Dragon Pharma Sells Polymun Development

Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD) (“the Company”) announced today that the Company has sold its Development and Manufacturing Agreement with Polymun Scientific Immunbiologische Forschung GmBh (“Polymun”) to AS Biotech AG, a Swiss company, for US$1 million.

Prior to the acquisition of Oriental Wave Holding Limited in early 2005, Dragon entered into a Development and Manufacturing Agreement with Polymun to develop a new cell line of EPO for the European market. At that time, EPO was the only focus of the Company and development of the European EPO market was originally based on the assumption that EMEA (European Medicines Evaluation Agency), also known as European Medicines Agency, the centralized European medicinal products authorization authority, would issue a relatively less stringent clinical requirements guideline for the registration of recombinant human EPO that allowed the approval of Dragon’s recombinant EPO be commercialized in 2006 or 2007. Under the assumed process time, the Company believed that it could fulfill the up-coming Euro 3.2 million (or approximately US$ 3.84 million) minimum purchase commitment of EPO from Polymun in 2006 and 2007.

However, in light of EMEA’s much delayed and more stringent clinical requirements for human recombinant EPO and the cautious regulatory approach to biosimilars by the EMEA, such as rejecting CPMP’s recommendation to approve Sandoz’s biosimilar version of human growth hormone, Dragon’s Board of Directors revaluated its current and future financial investment in this project. Based on the latest EMEA approval guidelines, the Company estimated that it would have to spend over US$ 20 million and would require a minimum of another 3 to 4 years to commercialize EPO in the European market. As a result, the Board of Directors has determined that the potential return of the project does not justify its risk profile and uncertainties. Therefore the Company’s Board of Directors, with Dr. Wick abstaining, approved the sale of the Polymun agreement, including the remaining milestone payment, minimum purchase commitment, and other obligations to AS Biotech AG, a Swiss company owned by Dr. Wick who also served as its Chairman, for US$ 1 million. Further, Dr. Wick has resigned as the President of the Company effective immediately but would remain as a Director. In addition, Dragon also terminated the consulting agreements with Dr. Rene Fricker and James Harris who were focusing mainly on this project during last year.

Prior to the sale, Dragon paid Euro 200,000 (or approximately US$ 235,000) to Polymun for two development milestone payments and incurred nominal travel and other expenses for this project. The milestone payments were expensed during 2003 and 2005. As a result, the Company expects to recognize an extraordinary gain for the project with the US$1 million cash payment received from the buyer.

“We believe our shareholders will share the same view with us on this project” said Mr. Yanlin Han, Chairman and CEO of Dragon, “The Company can now focus on developing its other growth areas especially the Chemical business which, through our world class facilities, could be very competitive and successful in both the Chinese and international markets.”

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