Dragon Pharmaceuticals Inc. Reports 2009 Third Quarter Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - November 16, 2009) - Dragon Pharmaceutical Inc. (“Dragon Pharma” or the “Company”) (TSX: DDD)(OTCBB: DRUG)(BBSE: DRP), a leading international pharmaceutical company, today announced its financial results for the third quarter ended September 30, 2009, achieving earnings per share (“EPS”) of $0.03 for the quarter and $0.08 for the first nine months of the year.

 Three Nine In Thousand US$ months ended Change months ended Change (Except EPS) September 30 % September 30 % ------------------------- ------------------------- 2009 2008 2009 2008 ------------------------- ------------------------- Total Sales 41,497 35,482 +17% 118,601 115,498 +3% Total Gross Profit 6,479 5,221 +24% 19,737 19,116 +3% Income from Operations 3,472 907 +283% 10,471 7,643 +37% Net Income 2,196 1,056 +108% 5,694 5,939 -4% EPS (Basic and Diluted) 0.03 0.02 +50% 0.08 0.09 -1% 

Financial Highlights for the Third Quarter of 2009

- Total sales increased 17% to $41.50 million from $35.48 million for the same period of 2008

-- Penicillin Division’s sales increased 13% to $11.79 million from $10.42 million

-- Cephalosporin Division’s sales increased 19% to $29.70 million from $25.06 million

- Gross profit increased 24% to $6.48 million from $5.22 million for the same period of 2008

- Total operating expenses decreased to $3.01 million from $4.31 million for the same period of 2008

- Net income increased 108% to $2.20 million from $1.06 million for the same period of 2008

- Basic and diluted earnings per share were $0.03 compared to $0.02 for the same period of 2008

Financial Highlights for the Nine Months Ended September 30, 2009

- Total sales increased 3% to $118.60 million from $115.50 million for the same period of 2008

-- Penicillin Division’s sales were $39.36 million compared to $35.60 million

-- Cephalosporin Division’s sales were $79.24 million compared to $79.90 million

- Gross profit increased 3% to $19.74 million from $19.12 million for the same period of 2008

- Total operating expenses decreased to $9.27 million from $11.47 million for the same period of 2008

- Net income was $5.70 million compared to $5.94 million for the same period of 2008

- Basic and diluted earnings per share were $0.08 compared to $0.09 for the same period of 2008

Results for the Quarter Ended September 30, 2009

Revenues for the quarter ended September 30, 2009 were $41.50 million, representing 17% year-over-year growth and 3% sequential growth. Driven by the strong performance of the Company’s core product Clavulanic Acid and Cephalosporin Bulk Drugs, sales in China and in the international market increased 15% and 28%, respectively.

Sales from the Penicillin Division increased 13% from the same quarter of 2008 to $11.79 million, accounting for 28% of the Company’s total revenues. As the dominant market leader of Clavulanic Acid in China and one of the largest suppliers to the emerging markets, the Company maintained its strong sales momentum in the quarter and achieved 10% of year-over-year growth in sales of Clavulanic Acid products. Sales volumes increased 18% to 21 tons from 18 tons in the same period of 2008. Gross margin further improved to 42% from 35% in the same period of 2008 primarily due to larger production volumes as well as continued improvements in fermentation technology. In September 2009, a long term contract was signed with a current client to supply 10 tons of Clavulanic Acid every year to its subsidiary in another country of the Middle East. Since the Company’s Clavulanic Acid production facility has been running beyond its designed capacity for a while, the Company has started an expansion project to expand capacity to 135 tons a year. Completion of this project is planned for the end of this year.

Sales from the Cephalosporin Division increased 19% to $29.70 million, mostly due to substantial sales growth in Cephalosporin crude bulk drugs. As part of the Company’s business strategy to establish vertically integrated product lines covering intermediates, bulk drugs and finished formulation products, three new types of crude bulk Active Pharmaceutical Ingredients (API) were added to the Company’s product portfolio including Ceftriaxone, Cefalotin and Cefuroxime crude powders. As a result of the broader product offering, sales revenues from crude bulk drugs increased 98% to $11.53 million while sales volumes increased 229% to 106 tons from 32 tons for the same period of 2008. As larger volumes of 7-ACA were used for in-house downstream applications, sales of 7-ACA decreased 16% to $7.62 million and gross margin decreased to 26% from 31% for the same period of 2008.

Net income was $2.20 million, up 108% year-over-year and 7% sequentially. Earnings per share (basic and diluted) were $0.03 compared to $0.02 for the same period of 2008.

“Our performance in this past quarter reflects the quality of our business and our excellent execution as we continued to increase operational and financial efficiency,” said Dragon Pharma’s Chairman and CEO, Mr. Yanlin Han. “By the end of September, all of our production facilities were operating close to full capacity. In order to maintain our current position in the market, we have taken initiatives to expand our production capacities to the highest possible levels achievable in the existing facilities. Further large scale expansion, however, is not possible in our current location and we may need to work with the city planning authority for a practical solution.”

For further information, please refer to the Company’s 10-Q, which has been filed with the U.S. Securities and Exchange Commission and the Ontario Securities Commission. The full financial statements are also available on Dragon’s website at www.dragonpharma.com.

About Dragon Pharmaceutical Inc.

Dragon Pharmaceutical, incorporated in Florida and headquartered in Vancouver, Canada, is a leading manufacturer and distributor of a broad line of high-quality antibiotic products including Clavulanic Acid and 7-ACA, a key intermediate to produce cephalosporin antibiotics and formulated drugs. Dragon Pharma is the third largest 7-ACA producer and the dominant manufacturer and market leader of Clavulanic Acid products in China. Dragon Pharma utilizes its nationwide sales distribution network, close customer relationships, understanding of local markets and customer needs and low cost structure to outperform its international and domestic peers. With an annual capacity of 780 tons, Dragon Pharma is the largest exporter of 7-ACA in China. To learn more about Dragon Pharmaceutical Inc., please visit www.dragonpharma.com.

Safe Harbor Statement

This press release contains forward looking statements, including but not limited to, that the Company will continue to experience growth in sales of its main products, that it will continue to be able to improve its production technology, that it will continue to achieve continuous growth in business and profitability in the near future, that it will continue to utilize its current facilities at their maximum capacities and that there will be growth in the Chinese and the international market. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward looking statements. Readers should not place undue reliance on forward looking statements, which only reflect the views 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.