Dragon Pharmaceutical Inc.
OTC Bulletin Board : DRUG

Dragon Pharmaceutical Inc.

August 14, 2008 19:00 ET

Dragon Pharma Reports 2008 Record Second Quarter Financial Results

Earning Per Share of $0.07 for the first half of 2008

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 14, 2008) - Dragon Pharmaceutical Inc. ("Dragon Pharma" or the "Company") (TSX:DDD)(OTCBB:DRUG)(BBSE:DRP), a leading international pharmaceutical company, today announced its financial results for the second quarter ended June 30, 2008, achieving earnings per share ("EPS") of $0.04 for the quarter and $0.07 for the first half of the year.

In Thousand US$ Three months ended Change Six months ended Change
(Except EPS) June 30 % June 30 %
------------------------------ --------------------------
2008 2007 2008 2007
------------------------------ --------------------------
Total Sales 44,147 19,977 +121% 80,015 36,880 +117%

Total Gross
Profit 7,727 3,545 +118% 13,894 7,294 +91%

Net Income 2,923 454 +544% 4,883 1,304 +274%

(Basic and
Diluted) 0.04 0.01 +300% 0.07 0.02 +250%

Financial Highlights for Q2 2008

- Sales increased 121% to $44.15 million from $19.98 million in Q2 2007

-- Cephalosporin Division's sales increased 98% to $31.11 million from $15.70 million

-- Penicillin Division's sales increased 204% to $13.04 million from $4.28 million

- Gross profit increased 118% to $7.73 million from $3.54 million for Q2 2007

- Total operating expenses increased to $3.56 million from $2.70 million for Q2, 2007, mainly due to an increase in selling expenses related to increased revenues for both the Cephalosporin and Penicillin Divisions

- Net profit increased 544% to $2.92 million from $0.45 million for Q2 2007

- Comprehensive income increased 298% to $4.14 million, which included a gain on foreign currency translation of $1.22 million

- EPS (basic and diluted) was $0.04 as compared with $0.01 for Q2 2007

Financial Highlights for First Half of 2008

- Sales increased 117% to $80.02 million from $36.88 million for the same period of 2007

-- Cephalosporin Division's sales increased 93% to $54.84 million from $28.36 million

-- Penicillin Division's sales increased 195% to $25.18 million from $8.52 million

- Gross profit increased 91% to $13.89 million from $7.29 million for the same period of 2007

- Total operating expenses increased to $7.16 million from $4.71 million for the same period of 2007, mainly due to increased R&D expenses as well as sales commission related to increased sales from both divisions

- Net income increased 274% to $4.88 million from $1.30 million for the same period of 2007

- EPS (basic and diluted ) was $0.07 as compared with $0.02 for the same period of 2007

Solid sales growth with strengthened market leadership position

Dragon Pharma maintained its strong sales momentum and reported $44.15 million of revenues for the quarter, representing 121% year-over-year growth and 23% sequential growth from $19.98 million in Q2 2007 and $35.87 million in Q1 2008, respectively. The record results were mostly attributed to strong sales volume growth for all product lines, especially Clavulanic Acid, formulation business and newly launched API bulk drugs in early 2008.

Dragon Pharma is the dominating market leader in China and top supplier in India for Clavulanic Acid. As the market prices remained stable in this quarter, the sales quantity increased 69% to 15.35 tons from 9.10 tons in the same period of 2007. Meanwhile, the Company continued to enlarge its market share in China and achieved 199% increase in sales for its formulation drugs. The sales quantity reached 62.47 million units, an increase of 202% from the same period of 2007. As a result of strong sales, together with the increased synergy from the vertical production lines, gross margin for formulations improved from -7.8% to 2.6%. Management believes the fast-growing formulation business is strategically important as it enables the Company to maximize the benefit from the vertically integrated operations, reduce exposure to market fluctuations, increase brand recognition as well as further strengthen the Company's leadership position in the antibiotic market.

Moreover, the new bulk API products launched in early 2008 have become important growth contributors for the Company. Sales from new products amounted to $11.55 million, accounting for approximately 26% of the total sales in the quarter. The Company plans to introduce more major types of bulk API products within its product pipeline to generate additional sources of growth as well as have a better control over product quality and costs.

Increased profitability from manufacturing know-how and operational efficiency

Dragon views its manufacturing know-how as its core value and constantly endeavors to incorporate the most advanced technology into its production process through R&D collaborations. With the support of technology, the Company was able to further reduce its unit production costs, leading to margin expansion for all its major products. Total gross profit reached $7.73 million in the quarter, an increase of 118% from $3.54 million for the same period of 2007. Net profit reached $2.92 million, representing 544% year-over-year growth and 49% sequential growth.

Enhanced long-standing relationship with key clients

During the quarter, Dragon Pharma further expanded its client base by securing new customers in China, India and other emerging markets. Sales revenues from China and international markets increased 164% and 26%, respectively, as compared with the same period of 2007. Additionally, sales were bolstered by high product quality while strong customer service helped the Company enhance its long-term business cooperation with key clients. Sales to the Company's ten largest clients accounted for approximately 49% of total sales in the first half of the year.

"Our record financial results continue to validate our business strategy and demonstrate the significant progress towards our goals," said Mr. Yanlin Han, Dragon Pharma's chairman and CEO. "During this quarter, we increased our sales and margins across all product segments, in addition to increases in our formulation business and new product offerings. Despite the rising raw material prices, our unit costs for 7-ACA and Clavulanic Acid were further reduced and have been among the lowest level in the industry mainly due to our continuous improvements in the manufacturing technology. Improved cost structure and operational efficiency, combined with synergistic benefits from the vertical production operations, have led to five-fold increases in net profit for the second straight quarter. With enhanced competitive advantages, we believe Dragon Pharma is well positioned for strong performance in 2008."

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 www.dragonpharma.com.

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.

Contact Information

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