Public Accountants

September 20, 2012

Toronto, Canada

KPMG LLP	Telephone	(416) 777-8500
Chartered Accountants	Fax	(416) 777-8818
Bay Adelaide Centre	Internet	www.kpmg.ca
333 Bay Street Suite 4600
Toronto ON  M5H 2S5
Canada

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

To The Board of Directors of YM BioSciences Inc.:

We have audited YM BioSciences Inc.'s internal control over financial reporting as of June 30, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). YM BioSciences Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the Management's Discussion and Analysis of Financial Condition and Results of Operations for the year ended June 30, 2012. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

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

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

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

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG

network of independent member firms affiliated with KPMG International Cooperative

(“KPMG International”), a Swiss entity.

KPMG Canada provides services to KPMG LLP.

Page 2

Opinion

In our opinion, YM BioSciences Inc. maintained, in all material respects, effective internal control over financial reporting as of June 30, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of YM BioSciences Inc. and subsidiaries as of June 30, 2012, June 30, 2011 and July 1, 2010, and the related consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years ended June 30, 2012 and June 30, 2011, and our report dated September 20, 2012 expressed an unqualified opinion on those consolidated financial statements.

Chartered Accountants, Licensed Public Accountants

Toronto, Canada

September 20, 2012

ym biosciences inc.

Consolidated Statements of Financial Position

(Expressed in Canadian dollars, unless otherwise noted)

				June 30,			June 30,			July 1,
	Note			2012			2011			2010
Assets
Current assets:
Cash and cash equivalents		4		$	87,140,020		$	32,046,630		$	19,460,141
Short-term deposits		4			45,310,288			47,611,922			26,184,991
Accounts receivable					252,884			205,900			161,184
Prepaid expenses					257,780			731,676			237,962
Total current assets					132,960,972			80,596,128			46,044,278
Non-current assets:
Property and equipment		5			62,118			91,320			84,775
Intangible assets		6			2,629,682			7,137,698			11,645,714
Total non-current assets					2,691,800			7,229,018			11,730,489
Total assets				$	135,652,772		$	87,825,146		$	57,774,767
Liabilities and Equity
Current liabilities:
Accounts payable				$	803,421		$	1,718,893		$	699,277
Accrued liabilities					2,262,972			2,652,511			2,085,824
Share purchase warrants		8			7,221,040			14,476,681			6,358,480
Deferred revenue		10			381,270			594,072			1,523,916
Total current liabilities					10,668,703			19,442,157			10,667,497
Non-current liabilities:
Deferred revenue		10			1,556,853			1,831,722			1,650,909
Total non-current liabilities					1,556,853			1,831,722			1,650,909
Equity:
Share capital		9	(a)		340,173,078			264,548,643			203,498,239
Contributed surplus					16,712,315			15,144,062			14,232,353
Deficit					(233,458,177	)		(213,141,438	)		(172,274,231	)
Total equity					123,427,216			66,551,267			45,456,361
Total liabilities and equity				$	135,652,772		$	87,825,146		$	57,774,767

Approved by the Board and authorized for issue on September 20, 2012:

/s/ Tryon M. Williams                                                  Director

/s/ Dr. Nick Glover                                                        Director

See accompanying notes to the consolidated financial statements.

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Consolidated Statements of Loss and Comprehensive Loss

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

	Note			2012			2011
Revenue:
Out-licensing				$	1,070,665		$	1,033,239
					1,070,665			1,033,239
Expenses:
Licensing and product development		12			26,643,838			23,821,980
General and administrative		13			6,175,132			7,739,857
					32,818,970			31,561,837
Loss before financial results					(31,748,305	)		(30,528,598	)
Finance income		14			11,431,566			480,314
Finance costs		14			–			(10,818,923	)
Net loss and comprehensive loss for the year				$	(20,316,739	)	$	(40,867,207	)
Basic and diluted loss per common share		9	(b)	$	(0.16	)	$	(0.42	)

See accompanying notes to the consolidated financial statements.

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Consolidated Statements of Changes in Equity

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

	Share capital				Contributed
	Number		Amount		surplus			Deficit			Total
	(note 9)
Balance, June 30, 2011		116,681,948	$	264,548,643	$	15,144,062		$	(213,141,438	)	$	66,551,267
Net loss and comprehensive loss for the year		–		–		–			(20,316,739	)		(20,316,739	)
Transactions with owners of the Company, recognized directly in equity:
Shares issued pursuant to prospectus offering		40,250,000		74,232,207		–			–			74,232,207
Shares issued on exercise of options		614,845		1,392,228		(670,529	)		–			721,699
Share-based compensation		–		–		2,238,782			–			2,238,782
Total transactions with owners of the Company		40,864,845		75,624,435		1,568,253			–			77,192,688
Balance, June 30, 2012		157,546,793	$	340,173,078	$	16,712,315		$	(233,458,177	)	$	123,427,216

	Share capital				Contributed
	Number		Amount		surplus			Deficit			Total
	(note 9)
Balance, July 1, 2010		80,359,623	$	203,498,239	$	14,232,353		$	(172,274,231	)	$	45,456,361
Net loss and comprehensive loss for the year		–		–		–			(40,867,207	)		(40,867,207	)
Transactions with owners of the Company, recognized directly in equity:
Shares issued on exercise of options		1,074,077		1,965,590		(798,279	)		–			1,167,311
Shares issued on exercise of warrants		723,248		2,375,179		–			–			2,375,179
Shares issued pursuant to prospectus offering		34,525,000		56,709,635		–			–			56,709,635
Share-based compensation		–		–		1,709,988			–			1,709,988
Total transactions with owners of the Company		36,322,325		61,050,404		911,709			–			61,962,113
Balance, June 30, 2011		116,681,948	$	264,548,643	$	15,144,062		$	(213,141,438	)	$	66,551,267

See accompanying notes to the consolidated financial statements.

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ym biosciences inc.

Consolidated Statements of Cash Flows

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

	Note			2012			2011
Cash provided by (used in):
Operating activities:
Net loss for the year				$	(20,316,739	)	$	(40,867,207	)
Items not involving cash:
Depreciation of property and equipment		5			57,359			78,533
Amortization of intangible assets		6			4,508,016			4,508,016
Interest income					(716,799	)		(469,191	)
Unrealized (gain) loss on cash and cash equivalents					(1,269,907	)		1,407,760
Gain on disposal of property and equipment					–			(13,394	)
Share-based compensation		9	(c)		2,238,782			1,709,988
Change in fair value of share purchase warrants		8			(7,255,641	)		9,411,162
Changes in non-cash working capital balances:
Short-term deposits					(598,996	)		(417,445	)
Accounts receivable					(46,984	)		(44,716	)
Prepaid expenses					473,896			(493,714	)
Accounts payable					(915,472	)		1,019,616
Accrued liabilities					(389,539	)		566,687
Deferred revenue		10			(487,671	)		(749,031	)
Net cash used in operating activities					(24,719,695	)		(24,352,936	)
Investing activities:
Proceeds from sale of short-term deposits					49,200,630			67,505,054
Purchase of short-term deposits					(46,300,000	)		(88,514,540	)
Interest received					716,799			469,191
Additions to property and equipment					(28,157	)		(71,684	)
Net cash provided by (used in) investing activities					3,589,272			(20,611,979	)
Financing activities:
Issuance of common shares on exercise of options					721,699			1,167,311
Issue of common shares on exercise of warrants					–			1,082,218
Net proceeds from issuance of shares					74,232,207			56,709,635
Net cash provided by financing activities					74,953,906			58,959,164
Increase in cash and cash equivalents					53,823,483			13,994,249
Impact of foreign exchange rates on cash					1,269,907			(1,407,760	)
Cash and cash equivalents, beginning of year					32,046,630			19,460,141
Cash and cash equivalents, end of year				$	87,140,020		$	32,046,630

See accompanying notes to the consolidated financial statements.

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ym biosciences inc.

Notes to the Consolidated Financial Statements

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

1. Corporate information:

YM BioSciences Inc. (the "Company" or "YM") was incorporated on August 17, 1994 under the laws of the Province of Ontario and was continued under the laws of the Province of Nova Scotia on December 11, 2001. The Company's shares are publicly traded on the Toronto Stock Exchange and the NYSE Amex. The Company's registered office is at 5045 Orbitor Drive, Building 11, Suite 400, Mississauga, Ontario, L4W 4Y4.

YM has entered into licensing agreements with certain biotechnology, pharmaceutical and medical institutes or has acquired technology originated in such institutes. The acquisitions of licenses and products provide exclusive rights for certain territories for certain products or families of products developed and rights of first refusal on additional territories, additional products or extensions to existing products. The Company is a drug development company advancing three clinical-stage hematology and cancer-related products.

2. Basis of presentation:

(a) Statement of compliance:

The Company's consolidated financial statements were previously prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). Canadian GAAP differs in some areas from IFRS. See note 18 for reconciliations and descriptions of the effect of the transition from Canadian GAAP to International Financial Reporting Standards ("IFRS") on the reported financial position, financial performance and cash flows of the Company.

These consolidated financial statements were prepared in accordance with IFRS as issued by the International Accounting Standards Board ("IASB") and the Company has elected July 1, 2010 as the date of transition to IFRS (the "transition date"). As these consolidated financial statements are the Company's first annual presentation of its results and financial position under IFRS, they were prepared in accordance with IFRS 1, First-time Adoption of IFRS ("IFRS 1"). The accounting policies applied in these consolidated financial statements are based on the IFRS standards and International Financial Reporting Interpretations Committee ("IFRIC") interpretations issued and in effect for the year ended June 30, 2012. The accounting policies set out below were consistently applied to all periods unless otherwise noted below.

These consolidated financial statements for the year ended June 30, 2012, were authorized for issuance by the Board of Directors of the Company on September 20, 2012.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

2. Basis of presentation (continued):

(b) Basis of measurement and going concern:

These consolidated financial statements have been prepared on the historical cost basis, except for financial assets which are measured at fair value through profit or loss and liabilities for cash-settled share-based payment arrangements which are measured at fair value through profit or loss.

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

Taking into consideration the cash, cash equivalents and short-term deposits, management has projected that the Company has sufficient cash resources to fund its current operations beyond the next 12 months.

(c) Functional and presentation currency:

Items included in the financial statements of each consolidated entity are measured using the currency of the primary economic environment in which the entity operates (the "functional currency").

These consolidated financial statements are presented in Canadian dollars, which is the functional currency of the parent company and its subsidiaries.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

2. Basis of presentation (continued):

(d) Use of significant estimates and assumptions:

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the application of accounting policies and the amounts of assets, liabilities, revenue and expenses reported in the consolidated financial statements and the related notes to the consolidated financial statements. Although these estimates are based on management's best knowledge of the amount, events or actions, actual results may differ from those estimates and those differences could be material. The impacts of such estimates are pervasive throughout the consolidated financial statements, and may require accounting adjustments based on future occurrences.

These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

The areas which require management to make significant estimates and assumptions in determining carrying values include, but are not limited to:

(i) Valuation of share-based compensation, share purchase warrants and share appreciation rights:

Management measures the costs for share-based compensation, the value of share purchase warrants and share appreciation rights using market-based option valuation techniques. Assumptions are made and estimates are used in applying the valuation techniques. These include estimating the future volatility of the share price, expected dividend yield, expected risk-free interest rate, future employee turnover rates and future share option and share purchase warrants exercise behaviours and corporate performance. Such estimates and assumptions are inherently uncertain. Changes in these assumptions affect the fair value estimates of share-based payments, share purchase warrants and share appreciation rights. These assumptions are reviewed annually.

7

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

2. Basis of presentation (continued):

(ii) Measurement, period of use and potential impairment of intangible assets:

Management reviews objective evidence each reporting period to assess whether there are indications of impairment of the intangible assets and make judgments about their period of use. These determinations and their individual assumptions require that management make a decision based on the best and most reliable information available at each reporting period.

(iii) Timing of recognition of revenue:

In determining the appropriate period over which to recognize revenue from an up-front non-refundable payment, management reviews the deliverables as identified in the collaboration arrangements and makes assumptions regarding the time to commercialization. These assumptions are reviewed each reporting period.

3. Significant accounting policies:

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and in preparing the opening IFRS consolidated statement of financial position at July 1, 2010, the date of transition to IFRS, unless otherwise indicated.

(a) Basis of consolidation:

(i) Subsidiaries:

Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. All intercompany transactions and balances have been eliminated upon consolidation.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

(ii) Jointly controlled entities:

Joint ventures are those entities over whose activities the Company has joint control, established by contractual agreement. The Company owns 80% of CIMYM BioSciences Inc. and has proportionately consolidated its joint venture since the date that joint control commenced and will continue until the date that joint control ceases and has made provisions for any advances to the joint venture that were not eliminated on consolidation.

(b) Foreign currency:

Transactions in foreign currencies are translated into the functional currency of the Company at the prevailing exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency differences arising on retranslation are recognized in profit or loss.

(c) Revenue recognition:

Revenue is recognized when the Company has transferred to the buyer the significant risks and rewards of ownership of the goods; the Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; the amount of revenue can be measured reliably; it is probable that the economic benefits associated with the transaction will flow to the Company; and the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Contingent revenue attributable to the achievement of regulatory or developmental milestones is recognized only on the achievement of the applicable milestone and when collectability is probable.

Non-refundable up-front fees for access to the Company's proprietary technology in connection with certain research and development collaborations are deferred and recognized as revenue on a systematic basis over the estimated term of the related collaboration required until the milestone associated with commercial approval of the first indication in the licensee's territory has been satisfied and the milestone payment received, or until it is determined that no further collaboration is required. The estimated term is based on a drug development plan, as discussed with licensees.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

The Company has license agreements that specify that certain royalties are earned by the Company on sales of licensed products in the licensed territories. Licensees report sales and royalty information in the 90 days after the end of the quarter in which the activity takes place and typically do not provide the Company with forward estimates or current-quarter information. Because the Company is not able to reasonably estimate the amount of royalties earned during the period in which these licensees actually ship products, royalty revenue is not recognized until the royalties are reported to the Company and the collection of these royalties is probable.

(d) Financial instruments:

(i) Financial assets:

Under IFRS, the Company's financial assets are classified as loans and receivables.

A financial asset is derecognized when the rights to receive cash flows from the asset have expired or when the Company has transferred its rights to receive cash flows from the asset.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are initially recognized at fair value plus transaction costs and subsequently measured at amortized cost using the effective interest rate method less any impairment losses. Cash and cash equivalents comprise cash balances. Short-term deposits comprise term deposits with original maturities of 12 months or less. The Company has classified its cash and cash equivalents, short-term deposits and accounts receivable as loans and receivables.

The Company does not have any financial assets at fair value through profit or loss, held-to-maturity investments or available-for-sale financial assets.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

(ii) Financial liabilities:

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as liabilities at fair value through profit or loss. The Company's share purchase warrants that have a strike price in a currency other than the Company's functional currency have been classified as a derivative financial liability at fair value, with changes in value reflected in profit or loss upon initial recognition and subsequent measurement.

Other financial liabilities are recognized initially at fair value plus any directly attributable transaction costs and, subsequently, at amortized cost using the effective interest method. The Company has classified its accounts payable and accrued liabilities as other financial liabilities.

A financial liability is derecognized when its contractual obligations are discharged, cancelled or expire.

(iii) Equity:

Common shares are classified as equity. Incremental costs directly attributable to the issuance of common shares are recognized as a deduction from equity, net of any income tax effects.

(e) Property and equipment:

(i) Recognition and measurement:

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Gains and losses on disposal of an item of property and equipment are determined by comparing the proceeds from disposal with the carrying amount of property and equipment, and are recognized in profit or loss.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

(ii) Subsequent costs:

The cost of replacing a part of an item of property and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company, and its cost can be measured reliably. The carrying amount of the replaced part is derecognized. The costs of the day-to-day servicing of property and equipment are recognized in profit or loss as incurred.

(iii) Depreciation:

The estimated useful lives and the methods of depreciation for the current and comparative periods are as follows:

Asset	Basis	Rate
Computer and other equipment	Straight line	Over 3 years
Furniture	Straight line	Over 5 years
Leasehold improvements	Straight line	Over lease term

Estimates for depreciation methods, useful lives and residual values are reviewed at each reporting period end and adjusted if appropriate.

(f) Intangible assets:

Intangible assets that are acquired (acquired technology) and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditures are recognized in profit or loss as incurred.

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use in the manner intended by management. The period over which the technologies acquired in the January 29, 2010 acquisition of Cytopia Limited ("Cytopia") are available for use is estimated at three years, which reflects management's intended use of the asset and the estimate of the time to market for the technologies.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

The amortization method and amortization period of an intangible asset with a finite life is reviewed at each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and are treated as changes in accounting estimates.

Development costs:

Development expenditures are capitalized only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Company intends to and has sufficient resources to complete development and to use or sell the asset. Other development expenditures are expensed as incurred. No development costs have been capitalized to date.

(g) Impairment:

(i) Financial assets:

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

An impairment test is performed, on an individual basis, for each material financial asset. Other individually non-material financial assets are tested as groups of financial assets with similar risk characteristics.

(ii) Non-financial assets:

The carrying amounts of the Company's non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount is estimated.

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ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

The recoverable amount of an asset or a cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of cash inflows of other assets or cash-generating units. An impairment loss is recognized if the carrying amount of an asset or its related cash-generating unit exceeds its estimated recoverable amount.

(h) Provisions:

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount on provisions is recognized in finance costs. No provisions have been recognized.

(i) Government grants and assistance:

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attached to them and that the grants will be received.

Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognized in profit or loss in the period in which they become receivable.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

Other government grants are recognized as a reduction of the related expenses over the periods necessary to match them with the costs for which they are intended to compensate, on a systematic basis.

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

(j) Share-based compensation:

The grant-date fair value of share-based payment awards granted to employees is recognized as expense, with a corresponding increase in contributed surplus, over the period that the employees unconditionally become entitled to the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service is expected to be met, such that the amount ultimately recognized as an expense is based on the number of awards that met the related service and non-market performance conditions at the vesting date.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognized as an expense with a corresponding increase in liabilities, over the period that the employees unconditionally become entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognized in profit or loss.

(k) Finance income and finance costs:

Finance income is comprised of interest income on funds invested, and fair value gains on financial assets and financial liabilities at fair value through profit or loss. Interest income is recognized as it accrues in profit or loss, using the effective interest rate method.

Finance costs comprise fair value losses on financial assets and financial liabilities at fair value through profit or loss.

Foreign currency gains and losses are reported on a net basis as either finance income or finance costs depending on the change from foreign currency fluctuations.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

(l) Income tax:

Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized.

(m) Loss per share:

Basic loss per share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted loss per share is computed similarly to basic loss per share, except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the reporting periods. The inclusion of the Company's stock options and warrants in the computation of diluted loss per share has an anti-dilutive effect on the loss per share and, therefore, they have been excluded from the calculation of diluted loss per share.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

(n) New standards and interpretations not yet effective:

Accounting standards issued but not yet effective up to the date of issuance of the Company's consolidated financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be applicable at a future date. The Company intends to adopt these standards when they become effective.

(i) International Accounting Standard ("IAS") 12, Income Taxes ("IAS 12"):

In December 2010, the IASB amended IAS 12 for the recovery of underlying assets measured at fair value and the impact on deferred taxes. The amendments provide a solution to the problem of assessing whether recovery would be through use or through sale when the asset is measured at fair value under IAS 40, Investment Property, by adding the presumption that the recovery would normally be through sale. The amendment also incorporates the remaining guidance in SIC-21, Income Taxes - Recovery of Revalued Non-depreciable Assets, as SIC-21 has been withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1, 2012. The Company is in the process of reviewing the amendment to determine the impact on the consolidated financial statements.

(ii) IFRS 7, Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements:

The amendment requires additional disclosure about financial assets that have been transferred but not derecognized to enable the user of the Company's consolidated financial statements to understand the relationship with those assets that have not been derecognized and their associated liabilities. In addition, the amendment requires disclosures about continuing involvement in derecognized assets to enable the user to evaluate the nature of, and risk associated with, the Company's continuing involvement in those derecognized assets. The amendment becomes effective for annual periods beginning on or after July 1, 2013. The amendment affects disclosure only and the Company does not expect the amendments to have a material impact on the consolidated financial statements, because of the nature of the Company's operations and the types of financial assets that it holds.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

(iii) IFRS 9, Financial Instruments ("IFRS 9"):

In November 2009, the IASB issued IFRS 9, which covers classification and measurement as the first part of its project to replace IAS 39, Financial Instruments - Recognition and Measurement ("IAS 39"). In October 2010, the IASB also incorporated new accounting requirements for liabilities. The standard introduces new requirements for measurement and eliminates the current classification of loans and receivables, available-for-sale and held-to-maturity, currently in IAS 39. There are new requirements for the accounting of financial liabilities as well as a carryover of requirements from IAS 39. The Company does not anticipate early adoption and will adopt the standard when it is mandated by the IASB, which is in fiscal 2016. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

(iv) IFRS 10, Consolidated Financial Statements ("IFRS 10"):

IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those return through its power over the investee. IFRS 10 supersedes SIC-12, Consolidations - Special Purpose Entities, and replaces parts of IAS 27, Consolidated and Separate Financial Statements ("IAS 27"). The effective date of this amendment is for annual periods beginning on or after January 1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

(v) IFRS 11, Joint Arrangements ("IFRS 11"):

IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint operation or a joint venture. The standard eliminates the use of the proportionate consolidation method to account for joint ventures. Joint ventures will be accounted for using the equity method of accounting while under a joint operation the venturer will recognize its share of the assets, liabilities, revenue and expenses of the joint operation. IFRS 11 supersedes SIC-13, Jointly Controlled Entities - Non-Monetary Contributions by Venturers, and IAS 31, Joint Ventures ("IAS 31"). The effective date of this amendment is for annual periods beginning on or after January 1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

3. Significant accounting policies(continued):

(vi) IFRS 12, Disclosure of Interest in other Entities ("IFRS 12"):

IFRS 12 establishes disclosure requirements for interests in other entities such as subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity's interest in other entities. IFRS 12 replaces the previous disclosure requirements included in IAS 27, IAS 31 and IAS 28, Investment in Associates and Joint Ventures. The effective date of this amendment is for annual periods beginning or after January 1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

(vii) IFRS 13, Fair Value Measurement ("IFRS 13"):

IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement. The effective date of this amendment is for annual periods beginning or after January 1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

(viii) IAS 28, Investments in Associates and Joint Ventures ("IAS 28"):

The IASB also amended IAS 28, an existing standard, to include joint ventures in its scope and to address the changes in IFRS 10, 11 and 12. The effective date of this amendment is for annual periods beginning or after January 1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

(ix) IAS 1, Presentation of Financial Statements ("IAS 1"):

The IASB amended IAS 1 by revising how certain items are presented in other comprehensive income ("OCI"). Items within OCI that may be reclassified to profit and loss will be separated from items that will not. The standard is effective for financial years beginning on or after July 1, 2012, with early adoption permitted. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

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

As a condition of various prospectus financings and the controlled equity offering program entered into on April 23, 2010, the Company agreed to restrict use of $144.361 million of the net proceeds raised to fund drug development activities not related to Cuban originated products or for general purposes not related to the Cuban licensed products and technologies, except those activities expressly consented under the licenses granted by the U.S. Office of Foreign Asset Control. As at June 30, 2012, of the $132.451 million (2011 - $79.659 million; 2010 - $45.645 million) in cash and short-term deposits, approximately $43.566 million (2011 - $31.189 million; 2010 - $38.816 million) is unrestricted and can be used for any purpose and approximately $88.885 million (2011 - $48.470 million; 2010 - $6.829 million) can be used for any purpose other than activities related to the Cuban products outlined above.

5. Property and equipment:

	Computer
	and other					Leasehold
	equipment			Furniture		improvements			Total
Cost
Balance, July 1, 2010	$	471,083		$	99,574	$	52,539		$	623,196
Additions		71,684			–		–			71,684
Disposals		(157,331	)		–		–			(157,331	)
Balance, June 30, 2011		385,436			99,574		52,539			537,549
Additions		23,357			4,800		–			28,157
Disposals		(159,135	)		–		(35,559	)		(194,694	)
Balance, June 30, 2012	$	249,658		$	104,374	$	16,980		$	371,012
Accumulated depreciation
Balance, July 1, 2010	$	411,950		$	85,203	$	41,268		$	538,421
Depreciation		66,689			4,908		6,936			78,533
Disposals		(170,725	)		–		–			(170,725	)
Balance, June 30, 2011		307,914			90,111		48,204			446,229
Depreciation		48,241			4,783		4,335			57,359
Disposals		(159,135	)		–		(35,559	)		(194,694	)
Balance, June 30, 2012	$	197,020		$	94,894	$	16,980		$	308,894
Net carrying amounts
Balance, July 1, 2010	$	59,133		$	14,371	$	11,271		$	84,775
Balance, June 30, 2011		77,522			9,463		4,335			91,320
Balance, June 30, 2012		52,638			9,480		–			62,118

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

6. Intangible assets:

Cost
Balance, July 1, 2010, June 30, 2011 and June 30, 2012	$	13,524,054
Accumulated amortization
Balance, July 1, 2010	$	1,878,340
Amortization		4,508,016
Balance, June 30, 2011		6,386,356
Amortization		4,508,016
Balance, June 30, 2012	$	10,894,372
Net carrying amounts
Balance, July 1, 2010	$	11,645,714
Balance, June 30, 2011		7,137,698
Balance, June 30, 2012		2,629,682

On January 29, 2010, on acquisition of Cytopia, the Company recorded $13,524,054 of acquired technologies, which included the intellectual property and in-process research and development of the Company's CYT387 and CYT997 products, as well as a number of other molecules.

7. Consolidation of joint venture:

Included in the consolidated financial statements are the following items:

	June 30,		June 30,		July 1,
	2012		2011		2010
Current assets	$	–	$	–	$	–
Non-current assets		–		–		–
Current liabilities(1)		79,072,851		77,324,884		70,295,376
Non-current liabilities		1,556,853		1,831,722		1,650,909
Out-licensing revenue		990,786		935,798		–
Expenses		2,463,884		8,146,119		–

⁽¹⁾Of the current liabilities, $78,691,578 (2011 - $76,730,809; 2010 - $68,771,457) is owed to the Company and is eliminated on consolidation.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

8. Share purchase warrants:

	2012					2011
	Number of		Fair			Number of			Fair
	warrants		value			warrants			value
Balance,  beginning of year		7,366,418	$	14,476,681			8,166,480		$	6,358,480
Exercised		–		–			(800,062	)		(1,292,961	)
Fair value adjustment		–		(7,255,641	)		–			9,411,162
Balance, end of year		7,366,418	$	7,221,040			7,366,418		$	14,476,681

The fair value of warrants was calculated using the Black-Scholes option pricing model with the following assumptions at June 30:

	2012			2011
Exercise price	$	1.60 U.S.		$	1.60 U.S.
Fair value	$	0.98		$	1.96
Expected life		2.7 years			3.7 years
Risk-free interest rate		1.1	%		2.1	%
Expected volatility		66.2	%		88.9	%

On March 10, 2010, the Company completed a prospectus offering of 14,583,000 units at U.S. $1.20 per unit for gross proceeds of U.S. $17,499,600 (Cdn. $17,895,081), and net cash proceeds of U.S. $15,712,614 (Cdn. $16,067,710). Each unit consisted of one common share and one-half common share purchase warrant. In connection with the financing, the Company issued 874,980 broker warrants having an aggregate fair value of U.S. $171,496 (Cdn. $175,371), estimated using the Black-Scholes option pricing model. Each whole common share purchase warrant and each broker warrant entitles the warrant holder to acquire one common share at an exercise price of U.S. $1.60 per share. These 8,166,480 warrants may be exercised at any time from September 10, 2010 to their expiry on March 10, 2015. There were no warrants exercised during the year ended June 30, 2012 (2011 - 800,062).

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

9. Share capital:

(a) Authorized and issued:

(i) Authorized:

The Company has authorized share capital of 500,000,000 Class A preferred shares; 500,000,000 Class B preferred shares, Series 1; 500,000 Class A non-voting common shares; and 500,000,000 common shares. All classes of shares have no par value.

Common shareholders are entitled to receive dividends as declared by the Company at its discretion and are entitled to one vote per share at the Company's annual general meeting.

(ii) Common shares issued in the year ended June 30, 2012:

On February 29, 2012, the Company completed a prospectus offering of 40,250,000 shares for gross proceeds of U.S. $80,500,000 (Cdn. $79,421,300), resulting in net cash proceeds of U.S. $75,243,165 (Cdn. $74,232,207) after deducting U.S. $5,256,835 (Cdn. $5,189,093) in transaction costs.

(iii) Common shares issued in the year ended June 30, 2011:

On December 17 and December 23, 2010, the Company completed a prospectus offering of 25,000,000 and 3,750,000 common shares at U.S. $1.60 per common share, respectively, for gross proceeds of U.S. $46,000,000 (Cdn. $46,493,000), resulting in net cash proceeds of U.S. $42,874,672 (Cdn. $43,334,522), after deducting U.S. $3,125,328 (Cdn. $3,158,478) in transaction costs.

Between January 13, 2011 and June 14, 2011, the Company sold 5,775,000 shares at a weighted average price of U.S. $2.53 per common share for gross proceeds of U.S. $14,582,098 (Cdn. $13,923,786), resulting in net proceeds of Cdn. $13,375,113 after deducting Cdn. $548,673 in transaction costs. These shares were sold under a Sales Agreement with Cantor Fitzgerald & Co, under which the Company could, at its discretion, from time to time, sell up to a maximum of 7,750,000 of its common shares through an at-the-market equity offering program known as a Controlled Equity Offering. The agreement expired on October 16, 2011.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

9. Share capital (continued):

(b) Basic and diluted loss per common share:

The weighted average number of shares for the year ended June 30, 2012 was 130,276,191 (2011 - 97,764,811). The Company has not adjusted its weighted average number of shares outstanding for the purpose of calculating the diluted loss per share as any adjustment related to stock options or warrants would be anti-dilutive.

(c) Stock options:

The Company has granted stock options pursuant to a stock option plan. Under the plan, options to purchase common shares may be granted to directors, officers, employees and service providers of the Company for a maximum term of 10 years.

Compensation cost recognized as an expense for the year ended June 30, 2012 for share-based employee compensation awards was $2,238,782 (2011 - $1,709,988).

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

	2012			2011
Number of options issued		2,037,500			1,633,000
Weighted average exercise price	$	1.73		$	1.77
Weighted average risk-free interest rate		2.1	%		2.6	%
Weighted average volatility factor		85.0	%		83.0	%
Forfeiture rate		2.5% - 7.8	%		2.5% - 7.8	%
Dividend rate		0.0	%		0.0	%
Weighted average expected life of options (years)		6.0			6.8
Vesting period (months)		0 - 24			0 - 24
Weighted average fair value of options granted	$	1.22		$	1.31
Fair value of options granted	$	2,478,394		$	2,141,045

The Black-Scholes model used by the Company to calculate option values was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differs from the Company's stock option awards. This model also requires highly subjective assumptions, including future stock price volatility and expected option life, which greatly affect the calculated values.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

9. Share capital (continued):

The risk-free interest rate is based on the implied yield on a Canadian Government zero-coupon issue with a remaining term equal to the expected term of the option. The volatility is based solely on historical volatility equal to the expected life of the option. The life of the options is estimated considering the vesting period at the grant date, the term of the option and the average length of time similar grants have remained outstanding in the past. The forfeiture rate is an estimate based on historical evidence and future expectations. The dividend yield was set at zero since it is the present policy of the Company to retain all earnings to finance operations and future growth.

The following table reflects the activity under the stock option plan for the years ended June 30, 2012 and 2011 and the share options outstanding at the end of the years:

	2012					2011
				Weighted					Weighted
				average					average
				exercise					exercise
	Number			price		Number			price
Outstanding, beginning of year		7,125,916		$	2.07		7,582,971		$	2.29
Granted		2,037,500			1.73		1,633,000			1.77
Exercised		(738,060	)		1.29		(1,074,077	)		1.09
Expired		(72,488	)		8.39		(629,742	)		4.67
Cancelled (after vesting)		(247,500	)		4.15		(300,400	)		4.36
Forfeited (before vesting)		(28,334	)		1.65		(85,836	)		1.39
Outstanding, end of year		8,077,034			1.94		7,125,916			2.07
Exercisable, end of year		6,296,006		$	1.99		5,848,888		$	2.15

	Options outstanding						Options outstanding
			Weighted						Weighted
			average		Weighted				average		Weighted
			remaining		average				remaining		average
Range of	Number		contractual		exercise		Number		contractual		exercise
exercise prices	outstanding		life (years)		price		exercisable		life (years)		price
$0.50 - $1.00		1,058,152		5.9	$	0.50		1,058,152		5.9	$	0.50
$1.01 - $2.00		5,564,382		7.1		1.64		3,895,193		6.3		1.62
$2.01 - $3.00		364,563		7.8		2.48		252,724		7.5		2.52
$3.01 - $4.00		492,558		3.2		3.40		492,558		3.2		3.40
$4.01 - $15.27		597,379		4.5		5.66		597,379		4.5		5.66
		8,077,034		6.5	$	1.94		6,296,006		5.8	$	1.99

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

9. Share capital (continued):

(d) Share appreciation rights:

The Company has granted share appreciation rights ("SARs") to certain employees. Under the plan, SARs are granted to employees and service providers of the Company's Australian subsidiary for a maximum term of 10 years.

The outstanding SARs are measured at their fair value using the Black-Scholes option pricing model at the end of each reporting period, with changes recognized through profit or loss. For the year ended June 30, 2012, the Company recorded a gain of $86,681 (2011 - expense of $120,213) related to SARs.

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

	2012			2011
Number of rights outstanding		180,000			153,332
Weighted average exercise price	$	1.69		$	1.67
Risk-free interest rate		1.1% - 1.5	%		1.6% - 2.7	%
Volatility factor		66% - 88	%		60% - 91	%
Dividend rate		0	%		0	%
Expected life of rights (% of contractual life)		60% - 95	%		95% - 100	%
Vesting period (months)		0 - 24			0 - 24
Weighted average fair value of rights outstanding	$	1.26		$	1.67
Amount accrued as at June 30	$	188,164		$	274,845

The Black-Scholes model used by the Company to calculate SARs values was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differs from the Company's SARs. This model also requires highly subjective assumptions, including future stock price volatility and average option life, which greatly affect the calculated values.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

9. Share capital (continued):

The risk-free interest rate is based on the implied yield on a Government of Canada zero-coupon issue with a remaining term equal to the expected term of the SARs. The volatility is based solely on historical volatility equal to the expected life of the SARs. The life of the SARs is estimated considering the vesting period at the grant date, the term of the SARs and the average length of time similar grants have remained outstanding in the past. The forfeiture rate is an estimate based on historical evidence and future expectations. The dividend yield was set at zero since it is the present policy of the Company to retain all earnings to finance operations and future growth.

The following table reflects the activity under the SARs plan for the years ended June 30, 2012 and 2011 and the SARs outstanding at the end of the years:

	2012					2011
				Weighted					Weighted
				average					average
				exercise					exercise
	Number			price		Number			price
Outstanding, beginning of year		153,332		$	1.67		–		$	–
Granted		90,000			1.72		490,000			1.67
Exercised/cancelled		(63,332	)		1.67		(336,668	)		1.67
Outstanding, end of year		180,000			1.69		153,332			1.67
Exercisable, end of year		116,666		$	1.69		109,999		$	1.67

10. Deferred revenue:

Deferred revenue consists of the unamortized portion of the initial license fees under the terms of licensing agreements. These initial license fees are non-refundable and are deferred and recognized as revenue over the term of the related collaboration. As at June 30, 2012, deferred revenue of $1,938,123 (2011 - $2,425,794; 2010 - $3,174,825) is related to an out-licensing agreement for nimotuzumab dated July 25, 2006. The revenue recognized for the year ended June 30, 2012 was $487,671 (2011 - $749,031). As a result of a revision to the estimated period of the collaboration in fiscal 2012, the revenue recognition period was extended an additional two years to July 2017.

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Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

10. Deferred revenue (continued):

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

11. Income taxes:

(a) Income tax expense:

	2012		2011
Current tax expense:
Current period	$	–	$	–
Adjustment for prior periods		–		–
		–		–
Deferred tax expense:
Origination and reversal of temporary differences		–		–
Reduction in tax rate		–		–
		–		–
Total tax expense	$	–	$	–

(b) Tax recognized in equity:

The Company did not recognize any deferred tax recovery related to share issue costs of $5,189,093 (2011 - $3,707,151) charged directly to deficit as management does not believe that it is more probable than not that the Company can realize its deferred tax assets. The share issue costs are included in the amount of unrecognized deductible temporary differences shown in note 11(e).

28

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

11. Income taxes (continued):

(c) Reconciliation of effective tax rate:

	2012						2011
Loss for the year				$	(20,316,739	)				$	(40,867,207	)
Total tax expense					–						–
Loss excluding tax				$	(20,316,739	)				$	(40,867,207	)
Income tax expense calculated at average:
Canadian income tax rates		27.26	%	$	(5,538,343	)		29.26	%	$	(11,957,745	)
Tax effect of changes in rates		10.11	%		(2,054,911	)		(1.14	)%		467,678
Differences in rates due to subsidiaries in foreign  jurisdictions		5.94	%		(1,207,123	)		0.56	%		(230,596	)
Other non-deductible items		13.98	%		(2,840,856	)		(5.92	)%		2,420,949
Other adjustments		5.94	%		(1,207,049	)		0.43	%		(175,152	)
Change in unrecognized temporary differences		(63.23	)%		12,848,282			(23.19	)%		9,474,866
		0.00	%	$	–			0.00	%	$	–

29

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

11. Income taxes (continued):

(d) Tax losses:

Unused tax losses for which no deferred tax asset has been recognized (as recovery is not currently probable).

			United
	Canada		States		Australia
2015	$	5,466,000	$	–	$	–
2019		–		1,000		–
2020		–		28,000		–
2021		–		84,000		–
2022		–		2,600,000		–
2023		–		4,603,000		–
2024		–		3,040,000		–
2025		–		3,143,000		–
2026		13,286,000		43,500,000		–
2027		10,200,000		4,987,000		–
2028		16,234,000		2,634,000		–
2029		13,262,000		1,204,000		–
2030		15,290,000		852,000		–
2031		11,079,000		1,199,000		–
2032		2,156,000		2,308,000		–
Indefinitely		–		–		93,969,000
	$	86,973,000	$	70,183,000	$	93,969,000

Tax losses were recognized to the extent required to offset the future reversal of the deductible temporary difference of $2,630,000 (2011 - $7,138,000) related to acquired technologies. No deferred tax asset was recognized for tax losses aggregating $251,125,000 (2011 - $240,172,000). In addition, the Company had capital losses at December 31, 2012 of approximately $1,048,000 (2011 - $1,048,000) in respect of which no deferred tax asset has been recognized. Deferred tax assets are recognized where it is probable that future taxable profit will be available to utilize the losses.

30

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

11. Income taxes (continued):

(e) Unrecognized temporary differences:

Deferred tax assets have not been recognized in respect of the following items:

	2012		2011
Deductible temporary differences	$	68,494,419	$	65,825,463
Non-capital tax losses		251,125,276		240,171,631
	$	319,619,695	$	305,997,094

The non-capital tax losses in Canada and the United States expire between 2015 and 2032 whereas those in Australia do not expire (see note 11(d) above). The deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Company can utilize the benefits therefrom.

(f) Recognized deferred tax assets and liabilities:

Deferred tax assets and liabilities are attributable to the following:

	2012			2011
Tax loss carryforwards	$	(788,905	)	$	(2,141,309	)
Acquired technologies		788,905			2,141,309
	$	–		$	–

31

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

11. Income taxes (continued):

(g) Unused investment tax credits:

The Company performs certain qualified research and development activities that result in investment tax credits ("ITCs") under applicable Canadian and U.S. tax laws. The ITCs can be used to offset future Canadian and United States federal taxes payable. The Company has not recognized a receivable in respect of its unused ITCs as there is no reasonable assurance that the ITCs can be utilized prior to their expiration. Canadian and U.S. federal ITCs expire as follows:

			United
	Canada		States
2019	$	–	$	2,000
2020		6,000		8,000
2021		257,000		113,000
2022		426,000		76,000
2023		354,000		196,000
2024		301,000		177,000
2025		423,000		199,000
2026		1,060,000		357,000
2027		1,049,000		204,000
2028		926,000		93,000
2029		994,000		45,000
2030		879,000		1,000
2031		849,000		30,000
2032		392,000		–
	$	7,916,000	$	1,501,000

In addition, the Company had provincial tax credits available of approximately $705,000 (2011 - $661,000), which can only be used to offset future provincial taxes payable, in respect of which no receivable has been recognized.

32

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

12. Licensing and product development:

Components of licensing and product development expenses for the years ended June 30, 2012 and 2011 were as follows:

	2012		2011
Licensing and product development costs, excluding the undernoted	$	16,837,585	$	13,033,580
Salaries, bonuses and fees		4,329,933		5,532,962
Share-based compensation		963,969		733,226
Depreciation of property and equipment		4,335		14,196
Amortization of intangible  assets		4,508,016		4,508,016
	$	26,643,838	$	23,821,980

Annual licensing and product development expenses may vary due to the timing of costs for manufacturing, initiating and completing pre-clinical and clinical trials, granting of stock options and recognizing government assistance.

13. General and administrative expenses:

Components of general and administrative expenses for the years ended June 30, 2012 and 2011 were as follows:

	2012		2011
General and administrative costs, excluding  the undernoted	$	3,536,209	$	4,016,245
Salaries, bonuses and fees		1,311,086		2,682,513
Share-based compensation		1,274,813		976,762
Depreciation of property and equipment		53,024		64,337
	$	6,175,132	$	7,739,857

33

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

14. Finance income and finance costs:

Components of finance income for the years ended June 30, 2012 and 2011 were as follows:

	2012		2011
Interest income	$	716,799	$	469,191
Gain on short-term deposits		–		11,123
Net foreign currency gain		3,459,126		–
Warrant revaluation adjustment		7,255,641		–
Finance income	$	11,431,566	$	480,314

Components of finance costs for the years ended June 30, 2012 and 2011 were as follows:

	2012		2011
Net foreign currency loss	$	–	$	1,407,760
Warrant revaluation adjustment		–		9,411,163
Finance costs	$	–	$	10,818,923

15. Commitments:

The Company has entered into various contracts for clinical, preclinical and other studies, none of which individually exceeds $1,000,000, totalling $11,046,952, of which $6,078,851 has been incurred as at June 30, 2012 and the remaining $4,968,101 has yet to be incurred. Any early termination penalties cannot exceed the amount of the contract commitment.

As at June 30, 2012, the approximate future minimum rental payments relating to operating leases for premises are as follows:

	2012		2011
Less than 1 year	$	46,397	$	215,437
Between 1 and 5 years		–		46,397
	$	46,397	$	261,834

34

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

16. Related party transactions:

The key management personnel of the Company are the Directors, the President and Chief Executive Officer, the Chief Medical Officer and all the Vice-Presidents.

Compensation for key management personnel of the Company for the years ended June 30, 2012 and 2011 was as follows:

	2012		2011
Short-term employee benefits	$	2,782,450	$	2,430,289
Termination benefits		290,222		1,612,408
Share-based compensation		1,330,602		1,314,113
	$	4,403,274	$	5,356,810

Key management personnel participate in the stock option plan and executive officers participate in the Company's health plan. Directors receive annual and meeting fees for their services. As at June 30, 2012, the key management personnel control less than 1% of the voting shares of the Company.

Occasionally, directors will provide assistance to management on a consulting basis to evaluate new opportunities or provide guidance for drug development activities. The fees incurred during the year ended June 30, 2012 totalled $125,122 (2011 - $91,513). Amounts due to related parties, including amounts due to key management personnel, at year end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables.

17. Financial instruments:

(a) Financial assets and liabilities:

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

35

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

17. Financial instruments (continued):

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

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

(i) Market risk:

(a) Foreign exchange risk:

The Company operates in Canada, the United States and Australia and has relationships with entities in other countries. Foreign exchange risk arises because the cost of transactions denominated in foreign currencies may vary due to changes in exchange rates.

Balances in foreign currencies at June 30, 2012 were:

	U.S.			Australian
	dollars			dollars
Cash and cash equivalents and short-term deposits	$	45,729,327		$	207,185
Accounts receivable		30,268			29,176
Accounts payable and accrued liabilities		(1,622,524	)		(285,242	)
	$	44,137,071		$	(48,881	)

Based on the balances above, a 1% change in the foreign exchange rate for the U.S. dollar or the Australian dollar would have a net impact of $440,882 on the year-end balances.

36

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

17. Financial instruments (continued):

(b) Interest rate risk:

The Company is exposed to interest rate risk to the extent that short-term deposits are at a fixed rate of interest and their market value can vary with the change in market interest rates. The Company's maximum exposure to interest rate risk is based on the effective interest rate and the current carrying value of these assets. The Company monitors market interest rates and mitigates against interest rate risk by not investing in deposits longer than 12 months.

There is a risk that future cash flows from invested cash, cash equivalents and short-term deposits will vary as the market interest rates fluctuate because these investments earn interest at market rates. Based on the June 30, 2012 balance of approximately $132.45 million, a variation of 100 basis points in the market interest rate could affect the consolidated financial statements of loss and comprehensive loss by approximately $1.324 million. For the year ended June 30, 2012, the Company recorded interest income of $717 thousand (2011 - $469 thousand), in relation to these assets.

(ii) Credit risk:

The Company limits its exposure to credit risk by investing only in liquid debt securities with a strong credit rating issued by Canadian Schedule I banks. Accounts receivable are subject to normal credit risk. The maximum exposure to credit risk is equal to the carrying value of the accounts receivable. The Company regularly assesses the accounts receivable and takes action to collect the amounts or provide adequate reserves against doubtful accounts. The Company currently has no reserve for doubtful accounts as there have been no bad debts to date.

(iii) Liquidity risk:

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

37

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

17. Financial instruments (continued):

(c) Fair value of financial instruments:

The Company measures fair value using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:

· Level 1 - quoted prices (unadjusted) in active markets for an identical instrument;

· Level 2 - inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly (i.e., as prices) or indirectly (i.e., derived from prices); and

· Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

As at June 30, 2012, June 30, 2011 and July 1, 2010, all of the Company's financial instruments that are carried at fair value have been classified as Level 2 within the fair value hierarchy.

(d) Capital management:

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

The Company includes cash and cash equivalents and short-term deposits in the definition of capital.

The Company is not subject to externally imposed capital requirements, except as described in note 4 regarding restricted cash and there has been no change with respect to the overall capital management strategy during the years ended June 30, 2012 and 2011.

38

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

18. Transition to IFRS:

These are the Company's first annual consolidated financial statements prepared in accordance with IFRS. The accounting policies set out in note 3 have been applied in preparing the consolidated financial statements for the years ended June 30, 2012 and 2011, and in the preparation of the opening IFRS statement of financial position as at July 1, 2010 (the Company's date of transition) and as at June 30, 2011.

Elected exemptions from full retrospective application:

IFRS 1 requires first-time adopters to retrospectively apply all effective IFRS as of the reporting date. However, it also provides for certain optional exemptions and certain mandatory exceptions for first-time IFRS adopters. In preparing these consolidated financial statements in accordance with IFRS 1, the Company has applied the mandatory exceptions of IFRS. The Company has also applied the following optional exemptions from full retrospective application of IFRS to its opening statement of financial position as at July 1, 2010:

Share-based payment transactions:

The Company elected to apply the exemption provided under IFRS 1 and only applied IFRS 2, Share-based Payments, to equity instruments granted after November 7, 2002 that had not vested by the transition date.

Business combinations:

The Company has applied the business combination exemption in IFRS 1 to not apply IFRS 3, Business Combinations ("IFRS 3"), retrospectively to past business combinations. Accordingly, the Company has not restated business combinations that took place prior to the transition date.

39

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

18. Transition to IFRS (continued):

Consolidated and separate financial statements:

In accordance with IFRS 1, if a company elects to apply IFRS 3 prospectively, IAS 27, Consolidated and Separate Financial Statements ("IAS 27"), as amended in 2008 must also be applied prospectively. As the Company elected to apply IFRS 3 prospectively, the Company has also elected to apply lAS 27 prospectively.

In preparing its opening IFRS consolidated statement of financial position, in accordance with IFRS 1, the Company has adjusted amounts reported previously in the consolidated financial statements prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the Company's financial position and financial performance is set out in the following tables and the notes that accompany the tables. The transition from Canadian GAAP to IFRS has not had a material impact on the consolidated statements of cash flows. The reconciling items between Canadian GAAP and IFRS presentation have no net effect on the cash flows generated.

40

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

18. Transition to IFRS (continued):

The July 1, 2010 Canadian GAAP consolidated financial position and equity have been reconciled to IFRS as follows:

						Effect of
			Canadian			transition
	Note		GAAP			to IFRS			IFRS
Assets
Current assets:
Cash and cash equivalents			$	19,460,141		$	–		$	19,460,141
Short-term deposits				26,184,991			–			26,184,991
Accounts receivable				161,184			–			161,184
Prepaid expenses				237,962			–			237,962
Total current assets				46,044,278			–			46,044,278
Non-current assets:
Property and equipment				84,775			–			84,775
Intangible assets				11,645,714			–			11,645,714
Total non-current assets				11,730,489			–			11,730,489
Total assets			$	57,774,767		$	–		$	57,774,767
Liabilities and Equity
Current liabilities:
Accounts payable			$	699,277		$	–		$	699,277
Accrued liabilities				2,085,824			–			2,085,824
Share purchase warrants		(i)		–			6,358,480			6,358,480
Deferred revenue				1,523,916			–			1,523,916
Total current liabilities				4,309,017			6,358,480			10,667,497
Non-current liabilities:
Deferred revenue				1,650,909			–			1,650,909
Total non-current liabilities				1,650,909			–			1,650,909
Equity:
Share capital				203,498,239			–			203,498,239
Share purchase warrants		(i)		1,473,246			(1,473,246	)		–
Contributed surplus		(ii)		14,088,671			143,682			14,232,353
Deficit		(i), (ii)		(167,245,315	)		(5,028,916	)		(172,274,231	)
Total equity				51,814,841			(6,358,480	)		45,456,361
Total liabilities and equity			$	57,774,767		$	–		$	57,774,767

41

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

18. Transition to IFRS (continued):

The June 30, 2011 Canadian GAAP consolidated financial position and equity have been reconciled to IFRS as follows:

						Effect of
			Canadian			transition
	Note		GAAP			to IFRS			IFRS
Assets
Current assets:
Cash and cash equivalents			$	32,046,630		$	–		$	32,046,630
Short-term deposits				47,611,922			–			47,611,922
Accounts receivable				205,900			–			205,900
Prepaid expenses				731,676			–			731,676
Total current assets				80,596,128			–			80,596,128
Non-current assets:
Property and equipment				91,320			–			91,320
Intangible assets				7,137,698			–			7,137,698
Total non-current assets				7,229,018			–			7,229,018
Total assets			$	87,825,146		$	–		$	87,825,146
Liabilities and Equity
Current liabilities:
Accounts payable			$	1,718,893		$	–		$	1,718,893
Accrued liabilities		(iii)		2,532,298			120,213			2,652,511
Share purchase warrants		(i)		–			14,476,681			14,476,681
Deferred revenue				594,072			–			594,072
Total current liabilities				4,845,263			14,596,894			19,442,157
Non-current liabilities:
Deferred revenue				1,831,722			–			1,831,722
Total non-current liabilities				1,831,722			–			1,831,722
Equity:
Share capital		(i)		263,399,692			1,148,951			264,548,643
Share purchase warrants		(i)		1,329,235			(1,329,235	)		–
Contributed surplus		(ii)		14,855,788			288,274			15,144,062
Deficit		(i), (ii), (iii)		(198,436,554	)		(14,704,884	)		(213,141,438	)
Total equity				81,148,161			(14,596,894	)		66,551,267
Total liabilities and equity			$	87,825,146		$	–		$	87,825,146

42

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

18. Transition to IFRS (continued):

Canadian GAAP consolidated statement of operations and comprehensive loss for the year ended June 30, 2011 has been reconciled to IFRS as follows:

						Effect of			Effect of
						transition			transition
			Canadian			to IFRS			to IFRS
Canadian GAAP description	Note		GAAP			measurement			reclassification			IFRS			IFRS description
Revenue:															Revenue:
Out-licensing			$	1,033,239		$	–		$	–		$	1,033,239		Out-licensing
Interest income		(iv)		469,191			–			(469,191	)		–
				1,502,430			–			(469,191	)		1,033,239
Expenses:															Expenses:
Licensing and product															Licensing and product
development		(ii), (iii), (viii), (ix)		23,249,053			120,213			452,714			23,821,980		development
General and administrative		(ii), (vii), (ix)		8,341,885			144,592			(746,620	)		7,739,857		General and administrative
				31,590,938			264,805			(293,906	)		31,561,837
Loss before the undernoted				(30,088,508	)		(264,805	)		(175,285	)		(30,528,598	)	Loss before the undernoted
Loss on foreign exchange		(iv) (v), (vi)		(1,407,760	)		–			1,888,074			480,314		Finance income
Gain on sale of short-term deposits		(i), (v), (vi)		11,123			(9,411,163	)		(1,418,883	)		(10,818,923	)	Finance costs
Gain on disposal of property
and equipment		(vii)		13,394			–			(13,394	)		–
Other income		(viii)		280,512			–			(280,512	)		–		Other income
Net loss and comprehensive															Net loss and comprehensive
loss for the year			$	(31,191,239	)	$	(9,675,968	)	$	–		$	(40,867,207	)	for the year loss

43

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

18. Transition to IFRS (continued):

Notes to tables:

Measurement differences:

(i) Share purchase warrants:

Under Canadian GAAP, the Company recognized its outstanding shareholder and broker warrants as part of equity; however, under IFRS, such warrants denominated in a different currency than the Company's functional currency must be classified as a financial liability and measured at fair value, with changes reflected in profit or loss upon initial recognition and subsequent measurement. This measurement difference has an effect on deficit and share purchase warrants liability in the consolidated statements of financial position and finance costs or finance income in the consolidated statement of loss and comprehensive loss in the periods presented.

(ii) Stock options:

Both Canadian GAAP and IFRS require the fair value of stock options granted to be expensed over the vesting period. YM stock options generally vest one third immediately and one third on each of the first and second anniversaries. Under Canadian GAAP, the Company treated each option grant as one contract, expensed one third of the compensation cost immediately and the remaining compensation cost on a straight-line basis over 24 months. Under IFRS, the Company is required to treat each tranche with a different vesting date as a separate contract and, therefore, expenses one third of the compensation cost immediately, one third equally over 12 months and one third equally over 24 months. This measurement difference has an effect on deficit and contributed surplus in the consolidated statements of financial position and general and administrative expenses and licensing and product development expense in the consolidated statement of loss and comprehensive loss for the periods presented.

44

ym biosciences inc.

Notes to the Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2012 and 2011

18. Transition to IFRS (continued):

(iii) SARs:

Under Canadian GAAP, the Company used the intrinsic value method to measure the value of SARs. IFRS requires that the SARs be valued using the fair value method. Thus, under IFRS, the Company uses the Black-Scholes option pricing model to determine the fair value upon initial recognition and subsequent measurement, with changes reflected in profit or loss. The SARs plan was started in September 2010 so there was no impact to the opening statement of financial position as at July 1, 2010. This difference has an effect on accrued liabilities and deficit in the consolidated statements of financial position and licensing and product development expenses in the consolidated statement of loss and comprehensive loss.

Reclassification differences:

Under Canadian GAAP, the consolidated statement of loss and comprehensive loss was presented by a combination of function and nature of expenses. The Company elected to present its items in the consolidated statements of loss and comprehensive loss by function under IFRS. The following reclassifications were made:

(iv)   Interest income was reclassified to finance income.

(v)   Loss on foreign exchange was reclassified to finance costs.

(vi)   Gain on sale of short-term deposits was reclassified to finance income.

(vii)   Gain on disposal of property and equipment was reclassified to general and administrative expenses.

(viii)  Grant received and other income were reclassified to licensing and product development expenses.

(ix)    A portion of share-based compensation was reclassified to licensing and product development expenses from general and administrative expenses.

45

EX-99.4

Exhibit 99.4

CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dr. Nicholas Glover, certify that:

1. I have reviewed this annual report on Form 40-F of YM BioSciences Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.     The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5.     The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Dated:   September 21, 2012

/s/ Dr. Nicholas Glover

Dr. Nicholas Glover

President & CEO (Principal Executive Officer)

EX-99.5

Exhibit 99.5

CERTIFICATION PURSUANT TO RULE 13a-14 OR 15d-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Leonard Vernon, certify that:

1. I have reviewed this annual report on Form 40-F of YM BioSciences Inc.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the periods presented in this report;

4.     The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the issuer’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting; and

5.     The issuer’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of the issuer’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer’s internal control over financial reporting.

Dated:   September 21, 2012

/s/ Leonard Vernon

Leonard Vernon

Vice President, Finance and
Administration (Principal Financial Officer)

EX-99.6

Exhibit 99.6

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of YM BioSciences Inc. (the “Company”) on Form 40-F for the year ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David G.P. Allan, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Dr. Nicholas Glover
	Dr. Nicholas Glover
	President & Chief Executive Officer

September 21, 2012

EX-99.7

Exhibit 99.7

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of YM BioSciences Inc. (the “Company”) on Form 40-F for the year ended June 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leonard Vernon, Vice President, Finance and Administration of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Leonard Vernon
	Leonard Vernon
	Vice President, Finance and Administration

September 21, 2012

EX-99.8

Exhibit 99.8

kpmg LLP	Telephone	(416) 777-8500
Chartered Accountants	Fax	(416) 777-8818
Bay Adelaide Centre	Internet	www.kpmg.ca
333 Bay Street Suite 4600
Toronto ON M5H 2S5

Consent of Independent Registered Public Accounting Firm

The Board of Directors YM BioSciences Inc.

We consent to the use of our report dated September 20, 2012, on the financial statements which comprise the consolidated statements of financial position as at June 30, 2012, June 30, 2011 and July 1, 2010, the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for the years ended June 30, 2012 and June 30, 2011, and notes, comprising a summary of significant accounting policies and other explanatory information and our audit report dated September 20, 2012 on the effectiveness of internal control over financial reporting, which reports are included in this annual report filed on Form 40-F of YM BioSciences Inc. for the fiscal year ended June 30, 2012.

We also consent to the incorporation by reference of such reports in the Registration Statements on Form F-10 (Registration No. 333-175381 and Registration No. 333-170872) and the Registration Statement on Form S-8 (Registration No. 333-134410) of YM BioSciences Inc.

/s/ KPMG LLP

Chartered Accountants, Licensed Public Accountants

Toronto, Canada

September 20, 2012

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG

network of independent member firms affiliated with KPMG International Cooperative

(“KPMG International”), a Swiss entity.

KPMG Canada provides services to KPMG LLP.