DRAXIS Health Reports Fourth Quarter and Year E...(of 2007 compared to the significant lowe...),Health

levels of the third quarter of 2007. Nevertheless, as expected,

Hectorol(R) volumes did not achieve the record levels of 2006 and in

particular the fourth quarter of 2006.

Included in this segment's revenues for the quarter are

approximately $0.9 million ($2.6 million for 2007) in product

transfer activities related to the Company's new Johnson & Johnson

Consumer contract.

- Product gross margin percentage decreased to 27% in the fourth

quarter and to 24% for 2007 compared to 39% and 36%, respectively,

for the same periods of 2006. The decrease was driven by lower

sterile volumes impacting margins through lower plant utilization

and a lower percentage of sterile volumes as part of the overall

product mix.

- Operating income for the fourth quarter of 2007 was $0.2 million and

for 2007 was $2.6 million compared to operating income of

$4.2 million and $13.0 million respectively for the same periods in

2006 due to lower sterile volumes and increased severance costs,

partially offset by a revaluation of incentive awards.

- During the fourth quarter of 2007, the contract manufacturing

division continued to implement procedures to reduce production

delays that have in the past resulted in shipments not being

released in a timely manner, impacting quarterly results for most of

2007. While the Company has made improvements in expediting the

process times for orders, shifting customer shipment schedules and

reprioritizing projects associated with organizational changes, the

improvements have to date only partially removed the backlog of

built-up demand. The procedures being put in place to remove the

backlog of demand and to improve t
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