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Dragon Completes Acquisition of Oriental Wave Holding Ltd. and Announces Appointment of Key Management Team

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Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD; BBSE: DRP) (“the Company”) is pleased to announce that it has completed the acquisition of Oriental Wave Holding Ltd. At closing, and as described in Dragon’s proxy statement dated December 8, 2004, Mr. Yanlin Han, Mr. Zhanguo Weng and Ms. Xuemei Liu were appointed to the Board of Directors that now consists of five members including Dr. Wick and Dr. Sun who were re-elected at the Company’s annual meeting of shareholders. The Board of Directors also appointed the following individuals as the key management team:

  • Mr. Yanlin Han as the Chief Executive Officer
  • Dr. Alexander Wick as the President
  • Mr. Zhanguo Weng as the Vice President, China Operation
  • Mr. Garry Wong, CFA as the Chief Financial Officer
  • Ms. Maggie Deng as the Chief Operating Officer

“The first practical step to integrate the original Dragon and Oriental Wave into a new and efficient organization has already been started” said, Dr. Alexander Wick, President of Dragon. “A new and state-of-the-art production facility for EPO (Erythropoietin) using the proven cell-line and technology of Nanjing Huaxin Bio-pharmaceutical Co. Ltd., the Company’s subsidiary in Nanjing, is being set up on Dragon’s Chemical division campus in Datong, sharing the existing energy and administrative infrastructure. This campus will also house a new workshop for the freeze-drying of temperature sensitive pharmaceutical products, among them, Levofloxacin, a currently marketed product of the Company.”

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Dragon Pharmaceutical Announces Proposed Private Offering

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Dragon Pharmaceutical Inc. (TSX: DDD; OTC BB: DRUG; BBSE: DRP) announces that it proposes to offer on a best efforts basis up to $25 million of its securities in a private placement to accredited investors. The type of securities, price and completion of the proposed private placement will depend on, among other things, market conditions. It is anticipated that the proceeds from the private placement will be used to serve as the working capital to ramp up the production of the newly operated Chemical division, to improve the Company’s financial structure and to fund the Company’s EPO market development in Europe as well as the relocation of the Biotech facility within China. The securities proposed to be offered in the private placement will not be registered under the Securities Act or any state securities laws, and unless they are so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws.

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Dragon Announces 2004 Year End Results

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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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Dragon Pharmaceutical Announces Business Update

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Dragon Pharmaceutical Inc. (TSX: DDD; OTC BB: DRUG; BBSE: DRP) today announced a business update and selected unaudited 2004 pro-forma financial data of the Company combined with Oriental Wave Holding Limited.

On January 12, 2005, Dragon completed the acquisition of Oriental Wave Holding Limited. As a result of the acquisition, Dragon has transformed itself into a diversified and growth oriented generic pharmaceutical company with three key business units: (1) Pharma division for 44 generic prescription, over-the-counter and sterilized bulk drugs; (2) Chemical division for bulk pharmaceutical chemicals and intermediates (Clavulanic Acid and 7-ACA, Abamectin); and (3) Biotech division for recombinant drugs (EPO and G-CSF). The Company, after the acquisition, has significantly increased the size of operations and now has four manufacturing facilities in China (three in Datong city and one in Nanjing city), approximately 1,800 employees, with over 1,200 sales representatives in China, and approximately 55 key products in 86 different dosages and presentations currently in the market.

The following is a discussion of the 2004 business highlights for both Dragon and Oriental Wave on a combined basis.

Business Highlights for 2004

Biotech Division:

  • Launched rh-Erythropoietin (“EPO”) product in Ecuador, Dominican Republic, Kosovo and Trinidad-Tobago in 2004 in addition to the earlier approved markets: China, India, Egypt, Peru and Brazil.
  • Announced the relocation from Nanjing city, China and construction of a brand new Biotech facility in Datong, China.
  • 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.

Chemical Division:

  • Commenced operations of the brand new Clavulanic Acid and 7-ACA production facilities during the first and third quarters of 2004 respectively.
  • Received import permit for Clavulanic Acid from the Indian health authority during the third quarter of 2004.
  • Shipment of initial quantities of 7-ACA and 2 Clavulanic Acid products to Indian customers commenced during the fourth quarter of 2004.

Pharma Division:

  • Receipt of additional 21 additional generic drug approvals from Chinese State Food and Drug Administrator (“SFDA?, bringing the total number of drug approvals to 306.
  • Establishment of a new freeze-dry production line for temperature-sensitive products.

Divisional Business Review and Update:

Biotech Division

  • Relocation and building a brand new facility in Datong. As previously announced, the Company will build a brand new state-of-the-art EPO production facility in Datong city, China and relocate the EPO production from its current facility in Nanjing city. The Company will construct the new EPO production site adjacent to the campus of the Chemical division, which already includes the entire basic infrastructure such as power, steam, purified water supply and water treatment facilities. The relocation of the EPO production site to Datong will allow the Company to capitalize on the existing production infrastructure and the efficiency of unified operational management. In the new facility, the capacity for bulk EPO will be doubled and the capacity for sterile filing will be tripled.
  • Continued progress on International EPO market approval. The Company continues to achieve good progress by receiving four additional market approvals during the second half of 2004: Ecuador, Dominican Republic, Trinidad-Tobago and Kosovo in addition to the earlier approved markets of China, Brazil, India, Egypt & Peru. It is the Company’s intention to supply the product from this new facility to fulfill the demands of the Chinese and other developing markets which are currently supplied from our China facility in Nanjing. Dragon will use the EPO produced in Europe specifically for the European market as well as for new indication developments in the EPO field. Although the 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. However, the Company expects that it will be among the early candidates to enter the market with the Company’s new European made EPO product.
  • In-licensed rhG-CSF for worldwide markets, excluding China. Dragon has 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 the Chinese market. Dragon will leverage its regulatory approval knowledge and expertise from launching its EPO internationally and will also utilize its existing licensing partnerships developed over time around the world to bring this rhG-CSF product to the international market. This in-licensing deal will allow Dragon to capture better economic value without incurring significant risk in research and developing an in-house product and the high investment to bring the drug into the production.
  • Chemical Division. Commencement of the two Chemical Production Facilities; Receipt of Import License for 2 Clavulanic Acid Products from the Indian Health Authority; Initial Shipment of 7-ACA and 2 Clavulanic Acid Products to Indian Customers Started.

The approximately $45 million investment in the two Chemical Division facilities were completed during 2004 and the production of Clavulanic Acid and 7-ACA started during the first and the third quarter respectively. Since the commencement of operations, the Company has been supplying the products mainly to the Chinese market. However, during the third quarter of 2004, the Company received licenses from Drugs Controller General of India to sell two Chemical products, including clavulanate potassium and avecil (1:1) and clavulanate potassium and syloid (1:1) into the Indian market. During the fourth quarter of 2004, initial quantities of 7-ACA and both Clavulanic Acid products had already been shipped and delivered to customers in India.

Pharma Division

Establishment of a new freeze-dried production line
Concurrent to the relocation of the EPO production facility to Datong city, China and as previously announced in January 2005, the Company plans to build a new workshop for the freeze-drying of temperature sensitive pharmaceutical products. Among these products is Levofloxacin, a product marketed by the Company whose production is currently outsourced to a third party contract manufacturer. This new workshop will also be housed in an area adjacent to the Chemical division’s campus sharing the production infrastructure that was newly built for the Chemical division. The construction of this new workshop will not only allow the Company to improve its cost structure from Chemical division.

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Dragon Strengthens its European Presence

News

Dragon Pharmaceutical Inc. (TSX: DDD; OTC BB: DRUG) is pleased to announce that the Company has strengthened its European presence by appointing an additional key executive in the newly established European office to focus on capturing European business opportunities through the execution of the Company’s European strategy.

The Company has appointed Dr. Rene A. Fricker as the Director of Dragon’s European Office in Basel, Switzerland. With his extensive European experience in the Chemical industry, Dr. Fricker will work closely with Dr. Alexander Wick, our President, to provide leadership in the European business development for Dragon especially for the Company’s Biotech division’s EPO and other chemical and intermediate products, such as Clavulanic Acid and 7-ACA, from the Chemical Division. Dr. Fricker holds a doctorate degree in business administration from the University of Basel and joins Dragon with over 30 years of experience in business and market development practised in different European chemical companies. Prior to joining Dragon, Dr Fricker was with Rohner AG, a subsidiary of the Dynamit Nobel AG Group of Germany from 1992 and most recently served as the Chief Executive Officer and member of the Board. Dr. Fricker took a leading role in restructuring RohnerAG from a traditional dyestuff supplier to a fine chemical producer for exclusive custom synthesis for chemical intermediates and active bulk ingredients for the Pharmaceutical industry. During this restructuring process Dr. Fricker completed the acquisition of Sylachim S.A., a fine chemical company from Sanofi-Synthelabo (now Sanofi-Aventis). Dr. Fricker was also a member of the Board of Lurgi Engineering AG in Bubendorf, Switzerland in 2001.

“We choose to expand our team and presence in Europe at this critical moment because the European market is of high strategic importance to us as it presents a huge market potential for our products. We see two specific industry trends that are extremely favorable to our company. Firstly, we see a global industry trend of relocating the production base of chemical and intermediates from a traditional pharmaceutical base such as Europe to cost-competitive countries such as China and India. The competitiveness of the production in China is evidenced with the fact that producers in China already dominate the production and supply of certain chemicals and intermediates, such as penicillin and beta-lactam antibiotics in the world market. Our newly established Chemical division is already in operations and starts supplying products to fulfill the demand from the Chinese and Indian markets. We believe that our cost competitive advantage will allow us capture additional business opportunities from Europe as a result of this favourable industry trend” said Mr. Yanlin Han, Chief Executive Officer of Dragon. “Secondly, the approximately US$4 billion current market size in Europe for the innovators’EPO products combined with the expiry of key patents for most of the European markets for EPO in 2004, have made Europe the largest potential biogeneric market available for our new EPO products to compete in. Our new EPO products, which are based on a new cell line and production technology, will be produced in Europe specifically for the European market and novel indication segment. While we already have extensive experience in commercializing the generic version of EPO in 9 countries, we are confident that the EPO potential in Europe will be one of the key growth drivers for the Company upon the approval of the products by the European regulatory authority.”

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Dragon Announces Appointment of General Manager of Chinese Operations

News

Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD) today announced the appointment of Mr. Xiaochun Zhang as the General Manager of the Company’s Chinese operations.

As the General Manager of our Chinese operations, Mr. Zhang is responsible for the overall operational and sales and marketing management of the Pharma and Chemical divisions. Such responsibilities will be extended to cover the Biotech division after its relocation from its current location in Nanjing city.

Mr. Zhang has 20 years of expertise in large-scale fermentation processes as a chemical engineer together with operational experience with various Chinese and international pharmaceutical companies. Prior to joining Dragon, Mr. Zhang was the Deputy General Manager of Aurobindo Bio-pharma Co. Ltd. in Datong, China, a subsidiary of one of the largest pharmaceutical companies in India. Mr. Zhang started his career as an engineer in the fermentation workshop in Zhangjiakou Pharmaceutical Co. Ltd., and became the Deputy General Manager of the company in 1997. In the same year, Mr. Zhang was appointed as the General Manager of GIST-Brocades Pharmaceutical Ltd., a joint venture in China between Zhangjiakou Pharmaceutical Co. Ltd. and Netherlands?DSM, one of largest chemical companies in the world.

Mr. Zhang holds a Bachelor degree in chemical mechanical engineering from Hebei University of Technology and is currently participating in an Executive MBA program from the Helsinki School of Economics and Business Administration. Mr. Zhang is based in our office in Datong city, China.

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Dragon Announces Date set for 2005 Annual Stockholder Meeting

News

Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD; BBSE: DRP) (“the Company”) is pleased to announce that August 12, 2005 has been set as the date for the annual stockholder meeting of the Company.

The annual meeting of Dragon stockholders will be held at Dragon’s corporate offices at Suite 1900, 1055 West Hastings Street, Vancouver, Canada at 10:00 a.m. Pacific Time. Stockholders of Dragon of record as of the close of business on July 12, 2005 will be entitled to vote on the following 5 proposals at the meeting:

  • elect five nominees as members of the Board of Directors to serve until their successors are elected and qualified;
  • approve an amendment to our Certificate of Incorporation to eliminate Article VII which states a specified number of directors;
  • approve an amendment to Article II, Section 1 of our Bylaws to allow the Board of Directors to set the number of directors at not less than one and not more than eleven directors;
  • approve the adoption of the 2005 Stock Option Plan; and
  • approve the adjournment of the annual meeting for any permitted reason, including, if necessary, to solicit additional proxies in the event that there are not sufficient votes at the time of the annual meeting to approve the proposals.

On or about July 14, 2005, the Company will send to these stockholders a copy of the definitive proxy statement in connection to the annual meeting.

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Dragon Appoints Ernst & Young LLP as Company’s Auditor

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Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD; BBSE: DRP) (“the Company”) is pleased to announce the appointment of Ernst & Young LLP (“Ernst & Young”) by its Board of Directors as the Company’s independent registered public accounting firm. In addition, the Board also approved the filing of a listing application with the American Stock Exchange (AMEX).

The appointment of Ernst & Young is a natural extension of a seven-year business relationship with Moore Stephens Ellis Foster Ltd. (“Moore Stephens Ellis Foster”) which has been the Company’s independent registered public accounting firm since inception. With the merger of Moore Stephens Ellis Foster in May 2005, Ernst & Young inherits the thorough understanding of Dragon’s history and business. The Company believes its international growth strategy will be supported by Ernst & Young’s global network and presence.

In addition, the Company’s Board also approved the filing of an application to list its common stock with the American Stock Exchange as soon as practicable. This will mark an important step for the Company to gain greater visibility and recognition among the investment community, which will help increase shareholders?value by providing liquidity and a more credible, stable trading environment.

The Company believes that the foregoing events will assist in seeking additional financing from new institutional and strategic investors as disclosed earlier even though the financing has been taken longer time than anticipated. “We are confident in our products and markets. We believe that working with a top-tier auditing firm and applying for a senior stock exchange listing in the U.S. will provide a good foundation for the Company to move forward by enhancing the visibility of the Company, liquidity of our stock and shareholders value.” said Mr. Yanlin Han, Chairman and CEO of Dragon.

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Dragon Announces Results of the Annual General Meeting

News

Dragon Pharmaceutical Inc. (OTC BB: DRUG; TSX: DDD) (“the Company”) is pleased to announce the results of the Annual Shareholders?Meeting held on August 12, 2005.

There were 54,818,706 shares equaling 87.20% of the outstanding shares represented at this meeting. All of the following proposals were approved by a substantial majority of votes:

  • Election of Mr. Yanlin Han, Dr. Alexander Wick, Ms Xuemei Liu, Mr. Zhanguo Weng, and Dr. Yiu Kwong Sun as the directors;
  • Amendment to Certificate of Incorporation to eliminate Article VII which states a specified number of directors;
  • Amendment to the By-laws of the Company to allow the Board of Directors to set the number of directors at a range from 1 to 11;
  • Adoption of 2005 Stock Option Plan.

“We are very pleased to see the support of our shareholders on all proposals” said by Yanlin Han, Chairman and CEO of the Company, “The amendments to our by-laws and Certificate of Incorporation will allow us to expand our board and appoint additional directors. We intend to appoint additional independent board members to meet the American Stock Exchange (AMEX) listing standard, which requires a majority of the Board to be independent directors. In addition, we intend to establish an audit committee and a compensation committee consisting of solely independent directors. The Company is in the final stage of searching for appropriate individuals as the independent Board members who will bring along their valuable experience and creditability for the Company to move forward.

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Dragon Reports Third Quarter Results of 2004

News

Dragon Pharmaceutical Inc. (TSX: DDD; OTC BB: DRUG; BBSE: DRP) is pleased to announce the results for the third quarter ended September 30, 2004.

For the three-month ended September 30, 2004
During the third quarter in 2004, the Company posted revenues of $1,057,254 from the sales of rHu Erythropoietin (EPO) compared to $1,151,646 for the same period of the prior year. Revenues of $691,669 were generated in China and $365,585 from outside of China during the third quarter of 2004 compared to $742,467 in China and $409,179 from outside of China for the same period in 2003. The gross profit margin was 73% for the period in 2004, which improved from the gross margin of 69% for the same period in 2003.

Net loss for the third quarter in 2004 was $212,148 or $0.01 per share, compared to a net loss of $282,581 or $0.01 per share, for the same period in 2003. The decrease in net loss for the third quarter in 2004 was mainly due to lower selling, general and administrative expenses and research and development expenses related to the development of EPO product for the European market.

For the nine-month ended September 30, 2004
Revenues for the nine-month period in 2004 were $2.84 million, slightly up from $2.82 million from the same period in 2003. Sales in and outside of China were $ 2.05 million and $0.79 million respectively during the period in 2004 compared to $1.77 million in China and $1.05 million outside of China for the same period in 2003. The gross profit margin was 75% for the period of 2004, improved from 69% for the same period in 2003. Net loss for the period of 2004 was $0.85 million or $0.04 per share compared to a loss of $1.25 million or $0.06 per share for the same period in 2003, reflecting a higher gross margin and lower selling, general and administrative expenses the results of effective cost control measures and a leaner corporate structure.

Status on the Proposed Acquisition of Oriental Wave and the Annual General Meeting
Dragon has filed a revised preliminary Proxy Statement with the U.S. Securities and Exchange Commission (SEC) in connection to the proposed acquisition of Oriental Wave. Once the regulatory reviews are completed, Dragon will announce the date for the Annual General Meeting which is currently anticipated to be in the second half of December, 2004.

New Markets for Dragon’s EPO: Dominican Republic, Trinidad-Tobago and Kosovo
Dragon is pleased to announce that Dragon’s EPO products have been granted market approvals in the Dominican Republic and Trinidad-Tobago as advised by Dragon’s licensees. In addition, the health authority of Kosovo has accepted our licensee’s application for the market approval and under such a circumstance, Dragon’s licensee is allowed to bid for government tender and has since won such a tender. Initial shipment of our EPO products to all three additional markets has been started during the fourth quarter of 2004. Together with the already approved markets in China, Brazil, India, Egypt, Peru and Ecuador, Dragon’s EPO products have been marketed in a total of 9 countries across Asia, Central and South America, the Middle East and Eastern Europe. For details, please refer to the announcement of a separate press release regarding the Dominican Republic, Trinidad-Tobago and Kosovo markets.

“During the third quarter, we managed to achieve 16% sequential growth in revenues over the second quarter. We are especially encouraged to see stronger international sales during the third quarter. On a year-to-date basis, we continued to lower our cost structure which led to a lower net loss. Compared to last year, our net loss has already been decreased by 33% at a similar revenue level.” said Dr. Alexander Wick, President and CEO of Dragon Pharmaceutical Inc. “Further, while the regulatory review process in connection with the proposed acquisition of Oriental Wave has taken longer time than expected, we look forward to completing the process as soon as we can so that we can hold the Annual General Meeting to vote on the transaction by the end of this year.”

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