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Dragon Pharma announces 2007 full year financial results

VANCOUVER, March 31 /PRNewswire-FirstCall/ - Dragon Pharmaceutical Inc. ("Dragon" or the "Company" TSX: DDD; OTCBB: DRUG; BBSE: DRP), a leading international pharmaceutical company, today announced its financial results for the fiscal year ended December 31, 2007.

2007 Full Year Financial Highlights:

- Sales increased 63.7% to $85.8 million from $52.4 million in 2006

- Chemical Division's sales increased 50.4 % to $68.9 million from

$45.8 million in 2006.

- Pharma Division's sales increased 156% to $16.9 million from

$6.6 million in 2006.

- Gross profit increased 115% to $17.8 million from $8.25 million in


- Gross margin increased to 21% from 16% in 2006.

- Chemical Division's gross margin rose to 28% from 20% in 2006.

- Pharma Division's gross margin was -9%, improved from -13% in


- Net income from continuing operations was $4.9 million or $0.08 per

share, increased from a loss of $0.9 million or ($0.01) per share in


- Net loss from discontinued operations was $2.4 million or ($0.04) per

share, compared to an income of $5.4 million or $0.08 per share in


2007 Full Year Operational Highlights:

- Dragon sold its EPO business to fully focus on its core antibiotic

business that has showed significant growth in the past few years.

- Under the favorable market conditions, the Company further increased

its production level and achieved a utilization rate of 95% for 7-ACA

production and 62% for Clavulanic Acid production.

- An enzymatic technology has been successfully adopted for the

production of 7-ACA, which will lower the production costs by

approximately 10% and additionally reduce the amount of capital

investment pertaining to environment issues.

- Dragon continued to be the third largest producer and largest

exporter of 7-ACA and the dominating market leader of Clavulanic Acid

in China, with total sales volume of 568 tons for 7-ACA and 39 tons

for Clavulanic Acid.

- With a more focused antibiotic product portfolio and effective

marketing strategies, the Company has substantially expanded its

market share and realized an increase in sales quantity and sales

revenue of 128% and 156% respectively for its formulation drugs in

the Chinese market.

- Subsequent to the year end of 2007 and as previously announced, the

Company increased its annual production capacity for 7-ACA and

Clavulanic Acid by 30% and 56% respectively in order to meet rising

customer demand.

- Two new antibiotic products, Ceftazidime and Cefalexin, have been

successfully launched into the Chinese market.

Results for the Year Ended December 31, 2007

During 2007, the Company made a strategic decision to sell its EPO Division and fully focus on its chemical and formulation businesses that have shown significant growth since establishment in 2004. Dragon's efforts have successfully increased its sales, productions and profits for both the Chemical Division and Pharma Division. In the full year 2007, the total sale revenues reached $85.8 million, representing an increase of 63.7% from $52.4 million recorded for the full year 2006.

The Chemical Division continued to be the main growth driver and contributed 80% of the revenues for the Company in 2007. Under the favorable market conditions, the Company further increased its production level and achieved a utilization rate of 95% for 7-ACA production and 62% for Clavulanic Acid production. As the strong demand pushed up the market price for 7-ACA, the Company realized 568 tons of sales, an increase of 27% compared with 448 tons of sales for the same period of 2006. Mainly driven by the rising customer demand in the Indian market, sales revenue from Clavulanic Acid also increased by 49% to $16.8 million while total sales quantity increased 63% to 39 tons, up from 24 tons in 2006. As a result of the increased sales, combined with higher facility utilization and improved production technology, the Chemical Division's gross margin for 2007 increased to 28.13% from 19.86% for 2006.

The Company views its research and development capability as a competitive edge and constantly strives to improve its production technology so as to enhance core capability. An important achievement that was completed in 2007 was the successful adoption of an enzymatic process to the production of 7-ACA. Currently the Company is in the process of converting its entire production to incorporate this innovative technology. It is expected that the overall adoption will further lower the production costs and additionally reduce the amount of capital investment pertaining to the environment protection. In addition, subsequent to the year end of 2007, the Company has increased its annual production capacity for 7-ACA and Clavulanic Acid by 30% and 56% respectively in order to meet rising customer demand. Management believes that all these improvements will further reinforce its market leadership position and contribute positively to its financial performance in the coming years.

With a more focused antibiotic product portfolio and effective marketing strategies, the Company has also substantially increased its sales and improved its gross margin for the formulation drugs. By strengthening its sales team and utilizing its national distribution network and close customer relationship, the Company has significantly expanded its market share in the Chinese market. Mainly due to the increased sales volume and selling prices, revenues for the Pharma Division have climbed to $16.9 million in 2007, up 156% from $6.6 million in 2006, and the gross margin has risen to -9.4% in 2007 compared to -12.8% in 2006.

The total operating expenses were $10.9 million in 2007 as compared to $7.7 million in 2006. The increase reflects an increase of the non-cash stock-based compensation expense and consulting fees related to Sarbanes-Oxley compliance and increased selling expenses due to an increase in sales in both the Chemical and Pharma Divisions.

As a result of the strong sales growth as well as the improved margins for both divisions, the Company realized an after-tax income from continuing operations of $4.9 million for 2007 as compared to an after-tax loss from continuing operation of $0.9 million for the year of 2006. The Company also recognized an after-tax loss from discontinued operations of $2.40 million, which was mainly due to the impact of a non-cash write-off of $3.11 million of intangible assets and goodwill with the sales of the Biotech Division. The net income was $2.50 million or $0.04 per share, which was the net of $4.9 million or $0.08 per share net income from continuing operations and $2.40 million or $0.04 per share net loss from discontinued operations.

"2007 has been an extremely positive year for Dragon Pharma," said Dragon's Chairman and CEO Mr. Yanlin Han. "The Company's solid year-over-year growth demonstrates our effectiveness and capabilities in executing our core business strategy. To achieve our goal to become a leading vertically integrated antibiotic drugs manufacturer, we will continuously broaden our product portfolio, expand market share, lower production cost by incorporating innovative technology, improve manufacturing process and efficiencies, strengthen our management team and enhance R&D capability. In early 2008, the Company has successfully launched two new products ceflazidime and cefalexin. With the expansion of our product portfolio alongside increased annual production capacity for our core products 7-ACA and Clavulanic Acid, we are confident in our ability to accomplish growth in revenues and profitability to maximize shareholder value."

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

Safe Harbor Statement

This press release contains forward looking statements, including but not limited to, that the Company will continue to experience growth in sales of its main products, that it will continue to be able to improve its production technology and efficiency, that it will continue to achieve continuous growth in business and profitability in the near future. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward looking statements. Readers should not place undue reliance on forward looking statements, which only reflect the views of management as of the date hereof. The Company does not undertake the obligation to publicly revise these forward looking statements to reflect subsequent events or circumstances. Readers should carefully review the risk factors and other factors described in its periodic reports filed with the Securities and Exchange Commission.

Dragon Pharmaceutical Inc

Selected Financial Data

(In Millions of US Dollars, Except Per Share Data)


For the full For the full (Decrease) from

year of 2007 year of 2006 2006 to 2007


- Chemical Division 68.88 45.80 50.4%

- Pharma Division 16.90 6.61 156%


Total Revenues 85.78 52.41 63.7%

Gross Profit:

- Chemical Division 19.37 9.09 113%

- Pharma Division (1.58) (0.84) (88%)


Total Gross Profit 17.79 8.25 115%

Gross Margin:

- Chemical Division 28.13% 19.86%

- Pharma Division (9.36%) (12.77%)


Overall Gross Margin 20.74% 15.74%

Net Income (loss) from

Continuing Operations 4.90 (0.90)

Net Income (Loss) from

Discontinued Operations (2.40) 5.43


Net Income 2.50 4.53

Earnings per Share

- from Continuing Operations 0.08 (0.01)

- from Discontinued Operations (0.04) 0.08


- Total 0.04 0.07

CONTACT: Dragon Pharmaceutical Inc., Maggie Deng, Chief Operating Officer or Karen Huang, Manager, Business Research & Development, Telephone: (604) 669-8817, or North America Toll Free: 1-877-388-3784, Email:, Website:

SOURCE Dragon Pharmaceutical Inc.
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