Dragon Pharmaceutical Inc.

Dragon Pharmaceutical Inc.

March 30, 2005 17:47 ET

Dragon Announces 2004 Year End Results



OTC Bulletin Board SYMBOL: DRUG

MARCH 30, 2005 - 17:47 ET

Dragon Announces 2004 Year End Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 30, 2005) - Dragon
Pharmaceutical Inc. (TSX:DDD)(OTCBB:DRUG)(BBSE:DRP) today announced
results for the twelve-month period ended December 31, 2004.

Highlights for 2004

- Generated revenues of $3.71 million and a net loss of $0.94 million,
or $0.05 per share for the full year of 2004.

- Continued momentum in developing the International market; Launched
rh-Erythropoietin ("EPO") product in Ecuador, Dominican Republic, Kosovo
and Trinidad-Tobago in addition to existing markets in China, India,
Egypt, Peru and Brazil.

- Entered into an agreement with Suzhou Zhongkai Bio-Pharmaceuticals
Company Limited to in-license the exclusive right to commercialize its
Recombinant Human Granulocyte Colony Stimulating Factor ("rhG-CSF")
product worldwide, excluding China.

- Subsequent to year-end:

- Completed the acquisition of Oriental Wave Holding Limited ("Oriental
Wave") and transformed itself into a diversified and growth oriented
pharmaceutical company with three key business units: Chemical division
for bulk pharmaceutical chemical, Biotech division for recombinant drugs
(EPO and G-CSF) and Pharma division for prescription and
over-the-counter drugs.

- Decided to construct a new state-of-the-art EPO production facility in
Datong city, China and relocate the EPO production from the current
facility in Nanjing city, China which will be closed in August 2005.

- Foreclosed on 2.23 million Dragon's common shares from Dr. Liu that
partially secured debt owed by Dr. Liu to the Company.

Financial Review for 2004

The Company posted revenues of $3.71 million in 2004 compared to $3.65
million in 2003. Net loss for 2004 was narrowed down to $0.94 million or
$0.05 per share from a loss of $1.99 million or $0.10 per share in 2003.
Sales in China and outside of China were $2.66 million and $1.05
million, respectively for 2004 compared to $2.26 million and $1.39
million respectively for 2003.

During 2004, an 18% growth in sales was achieved in China, which was
partially offset by lower international sales outside of China. During
2004, the Company implemented a new non-fixed sales compensation system
for the Company's direct sales team in China, which provided more
incentive for the Company's sales representatives to focus on delivering
results. International sales in 2004 were lower than those in 2003
because the Company sold product with a limited shelf life at a reduced
price in Brazil during 2003, and we did not experience similar sales
during 2004.

After the completion of the acquisition of Oriental Wave, the new Board
of Directors decided to build a brand new state-of-art EPO production
facility in Datong city, China and to relocate the EPO production from
its current facility in Nanjing city. The Company will locate the new
EPO production site adjacent to the Chemical division, which already
includes the entire basic production infrastructure such as power,
steam, purified water supply and water treatment facilities. As a result
of the relocation decision, Dragon has decided to close the Nanjing
facility in August 2005 and has written off and accelerated the
depreciation and amortization of certain assets during 2004 of $938,000.
This write off was offset by the gain from foreclosure of 2.23 million
Dragon shares previously owned by Dr. Liu and that partially secured his
amount due to the Company. According to the comprehensive settlement
agreement dated April 4, 2004, Dr. Liu placed 2.23 million Dragon's
shares in escrow as partial security for his amount due to the Company.
These shares, which were forfeited effective December 31, 2004 and are
to be cancelled, were valued at $2.61 million and resulted in the
Company's recovery of $2.11 million of the amount that was previously
written-off in prior years. Dr. Liu still owes the Company approximately
$2.48 million although this balance due is carried on the Company's
balance sheet at a nominal value of $100. Dragon is considering what
further actions may be taken against Dr. Liu.

"We are encouraged by the growth of our market in China. On the
international front, we continue to receive remarkable progress by
receiving four additional market approvals during the second half of
2004: Ecuador, Dominican Republic, Trinidad-Tobago and Kosovo," stated
Dr. Alexander Wick, President of Dragon Pharmaceutical. "We believe our
decision to relocate the EPO production site to Datong will allow us to
increase the EPO output by two to three times than that of the current
facility in Nanjing and to capitalize on infrastructure advantages and
the efficiency of local operational management. As previously announced,
it is the Company's intention to supply EPO product from this new
facility to fulfil the anticipated demands of the Chinese and other
developing markets which are currently supplied from our Chinese
facility in Nanjing while we will use the new EPO to be produced in
Europe specifically for the European market as well as for new
indication developments in the EPO field. Although the main European
patent for EPO expired in most European countries in December 2004, the
European regulatory authority, EMEA, has not clearly indicated the
approval process for the EPO from generic competitors. However, we are
confident that we will be among the early candidates to enter the market
with our new European made EPO product."

About Dragon Pharmaceutical Inc.

On January 12, 2005, Dragon completed the acquisition of Oriental Wave
Holding Limited. As a result of the acquisition, Dragon has transformed
itself into a diversified generic pharmaceutical diversified and growth
oriented pharmaceutical company with three key business units: Chemical
division for bulk pharmaceutical chemical (Clavulanic Acid and 7-ACA),
Biotech division for recombinant drugs (EPO and G-CSF) and Pharma
division for prescription and over-the-counter drugs. The Company, after
the acquisition, has significantly increased the size of operations and
now has approximately 3,000 employees, including over 1,200 sales
representatives in China, four manufacturing facilities (three in Datong
city and one in Nanjing city) and approximately 40 key products
currently in the market. Selected 2004 pro-forma financials for the
newly combined Dragon will be announced in a separate press release

This press release contains forward looking statements. These statements
are subject to certain risks and uncertainties that could cause actual
results to differ materially from those anticipated in the forward
looking statement. Factors that might cause such a difference include,
but are not limited to, the following: (1) risks and uncertainties
relating to the political and regulatory environment in China; (2) that
the Company will be able to successfully construct and operate a biotech
production facility in Datong, China that will be able increase
production and operate more efficiently than its facility in Nanjing;
and (3) that the Company will be able to successfully sell its EPO
product in Europe.

Readers should not place undue reliance on forward looking statements,
which only reflect the view 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 with the Securities and Exchange

For the Year Ended December 31

(in U.S. Dollars) 2004 2003
Sales $ 3,705,261 $ 3,648,149
Cost of sales 1,546,028 1,184,896
Gross profit 2,159,233 2,463,253

Selling, general and
administrative expenses (3,354,522) (3,391,430)
Depreciation of property and
equipment and amortization of
license and permit (706,941) (743,080)
Net write off of land-use right
and property and equipment (937,777) (165,912)
New market and EPO development
expenses (246,080) (216,560)
Provision for doubtful accounts - (29,450)
Loan interest expense (4,223) (6,357)
Stock-based compensation - -
Development of insulin, G-CSF and rhTPO - -
Recovery (write-down) of amount
owing from related party 2,106,486 -

Operating income (loss) (983,824) (2,089,536)
Interest and other income 41,106 138,802

Loss before income taxes (942,718) (1,950,734)
Income taxes - 44,000
Net (loss) for the year $ (942,718) $ (1,994,734)

(Loss) per share - basic and diluted $ (0.05) $ (0.10)

Weighted average number of common
shares outstanding
Basic and diluted 20,551,440 20,348,195

As at December 31

(in U.S. Dollars) 2004 2003
Current Assets
Cash and short term securities $ 2,161,781 $ 3,126,667
Accounts receivable 1,382,019 1,265,676
Inventories 585,565 1,090,464
Due from a director 100 -
Prepaid and deposits 401,727 139,595
Total current assets 4,531,192 5,622,402
Property and equipment 873,036 2,089,352
Due from related party - Hepatitis
B vaccine project - 100
Patent rights - related party - 500,000
License and permit 2,372,207 2,924,198
Total assets $ 7,776,435 $ 11,136,052

Accounts payable and accrued
liabilities $ 1,548,144 $ 1,428,257
Stockholders' Equity
Share capital
Authorized: 50,000,000 common shares at
par value of $0.001 each
Issued and outstanding: 18,376,000
common shares
(December 31, 2003 - 20,462,000
common shares) 18,376 20,462
Additional paid in capital 24,176,970 26,708,870
Accumulated other comprehensive (loss) (34,807) (32,007)
Accumulated deficit (17,932,248) (16,989,530)
Total stockholders' equity 6,228,291 9,707,795
Total liabilities and
stockholders' equity $ 7,776,435 $ 11,136,052


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