Dragon Pharma announces 2007 full year financial results

Tuesday, April 1, 2008 General News
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VANCOUVER, March 31 /PRNewswire-FirstCall/ - Dragon Pharmaceutical Inc.("Dragon" or the "Company" TSX: DDD; OTCBB: DRUG; BBSE: DRP), a leadinginternational pharmaceutical company, today announced its financial resultsfor the fiscal year ended December 31, 2007.

During 2007, the Company made a strategic decision to sell its EPODivision and fully focus on its chemical and formulation businesses that haveshown significant growth since establishment in 2004. Dragon's efforts havesuccessfully increased its sales, productions and profits for both theChemical Division and Pharma Division. In the full year 2007, the total salerevenues reached $85.8 million, representing an increase of 63.7% from $52.4million recorded for the full year 2006.

The Chemical Division continued to be the main growth driver andcontributed 80% of the revenues for the Company in 2007. Under the favorablemarket conditions, the Company further increased its production level andachieved a utilization rate of 95% for 7-ACA production and 62% for ClavulanicAcid production. As the strong demand pushed up the market price for 7-ACA,the Company realized 568 tons of sales, an increase of 27% compared with 448tons of sales for the same period of 2006. Mainly driven by the risingcustomer demand in the Indian market, sales revenue from Clavulanic Acid alsoincreased by 49% to $16.8 million while total sales quantity increased 63% to39 tons, up from 24 tons in 2006. As a result of the increased sales, combinedwith higher facility utilization and improved production technology, theChemical Division's gross margin for 2007 increased to 28.13% from 19.86% for2006.

The Company views its research and development capability as a competitiveedge and constantly strives to improve its production technology so as toenhance core capability. An important achievement that was completed in 2007was the successful adoption of an enzymatic process to the production of7-ACA. Currently the Company is in the process of converting its entireproduction to incorporate this innovative technology. It is expected that theoverall adoption will further lower the production costs and additionallyreduce the amount of capital investment pertaining to the environmentprotection. In addition, subsequent to the year end of 2007, the Company hasincreased its annual production capacity for 7-ACA and Clavulanic Acid by 30%and 56% respectively in order to meet rising customer demand. Managementbelieves that all these improvements will further reinforce its marketleadership position and contribute positively to its financial performance inthe coming years.

With a more focused antibiotic product portfolio and effective marketingstrategies, the Company has also substantially increased its sales andimproved its gross margin for the formulation drugs. By strengthening itssales team and utilizing its national distribution network and close customerrelationship, the Company has significantly expanded its market share in theChinese market. Mainly due to the increased sales volume and selling prices,revenues for the Pharma Division have climbed to $16.9 million in 2007, up156% from $6.6 million in 2006, and the gross margin has risen to -9.4% in2007 compared to -12.8% in 2006.

The total operating expenses were $10.9 million in 2007 as compared to$7.7 million in 2006. The increase reflects an increase of the non-cashstock-based compensation expense and consulting fees related to Sarbanes-Oxleycompliance and increased selling expenses due to an increase in sales in boththe Chemical and Pharma Divisions.

As a result of the strong sales growth as well as the improved margins forboth divisions, the Company realized an after-tax income from continuingoperations of $4.9 million for 2007 as compared to an after-tax loss fromcontinuing operation of $0.9 million for the year of 2006. The Company alsorecognized an after-tax

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