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Dragon Pharma Reports 2008 Record First Quarter Financial Results

Published Date: 2008-05-14


Vancouver, Canada – May 14, 2008 - Dragon Pharmaceutical Inc. ("Dragon Pharma" or the "Company" TSX: DDD; OTCBB: DRUG; BBSE: DRP), a leading international pharmaceutical company, today announced its financial results for the first quarter ended March 31, 2008, achieving record growth in both revenue and net profit, with an earnings per share (“EPS”) of $0.03 for the quarter.

First Quarter 2008 Financial Highlights:

· Sales increased 112% to $35.87 million from $16.90 million for the same period of 2007

--Cephalosporin Division’s sales increased 87% to $23.73 million from $12.66 million for the same period of 2007

--Penicillin Division’s sales increased 186% to $12.14 million from $4.24 million for the same period of 2007

· Gross profit increased 65% to $6.17 million compared to $3.75 million for the same period of 2007

· Net income increased 131% to $1.96 million compared to $0.85 million for the same period of 2007

· Basic and diluted EPS increased to $0.03 compared to $0.01 for the same period of 2007

· Net cash generated from operating activities increased to $3.97 million from $0.64 million for the same period of 2007



“Our record financial results in the first quarter demonstrate our solid execution of our business strategy and ongoing focus on operational excellence,” said Mr. Yanlin Han, Dragon’s Chairman and Chief Executive Officer. “During the quarter, our purchasing prices of agricultural and petrochemical materials all increased, while our unit production costs actually declined due to our continuous efforts in optimizing our manufacturing process and innovative technology platform. We believe our strategy of providing high quality antibiotic products at lower prices, uniquely positions Dragon Pharma to compete in China and other emerging markets.”



Results for the First Quarter Ended March 31, 2008

Total Revenues

Total revenues increased 112% to $35.87 million from $16.90 million for the same period of 2007. Record results were driven by strong market demand and solid execution of its business strategy as the Company achieved substantial growth in revenues and gross profits for all its products.

Gross Profit

Gross profit was $6.17 million, a 65% increase from $3.75 million from the first quarter of 2007. Overall gross profit margins were 17% in the first quarter of 2008 compared to 22% in the corresponding period of 2007. The overall gross margin slightly declined due to an increase in sales contribution of formulation drugs and the introduction of Cefalexin in January 2008. However, the Company achieved gross margin improvement in every product line within the two divisions.

Segment Performances



Cephalosporin Division



Cephalosporin Division, which operates the production and sales of 7-ACA and formulation drugs, maintained its strong sales momentum during the first quarter of 2008. Sales quantity of 7-ACA increased 18% to 145 tons and sales revenue increased 26% to $13.56 million as compared to the same period of 2007. While raw material costs have increased, the Company successfully reduced the unit production costs with the adoption of enzymatic technology and continuous improvement in manufacturing process and efficiencies. As a result, the gross margin of 7-ACA increased to 27% from 25% for the same period of 2007.



Management believes that the developing formulation business properly positions the Company to 1) further benefit from its vertically integrated operations, 2) reduce its exposure to 7-ACA market fluctuations, 3) increase its brand name recognition and 4) strengthen its dominant market position. Cephalosporin formulation drug sales increased 443% to $10.17 million due to robust market demand and government development of public health services. Sales volume increased 257% to 54.80 million units, up from 15.33 million units in the same period of 2007. As a result of the increased market share and introduction of additional higher margin products, gross margin improved to (0.32%) from (1.41%) for the corresponding period of 2007.



Penicillin Division



The Penicillin Division, which operates the production and sales of Clavulanic Acid and Cefalexin, recorded $12.14 million of sales, which accounted for 34% of the total sales for the Company in the first quarter of 2008. The Company continued to remain as a dominant market leader in China and top supplier in India for Clavulanic Acid, demonstrated by successfully increasing its sales 65% in China and 26% in international markets. Mainly due to the increase in both sales volume and selling prices, the Gross margin for Clavulanic Acid increased to 34% from 27% for the same period of 2007.



Cefalexin, launched in January 2008 into the Chinese market has become an important growth driver for the Company. Sales reached $4.27 million, accounting for 12% of the total sales in the first quarter of 2008.



Net Income

Due to the strong growth in sales and margins for all the products, net income in the first quarter of 2008 increased 131% to $1.96 million or $0.03 per basic and diluted share from $0.85 million or $0.01 per basic and diluted share for the same period of 2007.

Corporate Update

The Company announced that the recent earthquake in the Sichuan province of China has not affected the company’s operations and subsidiaries in Datong City, Shanxi Province.

About Dragon Pharmaceutical Inc.

Dragon Pharmaceutical, headquartered in Vancouver, Canada, is a leading manufacturer and distributor of a broad line of high-quality antibiotic products including 7-ACA, a key intermediate to produce cephalosporin antibiotics, clavulanic acid, and formulated cephalosporin antibiotic drugs. Dragon is the third largest 7-ACA producer and the first manufacturer and market leader of clavulanic acid products in China. Dragon utilizes its nationwide sales distribution network, close customer relationships, understanding of local markets and customer needs and low cost structure to outperform its international and domestic peers. With an annual capacity of 780 tons, Dragon is the largest exporter of 7-ACA in China. To learn more about Dragon Pharmaceutical Inc., please visit www.dragonpharma.com.