Dragon Pharmaceutical Inc.
OTC Bulletin Board : DRUG

Dragon Pharmaceutical Inc.

April 02, 2007 19:00 ET

Dragon Pharmaceutical Announces 2006 Year End Results

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - April 2, 2007) - Dragon Pharmaceutical Inc. (TSX:DDD)(OTCBB:DRUG)(BBSE:DRP) today announced the results for its fiscal year ended December 31, 2006. As previously disclosed, Dragon sold a part of its formulation business effective July 1, 2006, therefore the financial results of 2005 were reclassified to reflect this change of business composition.

Financial Highlights for 2006

- Sales increased by 57% to $54.87 million from $35.06 million in 2005, mainly due to the growth in Chemical Division.

- Gross profit and gross margin increased to $10.02 million and 18.25% from $4.49 million and 12.80% in 2005.

- The comprehensive income was $5.72 million in 2006 compared to a comprehensive income of $0.93 million for 2005.

- Comprehensive net income per share increased to $0.07 for 2006 from $0.00 for 2005.

Financial Summary

Sales for 2006 increased 57% to $54.87 million as compared to 2005. The increase in sales was primarily achieved through the growth of sales from the Chemical Division, which increased by 68% as compared to 2005.

Gross profit reached $10.02 million, representing an increase of 123% over 2005. The gross margin was increased from 12.80% for 2005 to 18.25%. This is mainly achieved by lowering the production costs based on technology renovation and high utilization rate of production facilities.

Total operating expenses were $9.06 million for 2006 and $8.12 million for 2005. The net loss from operation was $0.60 million including two accounting treatments on non-cash expenses items totaling $1.96 million, out of which $1.57 million was non-cash accreted interest expenses on long term payables and $0.39 million was non-cash stock-based compensation expense.

Market Segment

The Company continued to expand the international market outside of China especially for Chemical products. In 2006, $35.26 million or approximately 64% of the sales were generated from the sales in the Chinese market, and the remaining $19.91 million or approximately 36% were from sales in international markets. In 2005, 70% of the sales were generated from the sales in the Chinese market, and the remaining 30% were from the sales in international markets.

Product Segment

Chemical Division was still the strong growth driver for sales in 2006. Of the total sales, $45.80 million or 83% were from the Chemical Division, $6.61 million or 12% were from the Pharma Division, and $2.46 million or 5% were from the Biotech Division. For the same period in 2005, 78% of sales were from the Chemical Division, 11% were from the Pharma Division and 11% were from the Biotech Division.

"The Company achieved the strong growth in sales under a very challenging market condition in 2006," said Yanlin Han, Chairman and CEO of the Company. "The market price for our main product dropped 30% in summer, and, as a result, only cost-efficient, large scale players, of which we are one, remain active when the market recovered in later time of the year."

Dragon is the third largest 7ACA producer and the market leader of Clavulanic Acid in China with a market share of 70%. Despite the unfavorable market condition, the business still showed a strong cash generating power of 13.67 million over 2006. This helped the Company to lower its debts burden to a more reasonable level.

"We believe the competition the Company went through in 2006 will help to restore the market order," said again by Mr. Han. "The Company has proven itself as a leading player and we are dedicated to doing an even better job."

Notes to Investors

Dragon has launched a new version of website with the same domain address. www.dragonpharma.com.

This press release contains forward looking statements, including but not limited to, that the Company will be able to maintain or increase its sales and market position. 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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