VANCOUVER, May 16 /PRNewswire-FirstCall/ -- Dragon Pharmaceutical Inc. (TSX: DDD; OTCBB: DRUG; BBSE: DRP) today announced the financial results for the first quarter ended March 31, 2007. First-Quarter Highlights - Sales increased 32% to $17.33 million from $13.15 million for the same period of 2006; - Gross profit and gross margin increased to $4.06 million and 23.44% from $2.63 million and 19.99% for the same period of 2006; - Operating income reached $1.79 million, representing a 785% increase compared to $0.20 million for the same period of 2006; - Net income and net income per share was $0.85 million and $0.01, respectively, and comprehensive income was $1.22 million. Sales kept increasing with leading market position strengthened Dragon reported sales of $17.33 million for the quarter ended March 31, 2007, an increase of 32% compared to the same period of 2006. The sales increase was primarily driven by the growth of sales from the Chemical Division and Pharma Division, which increased by 31% and 73%, respectively. After severe competition during 2006, the Company has established a stronger market position and customer base for its chemical products in China as well as internationally. As the third largest producer and the largest exporter of 7ACA in China, the Company has established relationships with key customers to sell 60% to 80% of its production. The remaining 7ACA production has been mostly consumed by its expanding downstream formulation business in the form of cephalosporin powder for injections in the Chinese market. The Company is also the dominating market leader of Clavulanic Acid with more than 80% of market share in China and one of the top suppliers to the Indian market. During the first quarter, the Company successfully expanded its customer base in Korea, Egypt, Indonesia and Pakistan. Production know-how has been built up improving product quality and cost efficiency The Company believes that it has been able to increase its sales based upon the strong acceptance of the product quality by its customers. Together with the technical consultants from Europe, the Company continues its efforts on improving production performances parameters such as fermentation yields, refining yield and solvent recovery ratio. We continue to advance in these performance indicators towards the international standard. With the support of the production know-how, the Company achieved utility rate of 87 % for 7ACA and 60% for Clavulanic Acid in the first quarter. The gross profit and gross margin were increased to $4.06 million and 23.44% as compared to $2.63 million and 19.99% for the same period of 2006. The operating income in the first quarter affirms the steady growth of the business The Company achieved a significant growth in operating income in the first quarter of 2007, which was $1.79 million, representing a 785% increase as compared to $0.20 million for the same period of 2006. This reflects that the business of the Company has been ramped up to an optimal scale. Starting from this point, the Company believes that its on-going efforts on quality improvement and cost reduction will lead to better financial performance. The Company's next strategic step is to assemble downstream product lines for 7ACA to the formulation market. Up to the first quarter, the formulation business only provided marketing support to the 7ACA with a slight gross loss of $30K; however, the Company intends ramp up the sales for cephalosporin formulation products to achieve higher margins through the complete product chain starting from 7ACA to finished formulation products. "Competition eliminated many ambitions on expansion and new investment in our products sector," said Mr. Yanlin Han, Chairman and CEO of the Company. "We did not find any new competitors in the business in 2006 and first quarter of 2007, therefore we are confident that our business will grow under the restored market condition in China. Meanwhile, as the leading exporter from China, we are excited to see our Company being one of the companies who can leverage our manufacturing advantages from China to the international markets." "China based manufacturers have become global market leaders in other pharmaceutical chemicals such as Vitamin C and Penicillin," said Mr. Han, "and we are working towards a similar successful story." This press release contains forward looking statements, including but not limited to, that the Company will be able to improve it product quality and efficiency, that its products will be continue to be accepted in China and internationally, and that competition will not substantially increase affecting the demand for our products. 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. CONTACT: Maggie Deng, Dragon Pharmaceutical Inc., Telephone: (604) 669-8817, or North America Toll Free: 1-877-388-3784, Email: , Website: http://www.dragonpharma.com/ DATASOURCE: Dragon Pharmaceutical Inc. CONTACT: Maggie Deng, Dragon Pharmaceutical Inc., Telephone: (604) 669-8817, or North America Toll Free: 1-877-388-3784, Email: , Website: http://www.dragonpharma.com/

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