Dragon Pharmaceutical Inc.
OTC Bulletin Board : DRUG

Dragon Pharmaceutical Inc.

November 14, 2006 19:00 ET

Dragon Announces 2006 Third Quarter Results With $2.99 Million Net Income

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 14, 2006) - Dragon Pharmaceutical Inc. (TSX:DDD)(OTCBB:DRUG)(BBSE:DRP) today announced financial results for the three and nine months ended September 30, 2006. As previously disclosed, Dragon sold a part of its formulation business effective July 1, 2006. Affected items on 2005 financial statements were reclassified to reflect the sale of part of the formulation business during the third quarter of 2006.

Highlights for the three and nine months ended September 30, 2006

- Sales for the third quarter increased by 41% to $11.91M from $8.44M for the same period in 2005; total sales for the first nine months was $38.96M, an increase of 74% as compared to the same period in 2005;

- Gross profit was $1.07M for the third quarter and $6.10M for the nine months;

- Earnings per share increased to $0.05 for the third quarter and $0.06 for the nine months.

Financial Summary

Dragon reported an increase of 41% for sales for the third quarter ended September 30, 2006 as compared to the same period of 2005, mainly due to increasing sales of chemical products. Of the total sales of $11.91M, 83% were from the Chemical Division, 13% were from Pharma Division and 4% were from Biotech Division. Sales for the nine months ended September 30, 2006 increased 74% to $38.96M from $22.37M for the same period in 2005. The Company continues to expand the international market outside of China, which accounted for 42% of the total sales for the nine month period, while it was only 23% for the same period in 2005.

Gross profit and gross margin for the third quarter were $1.07M and 9%. The slight decrease in gross margin as compared to the same period last year was mainly due to lower market prices for 7ACA products. Gross profit for the nine months 2006 was $6.10M with a gross margin of 15.6%.

Total operating expenses for the third quarter decreased 12% as compared to the same period last year. The interest expense for the first nine months of 2006 was $2.34M, of which $1.13M was cash interest expense and the remaining $1.21M was non-cash accreted interest expense on long-term payables.

During the third quarter, the Company completed the sale of a substantial portion of its formulation business and the registration documentation services to an unaffiliated party, resulting in a one-time gain after taxes of $4.06M.

Net income for the three and nine months ended September 30, 2006 were $2.99M, or $0.05 per share, and $3.77M, or $0.06 per share, respectively.

The Company remains as one of the three major manufacturers of 7ACA in China after the severe competition during the second and third quarters of 2006. Management believes that the market conditions for 7ACA, one of the Company's key products, have recovered since beginning of the fourth quarter this year. The Company is dedicated to enhance its dominating position for a rewarding return.

This press release contains forward looking statements, including but not limited to, that the Company will be a significant supplier in its remaining Parma Division in a more regulated environment and that it will be able to maintain or increase its 7ACA sales. 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. 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 filed with the Securities and Exchange Commission.

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