Dragon Pharmaceutical Inc. (TSX: DDD; OTC BB: DRUG; BBSE: DRP) today announced results for the twelve-month period ended December 31, 2004.
Highlights for 2004
- Generated revenues of $3.71 million and a net loss of $0.94 million, or $0.05 per share for the full year of 2004.
- Continued momentum in developing the International market; Launched rh-Erythropoietin (“EPO”) product in Ecuador, Dominican Republic, Kosovo and Trinidad-Tobago in addition to existing markets in China, India, Egypt, Peru and Brazil.
- Entered into an agreement with Suzhou Zhongkai Bio-Pharmaceuticals Company Limited to in-license the exclusive right to commercialize its Recombinant Human Granulocyte Colony Stimulating Factor (“rhG-CSF”) product worldwide, excluding China.
Subsequent to year-end:
- Completed the acquisition of Oriental Wave Holding Limited (“Oriental Wave? and transformed itself into a diversified and growth oriented pharmaceutical company with three key business units: Chemical division for bulk pharmaceutical chemical, Biotech division for recombinant drugs (EPO and G-CSF) and Pharma division for prescription and over-the-counter drugs.
- Decided to construct a new state-of-the-art EPO production facility in Datong city, China and relocate the EPO production from the current facility in Nanjing city, China which will be closed in August 2005.
- Foreclosed on 2.23 million Dragon’s common shares from Dr. Liu that partially secured debt owed by Dr. Liu to the Company.
Financial Review for 2004
The Company posted revenues of $3.71 million in 2004 compared to $3.65 million in 2003. Net loss for 2004 was narrowed down to $0.94 million or $0.05 per share from a loss of $1.99 million or $0.10 per share in 2003. Sales in China and outside of China were $2.66 million and $1.05 million, respectively for 2004 compared to $2.26 million and $1.39 million respectively for 2003.
During 2004, an 18% growth in sales was achieved in China, which was partially offset by lower international sales outside of China. During 2004, the Company implemented a new non-fixed sales compensation system for the Company’s direct sales team in China, which provided more incentive for the Company’s sales representatives to focus on delivering results. International sales in 2004 were lower than those in 2003 because the Company sold product with a limited shelf life at a reduced price in Brazil during 2003, and we did not experience similar sales during 2004.
After the completion of the acquisition of Oriental Wave, the new Board of Directors decided to build a brand new state-of-art EPO production facility in Datong city, China and to relocate the EPO production from its current facility in Nanjing city. The Company will locate the new EPO production site adjacent to the Chemical division, which already includes the entire basic production infrastructure such as power, steam, purified water supply and water treatment facilities. As a result of the relocation decision, Dragon has decided to close the Nanjing facility in August 2005 and has written off and accelerated the depreciation and amortization of certain assets during 2004 of $938,000. This write off was offset by the gain from foreclosure of 2.23 million Dragon shares previously owned by Dr. Liu and that partially secured his amount due to the Company. According to the comprehensive settlement agreement dated April 4, 2004, Dr. Liu placed 2.23 million Dragon’s shares in escrow as partial security for his amount due to the Company. These shares, which were forfeited effective December 31, 2004 and are to be cancelled, were valued at $2.61 million and resulted in the Company’s recovery of $2.11 million of the amount that was previously written-off in prior years. Dr. Liu still owes the Company approximately $2.48 million although this balance due is carried on the Company’s balance sheet at a nominal value of $100. Dragon is considering what further actions may be taken against Dr. Liu.
“We are encouraged by the growth of our market in China. On the international front, we continue to receive remarkable progress by receiving four additional market approvals during the second half of 2004: Ecuador, Dominican Republic, Trinidad-Tobago and Kosovo” stated Dr. Alexander Wick, President of Dragon Pharmaceutical. “We believe our decision to relocate the EPO production site to Datong will allow us to increase the EPO output by two to three times than that of the current facility in Nanjing and to capitalize on infrastructure advantages and the efficiency of local operational management. As previously announced, it is the Company’s intention to supply EPO product from this new facility to fulfil the anticipated demands of the Chinese and other developing markets which are currently supplied from our Chinese facility in Nanjing while we will use the new EPO to be produced in Europe specifically for the European market as well as for new indication developments in the EPO field. Although the main European patent for EPO expired in most European countries in December 2004, the European regulatory authority, EMEA, has not clearly indicated the approval process for the EPO from generic competitors.
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