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3SBio Inc. Announces Unaudited Fourth Quarter and Fiscal Year 2007 Results

e same period in 2006.

Cost of revenues increased by 50.3% to RMB17.4 million (US$2.4 million) in 2007 from RMB11.6 million in 2006. The increase was primarily attributed to costs associated with production increase relating to the increase in sales volume throughout the year.

Gross Profit. As a result of the foregoing, gross profit increased by 23.3% to RMB39.9 million (US$5.5 million) in the fourth quarter 2007 from RMB32.4 million for the same period in 2006. Gross margin decreased to 87.4% in the fourth quarter 2007 from 92.0% for the same period in 2006.

In 2007, gross profit grew 40.1% to RMB162.7 million (US$22.3 million) from RMB116.2 million in 2006. However, the gross margin of 90.3% in 2007 remained in line with the gross margin of 90.9% in 2006.

Operating Expenses. In the fourth quarter 2007, total operating expenses increased by 42.8% to RMB33.8 million (US$4.6 million) as compared to the same period in 2006, which was primarily attributed to the increase in research and development expenses of TPIAO and higher personnel costs and bonuses. In 2007, our total operating expenses increased by 43.4% to RMB114.2 million (US$15.7 million) from RMB79.6 million in 2006.
-- Research and Development Expense: Our research and development expense

increased by 58.4% to RMB3.7 million (US$0.5 million) in the fourth

quarter 2007 from RMB2.3 million for the same period in 2006. Research

and development expense as a percentage of total net revenues increased

to 8.1% in the fourth quarter 2007 from 6.7% for the same period in

2006. Our research and development expense increased by 90.7% to

RMB11.6 million (US$1.6 million) in 2007 from RMB6.1 million in 2006.

Research and development expense as a percentage of total net revenues

increased to 6.5% in 2007 from 4.8% in 2006. The overall increase in

research and development expenses for the fourth quarte

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