In addition, international patent applications are pending based upon our clinical development program. This series of patent applications focused on the survival advantage demonstrated following the analysis of the earlier phase III trial and relates to the selection of patient populations that will most benefit from the chemopotentiating and cytoprotective properties of tesmilifene. Patents that result from these filings should expires in 2022 in the US and other major markets.

Development Status

We do not intend to further develop tesmilifene and the asset is held for sale.

Clinical, Pre-Clinical And Basic Research

We design, fund and manage clinical and some pre-clinical research, and may support, but do not conduct, basic research. We manage the development of products that we in-license through our own team of clinical, regulatory, licensing and business development executives and through a number of research and medical collaborations. We are responsible for filing applications with the relevant authorities for regulatory approval for clinical trials and conduct, or have conducted on our behalf, clinical trials to progress products in development toward regulatory approval and possible out-licensing for commercial sale. Our current licenses generally provide that we will conduct, or cause to be conducted, the tests and clinical studies necessary to progress products in development toward regulatory approval with a view to obtaining the approval for sale of the licensed drug from appropriate regulatory authorities. We, and/or our licensees, have received regulatory clearances for clinical trials in a number of countries, including in Canada, the US, the United Kingdom, Europe, India, Japan, Korea, Singapore, and South Africa and numerous Eastern European countries from Phase I through Phase III. Some basic research is conducted at the facilities of our licensors, and we pay for certain amounts of this research.

Licensing Arrangements

In-Licensing

Licenses for Nimotuzumab

In May 1995, YM acquired an exclusive, sub-licensable license (as amended, the “1995 CIMYM License”) from CIMAB, acting on behalf of CIM, to products for passive immunotherapy of cancer directed toward EGF and EGFR as targets, including hR3, a humanized MAb targeting the EGFR. CIMAB is the company responsible for the commercialization of products developed at CIM. The 1995 CIMYM License is in respect of Europe, Canada, the US, Japan, Australia, Taiwan, Singapore, Thailand, Hong Kong, South Korea, Malaysia, Indonesia and the Philippines. As a term of the 1995 CIMYM License, YM has a right of first refusal with respect to licensing any other products derived from the EGF and EGFR programs of CIMAB except its anti-EGFR monoclonal antibody for psoriasis in Europe.

Pursuant to the 1995 CIMYM License, in 1995 we incorporated CIMYM and assigned the 1995 CIMYM License to CIMYM. Pursuant to the terms of the 1995 CIMYM License, CIMAB acquired a 20% equity interest in CIMYM as partial consideration for the 1995 CIMYM License. In addition to that 20% equity interest in CIMYM, CIMAB is entitled to receive 10% of net revenues received by CIMYM and CIMYM is entitled to receive from CIMAB 15%. In addition, YM and CIMYM, pursuant to the terms of the 1995 CIMYM License, paid US$2,750,000 for certain product development costs for nimotuzumab and US$330,000 for certain product development costs for RadioTheraCIM.

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

As at June 30, 2009 we had advanced $50 million to CIMYM and for the licensing and development of the products licensed by CIMYM. We have 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 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 equity a 20% interest in CIMYM BioSciences and is entitled to receive 10% of net revenues received by CIMYM. We have agreed to negotiate in good faith a further 10% equity interest in CIMYM BioSciences to CIMAB such that we would then own a 70% equity interest and CIMAB would own a 30% equity interest in CIMYM BioSciences.

Licenses for AeroLEF

The technology related to AeroLEF formulation and delivery is owned not licensed.

License for Tesmilifene

In November 2000, YM was granted an exclusive worldwide license by the University of Manitoba and The Manitoba Cancer Treatment and Research Foundation (now CancerCare Manitoba) (the “Original Licensor”) for all products and formulations of tesmilifene pursuant to which the Company undertook the responsibility for the clinical development of the product and its commercialization.

We must pay to the Original Licensor a specified minority percentage of revenues received from sub-licensing the product, after our recovery of certain specified development and attributed overhead costs. If we manufacture and sell tesmilifene itself rather than through sub-licensing, we must pay a specified lesser minority percentage of net sales, after our recovery of certain specified development and attributed overhead costs, to the Original Licensor. We believe these royalties are consistent with general industry practice for similar arrangements. No royalties have been paid to date, and future royalties cannot be quantified because they are dependent on net sales, net royalties and net revenues which have not yet materialized. There can be no assurance as to if or when we may sell the licensed product nor enter into sub-licensing arrangements for the product. We may sub-license the product. This license agreement shall be in force as long as any patents thereunder are valid, or until such time as the license agreement is terminated by either party because of a default by the other party, by either party if the other party enters into liquidation or reorganization proceedings or receivership or bankruptcy, or by YM on 90 days written notice if there are no sub-licensees. In 2003, we acquired certain additional patent rights related to a method of selecting patients demonstrating an enhanced survival benefit. Vincent Research and Consulting transferred assignment of the patent applications in exchange for a small share of YM’s future royalty revenues. We do not consider the agreement with Vincent Research and Consulting to be material to us as of the date hereof.

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Nimotuzumab

On November 12, 2003, our subsidiary, CIMYM (now CIMYM BioSciences), licensed the rights for nimotuzumab (known as “Theraloc” in Europe) in most of Europe to Oncoscience of Germany. Under the terms of the agreement, CIMYM BioSciences is entitled to receive up to US$30 million as a share of any amounts received by Oncoscience in relation to development or sublicensing of the product and as a royalty on initial net sales. After CIMYM BioSciences has received US$30 million, CIMYM BioSciences continues to receives royalties on net sales but at a lesser percentage. Oncoscience has agreed to use diligent and reasonable efforts to develop and commercially exploit nimotuzumab in the licensed territory. A non-material amount of royalties have been received as of the date hereof by CIMYM BioSciences from Oncoscience, from the Special Access Program but no sublicensing fees have been received by Oncoscience. This license agreement may be terminated by either party in the event of specified breaches and insolvency events, if a Phase II trial of nimotuzumab has not commenced in Europe within two years of licensing, or if certain regulatory approvals for marketing nimotuzumab in Europe have not been obtained within five years. In addition, Oncoscience may terminate the agreement at any time on 90 days notice.

On August 23, 2005 CIMYM BioSciences and CIMAB licensed development and marketing rights to Kuhnil Pharmaceutical Co., Ltd. for Korea. There was an initial fee to CIMYM BioSciences on signing and it is entitled to receive additional milestone payments and royalties.

On October 31, 2005 CIMYM BioSciences and CIMAB licensed development and marketing rights to Innogene Kalbiotech Private Limited (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. The initial fee to CIMYM BioSciences on signing was U$1,000,000 and it is entitled to receive additional milestone payments and royalties.

In July 2006, CIMYM BioSciences licensed development and marketing rights for nimotuzumab in Japan to Daiichi Pharmaceutical Co., Ltd., a wholly owned subsidiary of Daiichi Sankyo Co., Ltd., one of Japan’s largest pharmaceutical companies. Under the agreement, CIMYM BioSciences received an up-front payment of US$14.5 million and significant milestone payments at certain states of development for each of a number of indications as well as payments based on supply of nimotuzumab and sales performance in the territory. Daiichi is developing nimotuzumab for the Japanese market in several cancer indications.

Out-Licensing

We generally plan to out-license our licensed drugs to pharmaceutical companies for manufacturing and marketing under license, although we may retain co-development or marketing rights if management considers it appropriate to do so. Under our business model, licensees would be expected, to the extent necessary, to participate in the remaining clinical development required to obtain final regulatory approval for the product. We expect that out-licensing would result in a pharmaceutical company or other licensee marketing or manufacturing the product in return for licensing fees and royalties on the sale of the product. We believe this model is consistent with current biotechnology and pharmaceutical industry licensing practices.

Our objectives in seeking to out-license products include:

·	obtaining long term revenue streams from royalty payments on the sale of the products;

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

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

·	minimizing 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.

We do not intend to develop our own manufacturing, marketing or distribution programs although we may wish to participate in ownership of manufacturing facilities if appropriate opportunities become available. We intend to remain principally focused on the identification, further development and commercialization of in-licensed products.

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Regulatory Approval

Securing final regulatory approval for the manufacture and sale of human therapeutic products in Canada and our other territories, including the US, is a long and costly process that is controlled by that particular territory’s national regulatory agency. The national regulatory agency in Canada is Health Canada, and in the US it is the FDA. Other national regulatory agencies have similar regulatory approval processes, but each national regulatory agency has its own approval processes. Approval in either Canada or the US does not assure approval by other national regulatory agencies, although often test results from one country may be used in applications for regulatory approval in another country.

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

None of our products has been completely developed or tested and, therefore, we are not yet in a position to seek final regulatory approval to market any of our in-licensed products. To date we have obtained various regulatory approvals to develop and test our in-licensed products. Nimotuzumab has been designated an orphan drug in Europe and by the FDA in the US. See “Products in Clinical Development”.

Canadian Approval Process

The manufacture, distribution and consumption of medical` products, drugs and equipment is regulated by a variety of industry-specific statutes and regulations in Canada and the countries to which YM has rights for the licensed products. Drugs sold in Canada are regulated by the Food and Drugs Act (Canada) and the regulations made under that Act.

Even though a drug, medical product or device may be approved for use in another jurisdiction, it may not be sold in Canada until approved by Health Canada. Outside Canada, the regulatory approval process for the manufacture and sale of pharmaceuticals varies from country to country and the time required may be longer or shorter than that required by Health Canada.

The Canadian Food and Drug Regulations require licensing of manufacturing facilities, carefully controlled research and testing of products, governmental review and approval of test results prior to marketing of therapeutic products, and adherence to GMP, as defined by each licensing jurisdiction, during production.

The principal activities which must be completed prior to obtaining approval for marketing of a therapeutic drug product are essentially the same in Canada as in most major markets of the world and are as follows:

Pre-clinical Animal Studies. Pre-clinical studies are conducted in animals to test pharmacology and toxicology and to do formulation work based on in vivo results.

Phase I Clinical Trials. Phase I clinical trials consist of testing a product in a small number of humans for its safety (toxicity), dose tolerance and pharmacokinetic properties.

Phase II Clinical Trials. Phase II clinical trials usually involve a larger patient population than is required for Phase I trials and are conducted to evaluate the efficacy of a product in patients having the disease or medical condition for which the product is indicated. These trials also serve to further identify side effects and risks in a larger group of patients.

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Phase III Clinical Trials. Phase III clinical trials involve “conducting tests in an expanded patient population at geographically dispersed test sites (multi-center trials) in a controlled and/or uncontrolled environment to gather information about clinical safety and efficacy.” These trials also generate information from which the overall benefit-risk relationship of the drug can be determined and provide a basis for drug labeling.

Two key factors influencing the progression of clinical trials are the rate at which patients can be recruited into clinical trials and whether effective treatments are currently available for the disease the drug is intended to treat. Patient recruitment is largely dependent upon the incidence and severity of the disease and the alternative treatments available, as well as alternate research studies.

A Clinical Trial Application must be filed and accepted by either the Therapeutic Products Directorate (“TPD”) or the Biologics and Genetic Therapies Directorate (“BGTD”) of Health Canada before each phase of human clinical trials may begin. The CTA application must contain specified information including the results of the pre-clinical or clinical tests completed at the time of the CTA application. In addition, since the method of manufacture may affect the efficacy and safety of a drug, information on chemistry and manufacturing methods must be presented. Health Canada conducts inspections to determine compliance with GMP. Good manufacturing practices and quality control procedures must be in place.

Upon completion of all clinical studies, the results are submitted to the TPD or BGTD as part of a New Drug Submission (“NDS”). A notice of compliance (“NOC”) which permits marketing of the product typically takes between 12 and 24 months from the date a NDS is submitted.

Even after marketing approval has been obtained, further studies may be required to provide additional data on safety and efficacy in order to gain approval for the use of a drug as a treatment for clinical indications other than those for which the product was initially tested. Also, Health Canada conducts post-market surveillance programs to monitor a product’s side effects. Results of post-marketing programs may limit or expand the further marketing of products. A serious safety or efficacy problem involving an approved drug or medical device may result in Health Canada action requiring withdrawal of the product from the market.

US Approval Process

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

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

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

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

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

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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 tested at this stage. Ultimately, Phase I studies demonstrate how an experimental drug affects the body of a healthy individual. Phase I consists of a series of small studies consisting of “tens” of volunteers. Tests are done on each volunteer throughout the study to see how the person’s body processes, responds to, and is affected by the drug. Low doses and high doses of the drug are usually studied, resulting in the determination of the safe dosage range in volunteers by the end of Phase I. This information will determine whether the drug proceeds to Phase II.

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

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

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

Stage 3: FDA Review for Approval Following Phase III, 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 an be marketed for that purpose.

Arrangements With Subsidiaries

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

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

CIMYM (Barbados) was incorporated in Barbados in May 1996 to market the licensed products under the 1995 CIMYM License outside of Canada. On June 30, 2006, CIMYM (Barbados) was amalgamated with CIMYM to form CIMYM BioSciences Inc.

C	Organizational Structure

We currently have two material subsidiaries, shown in the following diagram:

*subject to current negotiations, ownership may become 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). CIMYM is 80% owned by the Company and 20% owned by CIMAB.

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

D	Property, Plant and Equipment

Facilities

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

YM USA currently occupies 9,000 square feet of space in Wayne, Pennsylvania pursuant to a lease agreement dated July 27, 2006 that expires on February 15, 2012. Average annual fixed rent, excluding operating costs is approximately US $218,000.

There are no environmental issues associated with any of our facilities and we currently have no plans to construct, expand or improve our facilities.

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Item 4A:

Unresolved Staff Comments

Not applicable.

Item 5:

Operating and Financial Review and Prospects

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following MD&A should be read in conjunction with the audited financial statements for the years ended June 30, 2009, 2008, 2007, and the notes thereto.

This MD&A contains forward-looking statements that reflect our current views with respect to future events and financial performance and that involve risks and uncertainties. Our actual results, performance or achievements could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including risks discussed under the heading “Forward-Looking Statements” and elsewhere in this annual report on Form 20-F for the year ended June 30, 2009.

The consolidated financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada (Canadian GAAP). These accounting principles differ in certain respects from United States GAAP. The differences, as they affect our consolidated financial statements, are set out in Note 15 to the audited consolidated financial statements for the fiscal year ended June 30, 2009.

OVERVIEW OF BUSINESS

YM BioSciences Inc. is engaged in the licensing and commercialization of drug products and technologies from original research. We evaluate drug projects, technologies, and products and the prospective markets for them and obtain, as appropriate, a license for the further development and marketing of the products.

We expend money on the evaluation, in-licensing and further development of certain drug products and on providing out-licensing, marketing, clinical development and regulatory affairs skills, intellectual property management and funding to facilitate the introduction of the licensed products into the principal pharmaceutical markets. This involves taking the products researched and developed by others and taking them through the clinical and regulatory processes in Canada and elsewhere in order to achieve regulatory approval for their sale in the markets to which we have rights.

We will incur expenditures either directly or pursuant to agreements with certain licensees or partners. These expenditures will include: costs associated with the conduct of clinical trials; the collection and collation of data; the organizing of data and market information for each product; the development and production of non-confidential and confidential dossiers on each licensed product and the marketing of the information contained in the dossiers to prospective commercialization partners. We plan to generate revenues from out-licensing the licensed products or from the direct commercialization of the products.

We do not have our own manufacturing facilities but may participate in ownership of manufacturing facilities and the marketing of the products if appropriate opportunities are available.

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SELECTED ANNUAL FINANCIAL INFORMATION

	Year ended June 30,
	2009			2008			2007

Out-licensing revenue		4,543,280			4,859,085			4,407,890
Interest income		1,070,264			2,584,080			3,239,540

Expenses:
Licensing and product development		14,172,845			15,631,550			28,758,469
General and administrative		4,839,870			6,831,955			6,978,336
Impairment		-			-			1,829,538

Loss for the year		(13,069,466	)		(14,885,744	)		(31,730,240	)
Deficit, beginning of year		(133,182,485	)		(118,296,741	)		(86,566,501	)
Deficit, end of year		(146,251,951	)		(133,182,485	)		(118,296,741	)

Basic and diluted loss per common share		(0.23	)		(0.27	)		(0.57	)

Total Assets		46,069,936			63,073,239			81,739,800

RESULTS OF OPERATIONS

Year ended June 30, 2009 compared to year ended June 30, 2008

Out-licensing Revenue

Revenue from out-licensing decreased by $316 thousand for the year ended June 30, 2009 compared to the year ended June 30, 2008. The decrease is mainly attributable to the 12 month extension of the revenue recognition period for the initial payment from Daiichi Pharmaceutical Co., Ltd (“Daiichi”), as a result of a revision to the estimated period of the collaboration. The majority of YM’s out-licensing revenue comes from five out-licensing agreements with third party licensees. The licensing agreements include a non-refundable up-front payment from the licensees. The initial license fees have been recorded as deferred revenue and are being recognized 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. The largest of these contracts was entered into in July 2006 with Daiichi, a subsidiary of Daiichi Sankyo Co., Ltd. The agreement licensed the commercial rights for nimotuzumab for the Japanese market and included a non-refundable up-front payment from Daiichi to the Company of $16.227 million. This initial license fee has been recorded as deferred revenue and is being recognized over the revised estimated period of collaboration of five years. The Company also began receiving royalty payments from a limited sales program in Europe in the fourth quarter of fiscal 2008.

Interest Income

Interest income decreased by $1.514 million in the year ended June 30, 2009 compared to the year ended June 30, 2008. Interest income decreased as the Company drew on its cash and short term investment balances to fund its operations, and due to the dramatic decline in interest rates.

Licensing and Product Development Expenses

Licensing and product development expenses for the year ended June 30, 2009 decreased by $1.459 million compared to the year ended June 30, 2008. In addition to the changes described below, core expenses for licensing and product development decreased by $1.205 million for the year ended June 30, 2009. This was mainly caused by decreases in salaries and travel expenses as a result of a reduction of staff in the U.S. office.

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Nimotuzumab

Costs associated with development activities for nimotuzumab increased by $889 thousand to $6.048 million for the year ended June 30, 2009, compared to the year ended June 30, 2008. The increase was due mainly to two new clinical trials, one for brain metastases from non-small cell lung cancer (NSCLC) and the other for NSCLC patients ineligible for radical chemotherapy, which were initiated during fiscal 2009. These expenses were partially offset by the decrease in expenditures for the phase II pediatric pontine glioma trial and monkey toxology studies.

AeroLEF™

Costs associated with development activities for AeroLEF™ decreased by $260 thousand to $1.741 million for the year ended June 30, 2009 as compared to the year ended June 30, 2008. The decrease was primarily due to the shift from clinical activity in fiscal 2008, to new marketing, and out-licensing initiatives, as well as clarifying our regulatory position in Europe, in fiscal 2009.

Tesmilifene

Costs related to development activities for tesmilifene, have decreased by $883 thousand to $432 thousand for the year ended June 30, 2009 compared to the year ended June 30, 2008. The decrease in spending for the current fiscal year resulted mainly from the curtailment of development subsequent to the termination of the DEC study in January 2007 and from lower intellectual property costs. Fiscal 2008 costs were associated with closing out the DEC study and completing the PK studies. Fiscal 2009 costs were related to the closing of the PK studies.

General and Administrative Expenses

General and administrative expenses have decreased by $1.992 million to $4.840 million for the year ended June 30, 2009, compared to the year ended June 30, 2008. This was due mainly to lower stock based-compensation expense of $761 thousand in fiscal 2009 compared to $2.064 million in fiscal 2008, and lower audit fees by $140 thousand since we do not require a SOX audit this fiscal year end. In addition, expenditures for consulting, legal fees, salaries, and investor relations were also lower for the year ended June 30, 2009.

Year ended June 30, 2008 compared to year ended June 30, 2007

Out-licensing Revenue

Revenue from out-licensing increased by $451 thousand for the year ended June 30, 2008 compared to the year ended June 30, 2007. The increase in revenue was due to the out-licensing agreement entered into at the end of July 2006 with Daiichi. The agreement licensed the commercial rights for nimotuzumab for the Japanese market and included a non-refundable up-front payment from Daiichi to the Company of $16.227 million. This initial license fee was recorded as deferred revenue and was being recognized over the estimated period of collaboration of four years. The Company also recognized royalty revenues based on a limited sales program in Europe.

Interest Income

Interest income decreased by $655 thousand in the year ended June 30, 2008 compared to the year ended June 30, 2007. Interest income decreased as the Company drew on its cash and short term investment balances to fund its operations.

Licensing and Product Development Expenses

Licensing and product development expenses for the year ended June 30, 2008 decreased by $13.127 million compared to the year ended June 30, 2007. In addition to the specific licensing and product development costs addressed below, there was a significant decrease in licensing and product development salary expenses. Salary expenses including termination costs were $2.039 million less in fiscal 2008 compared to fiscal 2007 as the Company reduced development staff following the termination of the DEC study.

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Nimotuzumab

Costs associated with development activities for nimotuzumab decreased by $784 thousand to $5.159 million for the fiscal year ended June 30, 2008 compared to $5.943 million for the year ended June 30, 2007.

The major costs in fiscal 2007 were associated with the clinical trial in Head & Neck cancer which was completed in fiscal 2007. Expenses in fiscal 2008 were primarily associated with the monkey toxicity study, the Phase II clinical trial in colorectal cancer, and the Phase II clinical trial in pediatric diffuse incurable pontine glioma. All of these activities began in fiscal 2008 and continued into fiscal 2009.

AeroLEF™

Costs associated with development activities for AeroLEF™ decreased by $909 thousand to $2.001 million for the fiscal year ended June 30, 2008 compared to $2.910 million for the year ended June 30, 2007. Last year’s costs were associated with the Phase IIb study in acute pain. In fiscal 2008, the costs included transferring the manufacturing to a contact manufacturer in the U.S. and preparing the submissions to the U.S. F.D.A.

Tesmilifene

Costs related to development activities for tesmilifene for the year ended June 30, 2008 decreased by $6.193 million to $1.315 million compared to $7.508 million for the prior year. In the fiscal year ended June 30, 2007 the Company was completing a Phase III clinical trial (DEC) and gearing up for a FDA submission. With the termination of this study, development of tesmilifene halted at the end of January 2007 except for completing a pharmacokinetic study and, as a result, the development costs for fiscal 2008 are significantly lower compared to the same period last year. Costs in fiscal 2008 consisted mainly of winding down the DEC study, completing the PK studies, and maintaining the patent portfolio.

General and Administrative Expenses

General and administrative expenses decreased by $146 thousand to $6.832 million for the year ended June 30, 2008 compared to the prior year. Stock option expense increased by $347 thousand from $1.717 million for the year ended June 30, 2007 to $2.064 million for the year ended June 30, 2008. This increase was offset by reductions in other expenses such as consulting and legal costs.

Fourth Quarter – Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

Out-licensing Revenue

Out-licensing revenue for the quarter ended June 30, 2009 of $720 thousand decreased by $700 thousand compared to $1.420 million in the same quarter in the prior year. This is mainly because the recognition period for the initial payments for the Daiichi and Kuhnil contracts were extended by 12 months effective January 1, 2009 and the recognition period for the IGK contract ended in December 2008, reducing the amount recognized in the quarters following.

Interest Income

Interest income has decreased by $483 thousand to $61 thousand for the three months ended June 30, 2009 compared to $544 thousand in the same period in the prior year. Interest income decreased as the Company drew on its cash and short term investment balances to fund its operations, and due to the dramatic decline in interest rates.

Licensing and Product Development Expenses

Licensing and product development expenses decreased by $932 thousand to $2.647 million for the fourth quarter ended June 30, 2009 compared to the same period last year. In addition to the changes described below, there were also decreases in salaries and travel expenses as a result of a reduction of staff in the U.S. office.

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Nimotuzumab

Costs associated with development activities for nimotuzumab were $1.314 million for the three months ended June 30, 2009, compared to $1.534 million for the three months ended June 30, 2008. The 2008 costs were primarily related to the completion of the monkey toxicity study, the Phase II clinical trial in colorectal cancer, and the Phase II clinical trial in pediatric diffuse incurable pontine glioma. The 2009 costs were due mainly to two new clinical trials, one for brain metastases from non-small cell lung cancer (NSCLC) and the other for NSCLC patients ineligible for radical chemotherapy, which were initiated during this fiscal year.

AeroLEF™

AeroLEF™ expenses have decreased by $174 thousand to $185 thousand for the three months ended June 30, 2009 compared to the same period in the prior year. The decrease was primarily due to the shift from clinical activity in fiscal 2008, to new marketing and out-licensing in fiscal 2009.

Tesmilifene

Costs related to tesmilifene totaled $13 thousand for the three months ended June 30, 2009, a decrease of $191 thousand compared to $204 thousand in the same quarter of the previous year. The decrease in spending for the current quarter resulted mainly from the curtailment of development subsequent to the termination of the DEC study in January 2007 and from lower intellectual property costs. Q4 2008 costs were associated with closing out the DEC study and continuing the PK studies, as well as IP management. Q4 2009 costs were related to the closing of the PK studies.

General and Administrative Expenses

General and administrative expenses for the fourth quarter of fiscal 2009 were $1.309 million, which is comparable to $1.306 million for the same quarter in the prior year.

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SUMMARY OF QUARTERLY RESULTS

	Revenue and Interest Income		Net Loss			Basic and diluted loss per common Share
June 30, 2009	$	780,925	$	(3,264,030	)	$	(0.06	)
March 31, 2009	$	977,762	$	(3,474,839	)	$	(0.06	)
December 31, 2008	$	2,197,291	$	(3,174,385	)	$	(0.06	)
September 30, 2008	$	1,657,566	$	(3,156,212	)	$	(0.06	)
June 30, 2008	$	1,964,901	$	(2,962,900	)	$	(0.05	)
March 31, 2008	$	1,777,864	$	(3,818,647	)	$	(0.07	)
December 31, 2007	$	1,883,075	$	(4,479,888	)	$	(0.08	)
September 30, 2007	$	1,817,325	$	(3,624,309	)	$	(0.06	)

In general, revenue remained steady over the first five quarters ending September 30, 2008, but changed in the last three quarters. Revenue consists of interest earned and licensing revenue. Licensing revenue results primarily from recognition, over time, of non-refundable up-front payments from out-licensing agreements plus milestone payments. Revenue decreased in the quarters ended March 31, 2009 and June 30, 2009 because the payment received for one contract was fully recognized in the quarter ended December 2008 and because the recognition period for the initial payment for the Daiichi contract was extended by 12 months effective January 1, 2009, reducing the amount recognized in the quarters following. In the quarter ended December 31, 2008 we received a one-time milestone payment of US$500,000. 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. The Company also received royalty revenue based on a limited sales program in Europe for the first time in the fourth quarter of fiscal 2008. Interest income is decreasing as the Company draws on its cash and short term investment balances to fund its operations and due to interest rates dropping to historic low levels.

It is inherent in the development of drug products that planned expenditures vary depending on results achieved. Our current plan calls for an increase in expenditures for nimotuzumab with our two new clinical trials in brain metastases and palliative non-small cell lung cancer.

LIQUIDITY AND CAPITAL RESOURCES

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

The Company’s cash requirements will be affected by the progress of its clinical trials, the development of its regulatory submissions, the achievement of commercialization agreements, the costs associated with obtaining and protecting the patents for licensed products, and the availability of funding for part of the process from investors and prospective commercialization partners.

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The audited 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. 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 flows to continue as a going concern. The audited consolidated financial statements do not reflect the adjustments that might be necessary to the carrying amount of reported assets, liabilities and revenue and expenses and the balance sheet classifications used if the Company were unable to continue operations in accordance with this assumption.

As at June 30, 2009 the Company had cash and short-term deposits totalling $42.051 million and accounts payables and accrued liabilities totalling $913 thousand compared to $58.101 million and $2.023 million respectively, at June 30, 2008. The Company’s short-term deposits are bankers’ acceptances issued by Canadian Schedule A banks, maturing in less than one year. These financial instruments have been classified as held-for-trading and all gains and losses are included in loss for the period in which they arise.

Management believes that the cash and short-term deposits at June 30, 2009 are sufficient to support the Company’s activities for at least the next twelve months.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years

Office Lease – Wayne, Pennsylvania	$	684,000	$	254,000	$	430,000	$	Nil	$	Nil

Office Lease – Mississauga, Ontario	$	277,000	$	75,000	$	155,000	$	46,000	$	Nil
Total Operating Leases	$	961,000	$	329,000	$	585,000	$	46,000	$	Nil

OFF-BALANCE SHEET ARRANGEMENTS

The Company fully consolidates a joint venture (CIMYM BioSciences Inc.) in which it 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, 2009 no amounts were owing and the amount of future fees thereon, if any, is not determinable.

In November 2007, the Company entered into a contract for services of a clinical research organization (“CRO”), relating to a pediatric pontine glioma clinical trial for nimotuzumab in the U.S. at a cost of approximately $1.568 million (U.S. $1.348 million) of which approximately $1.005 million has been paid as at June 30, 2009 and the remaining $563 thousand has not yet been incurred. The Company may cancel the contract with 30 days’ notice and is obligated for services rendered by the CRO through to the effective date of termination and for any closeout services furnished by the CRO after the termination of the agreement. As at June 30, 2009 the Company continues to open clinical sites and is in the process of recruiting patients.

In February 2009, the Company entered into 2 contracts for CRO services relating to clinical trials for nimotuzumab. The first pertains to a randomized, Phase II, double-blind trial in brain metastases from NSCLC at a cost of $1.161 million, of which approximately $240 thousand has been incurred as at June 30, 2009 and the remaining $920 thousand is yet to be incurred. The second contract pertains to a randomized, Phase II, double-blind trial in NSCLC patients ineligible for radical chemotherapy and costs approximately $1.500 million, of which approximately $508 thousand has been incurred as at June 30, 2009 and the remaining $991 thousand is yet to be incurred. The Company may cancel either contract with a 30-day notice and is obligated for services rendered by the CRO through the effective date of termination and for any close-out services furnished by the CRO after the termination of the agreement.

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In addition to these above contracts, the Company has entered into many additional contracts for pre-clinical and other studies, none of which individually exceed $1 million, totaling approximately $4.058 million of which $2.010 million has been incurred as at June 30, 2009 and the remaining $2.048 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 nimotuzumab. There are also ongoing activities directed at out-licensing commercial rights for nimotuzumab and AeroLEFTM as well as in evaluating new products to in-license.

The Company has certain arrangements with its subsidiaries that have an effect or may have a future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources in that there is no assurance that funds advanced to its subsidiaries will be reimbursed. The arrangements are described in note 2 of the consolidated financial statements. The registrant has recorded 100% of the results of operations and cash flows of these entities.

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 at any one time and the availability of funding from investors and prospective commercial partners.

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

OUTLOOK

The business of YM is the identification, licensing, and further development of products it believes to have the prospect for utility in human health. The Company is continually evaluating the economic and prospective viability of its various products. YM’s majority-owned joint venture, CIMYM BioSciences Inc., is the licensee for nimotuzumab for Western and Eastern Europe, North America, and Japan as well as Australia, New Zealand, Israel and certain Asian and African countries, and YM owns AeroLEF®, its other principal product in development, outright.

Randomized, Phase II, double-blind trials in brain metastases from non-small cell lung cancer (NSCLC) and in NSCLC patients ineligible for radical chemotherapy, have been initiated in Canada; recruitment commenced in March 2009 on NSCLC and is anticipated for the brain metastases trial in Q3 of calendar year 2009. A Phase II, second-line, single-arm trial in children with progressive diffuse intrinsic pontine glioma (DIPG) is ongoing at multiple sites in the US, Canada, and Israel.

Completion of recruitment in a single-arm, Phase III trial of nimotuzumab as first-line therapy for DIPG was reported by Oncoscience AG (OSAG), CIMYM’s licensee for Europe, in August 2007, and preliminary data from this trial was released at ASCO in 2008. OSAG reports that it continues to recruit in a Phase III trial in adult glioma patients and a Phase II/III trial in pancreatic cancer patients.

Innogene Kalbiotech PTE Ltd. (IGK), a CIMYM licensee, reports marketing approval in the Philippines and Indonesia bringing to 18 the number of countries that are reported as having approved the drug for sale in specific indications. In January 2009, the National Cancer Centre of Singapore announced that it was launching a worldwide Phase III, 710-patient trial of nimotuzumab in the adjuvant setting in head and neck cancer in cooperation with IGK. This trial is in addition to the on-going investigator-initiated Phase II trial in locally advanced head and neck cancer and the initiation of a Phase II trial in cervical cancer.

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Daiichi Sankyo Co., Ltd., CIMYM’s licensee for nimotuzumab in Japan, initiated a randomized trial with nimotuzumab in gastric cancer, designed to complete recruitment in 2009, and launched a Phase II trial in first-line NSCLC.

Nimotuzumab is, at the time of this report, being tested in 32 clinical trials worldwide having completed 20 trials to date. Eleven of these are Phase II and Phase IIIs being conducted by YM and our licensees.

After consulting with regulatory bodies in Europe and Canada, YM continues discussing the readiness of AeroLEF® for late-stage trials to identify its best options for aggressive development and partnering of this unique approach to the use of opioids.

While expenditures will increase with additional clinical activity we believe we have the resources to permit the completion of the program designed to support marketing authorization for nimotuzumab as well as AeroLEF.

Subsequent to the end of the fiscal year, YM received a license from the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) to further develop its lead product, nimotuzumab, for patients in the United States. YM’s first priority is discussion with the FDA on its two IND submissions to include US citizens in the randomized, double-blind Phase II trial of nimotuzumab in NSCLC patients ineligible for radical chemotherapy and the parallel Phase II trial in patients with brain metastases from NSCLC, both of which YM initiated in Canada during the 2009 fiscal year. Development plans may also include extending one of the Phase III trials being conducted worldwide into the US, such as the multinational 710-patient Phase III trial of nimotuzumab in the adjuvant setting in head and neck cancer.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenue and expenses during the reporting period. Significant accounting policies and methods used in preparation of the financial statements are described in note 2 to the Consolidated Annual Financial Statements. Significant estimates affect: revenue recognition; intangible assets; research and development costs; the consolidation of variable interest entities; stock-based compensation; and the income tax valuation allowance.

Revenue recognition

Revenue from licensing agreements is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the amount is determinable and collectability is reasonably assured. Contingent revenue attributable to the achievement of milestones is recognized only on the achievement of the milestone. Non-refundable up-front fees for access to the Company’s proprietary technology are deferred and recognized on a systematic basis over the estimated remaining period of collaboration required until the milestone associated with commercial approval of the first indication in the licensee’s territory has been satisfied and the relevant payment received. Currently we have license agreements that specify that certain royalties are earned by the Company on sales of licensed products in the licensed territories. Licensees report sales and royalty information in the 90 days after the end of the quarter in which the activity takes place and typically do not provide us with forward estimates or current-quarter information. Because we are not able to reasonably estimate the amount of royalties earned during the period in which these licensees actually ship products, we do not recognize royalty revenue until the royalties are reported to us and the collection of these royalties is reasonably assured.

Intangible assets

The Company’s identifiable intangible assets consist of patents and in-process research and development technologies acquired on the acquisition of DELEX in May 2005. The intangible assets are amortized on a straight-line basis over the estimated time to market of seven years for technologies acquired. The estimated useful lives of the intangible assets are considered each reporting period and the carrying value is reviewed on the occurrence of a triggering event, to determine if there has been impairment in their value.

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Research and development costs

The Company does not engage in basic scientific research but does incur significant product development costs. Only development costs that meet strict criteria related to technical, marketing and financial feasibility would be capitalized under Canadian GAAP. To date, no costs have met such criteria and, accordingly, all development costs have been expensed when incurred.

Variable interest entity

The Company has a majority interest in a joint venture that is funded entirely by the Company. This joint venture is classified as a variable interest entity since the Company maintains a controlling financial interest. The Company has recorded 100% of the results of operations and cash flows of this entity since its inception.

Stock-based compensation

The Company expenses all stock-based payments using the fair value method and uses the Black-Scholes Option Pricing Model in estimating the fair value. Under the fair value method and the option pricing model used to determine fair value, estimates are made as to the volatility of the Company’s shares and the expected life of the options. Such estimates affect the fair value determined by the option pricing model.

Income tax valuation allowance

The Company and its joint venture have a net tax benefit resulting from non-capital losses carried forward, pools of scientific research and experimental development expenditures, investment tax credits, and withholding taxes paid. In view of the history of net losses incurred, management is of the opinion that it is not more likely than not that these tax assets will be realized in the foreseeable future and hence, a full valuation allowance has been recorded against these future tax assets. Accordingly, no future tax assets are recorded on the balance sheet.

NEW ACCOUNTING POLICIES

The following new accounting pronouncements have been adopted during fiscal 2009:

General standards on financial statement presentation

On July 1, 2008 the Company adopted the amendments of CICA Handbook Section 1400 which includes requirements to assess and disclose an entity’s ability to continue as a going concern. Management has assessed the Company’s ability to continue as a going concern and believe that the cash and short-term deposits at June 30, 2009 are sufficient to support the Company’s activities for at least the next twelve months.

NEW ACCOUNTING PRONOUNCEMENTS

The following new accounting pronouncements have been issued and are not yet effective:

Goodwill and intangible assets

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

Financial instruments

In June 2009, the CICA issued amendments to Handbook Section 3862, Financial Instruments – Disclosures, enhancing disclosure requirements about liquidity risk and fair value measurements of financial instruments, effective for fiscal years ending after September 30, 2009. The Company is currently assessing the impact of this section on its consolidated financial statements.

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International financial reporting standards

The Accounting Standards Board of Canada has announced that public companies in Canada are required to adopt IFRS for fiscal years beginning on or after January 1, 2011. The Company is required to prepare its first financial statements that are compliant with IFRS for the interim period ending September 30, 2011. The Company’s plan will consider the impact that IFRS has on its accounting policies and implementation decisions, financial statement presentation and disclosure options available on initial changeover to IFRS, information technology and data systems, and internal control over financial reporting. The Company is currently in the process of assessing the differences between its current accounting policies and IFRS and cannot at this time quantify the effect the adoption of the standards will have on its consolidated financial statements.

Consolidated financial statements and non-controlling interests

In January 2009, the CICA issued Section 1601, Consolidated Financial Statements (“Section 1601”), and Section 1602, Non-controlling Interests (“Section 1602”), which together replace Section 1600, Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS standard, International Accounting Standard 27 (Revised), Consolidated and Separate Financial Statements. The sections apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. Earlier adoption is permitted as of the beginning of a fiscal year. The Company is currently evaluating the impact of the adoption of these new sections on its consolidated financial statements.

OTHER MD&A REQUIREMENTS

As at June 30, 2009:		Amount		Number
	Common shares	$	172,921,153		55,835,356

	Warrants	Nil		Nil

Note 1: In addition to the 55,835,356 shares outstanding, 2,380,953 shares are held in escrow to be released contingent upon the completion of certain milestones. They will be valued and accounted for when they are released from escrow.

Note 2: During fiscal 2009, 5,709,765 warrants expired.

Item 6:

Directors, Senior Management and Employees

A	Directors and Senior Management

Directors

The name, municipality of residence, age as of September 24, 2009 and position with us of each of the current directors are set forth below.

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Name	Age	Position	Period Served
David G.P. Allan Toronto, Canada	67	Chairman, Chief Executive Officer and Director	Since 1994

Thomas I.A. Allen, Q.C. (1)(2)(3) Toronto, Canada	69	Director	Since 1996

Mark Entwistle, M.A. (3) Ottawa, Canada	53	Director	Since 1997

Henry Friesen, C.C., M.D. (1) Winnipeg, Manitoba	76	Director	Since 2001

Philip Frost, M.D., Ph.D. (2) Morristown, New Jersey	68	Director	Since 2007

Francois Thomas, M.D. (3) Brussels, Belgium	50	Director	Since 2007

Gilbert Wenzel, Ph.D. (1) Zurich, Switzerland	53	Director	Since 2001

Tryon M. Williams, B.Sc. (1)(2) The Valley, Anguilla	68	Director	Since 1995

Notes:

(1) Member of Audit Committee.

(2) Member of Corporate Governance and Nominating Committee.

(3) Member of Compensation Committee.

David G.P. Allan - Chairman, Chief Executive Officer And Director

Mr. Allan has been Chief Executive Officer of the Company since April 1998 and Chairman of the board of directors of the Company since 1994. In addition, Mr. Allan is a Director of Synthemed Inc. (medical devices), USA and DiaMedica Inc. (diabetes therapeutics), Canada. In 1992 he founded the Knowledge-Based Industries Group of a Canadian investment banking firm, organized as the first in Canada involved in financing, analyzing and creating strategic alliances for life sciences and information technology companies, where he was Executive Director until 1998. Mr. Allan was formerly a governor of The Toronto Stock Exchange, a member, and working group Chair, of the Ontario Biotechnology Advisory Board, a member of the Awards Selection Committee for the Networks of Centres of Excellence in Canada and a member of the Board of Trustees for the Ontario College of Art and Design. Mr. Allan is currently a member of BioteCanada’s Emerging Companies Advisory Board.

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

Mr. Allen is counsel to Ogilvy Renault, a Canadian law firm. Mr. Allen was the initial Chairman of the Accounting Standards Oversight Council of Canada and was a member of the Advisory Board of the Office of the Superintendent of Financial Institutions of Canada. He is currently a director of a number of public companies including Terra Nova Minerals Inc., Mundoro Mining Inc., Middlefield Bancorp Limited, and Thomas Weisel Partners Group, Inc. Mr. Allen recently acted as Chairman of the Task Force to Modernize Securities Legislation in Canada. Mr Allen has been a director of the Company since 1996.

Mark Entwistle, M.A. - Director

Prior to founding his own consulting practice in 1997 in international trade, political business intelligence and strategic communications, Mr. Entwistle was Ambassador for Canada to Cuba from 1993 to 1997. Mr. Entwistle was previously a career diplomat with the Canadian Department of Foreign Affairs and International Trade in a variety of embassy positions from 1982 to 1997, and served as Press Secretary and Director of Communications to the Prime Minister of Canada from 1991-1993. He is a Fellow of the Canadian Defence and Foreign Affairs Institute. Mr. Entwistle has been a director of the Company since October 1997.

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

Dr. Friesen currently serves as Chair of the Gairdner Foundation whose international awards are Canada’s most prestigious prizes in the biomedical sciences. He was most recently Chair, Genome Canada, 2000-2005; a $600 million budget non-profit organization that supports genomics/proteomics programs to position Canada as a world leader in selected areas in this important sector. From 1991 to 2000 Dr. Friesen was President of the Medical Research Council of Canada and was instrumental in transforming it into the Canadian Institutes of Health Research, an organization with an annual budget in 2008 of over $900 million dedicated to supporting Canadian researchers as well as industry participants. Dr. Friesen is noted for his discoveries of the human hormone prolactin. For 19 years he was Head of the Department of Physiology at the University of Manitoba and now is Distinguished University Professor Emeritus. Dr. Friesen is a Fellow of the Royal Society of Canada, a Companion of the Order of Canada recipient of 8 honorary degrees and also sits on the board of directors of Sanofi Pasteur Canada and Spectral Diagnostics Inc. Dr. Friesen has been a director of the Company since November 2001.

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

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

François Thomas, M.D. - Director

Dr. Thomas, a board certified medical oncologist, is a member of the Board of Directors of Eurogentec, and formerly was a Director of DNA therapeutics, Entomed, Neurotech, Newron, Novexel Unibioscreen, and CropDesign. 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.

Gilbert Wenzel, Ph.D. - Director

Dr. Wenzel is currently Chairman and Chief Executive Officer of Wenzel Healthcare Services AG, an investment company focused on investing into innovative healthcare delivery models in Europe. He is also the founder of QUISISANA AG, which imports, registers and commercializes generics for private label use by pharmacy chains and insurance companies in Europe. Dr. Wenzel joined Novartis Group, a global pharmaceutical manufacturer, in November 2000 where he served as Head of Strategic Planning and a Member of its Executive Committee until January 2003. Prior to joining Novartis in November 2000, Dr. Wenzel spent 15 years with McKinsey & Co., an international management consulting firm, and was a member of the European Leadership Group of its Pharma/Healthcare Sector and of the European New Venture Initiative. From 1981 to 1985, Dr. Wenzel was at Hoechst AG in Germany and developed global strategies for generics and over-the-counter medicines. Dr. Wenzel has been a director of the Company since March 2001.

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

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

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Officers

The name, municipality of residence, age as of September 24, 2009 and position with us of each of the current officers are set forth below.

Name	Age	Position
David G.P. Allan Toronto, Ontario	67	Chairman and Chief Executive Officer, YM BioSciences Inc. President, YM BioSciences USA Inc.

Gary Floyd Berwyn, USA	63	Vice President, Operations YM BioSciences USA Inc.

Vincent Salvatori Victoria, British Columbia	57	Executive Vice President, YM BioSciences Inc. President, CIMYM BioSciences Inc.

Sean Thompson Oakville, Ontario	43	Vice President, Corporate Development

Leonard Vernon Nobleton, Ontario	65	Vice President, Finance & Administration

Gary Floyd – Vice-President Of Operations

Mr. Floyd is a seasoned executive with an extensive background and 36 years of experience in the global pharmaceutical industry. Prior to joining Eximias in February 2005 as Vice-President, Operations, Mr. Floyd served as President of Pharmavene LLC, a pharmaceutical consulting firm. Prior to this, he was Senior Vice President, Worldwide Logistics and Procurement at Aventis Behring where he was responsible for Supply Chain Management of the company’s global business. He has also held senior positions in manufacturing, information systems, and sales and marketing at Aventis Behring and its predecessor companies. Mr. Floyd holds a Bachelors degree in Zoology and Chemistry from Olivet Nazarene University. Mr. Floyd has been an officer of the Company since 2006.

Vincent Salvatori, Ph.D. - Executive Vice President, President And CEO, CIMYM Biosciences

Dr. Salvatori is an experienced drug development executive with an accomplished background in the pharmaceutical and biotechnology industry. He has more than 27 years of experience in all aspects of drug development, corporate operations and external collaborations. Dr. Salvatori most recently held the position of Senior Vice President of Clinical Operations for Bioniche Life Sciences Inc. from May 1998 to July 2002. He was previously at StressGen Biotechnologies Corporation from January 1995 to April 1998 where he held the positions of Chief Operating Officer and Vice President of Research and Development, subsequently appointed to Senior Vice President. In this capacity, Dr. Salvatori was responsible for corporate operations, strategic management and clinical/regulatory development. Prior to joining StressGen, Dr. Salvatori was the Senior Director of Program Management at QLT PhotoTherapeutics Inc. from June 1990 to December 1994 and held various positions at Boehringer Ingelheim (Canada) Ltd. from April 1982 to June 1990. Dr. Salvatori has been an officer of the Company since 2002.

Sean Thompson, B.Sc. – Vice President, Corporate Development

Mr. Thompson is responsible for all aspects of corporate development for YM, including licensing, identifying targets for M&A and development partnerships. He has a solid background in clinical development and big Pharma marketing experience, and was previously Director of Clinical Research for YM. Prior to YM he worked for Roche, sitting on the Global Business Team in virology, and was Clinical Research Manager. Prior to Roche, he was a Clinical Scientist for SmithKline Beecham developing products for oncology, respiratory and CNS disorders. He is currently a member of the Ontario Institute for Cancer Research Industry Advisory Board, Vice Chair of the BIOTECanada Health Advisory Board and was a Board member for Variation Biotechnologies Inc. Mr. Thompson holds a Bachelor of Science degree from the University of Waterloo. Mr. Thompson has been an officer of the Company since 2000.

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

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

Clinical And Scientific Advisory Board

We maintain a Clinical and Scientific Advisory Board (“CSAB”) composed of internationally recognized clinicians and scientists. Management meets with members of the CSAB periodically to review operational aspects of our clinical and scientific programme and make recommendations with regard to the perceived trends and direction of medical and biopharmaceutical technologies and the industry generally. Each member of the CSAB has signed a confidentiality agreement with us. CSAB members receive honoraria paid by us of varying amounts per year. The current composition of the CSAB is as follows:

Robert S. Kerbel, Ph.D.

Professor of Medical Biophysics, University of Toronto, Toronto, Ontario, Canada; Canada Research Chair in Molecular Medicine; Director, Molecular and Cell Biology Research, Sunnybrook and Women’s College Health Science Centre, Toronto, Ontario, Canada. Dr. Kerbel has been an advisor since April 1999.

Leonard Saltz, M.D

Professor of Medicine, Weill College of Medicine, Cornell University, New York, New York, New York; Member of Memorial Sloan-Kettering Cancer Center, New York, New York, US; Attending Physician, Memorial Hospital for Cancer and Allied Diseases, New York, New York, US. Dr. Saltz has been an advisor since March 2006.

Nicolas Stiernholm, Ph.D.

Chief Executive Officer, Trillium Therapeutics Inc., Toronto, Ontario, Canada. Dr. Stiernholm was an executive vice-president of the Company until he resigned in December 2002 at which time he became an advisor.

Mark Vincent, M.D., M.R.C.P., F.R.C.P.C. - Chair

Associate Professor, Department of Oncology, University of Western Ontario, London, Ontario, Canada; Staff Medical Oncologist, London Regional Cancer Centre, London, Ontario, Canada. Dr. Vincent has been an advisor since October 1998.

B	Compensation

Summary of Compensation Paid to Directors in Fiscal 2009

Directors of the Company who are not full-time employees of the Company are entitled to receive an annual retainer fee of $12,000 plus an attendance fee of $1,500 per meeting (with the exception of informational meetings) and per day spent traveling to attend the meeting, plus expenses. With respect to informational meetings, directors of the Company who are not full-time employees of the Company are entitled to an attendance fee of $500 per meeting and per day spent traveling to attend the meeting, plus expenses. In addition, the Chair of the Audit Committee is entitled to an annual retainer fee of $6,000 and the Chair of each of the Compensation and the Nominating and Corporate Governance Committees are entitled to an annual retainer fee of $4,000. Members of the Audit, Compensation, and Nominating and Corporate Governance Committees who are not full-time employees of the Company are entitled to an attendance fee of $1,500 per meeting and per day spent traveling to attend the meeting, plus expenses. The Lead Director is entitled to an annual retainer fee of $10,000. As at the date hereof, the number of options held by non-executive directors is 1,170,613. An additional 1,699,502 options are held by the Chairman and Chief Executive Officer.

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The table below sets out the total fees (including retainer and attendance fees) paid or accrued to each non-executive director of the Company for meetings held during the fiscal year ended June 30, 2009.

Name of Director	Retainer Fees		Attendance Fees
Thomas I.A. Allen(1)	$	26,000	$	25,500
Mark Entwistle(2)	$	16,000	$	16,500
Henry Friesen, C.C.,	$	12,000	$	21,000
Philip Frost	$	12,000	$	16,500
Francois Thomas	$	12,000	$	16,500
Gilbert Wenzel	$	12,000	$	28,500
Tryon M. Williams(3)	$	18,000	$	33,000

Notes:

(1)

Earned a $10,000 annual retainer fee as Lead Director and a $4,000 annual retainer fee as Chair of the Corporate Governance and Nominating Committees.

(2)

Earned a $4,000 annual retainer fee as Chair of the Compensation Committee.

(3)

Earned a $6,000 annual retainer fee as Chair of the Audit Committee.

Report on Executive Compensation

General

The Company’s compensation policies are designed to support the Company’s strategic objectives, ensure that incentive programs are designed to motivate senior managers to achieve or exceed corporate objectives and to enhance shareholder value and to ensure that there is reasonable consistency in the application of the compensation policy.

The executive compensation comprises base salary, indirect compensation (benefits) and long-term incentives in the form of stock options. In determining actual compensation levels, the total program is taken into consideration rather than any single element in isolation. Total compensation levels are set to reflect both the marketplace (to ensure competitiveness) and the responsibility of each position (to ensure internal equity).

The Company’s executive compensation program has the following objectives:

·	to attract, retain and motivate qualified executives;

·	to provide incentives to executives to maximize productivity and enhance enterprise value by aligning the interests of the executives with those of the shareholders;

·	to foster teamwork and entrepreneurial spirit;

·	to establish a direct link between all elements of compensation and the performance of the Company, its subsidiaries and individual performance; and

·	to integrate compensation incentives with the development and successful execution of strategic and operating plans.

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Compensation Program

The key elements of the Company’s compensation program are salary and stock option grants. As the Company has limited discretionary resources, bonuses are paid strictly at the discretion of the Board on recommendation from the Compensation Committee in consultation with the Chief Executive Officer. In 2009, the Company retained a human resources consultant to assist management in revising the job description for each employee position and streamlining the performance review process. The intent is to create a transparent system that is suitable for a company of this size and structure.

The base salary for all executives is designed to be competitive and is adjusted for the realities of the market. The target salary is the mid-point, or just below the mid-point, of a salary range for an executive officer which is set at median levels in the comparator group to reflect similar positions in these companies using direct comparison of responsibilities. The comparator group consists of other publicly-traded Canadian life sciences companies that either have a pipeline of products at similar stages of development or are comparable in terms of revenue and market capitalization. Companies include: AEterna Zentaris Inc., Angiotech Pharmaceuticals, Inc., BioMS Medical Corp., Bioniche Life Sciences Inc., Cardiome Pharma Corp., MethylGene Inc. and Oncolytics Biotech Inc.

The compensation levels of the Chief Executive Officer are designed to recognize the Chief Executive Officer’s personal contributions and leadership. The Compensation Committee, in consultation with the Board of Directors, formally evaluates the performance of the Chief Executive Officer each year using both financial and non-financial measurements (including share price, revenues, product development and product pipeline as well as human resource management, representation of the Corporation in the market, integrity and the ability to respond to challenges of the business). On the recommendation of the Compensation Committee, the Board may approve an increase in the Chief Executive Officer’s total compensation to levels that are consistent with corporate and individual performance within the framework established by reference to the comparator group.

For the fiscal year ended June 30, 2008 the compensation plan included an annual bonus based on achievement of objectives. The Corporation used a formula that combines corporate and personal objectives to determine an individual’s appropriate bonus payout. Bonuses of the less senior employees were weighted more towards personal objectives while senior management’s bonuses were tied more closely to achieving the corporate objectives. Corporate objectives are set for the fiscal year by the Board of Directors as part of their annual strategic discussions. Departmental goals are derived therefrom by senior management and presented to the Board. At the end of fiscal 2008, the Board concluded that there was a 60% achievement of corporate objectives and a grading system was applied on that basis to determine the bonuses earned in fiscal 2008 and paid early in fiscal 2009. This bonus plan was withdrawn early in fiscal 2009 and replaced with a discretionary and subjective approach to bonuses. No bonuses were paid or are payable in relation to fiscal 2009.

The Compensation Committee, along with senior management, have concluded that, in light of the economic circumstances of the Corporation and the stage of development of the Corporation’s two products, nimotuzumab and AeroLEF™, the compensation model described above is no longer appropriate for the renewed entrepreneurial profile of the Corporation. Instead a less rigid and formulaic approach to compensation has been recommended, whereby the Board will set the Chief Executive Officer’s salary (and bonus, if any), with all other salaries being derived therefrom on the Chief Executive Officer’s recommendation and subject to consultation with and review by the Compensation Committee. In addition, the compensation philosophy adopted by the Board of Directors holds that it is more appropriate and effective going forward to tie any bonuses more closely to revenues and activities that enhance shareholder value. In this context, management recommended a cost of living increase to base salary and an award of stock options for fiscal 2010, with some discretionary adjustments to reflect individual performance as recommended by the Chief Executive Officer.

Option Based Awards

The stock-based compensation program provides stock options that create a direct link between executive rewards and enhanced shareholder value since the full benefit of this compensation element cannot be realized unless stock appreciation occurs over a number of years. The Committee, at its discretion, may grant stock options annually to executives and employees under the Company’s stock option plan based on the employee’s position and annual compensation. In addition, special grants of stock options may be approved to recognize singular achievements or to retain and motivate executives in order to further align executive and shareholder interests and to motivate employees.

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The Committee designates from time to time eligible persons to whom options are granted and determines the number of shares covered by such options. The underlying security of the options granted under the stock option plan is the Common Shares in the capital of the Company. During the fiscal year ended June 30, 2009, a total of 2,114,250 options were issued of which 1,531,750 were issued to management and employees, 350,000 were issued to directors and 232,500 were issued to third party consultants. The maximum number of shares available for issuance under the stock option plan is a rolling number equal to 15% of the issued and outstanding capital of the Company on the particular date of grant. See “Stock Option Plan”

Summary Compensation Table

The following table sets forth all compensation earned during the fiscal year ended June 30, 2009 by each of the Company’s Chief Executive Officer, Vice President, Finance and Administration and three other most highly compensated officers of the Company who earn greater than $150,000 in total salary and bonus (collectively, “Named Executive Officers”):

									Non-equity incentive plan compensation
Name and Principal Position	Year	Salary ($)			Share- based awards ($)		Option- based awards ($)(1)		Annual incentive plans ($)		Long term incentive plans ($)		Pension Value ($)		All other compen- sation ($)(2)		Total compen- sation ($)
David G.P. Allan	2009		436,000			-		183,016		-		-		-		-		565,016
CEO
Leonard Vernon	2009		244,000			-		61,389		-		-		-		-		331,389
VP, Finance and Administration
Ali Raza	2009		442,000	(3)		-		18,191		-		-		-		-		455,217
President, AeroLEF
Vincent Salvatori	2009		279,000			-		30,694		-		-				-		336,694
Executive VP
Sean Thompson	2009		187,000			-		30,694		-		-		-		-		238,694
VP Business Development

(1)	Value of share option awards determined using the Black-Scholes pricing model calculated as at the award date.

(2)	NEO’s are entitled to the same health, dental, etc. as all employees; the aggregate value for any individual does not exceed $50,000.

(3)	Ali Raza acted as President, AeroLEF throughout the fiscal year and was paid on a consulting basis. Fees totalled £240,000 and the $442,000 is the Canadian dollar equivalent translated throughout the year.

Compensation for the Named Executive Officers changed from fiscal 2008 with the elimination of bonus entitlements in fiscal 2009. The base salaries for the executives are reviewed on an annual basis to monitor any substantive changes over a three year period. The salaries are set to industry and regional economic standards and also reflect any cost of living adjustments as determined to be appropriate by the Compensation Committee in consultation with management. Changes in salary amounts in 2009 were based on a cost of living increase only.

Options were awarded as part of annual compensation with a view to aligning employees’ interests with those of the shareholders. Option grants were calculated as a percentage of the base salary based on a value ascribed by the Black-Scholes model. Percentages were positively correlated with seniority of the position of the employee or officer, as applicable. Dr. Raza’s compensation was negotiated by the Chief Executive Officer at the time of his engagement and approved by the Board of Directors. Any additional compensation that may become payable to Dr. Raza is tied to specific milestones in the development of AeroLEF™.

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Incentive Plan Awards

Outstanding share-based awards and option-based awards as at June 30, 2009.

	Option Based Awards							Share Based Awards
	Number of securities underlying unexercised options		Option Exercise Price		Option Expiration	Value of unexercised in-the- money options		Number of shares or units of shares that have not vested	Market or payout value of share-based awards that have not vested
Name	(#)		($)		Date	($)		(#)	($)
David G.P. Allan		250,000	$	4.50	9/1/2010
CEO		7,500	$	2.00	4/30/2013
		102,500	$	1.75	4/30/2013
		200,000	$	1.75	11/27/2013
		50,000	$	3.15	4/17/2015
		90,000	$	3.61	1/25/2016
		200,000	$	4.36	6/15/2016
		203,252	$	1.53	9/29/2017
		596,250	$	0.50	9/29/2018		89,438	NIL	NIL
Leonard Vernon		10,000	$	4.50	9/1/2010
VP, Finance and		15,000	$	4.50	12/1/2010
Administration		25,000	$	2.50	4/30/2013
		23,000	$	1.75	4/30/2013
		20,000	$	3.15	4/17/2015
		25,000	$	3.61	1/25/2016
		75,000	$	4.36	6/15/2016
		101,626	$	1.53	9/29/2017
		200,000	$	0.50	9/29/2018		30,000	NIL	NIL
Ali Raza President, AeroLEF		100,000	$	1.25	6/16/2011		0	NIL	NIL
Vincent Salvatori		14,500	$	1.75	4/30/2013
Executive VP		40,500	$	1.75	11/27/2013
		5,000	$	2.75	11/8/2014
		25,000	$	3.15	4/17/2015
		35,000	$	3.61	1/25/2016
		75,000	$	4.36	6/15/2016
		101,626	$	1.53	9/29/2017
		100,000	$	0.50	9/29/2018		15,000	NIL	NIL
Sean Thompson		5,000	$	4.50	5/24/2010
VP Business		20,000	$	4.50	5/24/2010
Development		13,000	$	1.75	4/30/2013
		20,000	$	2.50	4/30/2013
		19,875	$	1.75	11/27/2013
		12,500	$	3.15	4/17/2015
		25,000	$	3.61	1/25/2016
		50,000	$	4.36	6/15/2016
		54,064	$	1.53	9/29/2017
		33,333	$	0.50	9/29/2018		15,000	NIL	NIL

Incentive plan awards – value vested or earned during the year

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Name	Option-based awards - Value vested during the year ($)(1)	Share-based awards - Value vested during the year ($)	Non-equity incentive plan compensation – Value earned during the year ($)
David G.P. Allan CEO	NIL	NIL	NIL
Leonard Vernon VP, Finance and Administration	NIL	NIL	NIL
Ali Raza President, AeroLEF	NIL	NIL	NIL
Vincent Salvatori Executive VP	NIL	NIL	NIL
Sean Thompson VP Business Development	NIL	NIL	NIL

(1) The aggregate dollar value that would have been realized if stock options had been exercised on the vesting date.

Stock Option Plan

The material terms of the Option Plan are as follows:

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

•

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

•	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.

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

•	In any one-year period, Options that may be granted to Insiders shall not exceed 10% of the outstanding issue.

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

•

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

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

•	Once granted, the Options may only be transferred or assigned between an Eligible Person and a related “Employee Company” (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:

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:

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

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.

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:

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

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

•	The Company has no security purchase agreement or stock appreciation rights plan, and the Company does not have authority to transform Options into stock appreciation rights.

•

By its terms, the Option Plan may be amended by the Board without the consent of the shareholders, including 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 of the Company pursuant to the Option Plan, such amendments will require shareholder approval; and amendments that are of a housekeeping nature. It should also be noted that any amendment to increase the maximum percentage of the outstanding shares available for issuance under the Option Plan requires shareholder approval.

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

Termination and Change of Control Benefits

Mr. David Allan is entitled to receive twenty-four months salary upon his termination as Chief Executive Officer if such termination is caused by a change of control of the Company. Certain other Named Executive Officers, namely Messrs. Vincent Salvatori and Leonard Vernon, are entitled to receive six months salary upon termination if such termination is caused by a change of control of the Company. Assuming a change of control occurred on June 30, 2009, Mr. Allan would have been entitled to a payment of $872,000 and Mr. Salvatori and Mr. Vernon would have each been entitled to a payment of $139,500 and $122,000, respectively. A “change of control” is defined as: (i) the acquisition by any person or group of persons acting jointly or in concert of more than 50% of the voting shares of the Company; (ii) the sale of all or substantially all of the assets of the Company; or (iii) the individuals who at the commencement of the officer’s employment with the Company constitute the board of directors ceases to constitute at least a majority thereof, unless the election or the nomination for election, by the shareholders of each new Board member was approved by a majority of the Board members then still in office. These arrangements were put in place by a resolution of the Board of Directors. Other than the foregoing arrangements, the Company does not currently have employment agreements with any of the Named Executive Officers.

Director Compensation

Director compensation table

The following table shows the compensation earned by the non-executive directors for the fiscal year ended June 30, 2009.

Name	Fees Earned ($)		Share-based awards ($)	Option- based awards ($) (5)		Non-equity incentive plan compensation ($)	All other compensation ($)			Total ($)
Thomas I.A. Allen (1)		51,500	NIL		15,347	NIL					66,847
Mark Entwistle (2)		32,500	NIL		15,347	NIL					47,847
Henry Friesen, C.C.,		33,000	NIL		15,347	NIL					48,347
Philip Frost		28,500	NIL		15,347	NIL		2,960	(6)		46,807
François Thomas		28,500	NIL		15,347	NIL		59,422	(7)		103,269
Gilbert Wenzel(4)		40,500	NIL		15,347	NIL					55,847
Tryon M. Williams (3) (4)		51,000	NIL		15,347	NIL		3,938	(6)		70,285

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(1)

Earned a $10,000 annual retainer fee as Lead Director and a $4,000 annual retainer fee as Chair of the Corporate Governance and Nominating Committees.

(2)

Earned a $4,000 annual retainer fee as Chair of the Compensation Committee.

(3)

Earned a $6,000 annual retainer fee as chair of the Audit Committee. Mr. Williams was awarded 15,000 stock options in trust for an individual employee, in addition to the 50,000 stock options awarded to all Board members.

(4)

Earned $9,000 for travel days related to board meetings.

(5)

Fair value of 50,000 stock options awarded to each director in September, 2008.

(6)

Earned for serving as a member of a special committee of the Board formed to respond to an unsolicited offer for the Company.

(7)

Various consulting assignments principally relating to drug development and assessment of potential drug candidates.

Narrative Discussion

Directors of the Company who are not full-time employees of the Company are entitled to receive an annual retainer fee of $12,000 plus an attendance fee of $1,500 per meeting (with the exception of informational meetings) and per day spent traveling to attend the meeting, plus expenses. With respect to informational meetings, directors of the Company who are not full-time employees of the Company are entitled to an attendance fee of $500 per meeting and per day spent traveling to attend the meeting, plus expenses. In addition, the Chair of the Audit Committee is entitled to an annual retainer fee of $6,000 and the Chair of each of the Compensation and the Corporate Governance and Nominating Committees are entitled to an annual retainer fee of $4,000. Members of the Audit, Compensation, and Corporate Governance and Nominating Committees who are not full-time employees of the Company are entitled to an attendance fee of $1,500 per meeting and per day spent traveling to attend the meeting, plus expenses. The Lead Director is entitled to an annual retainer fee of $10,000. As at the date hereof, the number of options held by non-executive directors is 1,170,613. A total of 10 meetings of the board were held in fiscal 2009. Despite the reduction in the size of the Board from 10 to eight members and an increased amount of tasks and responsibilities as a direct result of Sarbanes-Oxley and other regulatory compliance obligations, director compensation has remained largely unchanged since 2004. Options are granted annually to non-executive members of the Board.

Share-based awards, option-based awards and non-equity incentive plan compensation

Name	Option-based awards - Value vested during the year ($)(1)		Share-based awards - Value vested during the year ($)	Non-equity incentive plan compensation – Value earned during the year ($)
Thomas I.A. Allen (1)		28,219	NIL	NIL
Mark Entwistle (2)		24,310	NIL	NIL
Henry Friesen, C.C.,		20,402	NIL	NIL
Philip Frost		20,402	NIL	NIL
François Thomas		20,402	NIL	NIL
Gilbert Wenzel		20,402	NIL	NIL
Tryon M. Williams (3)		20,310	NIL	NIL

(1) The fair value of each option granted was estimated on the date of grant using the Black-Scholes fair value options pricing model with the following assumptions: Risk free interest rate 3.34%; volatility factor 74%; expected life 7 years.

C	Board of Directors Practices

The Board of Directors has adopted corporate governance guidelines as well as written charters to provide the framework for effective governance of our company. These guidelines and charters are reviewed annually by the Nominating and Corporate Governance Committee and recommendations are made to the Board of Directors, if necessary.

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Role of the Lead Director

The Board of Directors appointed Thomas I.A. Allen as Lead Director. In this role, Mr. Allen is responsible for providing leadership to the independent directors. Key elements of Mr. Allen’s role include, but are not limited to:

·	fostering processes to enable the Board to function effectively without management;

·	providing input to the Chairman of the Board of Directors on behalf of the independent directors with respect to Board agendas;

·	working with the Chairman of the Board of Directors to ensure adequate resources and timely and relevant information are available to the Board of Directors;

·	chairing in camera meetings of the independent directors and communicating to the Chairman of the Board of Directors with regard to such discussions; and

·	assisting the Board of Directors in satisfying itself as to the integrity of the Chief Executive Officer.

Mandate of the Board of Directors

Our directors are elected by the shareholders and are responsible for the stewardship of the business and affairs of the Company. The Board seeks to discharge such responsibility by reviewing, discussing and approving the Company’s strategic planning and organizational structure and supervising management to oversee that the foregoing enhance and preserve the underlying value of the Company.

Although directors may be elected by the shareholders to bring special expertise or a point of view to Board deliberations, they are not chosen to represent a particular constituency. The best interests of the Company as a whole must be paramount at all times.

Duties of Directors

The Board discharges its responsibility for overseeing the management of our business and delegates responsibility our senior officers for day-to-day management of the Company. The Board discharges its responsibilities, including those listed below, either directly or through one of its committees: the Audit Committee, the Nominating and Corporate Governance and the Compensation Committee. In addition to these regular committees, the Board may appoint ad hoc committees periodically to address certain issues of a more short-term nature. In addition to the Board’s primary roles of overseeing corporate performance and providing quality, depth and continuity of management to meet our strategic objectives, principal duties include, but are not limited to (i) appointment of management, (ii) Board organization, (iii) strategic planning, (iv) monitoring of financial performance and other financial reporting matters, (v) risk management, (vi) policies and procedures, (vii) communications and reporting, (viii) position descriptions, (ix) orientation and continuing education, (x) nomination of directors and (xi) Board evaluation.

Committees of the Board of Directors

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

Audit Committee

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

- 62 -

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

(a)

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

(b)

at least one member must be “financially sophisticated” under the rules of the American Stock Exchange; and

(c)

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

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

Compensation Committee

The Compensation Committee is comprised of a minimum of three directors, the majority of whom will be Canadian citizens ordinarily resident in Canada, and, other than a non-executive Chair, may not be executive officers or employees of the Company or any of its affiliates. The members of the Company’s Compensation Committee are Mark Entwistle (Chair), Thomas I.A. Allen and François Thomas.

The mandate of the Compensation Committee is to establish and monitor our policies for attracting, retaining, developing and motivating senior employees. The compensation policies are designed to support our strategic objectives, ensure that incentive programs are designed to motivate senior managers to achieve or exceed corporate objectives and to enhance shareholder value and to ensure that there is reasonable consistency in the application of the compensation policies. The Committee’s responsibilities include reviewing annually the performance of the Chief Executive Officer (or more frequently if deemed necessary by the Compensation Committee), setting the Chief Executive Officer’s compensation and, in consultation with the Chief Executive Officer, establishing his personal objectives, reviewing the performance and approving the compensation of executive officers of the Company on the recommendation of the Chief Executive Officer, establishing incentive compensation programs and monitoring their effectiveness and developing and documenting the compensation policy and philosophy of the Company for approval by the Board of Directors. All members of this Committee are non-executive directors of the Company.

Compensation Committee Authority and Responsibilities

(a)

The Compensation Committee has the power and authority of the Board to perform the following duties and fulfill the following responsibilities:

(i)

Review the compensation practices and policies of the Company to ensure that they are competitive and that they provide appropriate motivation for corporate performance and increased shareholder value.

- 63 -

KPMG LLP	Telephone	(416) 228-7000
Chartered Accountants	Fax	(416) 228-7123
Yonge Corporate Centre	Internet	www.kpmg.ca
4100 Yonge Street Suite 200
Toronto ON M2P 2H3
Canada

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

To the Board of Directors of YM Biosciences Inc.

We have audited the accompanying consolidated balance sheets of YM Biosciences Inc. (the "Company") and subsidiaries as at June 30, 2009 and 2008 and the related consolidated statements of operations and comprehensive loss and deficit and cash flows for each of the years in the three-year period ended June 30, 2009. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. With respect to the consolidated financial statements for the years ended June 30, 2009 and 2008, we also conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States) require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and subsidiaries as at June 30, 2009 and 2008 and the results of their operations and their cash flows for each of the years in the three-year period ended June 30, 2009 in conformity with Canadian generally accepted accounting principles.

Canadian generally accepted accounting principles vary in certain significant respects from U.S. generally accepted accounting principles. Information relating to the nature and effect of such differences is presented in note 16 to the consolidated financial statements.

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

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

network of independent member firms affiliated with KPMG International, a Swiss cooperative.

KPMG Canada provides services to KPMG LLP.

F-2

Page 2

As discussed in note 2(p) to the consolidated financial statements, effective July 1, 2008, the Company adopted The Canadian Institute of Chartered Accountants' Handbook Section 1400, General Standards on Financial Statement Presentation.

Chartered Accountants, Licensed Public Accountants

Toronto, Canada

September 23, 2009

F-3

YM BIOSCIENCES INC.

Consolidated Balance Sheets

(Expressed in Canadian dollars, unless otherwise noted)

June 30, 2009 and 2008

	2009			2008

Assets

Current assets:
Cash	$	2,337,716		$	3,119,189
Short-term deposits		39,713,042			54,981,737
Accounts receivable		564,584			403,371
Prepaid expenses		352,850			375,133
		42,968,192			58,879,430

Property and equipment (note 3)		96,876			128,400

Intangible assets (note 4)		3,004,868			4,065,409

	$	46,069,936		$	63,073,239

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable	$	431,028		$	307,588
Accrued liabilities		486,723			1,715,024
Deferred revenue (note 10)		2,549,568			4,623,340
		3,467,319			6,645,952

Deferred revenue (note 10)		2,898,292			4,414,256

Shareholders' equity:
Share capital (note 6)		172,921,153			172,921,153
Share purchase warrants (note 7)		–			3,150,539
Contributed surplus (note 8)		13,035,123			9,123,824
Deficit		(146,251,951	)		(133,182,485	)
		39,704,325			52,013,031

Basis of presentation (note 1)
Commitments (note 12)

	$	46,069,936		$	63,073,239

See accompanying notes to consolidated financial statements.

On behalf of the Board:

/s/ Tryon Williams		Director

/s/ David G. P. Allan		Director

F-4

YM BIOSCIENCES INC.

Consolidated Statements of Operations and Comprehensive Loss and Deficit

(Expressed in Canadian dollars, unless otherwise noted)

	Years ended June 30,
	2009			2008			2007

Out-licensing revenue (note 10)	$	4,543,280		$	4,859,085		$	4,407,890
Interest income		1,070,264			2,584,080			3,239,540
		5,613,544			7,443,165			7,647,430

Expenses:
Licensing and product development		14,172,845			15,631,550			28,758,469
General and administrative		4,839,870			6,831,955			6,978,336
Impairment of intangible assets (note 4)		–			–			1,829,538
		19,012,715			22,463,505			37,566,343

Loss before the undernoted		(13,399,171	)		(15,020,340	)		(29,918,913	)
Gain (loss) on foreign exchange		67,075			32,463			(142,552	)
Gain (loss) on short-term deposits		(40,200	)		172,276			–
Loss on disposal of property and equipment		–			(70,143	)		–
Other income		307,140			–			–

Loss before income taxes		(13,065,156	)		(14,885,744	)		(30,061,465	)

Current income taxes (note 13)		4,310			–			1,668,775

Loss and comprehensive loss for the year		(13,069,466	)		(14,885,744	)		(31,730,240	)

Deficit, beginning of year		(133,182,485	)		(118,296,741	)		(86,566,501	)

Deficit, end of year	$	(146,251,951	)	$	(133,182,485	)	$	(118,296,741	)

Basic and diluted loss per common share	$	(0.23	)	$	(0.27	)	$	(0.57	)


Weighted average number of common shares outstanding		55,835,356			55,835,356			55,804,674

Excludes common shares held in escrow for contingent additional payment related to the acquisition of Delex Therapeutics Inc. (note 6)		2,380,953			2,380,953			2,380,953

See accompanying notes to consolidated financial statements.

F-5

YM BIOSCIENCES INC.

Consolidated Statements of Cash Flows

(Expressed in Canadian dollars, unless otherwise noted)

	Years ended June 30,
	2009			2008			2007

Cash provided by (used in):

Operating activities:
Loss for the year	$	(13,069,466	)	$	(14,885,744	)	$	(31,730,240	)
Items not involving cash:
Amortization of property and equipment		91,896			125,271			107,107
Amortization of intangible assets		1,060,541			1,060,541			1,913,040
Impairment of intangible assets		–			–			1,829,538
Loss on disposal of property and equipment		–			70,143			–
Unrealized loss on short-term deposits		41,912			–			–
Stock-based compensation		760,760			2,063,973			1,716,913
Change in non-cash operating working capital:
Accounts receivable and prepaid expenses		(138,930	)		(61,483	)		1,816,092
Accounts payable, accrued liabilities and deferred revenue		(4,694,597	)		(5,844,790	)		11,604,460
		(15,947,884	)		(17,472,089	)		(12,743,090	)

Financing activities:
Issuance of common shares on exercise of options		–			–			11,232
Issuance of common shares on exercise of warrants		–			–			89,375
		–			–			100,607

Investing activities:
Short-term deposits, net		15,226,783			14,742,701			15,881,679
Additions to property and equipment		(60,372	)		(37,770	)		(127,162	)
Proceeds from sale of property and equipment		–			38,996			–
		15,166,411			14,743,927			15,754,517

Increase (decrease) in cash and cash equivalents		(781,473	)		(2,728,162	)		3,112,034

Cash and cash equivalents, beginning of year		3,119,189			5,847,351			2,735,317

Cash and cash equivalents, end of year	$	2,337,716		$	3,119,189		$	5,847,351

See accompanying notes to consolidated financial statements.

F-6

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

YM Biosciences Inc. (the "Company" or "YM") was incorporated on August 17, 1994 under the laws of the Province of Ontario and was continued under the laws of the Province of Nova Scotia on December 11, 2001. In prior years, the Company was considered a development stage company. It has entered into licensing agreements with certain biotechnology, pharmaceutical and medical institutes or has acquired technology originated in such institutes. The acquisitions of licenses provide exclusive rights for certain territories for certain products or families of products developed and rights of first refusal on additional territories, additional products or extensions to existing products. The Company is developing certain therapeutic products for patients with cancer and an inhalation delivered fentanyl product to treat acute and breakthrough pain, including cancer pain.

1.	Basis of presentation:

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 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 product development. It has had no net earnings, minimal revenue and 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 amount of reported assets, liabilities, revenue and expenses and the balance sheet classifications used if the Company were unable to continue operations in accordance with this assumption.

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

F-7

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies:

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in Canada ("Canadian GAAP") which, except as described in note 16, conform in all material respects to accounting principles generally accepted in the United States ("United States GAAP"). Significant accounting policies are summarized below:

(a)

Basis of consolidation:

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

The Company consolidates all VIEs of which it is the primary beneficiary in accordance with Canadian GAAP. VIEs are entities in which equity investors do not have controlling financial interest or the equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support by other parties. The Company's only VIE is CIMYM BioSciences Inc., an 80% owned joint venture incorporated in Canada.

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

(b)

Foreign currency translation:

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

F-8

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies (continued):

(c)

Revenue recognition:

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

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

Non-refundable, up-front fees for access to the Company's proprietary technology in connection with certain research and development collaborations are deferred and recognized as revenue on a systematic basis over the term of the related collaboration.

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

(d)

Cash and cash equivalents:

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

(e)

Short-term deposits:

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

F-9

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies (continued):

(f)

Property and equipment:

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

Computer equipment	3 years
Furniture and equipment	5 years
Leasehold improvements	Term of lease

(g)

Intangible assets:

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

(h)

Impairment of long-lived assets:

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

(i)

Development costs:

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

F-10

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies (continued):

(j)

Government assistance:

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

(k)

Income taxes:

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

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

F-11

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies (continued):

(l)

Stock-based compensation:

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

(m)

Basic and diluted loss per common share:

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

F-12

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies (continued):

(n)

Use of estimates:

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the years. Significant items subject to such estimates include, but are not limited to, the carrying amount of property, plant and equipment, determination of fair value of intangible assets, stock-based compensation expense, amortization periods and the valuation of long-lived assets and future income taxes. Actual results could differ from those estimates.

(o)

Financial instruments:

Financial assets and financial liabilities are initially recorded at fair value and their subsequent measurements are determined in accordance with their classification. The classification depends on the purpose for which the financial instruments were acquired or issued and their characteristics. Cash and cash equivalents and short-term deposits are classified as held-for-trading assets and are accounted at fair value. All changes in fair value are included in loss for the year in which they arise. Accounts receivable are classified as loans and receivables, and after initial recognition are recorded at amortized cost. Accounts payable and accrued liabilities are classified as other financial liabilities, and after initial recognition are recorded at amortized cost.

(p)

New accounting pronouncements:

General standards on financial statement presentation:

On July 1, 2008, the Company adopted amendments of The Canadian Institute of Chartered Accountants' ("CICA") Handbook Section 1400, General Standards of Financial Statement Presentation, which includes requirements to assess and disclose an entity's ability to continue as a going concern, as disclosed in note 1. The adoption of this change did not have an impact on the Company's consolidated financial statements.

F-13

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies (continued):

(q)

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

(i)

Goodwill and intangible assets:

(ii)

Financial instruments:

In June 2009, the CICA issued amendments to Handbook Section 3862, Financial Instruments - Disclosures, enhancing disclosure requirements about liquidity risk and fair value measurements of financial instruments, effective for fiscal years ending after September 30, 2009. The Company is currently assessing the impact of this section on its consolidated financial statements.

(iii)

International financial reporting standards:

The Accounting Standards Board of Canada has announced that public companies in Canada are required to adopt International Financial Reporting Standards ("IFRS") for fiscal years beginning on or after January 1, 2011. The Company is in the process of assessing the effects of the standards on its consolidated financial statements.

F-14

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

2.	Significant accounting policies (continued):

(iv)

Consolidated financial statements and non-controlling interests:

In January 2009, the CICA issued Section 1601, Consolidated Financial Statements ("Section 1601"), and Section 1602, Non-controlling Interests ("Section 1602"), which together replace Section 1600, Consolidated Financial Statements. Section 1601 establishes standards for the preparation of consolidated financial statements. Section 1602 establishes standards for accounting for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. It is equivalent to the corresponding provisions of IFRS standard, International Accounting Standard 27 (Revised), Consolidated and Separate Financial Statements. The sections apply to interim and annual consolidated financial statements relating to fiscal years beginning on or after January 1, 2011. Earlier adoption is permitted as of the beginning of a fiscal year. The Company is currently evaluating the impact of the adoption of these new sections on its consolidated financial statements.

3.	Property and equipment:

	2009						2008
			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		value		Cost		amortization		value

Computer equipment	$	419,259	$	359,857	$	59,402	$	378,289	$	278,449	$	99,840
Furniture and equipment		99,574		80,316		19,258		80,172		76,765		3,407
Leasehold improvements		52,539		34,323		18,216		52,539		27,386		25,153

	$	571,372	$	474,496	$	96,876	$	511,000	$	382,600	$	128,400

F-15

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

4.	Intangible assets:

	2009						2008
			Accumulated		Net book				Accumulated		Net book
	Cost		amortization		value		Cost		amortization		value

Acquired technologies	$	7,348,185	$	4,343,317	$	3,004,868	$	7,348,185	$	3,282,776	$	4,065,409

Delex:

In 2005, on acquisition of Delex, the Company recorded $7,348,185 of acquired technologies which includes the intellectual property and in-process research and development of the Company's inhalation delivered fentanyl product to treat acute and breakthrough pain, including cancer pain.

Eximias:

The Company identified the workforce as an intangible asset as part of the acquisition of assets from Eximias in 2006 because of the expected future benefits that could be derived with respect to their involvement with the Company's lead product, tesmilifene.

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

F-16

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

5.	Consolidation of variable interest entity:

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

	Years ended June 30,
	2009			2008			2007

Out-licensing revenue	$	4,474,671		$	4,802,291		$	4,236,398

Expenses:
General and administrative		4,312,867			5,677,860			2,458,547
Licensing and product development		9,886,659			8,277,154			8,913,425
		14,199,526			13,955,014			11,371,972

Loss before income taxes		(9,724,855	)		(9,152,723	)		(7,135,574	)

Current income taxes		–			–			1,622,695

Loss for the year	$	(9,724,855	)	$	(9,152,723	)	$	(8,758,269	)

6.	Share capital:

Authorized:

500,000,000 Class A preferred shares

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

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

500,000,000 common shares

Issued:

	Number of
	shares		Amount

Common shares:
Balance, June 30, 2007, 2008 and 2009		55,835,356	$	172,921,153

F-17

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

6.	Share capital (continued):

At June 30, 2009, 2,380,953 (2008 - 2,380,953) common shares were held in escrow for contingent payments related to the Delex acquisition. These escrowed shares will be valued based upon their fair market value at the time of resolution of the related milestone contingency: 634,921 common shares upon entering a collaboration or other licensing arrangement; 1,111,112 common shares upon initiation of the first Phase III clinical trial; and 634,920 common shares upon initiation of the second Phase III clinical trial. Upon receipt of United States regulatory approval to market a product using Delex's technology, the Company will make an additional payment of $4,750,000 in cash or common shares, or a combination of both, at its option, to the former Delex shareholders.

7.	Share purchase warrants:

The Company has issued warrants for the purchase of common shares for a specified price for a specific period of time. Nominal value was ascribed to the warrants issued prior to June 30, 2002. Warrants issued after that date have been valued on a relative fair value basis using the Black-Scholes option pricing model. The following table contains information regarding the outstanding warrants to acquire common shares for the years ended June 30, 2009, 2008 and 2007.

				Weighted
				average
	Number of			exercise
	warrants			price		Amount

Outstanding, June 30, 2006		9,022,777		$	2.88	$	4,597,988
Exercised		(50,500	)		1.77		(44,680	)

Outstanding, June 30, 2007		8,972,277			2.89		4,553,308
Expired		(3,262,512	)		3.69		(1,402,769	)

Outstanding, June 30, 2008		5,709,765			2.43		3,150,539
Expired		(5,709,765	)		2.43		(3,150,539	)

Outstanding, June 30, 2009		–			–	$	–

F-18

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

8.	Contributed surplus:

Balance, June 30, 2006	$	3,944,492
Stock-based compensation		1,716,913
Exercise of options		(4,323	)

Balance, June 30, 2007		5,657,082
Stock-based compensation		2,063,973
Expiry of warrants		1,402,769

Balance, June 30, 2008		9,123,824
Stock-based compensation		760,760
Expiry of warrants		3,150,539

Balance, June 30, 2009	$	13,035,123

9.	Stock-based compensation:

The Company has granted stock options pursuant to a stock option plan. Under the plan, options to purchase common shares may be granted to directors, officers, employees and service providers of the Company.

Compensation cost recognized as an expense for the year ended June 30, 2009 for stock-based employee compensation awards was $760,760 (2008 - $2,063,973; 2007 - $1,716,913).

As at June 30, 2009, total compensation cost related to non-vested awards not yet recognized was $353,458 and the weighted average period over which it is expected to be recognized was 0.6 years. The Company has 2,168,831 stock options that have been authorized but not granted.

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:

Issue date	2009			2008			2007

Number of options issued		2,114,250			2,110,290			165,000
Risk-free interest rate		1.9% - 3.3	%		3.2% - 4.4	%		3.9% - 4.1	%
Volatility factor		68% - 87	%		72% - 74	%		51% - 73	%
Dividend rate		0	%		0	%		0	%
Contractual life of options	3 - 10 years			10 years			10 years
Vesting period (months)	0 to 24			0 to 24			0 to 24
Weighted average fair value of options granted	$	0.31		$	1.13		$	1.41
Fair value of options granted	$	660,001		$	2,374,465		$	232,931

F-19

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

9.	Stock-based compensation (continued):

The following tables reflect the activity under the stock option plan for the years ended June 30, 2009, 2008 and 2007 and the share options outstanding at the end of the year:

	2009					2008					2007
				Weighted					Weighted					Weighted
				average					average					average
				exercise					exercise					exercise
	Number			price		Number			price		Number			price

Outstanding, beginning of year		5,633,102		$	2.80		4,196,205		$	3.63		4,779,789		$	3.78
Granted		2,114,250			0.55		2,110,290			1.51		165,000			3.49
Cancelled/forfeited		(1,183,737	)		2.78		(673,393	)		3.96		(745,251	)		4.53
Exercised		–			–		–			–		(3,333	)		3.37

Outstanding, end of year		6,563,615			2.08		5,633,102			2.80		4,196,205			3.63

Exercisable, end of year		4,664,072		$	2.60		4,342,733		$	3.17		3,587,176		$	3.55

As at June 30, 2009:

	Options outstanding						Options exercisable
			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		1,961,250		9.0	$	0.50		676,393		8.9	$	0.50
$1.01 - $2.00		2,385,505		6.7		1.57		1,770,819		6.5		1.61
$2.01 - $3.00		63,750		3.9		2.52		63,750		3.9		2.52
$3.01 - $4.00		853,610		5.4		3.42		853,610		5.4		3.42
$4.01 - $5.74		1,299,500		4.8		4.50		1,299,500		4.8		4.50

$0.50 - $5.74		6,563,615		6.8		2.08		4,664,072		6.1		2.60

F-20

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

10.	Out-licensing agreements:

				Deferred revenue				Revenue recognized
		Initial		as at June 30,				for years ended June 30,
Date of agreement	Product	license fee		2009		2008		2009		2008		2007

November 3, 2006	Tesmilifene	$	230,400	$	120,400	$	154,000	$	33,600	$	26,800	$	49,600
July 25, 2006	Nimotuzumab		16,226,950		5,179,975		8,451,538		3,271,563		4,056,735		3,718,677
January 20, 2006	Nimotuzumab		1,152,788		–		192,131		192,131		384,262		384,263
August 30, 2005	Nimotuzumab		441,792		6,995		64,428		57,433		96,643		133,458
January 26, 2005	Tesmilifene		620,311		140,490		175,499		35,009		29,995		121,892
Royalty revenue	Nimotuzumab		–		–		–		953,544		264,650		–

		$	18,672,241	$	5,447,860	$	9,037,596	$	4,543,280	$	4,859,085	$	4,407,890

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

As a result of a revision to the estimated period of collaboration, the revenue recognition period for the July 25, 2006 agreement was extended by 12 months. This change was made as at January 1, 2009.

F-21

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

11.	Related party 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, 2009 totalled $66,000 (2008 - $92,000; 2007 - nil). 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.

12.	Commitments:

In November 2007, the Company entered into a contract for services of a Clinical Research Organization ("CRO") relating to a pediatric pontine glioma clinical trial for nimotuzumab in the United States at a cost of approximately $1.568 million (U.S. $1.348 million), of which approximately $1.005 million has been incurred as at June 30, 2009 and the remaining $563,000 has yet to be incurred. The Company may cancel the contract with 30 days notice and is obligated for services rendered by CRO through to the effective date of termination and for any close-out services furnished by CRO after the termination of the agreement.

In February 2009, the Company entered into two contracts for CRO services relating to clinical trials for nimotuzumab. The first pertains to a randomized, phase II, double-blind trial in brain metastases from non-small cell lung cancer ("NSCLC") at a cost of $1.161 million, of which approximately $240,000 has been incurred as at June 30, 2009 and the remaining $921,000 has yet to be incurred. The second contract pertains to a randomized, phase II, double-blind trial in NSCLC patients ineligible for radical chemotherapy at a cost of approximately $1,500,000, of which approximately $508,000 has been incurred as at June 30, 2009 and the remaining $992,000 has yet to be incurred. The Company may cancel either contract with 30 days notice and is obligated for services rendered by the CRO through the effective date of termination and for any close-out services furnished by the CRO after the termination of the agreement.

In addition to the above contracts, the Company has entered into many additional contracts for pre-clinical and other studies, none of which individually exceeds $1.0 million, totalling approximately $4.058 million, of which approximately $2.010 million has been incurred as at June 30, 2009 and the obligation to pay the remaining $2.048 million has yet to be incurred. Any early termination penalties cannot exceed the amount of the contract commitment.

F-22

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

12.	Commitments (continued):

As at June 30, 2009, the approximate future minimum rental payments relating to operating leases for premises are as follows:

2010	$	328,966
2011		338,660
2012		246,295
2013		46,397

	$	960,318

13.	Income taxes:

(a)

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

	2009			2008			2007

Average Canadian income tax rate		33.25	%		34.82	%		36.12	%


Loss before income taxes	$	(13,065,156	)	$	(14,885,744	)	$	(30,061,465	)


Income tax expense calculated at average Canadian income tax rates	$	(4,344,164	)	$	(5,183,330	)	$	(10,858,201	)
Change in income taxes resulting from:
Tax effect of changes in rates		(205,046	)		8,185,555			–
Differences in rates applicable to subsidiary in foreign jurisdiction		449,471			186,000			(298,859	)
Withholding taxes		–			–			1,668,775
Other non-deductible items		194,049			734,775			586,813
Change in valuation allowance		3,910,000			(3,923,000	)		10,570,247

Income tax expense	$	4,310		$	–		$	1,668,775

F-23

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

13.	Income taxes (continued):

(b)

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

	2009			2008

Future tax assets:
Property and equipment	$	4,848,000		$	4,806,000
Financing costs		41,000			186,000
Deferred revenue		3,084,000			2,621,000
Capital loss carryforward		152,000			173,000
Eligible capital expenditures		41,000			41,000
Federal Ontario harmonization credit		1,090,000			–
Non-capital losses - United States		25,552,000			27,338,000
Non-capital losses - Canada		21,046,000			18,885,000
Research and development expenses		6,636,000			4,838,000
		62,490,000			58,888,000

Future tax liabilities:
Acquired technologies		(871,000	)		(1,179,000	)
		61,619,000			57,709,000

Less valuation allowance		61,619,000			57,709,000

Net future tax asset	$	–		$	–

2008 numbers have been re-stated to conform to 2009 presentation.

F-24

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

13.	Income taxes (continued):

(c)

The Company has available Canadian and United States non-capital loss carryforwards that expire as follows:

	Canada		United States

2010	$	2,250,000	$	–
2014		7,158,000		–
2015		16,300,000		–
2019		–		1,000
2020		–		32,000
2021		–		96,000
2022		–		2,969,000
2023		–		5,256,000
2024		–		3,471,000
2025		–		3,589,000
2026		12,075,000		49,670,000
2027		10,235,000		5,694,000
2028		15,469,000		3,008,000
2029		9,084,000		1,366,000

	$	72,571,000	$	75,152,000

(d)

The Company has approximately $22,884,000 (2008 - $15,722,000) of unclaimed development costs that may be claimed against future taxable income.

(e)

The Company has accumulated net capital losses for tax purposes of approximately $1,049,000, which may be carried forward and used to reduce taxable capital gains in future years.

F-25

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

13.	Income taxes (continued):

(f)

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

	Ontario		Canada		United States
2019	$	–	$	–	$	2,000
2020		–		25,000		10,000
2021		–		305,000		129,000
2022		–		430,000		87,000
2023		–		356,000		223,000
2024		–		302,000		202,000
2025		–		1,097,000		227,000
2026		–		703,000		408,000
2027		–		1,180,000		233,000
2028		–		1,151,000		106,000
2029		223,000		1,042,000		–

	$	223,000	$	6,591,000	$	1,627,000

The Company accrues and records cash refundable OITCs amounts directly against development expenses where there is reasonable assurance that the assistance will be realized. During the year, the Company received cash refundable OITCs claims related to prior years in the amount of $135,305. At June 30, 2009, OITCs receivable amounted to $300,000 (2008 - $158,742; 2007 - $143,049).

	2009			2008		2007

Gross development expenses	$	14,456,637		$	15,613,224	$	28,758,469
OITCs		(283,792	)		18,326		–

Licensing and product development expenses	$	14,172,845		$	15,631,550	$	28,758,469

F-26

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

13.	Income taxes (continued):

(g)

The province of Ontario harmonized its corporate taxation system with the Government of Canada effective at the commencement of the first taxation year that included January 1, 2009. At that time, the Company's accumulated loss carryforwards, undepreciated capital costs, research and development expenditure pools and undeducted eligible capital expenditures for Ontario purposes were required to be adjusted to the federal values. Since the Company's Ontario balances exceeded its federal balances, the reduction resulted in a harmonization credit of $1,090,000 which can be utilized to reduce Ontario taxes payable over the next five years. A full valuation allowance has been provided against the future tax amount.

14.	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, short-term deposits in the definition of capital.

The Company is not subject to externally imposed capital requirements and there has been no change with respect to the overall capital management strategy during the 12 months ended June 30, 2009.

15.	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 monetary assets and liabilities approximate their fair values due to their relatively short periods to maturity.

F-27

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

15.	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)

Foreign exchange risk:

The Company operates in Canada and the United States and has relationships with entities in other countries. Foreign exchange risk arises because the cost of transactions denominated in foreign currencies may vary due to changes in exchange rates ("transaction exposures").

Balances in foreign currencies at June 30, 2009 were approximately:

	U.S. dollars			Euros

Cash and short-term deposits	$	344,999		€	23,502
Accounts receivable		29,917			–
Accounts payable and accrued liabilities		(103,337	)		–

	$	271,579		€	23,502

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

(ii)

Interest rate risk:

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

F-28

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

15.	Financial instruments (continued):

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, 2009 balance of approximately $42 million, a variation of 100 basis points in the market interest rate could affect the consolidated statement of operations and comprehensive loss and deficit by approximately $420,000. For the year ended June 30, 2009, the Company recorded interest income of $1.070 million (2008 - $2.584 million; 2007 - $3.240 million) in relation to these assets.

(iii)

Credit risk:

Accounts receivable are subject to normal credit risk. The maximum exposure to credit risk is equal to the carrying value of the accounts receivable. The Company regularly assesses the 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.

(iv)

Liquidity risk:

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

16.	Canadian and United States accounting policy differences:

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

F-29

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

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

(a)

Consolidated statements of operations and comprehensive loss:

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

	2009			2008			2007

Loss for the year based on Canadian GAAP	$	(13,069,466	)	$	(14,885,744	)	$	(31,730,240	)
Amortization of acquired technologies (i)		1,060,541			1,060,541			1,059,255

Loss for the year and comprehensive loss based on United States GAAP	$	(12,008,925	)	$	(13,825,203	)	$	(30,670,985	)

	2009			2008			2007

Basic and diluted loss per share (ii)	$	(0.22	)	$	(0.25	)	$	(0.55	)


Weighted average number of common shares outstanding		55,835,356			55,835,356			55,804,674

Excludes common shares held in escrow for contingent additional payment related to the acquisition of Delex (note 6)		2,380,953			2,380,953			2,380,953

(i)

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

F-30

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

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

(ii)

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

(b)

Consolidated statement of changes in shareholders' equity:

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

									Additional
				Share					paid-in
	Warrants			capital		Deficit			capital			Total

Total shareholders' equity under U.S. GAAP, June 30, 2006	$	4,597,988		$	172,771,544	$	(90,933,372	)	$	2,183,380		$	88,619,540
Issued on exercise of options		–			15,554		–			(4,323	)		11,231
Issued on exercise of warrants		(44,680	)		134,055		–			–			89,375
Stock-based compensation		–			–		–			1,716,913			1,716,913
Loss for the year		–			–		(30,670,985	)		–			(30,670,985	)

Total shareholders' equity under U.S. GAAP, June 30, 2007		4,553,308			172,921,153		(121,604,357	)		3,895,970			59,766,074
Expiry of warrants		(1,402,769	)		–		–			1,402,769			–
Stock-based compensation		–			–		–			2,063,973			2,063,973
Loss for the year		–			–		(13,825,203	)		–			(13,825,203	)

Total shareholders' equity under U.S. GAAP, June 30, 2008		3,150,539			172,921,153		(135,429,560	)		7,362,712			48,004,844
Expiry of warrants		(3,150,539	)		–		–			3,150,539			–
Stock-based compensation		–			–		–			760,760			760,760
Loss for the year		–			–		(12,008,925	)		–			(12,008,925	)

Total shareholders' equity under U.S. GAAP, June 30, 2009		–			172,921,153		(147,438,485	)		11,274,011			36,756,679
Stock-based compensation		–			–		(1,818,334	)		1,761,112			(57,222	)
In-process research and development acquired		–			–		7,348,185			–			7,348,185
Amortization of in-process
research and development acquired		–			–		(4,343,317	)		–			(4,343,317	)

Total shareholders' equity under Canadian GAAP, June 30, 2009	$	–		$	172,921,153	$	(146,251,951	)	$	13,035,123		$	39,704,325

F-31

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

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

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

(c)

Investment tax credits:

Canadian GAAP requires that investment tax credits relating to development costs be accounted for as a reduction of development costs. United States GAAP requires such amounts to be accounted for as a reduction of income tax expense. There is no impact on the loss for the year as a result of this GAAP difference. For the year ended June 30, 2009, the Company recognized $283,792 (2008 - nil; 2007 - nil) of investment tax credits.

(d)

Income taxes:

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

The future tax assets and related valuation allowances calculated using United States GAAP were approximately $70,932,000, $65,212,000 and $68,741,000, respectively, for the years ended June 30, 2009, 2008 and 2007.

The Company fully recognizes its tax benefits, which are offset by a valuation allowance to the extent that it is more likely than not that the deferred tax assets will not be realized.

The parent company and its Canadian subsidiary each file a Canadian federal and Ontario income tax return. Generally, the Company is no longer subject to federal and provincial income tax examinations by Canadian tax authorities for year ends prior to June 30, 2004. However, years from 2001 to 2009 remain open with respect to related party transactions.

F-32

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

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

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

The Company recognizes any interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the year ended June 30, 2009, there were no such interest or penalties.

(e)

New accounting pronouncements:

On July 1, 2008, the Company adopted FASB Statement No. 157 ("SFAS 157"), Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value under United States GAAP, and expands disclosures about fair value measurements. SFAS 157 applies to other accounting pronouncements that require or permit fair value measurements. The adoption of this change did not have an impact on the Company's consolidated financial statements.

On July 1, 2008, the Company adopted FASB Statement No. 159 ("SFAS 159"), The Fair Value Options for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial instruments as fair value on a contract-by-contract basis. SFAS 159 applies to all reporting entities and contains financial statement presentation and disclosure requirements for assets and liabilities reported at fair value as a consequence of the election. The adoption of this change did not have an impact on the Company's consolidated financial statements.

(f)

Recently issued accounting pronouncements not yet adopted:

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

F-33

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

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

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

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

F-34

YM BIOSCIENCES INC.

Notes to Consolidated Financial Statements (continued)

(Expressed in Canadian dollars, unless otherwise noted)

Years ended June 30, 2009, 2008 and 2007

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

In June 2009, the FASB issued Statement No. 168 ("SFAS 168"), The FASB Accounting Standards Codification™ ("Codification") and the Hierarchy of Generally Accepted Accounting Principles to replace SFAS 162, The Hierarchy of Generally Accepted Accounting Principles, which became effective November 13, 2008. The Codification will become the source of authoritative United States GAAP recognized by the FASB to be applied by non-governmental entities. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative United States GAAP for SEC registrants. On the effective date of this statement, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company does not expect the adoption of SFAS 168 will have an impact on its consolidated financial statements other than changes to note disclosures.

F-35

Title of Each Class		Name of Each Exchange on Which Registered
Common Shares, No Par Value		NYSE Amex

US GAAP £		International Financial Reporting Standards as issued £		Other S
		by the International Accounting Standards Board

		Page

PART I		7
Item 1:	Identity of Directors, Senior Management and Advisors	7
A	Directors and Senior Management	7
B	Advisors	7
C	Auditors	7
Item 2:	Offer Statistics and Expected Timetable	7
A	Offer Statistics	7
B	Method and Expected Timetable	7
Item 3:	Key Information	7
A	Selected Financial Data	7
B	Capitalization and Indebtedness	8
C	Reasons for the Offer and Use of Proceeds	8
D	Risk Factors	8
Item 4:	Information on the Company	19
A	History and Development of the Company	19
B	Business Overview	21
C	Organizational Structure	38
D	Property, Plant and Equipment	38
Item 5:	Operating and Financial Review and Prospects	39
Item 6:	Directors, Senior Management and Employees	49
A	Directors and Senior Management	49
B	Compensation	53
C	Board of Directors Practices	61
D	Employees	65
E	Share Ownership	65
Item 7:	Major Shareholders and Related Party Transactions	66
A	Major Shareholders	66
B	Related Party Transactions	67
C	Interests of Experts and Counsel	67
Item 8:	Financial Information	67
A	Consolidated Statements and Other Financial Information	67
B	Significant Changes	67
Item 9:	The Offer and Listing	67
A	Offer and Listing Details	67
B	Plan of Distribution	68
C	Markets	68
D	Selling Shareholders	68
E	Dilution	69
F	Expenses of the Issue	69
Item 10:	Additional Information	69
A	Share Capital	69
B	Articles of Continuance	75
C	Material Contracts	75
D	Exchange Controls	75
E	Taxation	77
F	Certain US Federal Income Tax Considerations	79
G	Dividends and Paying Agents	86
H	Statements by Experts	86
I	Documents on Display	86
J	Subsidiary Information	87
Item 11:	Quantitative and Qualitative Disclosures About Market Risk	87
Item 12:	Description of Securities Other Than Equity Securities	87
A	Debt Securities	87

B	Warrants and Rights	87
C	Other Securities	87
D	American Depository Shares	88
PART II		88
Item 13:	Defaults, Dividend Arrearages and Delinquencies	88
Item 14:	Material Modification to the Rights of Security Holders and Use of Proceeds	88
Item 15:	Controls and Procedures	88
Item 16A:	Audit Committee Financial Expert	89
Item 16B:	Code of Ethics	89
Item 16C:	Principal Accounting Fees and Services	89
Item 16D:	Exemptions from the Listing Standards for Audit Committee	90
Item 16E:	Purchases of Equity Securities by the Issuer and Affiliated Purchases	90
PART III		91
Item 17:	Financial Statements	91
Item 18:	Financial Statements	91
Item 19:	Exhibits	91

	Years Ended June 30
	2009		2008		2007		2006		2005

Consolidated balance sheet

Cash, cash equivalents and short-term deposits	$	52,051	$	58,101	$	75,572	$	88,341	$	30,569

Working capital	$	39,501	$	52,233	$	68,314	$	86,418	$	28,293

Total assets	$	46,070	$	63,073	$	81,740	$	100,048	$	38,200

Long-term obligations	$	2,898	$	4,414	$	8,930	$	844	$	327

Common Shares	$	172,921	$	172,921	$	172,921	$	172,772	$	87,488

Shareholders’ equity (net assets)	$	39,704	$	52,013	$	64,835	$	94,748	$	33,840

Number of Common Shares issued and outstanding (000s)		55,835,356		55,835,356		55,835,356		55,781,523		38,584,288

The above number of Common Shares excludes common shares held in escrow for contingent additional payment related to the acquisition of Delex		2,380,953		2,380,953		2,380,953		2,380,953		2,777,778

Date	Country	Indication
April 2005	China	Nasopharyngeal carcinomas
April 2005	Colombia	Head an Neck
June 2006	Argentina	Head and neck
June 2006	India	Head and neck
April 2007	Cuba	Head and neck, refractory children glioma, adult glioma
June 2007	Peru	Head and neck
October 2007	Ukraine	Head and neck, refractory children glioma and adult glioma
July 2008	Argentina	Head and neck
July 2008	Paraguay	Head and neck
August 2008	Philippines	Glioma
September 2008	Sri Lanka	Head and neck
November 2008	Indonesia	Stage III/IV glioma
November 2008	Gabon	Head and neck
November 2008	Mauritania	Glioma
January 2009	Cambodia	Head and neck & glioma
March 2009	Brazil	Glioma
May 2009	Vietnam	Head and neck and glioma
July 2009	Algeria	Head and neck

Name	Number of Common Shares		Percentage of Common Shares Outstanding			Common Shares Held Under Option		Exercise Price		Expiration Date
David G.P. Allan		1,039,659		1.78	%		1,699,502		$0.50-$4.50		2010-2019

Thomas I.A. Allen		-		-			184,135		$0.50-$4.50		2010-2019

Mark Entwistle		-		-			171,940		$0.50-$4.50		2010-2019

Gary Floyd		-		-			198,495		$0.50-$5.74		2016—2019

Henry Friesen		-		-			184,745		$0.50-$4.50		2011-2019

Philip Frost		1,000		*			86,585		$0.50-$1.53		2017-2019

Vincent Salvatori		-		-			396,626		$0.50-$4.36		2013-2019

Francois Thomas		-		-			86,585		$0.50-$1.53		2017-2019

Sean Thompson		19,500		*			348,675		$0.50-$4.50		2010-2019

Leonard Vernon		-		-			494,626		$0.50-$4.50		2008-2019

Gilbert Wenzel		-		-			179,745		$0.50-$4.50		2011-2019

Tryon M. Williams		20,100		*			276,878		$0.50-$4.50		2010-2019

Name of Shareholder		Approximate Number of Common Shares Beneficially Owned, Directly or Indirectly, or over which Control or Direction is Exercised				Percentage of Outstanding Common Shares Represented
Accipiter Capital Management, L.L.C.			5,915,258				10.16	%

Total Number of Holders of Record		Total Number of Common Shares Issued and Outstanding				Number of US Holders of Record				Number of Common Shares Held by US Holders of Record				Percentage of Common Shares Held by US Holders of Record
73			58,225,458				33				22,279,017				38.26	%

	Common Shares
	NYSE Amex(1)				TSX
Fiscal	High		Low		High		Low
	US$		US$		C$		C$
2005		3.33		1.96		4.1		2.45
2006		6.5		2.35		7.4		2.93
2007		4.15		1.25		4.88		1.55
2008		1.89		0.84		1.98		0.86
Quarter 1		4.05		2.58		4.4		2.91
Quarter 2		3.45		2.62		3.9		2.98
Quarter 3		4.15		1.25		4.88		1.55
Quarter 4		2.11		1.5		2.39		1.77
2009		2.24		0.20		2.42		0.27
(to and including September 23)
January		0.43		0.32		0.49		0.40
February		0.34		0.23		0.41		0.27
March		0.40		0.20		0.48		0.29
April		0.53		0.37		0.63		0.46
May		0.60		0.42		0.63		0.48
June		0.68		0.49		0.73		0.55
July		0.70		0.48		0.75		0.55
August		2.24		0.57		2.42		0.63
September		2.00		1.40		2.14		1.51
(to and including September 23)

Note:
(1) Commenced trading on the NYSE Amex (formerly AMEX) on October 1, 2004.

	Fees Billed
Service	2008		2009
Audit Fees	$	352,500	$	250,000
Audit Related Fees		—		—
Tax Fees	$	49,500	$	53,000
All Other Fees		—		—
Total Fees Billed	$	402,000	$	303,000

	YM BIOSCIENCES INC.

	By:	/s/ David G. P. Allan
		David G. P. Allan
		Chairman and Chief Executive Officer

	Page
Report of Independent Registered Public Accounting Firm		F-2

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Consolidated Balance Sheets as at June 30, 2009 and 2008		F-4

Consolidated Statements of Operations and Comprehensive Loss and Deficit for the years ended June 30, 2009, 2008 and 2007		F-5

Consolidated Statements of Cash Flows for the years ended June 30, 2009, 2008 and 2007		F-6

Notes to the Consolidated Financial Statements		F-7