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Strong Demand Pushes up Both Prices and Sales Volumes for Dragon's Main Products

VANCOUVER, Oct. 3 /PRNewswire-FirstCall/ - Dragon Pharmaceutical Inc. (TSX: DDD; OTCBB: DRUG; BBSE: DRP) today announces major increase in both prices and sales volumes for its main products. Further, under favorable market conditions, the Company has been operating near its maximum capacity to meet rising customer demand.

During the first eight months ended August 31, 2007, the Company has achieved significant increase in both price and sales volume for its main product 7ACA. The market price for 7ACA in China, including value added tax, has risen 27%, from 750 RMB/kg in January 2007 to 950 RMB/kg in August 2007, representing a record high price for the past two years. Total sales quantity of 7ACA reached 360 tons, an increase of 38% compared with 261 tons of sales for the same period of 2006.

The prime reason for the increase is because the rising demand for 7ACA has exceeded supplies. On one hand, the Chinese Government's effort to expand its National Medical Coverage in the rural area has triggered a strong demand for the basic antibiotic drugs; on the other hand, export from China continues to increase as other international 7ACA manufacturers outside of China continue to curtail their production levels. China is noted for its low cost and large-scale production of active pharmaceutical ingredients (APIs), and has fast emerged as a powerful player in the global API market with an average growth rate exceeding 25%. Meanwhile, since the prices of Penicillin intermediates still remain high, many customers have purchased cephalosporins as alternatives, which has further pushed up the demand for 7ACA products. During the first eight months of 2007, Dragon has maintained a utilization rate of over 90% for its production facility, compared to approximately 67% for the same period in 2006, in order to keep up with the demand from its existing and new customers.

Another factor affecting the price of 7ACA is the increased cost of raw materials, energy and especially the environment protection. Management realizes that the best strategy to lower environmental protection costs is to develop more environment-friendly technology. Currently, most 7ACA manufacturers in China still use a chemical process to produce 7ACA, which requires huge capital investments to reduce pollution level. The enzymatic method, however, eliminates the use and disposal of compounds that are toxic and harmful to the environment. It is expected that enzymatic method will replace the chemical production method in the future. Dragon has successfully developed the enzymatic method, and the product quality from this most advanced technology has been proven by recent customer trials. Dragon management believes that the large scale adoption of this new technology in the future will not only further increase our production capacity but also improve on our production cost structure. All these improvements will further strengthen our competitive advantage over our competitors in the market.

The Company has also continued its strong sales momentum for 7ACA downstream formulation drugs, mainly due to the strong demand and effective market activities. Compared to the level in the beginning of this year, the prices for the formulation drugs have risen by an average of 12%. The sale volume has jumped from 6.35 million units in January to 10.50 million units in August 2007.

The demand for Clavulanic Acid keeps rising as well, especially from Indian market which is growing at an annual growth rate of 15-20%. As the dominating market leader in China and top supplier in the Indian market, the Company has realized 27.5 tons of sales during the first eight months this year, which is 126% of 21.8 tons of production output. Export sales reached 17.8 tons, accounting for 66% of total sales.

"The price increases accompanied by strong growth in sales volumes suggest robust demand conditions for our main products," said Mr. Yanlin Han, Chairman and CEO of the Company, "We believe that this market trend will continue through the rest of this year. The Company is considering new initiatives to further increase the production level to meet the growing demand from customers."

This press release contains forward looking statements, including but not limited to, that the Company will continue to experience growth in sales of 7ACA, Clavulanic Acid and formulation drugs, that it will continue to be able to improve its technology and product quality. 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.

CONTACT: Dragon Pharmaceutical Inc., Maggie Deng or Karen Huang, Telephone: (604) 669-8817 or North America Toll Free: 1-877-388-3784, Email:, Website:

SOURCE Dragon Pharmaceutical Inc.
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