BMP Sunstone 10Q 2007 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission file number 000-51409

BEIJING MED-PHARM CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		20-0434726
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

600 W. Germantown Pike, Suite 400
Plymouth Meeting, Pennsylvania		19462
(Address of principal executive offices)		(Zip Code)

(610 ) 940-1675
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filero Accelerated filero Non-accelerated filerþ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

The number of shares of common stock of Beijing Med-Pharm Corporation outstanding as of August 10, 2007 was 26,857,943.

BEIJING MED-PHARM CORPORATION
INDEX


	Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2007 (Unaudited) and December 31, 2006		3
Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2007 and 2006		4
Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and six months ended June 30, 2007		5
Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended June 30, 2007 and 2006		6
Notes to Condensed Consolidated Financial Statements (Unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results Of Operations		13
Item 3. Quantitative and Qualitative Disclosures About Market Risk		23
Item 4. Controls and Procedures		23

Part II OTHER INFORMATION
Item 1A. Risk Factors		24
Item 4. Submission of Matters to a Vote of Security Holders		29
Item 6. Exhibits		30
SIGNATURES
Certificate of the Chief Executive Officer
Certificate of the Chief Financial Officer
Certificate of the Chief Executive Officer, required by Rule 13a-14(b)
Certificate of the Chief Financial Officer, required by Rule 13a-14(b)

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS


	(Unaudited)
	June 30,			December 31,
	2007			2006
Assets
Current Assets:
Cash and Cash Equivalents	$	10,399,735		$	15,330,606
Restricted Cash		498,513			108,000
Accounts Receivable, net of allowance for doubtful accounts of $0		8,824,311			7,237,167
Inventory, net of allowance for obsolescence of $0		1,870,503			1,969,547
Note Receivable		659,000			—
Other Receivables		287,629			350,151
VAT Receivable		357,225			597,119
Prepaid Expenses and Other Current Assets		1,080,430			597,439


Total Current Assets		23,977,346			26,190,029
Restricted Cash		157,000			157,000
Property and Equipment, net		440,071			312,594
Investments, at Cost		131,416			128,205
Intangible Assets, net of accumulated amortization		600,889			728,722


Total Assets	$	25,306,722		$	27,516,550


Liabilities and Stockholders’ Equity
Current Liabilities:
Notes Payable	$	117,378		$	117,378
Related Party Notes Payable		258,567			548,422
Accounts Payable		5,947,829			6,063,956
Accounts Payable Wanhui Group		—			214,227
Deferred Revenue		80,476			18,159
Accrued Payroll		532,212			533,290
Accrued Professional Fees		186,933			140,349
Accrued Taxes and related expenses		80,313			85,603
Accrued Social Welfare and related expenses		206,250			204,134
Accrued Contract Allowance		457,896			462,581
Accrued Other		481,296			442,172


Total Current Liabilities		8,349,150			8,830,271


Notes Payable, long term		59,082			126,495


Total Liabilities	$	8,408,232		$	8,956,766


Stockholders’ Equity:
Common Stock, $.001 Par Value; 50,000,000 Shares Authorized; 26,854,943 and 26,522,868 Shares Issued and Outstanding as of June 30, 2007 and December 31, 2006, respectively	$	26,855		$	26,523
Additional Paid in Capital		30,388,955			28,039,112
Common Stock Warrants		5,494,499			6,371,332
Accumulated Deficit		(19,210,397	)		(15,964,418	)
Accumulated Other Comprehensive Income		198,578			87,235


Total Stockholders’ Equity		16,898,490			18,559,784


Total Liabilities and Stockholders’ Equity	$	25,306,722		$	27,516,550

See notes to condensed consolidated financial statements.

BEIJING MED-PHARM CORPORATION AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


	Three months ended						Six months ended
	June 30,						June 30,
	2007			2006			2007			2006
Net Revenues	$	7,179,880		$	5,398,797		$	12,865,315		$	10,121,581
Cost of Sales		6,630,913			5,221,754			11,855,559			9,773,859


Gross Margin		548,967			177,043			1,009,756			347,722


Sales and Marketing Expenses		305,589			281,273			726,936			589,605
General & Administration Expenses		1,896,241			1,538,716			3,754,751			2,938,653


Total Operating Expenses		2,201,830			1,819,989			4,481,687			3,528,258


Loss From Operations		(1,652,863	)		(1,642,946	)		(3,471,931	)		(3,180,536	)


Other Income (Expense):
Interest Income		119,245			42,078			269,576			92,222
Interest Expense		(24,790	)		(7,202	)		(43,624	)		(23,589	)
Other Expense		—			(3,415	)		—			(3,415	)


Total Other Income		94,455			31,461			225,952			65,218


Loss Before Provision For Income Taxes		(1,558,408	)		(1,611,485	)		(3,245,979	)		(3,115,318	)
Provision For Income Taxes		—			—			—			33,863


Net Loss	$	(1,558,408	)	$	(1,611,485	)	$	(3,245,979	)	$	(3,149,181	)


Basic and Diluted Loss Per Share	$	(0.06	)	$	(0.07	)	$	(0.12	)	$	(0.14	)
Basic and Diluted Weighted-average Shares Outstanding		26,738,948			22,778,328			26,664,122			22,338,002

See notes to condensed consolidated financial statements.

BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY (Unaudited)


													Accumulated
													Other
													Comprehensive
	Common Stock						Common						Income Foreign		Total
	Number		$.001 Par		Additional		Stock			Accumulated			Currency		Stockholder’s
	of Shares		Value		Paid-in Capital		Warrants			Deficit			Translation		Equity
Balance as of December 31, 2006		26,522,868	$	26,523	$	28,039,112	$	6,371,332		$	(15,964,418	)	$	87,235	$	18,559,784
Stock-Based Compensation						316,028										316,028
Warrant Exercise		118,323		118		1,013,526		(479,833	)							533,811
Net Loss											(1,687,571	)				(1,687,571	)
Other Comprehensive Loss
Foreign Currency Translation														39,597		39,597


Total Comprehensive Loss																(1,647,974	)


Balance as of March 31, 2007		26,641,191	$	26,641	$	29,368,666	$	5,891,499		$	(17,651,989	)	$	126,832	$	17,761,649

Stock-Based Compensation						356,396										356,396
Warrant and Option Exercises		213,752		214		663,893		(397,000	)							267,107
Net Loss											(1,558,408	)				(1,558,408	)
Other Comprehensive Loss
Foreign Currency Translation														71,746		71,746

Other Comprehensive Loss																(1,486,661	)

Balance as of June 30, 2007		26,854,943	$	26,855	$	30,388,955	$	5,494,499		$	(19,210,397	)	$	198,578	$	16,898,490

See notes to condensed consolidated financial statements.

BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	For the six months ended June 30,
	2007			2006
Cash Flows from Operating Activities:
Net Loss	$	(3,245,979	)	$	(3,149,181	)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
Depreciation and amortization of Property and Equipment		51,901			38,829
Amortization of Intangible Assets		127,833			129,541
Stock-Based Compensation		672,424			567,024
Loss on Disposal of Asset		19,589			3,398
Increase in Accounts Receivable		(1,587,144	)		(346,697	)
Decrease (Increase) in Inventory		99,045			(265,933	)
(Increase) Decrease in Other Receivables		62,522			31,014
Decrease in Value Added Tax Receivable		239,894			15,349
(Increase) Decrease in Prepaid Expenses and Other Current Assets		(482,991	)		3,745
(Decrease) Increase in Accounts Payable		(116,127	)		(254,610	)
Increase in Deferred Revenue		62,317			166
Decrease in Accrued Payroll		(1,078	)		(15,862	)
Increase (Decrease) in Accrued Professional Fees		46,584			(124,150	)
Decrease in Accrued Taxes and related expenses		(5,290	)		—
Increase in Accrued Social Welfare and related expenses		2,115			—
(Decrease) Increase in Contract Allowances		(4,685	)		4,233
Increase in Accrued Other		39,126			96,017

Net Cash Used in Operating Activities		(4,019,944	)		(3,267,117	)


Cash Flows from Investing Activities:
Acquisition payment due to Wanwei Group		(214,227	)		(412,089	)
Acquisition of Property and Equipment		(198,966	)		(135,957	)
Note Receivable with Rongheng		(659,000	)		—

Net Cash Used In Investing Activities		(1,072,193	)		(548,046	)


Cash Flows from Financing Activities:
Net Proceeds from Exercise of Warrants		800,916			2,591,318
Payments on Note Payable		(357,268	)		(69,643	)
Increase in restricted cash		(390,513	)		—
Investment held for sale		(1,852	)		—

Net Cash Provided by Financing Activities		51,283			2,521,675
Effect of exchange rate changes on cash		109,983			11,671

Net Decrease in Cash and Equivalents		(4,930,871	)		(1,281,817	)
Cash and Equivalents, Beginning		15,330,606			6,905,911

Cash and Equivalents, Ending	$	10,399,735		$	5,624,094


Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Years for:
Income Taxes	$	0		$	50,290
Interest		25,533			33,768

See notes to condensed consolidated financial statements.

BEIJING MED-PHARM CORPORATION AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1. Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements as of June 30, 2007 and for the six months ended June 30, 2007 and 2006 of Beijing Med-Pharm Corporation and Subsidiaries (collectively, “the Company” ) include the accounts of Beijing Med-Pharm Corporation (the “Parent”) and its wholly-owned subsidiaries, Beijing MedPharm Co. Ltd. (“BMP China”), Beijing Wanwei Pharmaceutical Co., Ltd. (“Wanwei”) and Beijing Med-Pharm Hong Kong Co., Ltd. (“Hong Kong”) should be read in conjunction with the audited consolidated financial statements and accompanying footnotes of the Company as of December 31, 2006 and 2005, and for each of the three years in the period ended December 31, 2006, included in the Company’s Annual Report on form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2007. In the opinion of management, the accompanying unaudited consolidated financial statements contain all material adjustments, consisting principally of normal recurring adjustments, necessary for a fair presentation of the Company’s interim results. Certain information and footnote disclosures required for complete financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to applicable rules and regulations. The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year.

Earnings Per Share:The Company calculates basic earnings per share based on the weighted-average number of outstanding common shares. The Company calculates diluted earnings per share based on the weighted-average number of outstanding common shares plus the effect of dilutive stock options and warrants. Common stock equivalents have been excluded from the diluted per share calculations as of June 30, 2007 and 2006, as the Company has incurred a net loss during the three month period then ended, and their inclusion would have been anti-dilutive.

New Accounting Policy:The Company adopted the provisions of FASB Interpretation 48,Accounting for Uncertainty in Income Taxes, on January 1, 2007. Previously, the Company had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5,Accounting for Contingencies. As required by Interpretation 48, which clarifies Statement 109,Accounting for Income Taxes, the Company recognizes the financial statement benefits of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied Interpretation 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of FIN 48, the Company did not recognize an increase in tax liability for the unrecognized tax benefits because the Company has a full valuation allowance against any related deferred tax assets.

The amount of unrecognized tax benefits as of January 1, 2007 was $215,000. The amount includes $77,000 of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate. During the six months ended June 30, 2007, there have been no material changes in unrecognized tax benefits.

At June 30, 2007, the balance of unrecognized tax benefits was $265,000, which has increased $0 and $50,000 for the three and six months ended June 30, 2007 respectively. The increase from the beginning of the year is the result of a $50,000 first quarter increase in unrecognized tax benefits for positions related to the current period. The June 30, 2007 balance of unrecognized tax benefits includes $77,000 of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate.

The Company is subject to income taxes in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. This evaluation in accordance with FIN 48 was performed for tax years ended December 31, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions. The Company is not currently under examination by U.S. Federal and state tax authorities. The

Company is currently under a routine tax inspection by China’s Tax Authority. No material adjustments are expected as a result of this inspection.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties if any in operating expenses for all periods presented. The Company has not accrued interest and penalties related to unrecognized tax benefits as of June 30, 2007.

New Accounting Pronouncement:In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at faire value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company expects to adopt this statement effective January 1, 2008 and we have not yet determined the impact, if any, that the implementation of SFAS No. 159 will have on our financial statements.

In September 2006, the FASB issued SFAS No.157, “Fair Value Measures” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No.157 is effective the first quarter of our 2008 fiscal year with early adoption permitted. We have not yet determined the impact, if any, that the implementation of SFAS No.157 will have on our financial statements.

In June 2006, the Financial Accounting Standards Board (FASB) ratified the Emerging Issues Task Force (EITF)Issue 06-3, “How Taxes Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement,” (EITF 06-3). The scope of EITF 06-3 includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including but not limited to sales and value-added taxes. In EITF 06-3 a consensus was reached that entities may adopt a policy of presenting these taxes in the income statement on either a gross or net basis. If these taxes are significant, an entity should disclose its policy of presenting taxes and the amount of taxes if reflected on a gross basis in the income statement. EITF 06-3 was effective for interim and annual reporting periods beginning after December 15, 2006. The Company presents revenues net of sales and value-added taxes in its consolidated statement of operations and has not changed its policy as a result of the adoption of EITF 06-3.

Reclassifications:Certain reclassifications have been made to prior year balances in the note on segment information in order to conform to the current year’s presentation.

2. Acquisition:

On June 29, 2006, the Company paid Wanhui Group RMB 3,290,300, or $412,100 for the estimated tax obligation related to the Wanwei acquisition. On January 10, 2007, the Company paid $214,227 to the Chinese Tax Authority as the final payment related to the acquisition of Wanwei.

3. Segment Information:

The Company has two reportable segments: (i) the Pharmaceutical Distribution reportable segment which includes the operations of Wanwei and (ii) the Sales and Marketing reportable segment which includes the operations of BMP China.

The chief operating decision maker for the Pharmaceutical Distribution segment is the General Manager of Wanwei whose function is to allocate resources to, and assess the performance of Wanwei. This segment services both pharmaceutical manufacturers and healthcare providers in the pharmaceutical supply channel. The warehousing and distribution of pharmaceutical drugs, which are purchased from the same suppliers, is the primary business activity of Wanwei. Pharmaceutical Distribution operates in a high volume and low margin environment.

Wanwei distributes brand name and generic pharmaceuticals, over-the-counter healthcare products, and home healthcare supplies and equipment to a variety of healthcare providers.

The following tables present reportable segment information for the periods indicated:


	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007			2006
Pharmaceutical Distribution	$	7,159,275			5,385,757		$	12,844,710			10,064,870
Sales and Marketing		20,605			13,040			20,605			56,711
Sales and Marketing intersegment		139,241			225,610			240,770			363,933
Eliminations		(139,241	)		(225,610	)		(240,770	)		(363,933	)


Total Revenue	$	7,179,880			5,398,797		$	12,865,315			10,121,581


Pharmaceutical Distribution	$	127,246			(91,250	)	$	(150,644	)		(224,107	)
Sales and Marketing		(695,644	)		(452,571	)		(1,099,885	)		(844,976	)
Corporate		(1,414,727	)		(1,059,065	)		(2,645,974	)		(2,039,292	)
Eliminations		330,263			(40,060	)		424,572			(72,161	)


Total Operating Loss	$	(1,652,863	)		(1,642,946	)	$	(3,471,931	)		(3,180,536	)

4. Shareholders’ Equity

The following table shows weighted average basic shares for the respective periods:

Three months ended June 30,

Six months ended June 30,

2007

2006

2007

2006

Weighted average basic shares

26,738,948

22,778,328

26,664,122

22,338,002

The following table shows potential common stock equivalents outstanding to purchase shares of common stock that were excluded in the computation of diluted loss per share. All common stock equivalents have been excluded from the diluted per share calculations in the three and six months ended June 30, 2007 and 2006 because their inclusion would have been anti-dilutive.


	Three months ended June 30,				Six months ended June 30,
	2007		2006		2007		2006
Number of shares		2,206,001		1,555,926		2,035,286		1,796,385
Range of exercise price	$	1.15 – $10.90	$	1.15-$4.20	$	1.15 – $10.90	$	1.15-$4.20

5. Stock-Based Compensation:

The Company’s 2007 Omnibus Equity Compensation Plan (the “Plan”) which merged with the Company’s 2004 Plan as of April 26, 2007 provides for grants of stock options (incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock grants and other stock-based awards to all employees (including employees who are directors and officers), non-employee directors, consultants and independent contractors of the Company and its affiliates. The Plan authorizes the issuance of up to 5,000,000 shares of the Company’s common stock, subject to adjustment, and provides that no more than 400,000 shares of common stock may be awarded to any one individual in any calendar year if the value of the award is based solely on an increase in the value of shares of the Company’s common stock after the date of grant of the award, subject to adjustment. The Plan also provides that no more than 100,000 shares of common stock may be awarded to any one individual in any calendar year if the value of the award is not based solely on an increase in the value of shares of the Company’s common stock after the date of grant of the award, subject to adjustment. Options are granted for a term of ten years. Options granted under the Plan generally vest 25% after the

first year of the date of hire and ratably each month over the remaining 36 month period. Options granted in 2004 under the Stock Plan vest 50% after the first two years of the date of hire and ratably each month over the remaining 24 month period. The Plan is administered by the Company’s Compensation Committee. The Compensation Committee has the authority to determine the individuals who will receive grants, the type of grant, the number of shares subject to the grant, the terms of the grant, the time the grants will be made, the duration of any exercise or restriction period, and to deal with any other matters arising under the Plan. Options granted under the Plan may be “incentive stock options,” which are intended to qualify with the requirements of section 422 of the Code, and “nonqualified stock options,” which are not intended to so qualify. The Company’s board of directors may amend or terminate the Plan at any time if required under the Plan, subject to stockholder approval. Unless terminated earlier by the board of directors or extended by the board of directors, with the approval of the Company’s stockholders, no awards may be granted under the Plan after February 10, 2009.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


	Three months ended June 30,						Six months ended June 30,
	2007			2006			2007			2006
Expected life (years)		5.0			5.0			5.0			5.0
Risk-free interest rate		5.23	%		5.19	%		5.15%-5.23	%		4.32-5.19	%
Expected Volatility		80	%		105.30	%		78.8-80	%		93.6-105.3	%
Expected Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%

The expected volatility in our stock for the three and six months ended June 30, 2007 has decreased from the three and six months ended June 30, 2006 as the Company has refined its estimation of volatility based upon daily volatility as compared to 2006 when volatility was based on a trade by trade basis. The weighted average estimated fair value of the option granted for each of the three months ending June 30, 2007 and 2006 was $6.24 and $3.32, respectively and $6.16 and $2.75 for the six months ended June 30, 2007 and 2006, respectively.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Compensation cost which is based on the fair value of options granted is recognized on a straight line basis over the service period.

A summary of the options issued by the Company for the 6 months ended June 30, 2007 is as follows:


						Weighted-
				Weighted-		Average
				Average		Remaining
				Exercise		Contractual		Aggregate
				Price		Term		Intrinsic
	Options			per Share		(in years)		Value
Outstanding on January 1, 2007		2,103,000		$	2.08				—
Granted		40,000			7.95				—

Outstanding on March 31, 2007		2,143,000		$	2.18		7.78	$	4,682,150


Granted		460,000			9.23				—
Exercised		(35,728	)		1.75				—

Outstanding on June 30, 2007		2,567,272		$	3.45		7.94	$	8,865,022


Exercisable on June 30, 2007		1,241,151		$	1.63		7.13	$	2,022,606

There were 35,728 and 20,000 options exercised for both the six month periods ended June 30, 2007 and June 30, 2006, respectively. Total intrinsic value of the options exercised for the three and six months ended June 30, 2007 and 2006 was $293,192, $75,000, $293,192 and $75,000, respectively. The total fair value of shares vested during the three months ended June 30, 2007 and 2006 was $275,758 and $156,150, respectively.

A summary of the status of the Company’s non-vested shares as of June 30, 2007 is presented below:


				Weighted-Average
				Grant-Date Fair
Nonvested Shares	Shares			Value
Nonvested at January 1, 2007		1,147,175		$	1.92
Granted		500,000			6.17
Vested		(321,054	)		2.13


Non-vested at June 30, 2007		1,326,121		$	3.75

The unrecognized share-based compensation cost related to stock option expense at June 30, 2007 is $4,111,038 and will be recognized over a weighted average of 3.13 years.

6. Note Receivable:

On June 25, 2007, Wanwei entered into a $659,000 or 5.0 million RMB loan with an annualized rate of 5.67% with Shanghai Rongheng Pharmaceutical Company Limited , or Rongheng. The note is for 6 month with a maturity date of December 25, 2007. Interest is to be paid at each quarter end with the principal due at maturity. The proceeds of the loan are to be used by Rongheng as working capital.

7. Subsequent events:

On July 14, 2007, the Company entered into a Sale and Purchase Agreement (the “Purchase Agreement”), by and among the Company, Han Zhiqiang (“Zhiqiang”) and Tong Zhijun, the owners (the “Sellers”) of Sunstone Pharmaceutical Co., Ltd. (“Sunstone”), to acquire a minority interest in Sunstone.

Under the terms of the Purchase Agreement, the Company will acquire 49% of the issued share capital of Hong Kong Fly International Health Care Limited (“Hong Kong Health Care”), a Hong Kong corporation that holds a 100% equity interest in Sunstone, for $32 million U.S. dollars (the “Purchase Price”). The Company made an initial payment of $4.8 million U.S. dollars of the Purchase Price within five business days of signing the Purchase Agreement. The closing of the transactions contemplated by the Purchase Agreement (the “Closing”) is subject to certain conditions that must be met by September 30, 2007, which include (1) the restructuring of the board of directors of Sunstone to permit the Company to appoint two of the five members and (2) Zhiqiang and Sunstone entering into a License Agreement on Trademarks and a License Agreement on Patents, whereby Zhiqiang irrevocably licenses to Sunstone certain trademarks, patents and intellectual property rights free of any charge.

Upon completion of the conditions precedent set forth in the Purchase Agreement and not later than five business days after September 30, 2007, the Company will pay the remaining $27.2 million U.S. dollars of the Purchase Price to the Sellers. If the conditions precedent to the Closing are not satisfied due to the fault of the Sellers, the Sellers must refund any payments of the Purchase Price made by the Company and indemnify the Company for damages pursuant to applicable laws and the Purchase Agreement. If the conditions precedent to the Closing are not satisfied due to the fault of the Company, the Company must pay to the Sellers a penalty equal to 2% of the purchase price, $640,000 U.S. dollars, which will be deducted from the initial payment made by the Company, and the Sellers must refund the remaining payments of the Purchase Price previously made by the Company. Following the Closing, the Sellers agreed to indemnify the Company for breaches of the Sellers’ representations and warranties contained in the Purchase Agreement.

Pursuant to the Purchase Agreement, the Sellers, the Company, Hong Kong Health Care and Sunstone entered into a Shareholders’ Agreement (the “Shareholders Agreement”). The Shareholders Agreement establishes the composition and responsibilities of the board of directors of Sunstone and Hong Kong Health Care, including permitting the Company to appoint two of the five members of each board of directors, and sets forth the responsibilities and appointment of the management of Sunstone. The Shareholders Agreement also provides a preemptive right to the non-transferring shareholders of Hong Kong Health Care (pro rata in proportion to their share ownership) to purchase any shares of Hong Kong Health Care being transferred by the Sellers and the Company, pro rata in proportion to the non-transferring persons.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto contained herein and in conjunction with the financial statements and notes thereto included in the Company’s Annual Report onForm 10-K for the year ended December 31, 2006, filed with the SEC on March 26, 2007.

Forward-Looking Statements

Certain of the statements contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and elsewhere in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. The forward-looking statements herein include, among others, statements addressing management’s views with respect to future financial and operating results, our ability to obtain an increased market share in the Chinese pharmaceutical marketing and distribution markets, the dependence of our future success on obtaining additional promotional and market research agreements and licensing rights for China and on acquiring additional distribution companies, the significance of our acquisition of Wanwei, our cash and cash equivalents investments, our anticipated use of cash resources, our ability to fund our current level of operations through our cash and cash equivalents, our hiring goals for the next twelve months, our capital requirements and the possible impact on us if we are unable to satisfy these requirements, our approaches to raise additional funds, our expectation to continue to pursue strategic acquisitions in the near future. Various factors, including competitive pressures, success of integration, market interest rates, changes in customer mix, changes in pharmaceutical manufacturers’ pricing and distribution policies or practices, regulatory changes, changes in the People’s Republic of China’s policies, customer defaults or insolvencies, acquisition of businesses that do not perform as we expect or that are difficult for us to integrate or control, adverse resolution of any contract or other disputes with customers and suppliers, or the loss of one or more key customer or supplier relationships, could cause actual outcomes and results to differ materially from those described in forward-looking statements. Certain additional factors that management believes could cause actual outcomes and results to differ materially from those described in forward-looking statements are set forth in this report in Part II, Item 1A. “Risk Factors” and in Part I, Item 1A. “Risk Factors – Risks Relating to Our Business” in our Annual Report on Form 10-K for the year ended December 31, 2006.

Overview

Beijing Med-Pharm Corporation, a Delaware corporation, is a pharmaceutical marketing and distribution company based in China. Our corporate headquarters are in suburban Philadelphia, Pennsylvania and our Chinese operations are based in Beijing, China. Our services, which we offer through Beijing Med-Pharm Market Calculating Co, Ltd., or BMP China, and Beijing Wanwei Pharmaceutical Co., Ltd., or Wanwei, which we acquired on December 6, 2005, to foreign and domestic pharmaceutical manufacturers in China, focus primarily on marketing and promotional services and distribution. These services include:

	•		pre-market entry analysis;

	•		clinical trial management;

	•		product registration;

	•		market research;

	•		pharmaceutical marketing to physicians, hospitals and other healthcare providers; and

	•		pharmaceutical distribution.

Through Wanwei, we have distribution relationships with over 120 distributors located throughout China and access to most major hospitals in Beijing. Wanwei distributes over 900 products to more than 340 customers. These distribution services include the distribution of:

	•		western medicines;

	•		traditional Chinese medicines;

	•		bio-chemical medicines; and

	•		medical applications.

Rongheng

On August 31, 2005, we entered into a non-binding letter of intent with Orient International Holding Shanghai Rongheng International Trading Co., Ltd. or Orient International, and Shanghai CAS Shenglongda Biotech (Group) Co., Ltd., or Shanghai CAS, to purchase a majority interest in Shanghai Rongheng Pharmaceutical Company Limited, or Rongheng. Orient International and Shanghai CAS currently own approximately 90% of the equity interests in Rongheng. Rongheng is a pharmaceutical distribution enterprise with operations in Shanghai, China, a municipality of more than 17 million permanent residents. Rongheng was established in 1999 and distributes to over 250 hospitals in Shanghai, including all of the Class A hospitals in Shanghai.

Under Chinese law, a proposed sale of state-owned assets, such as the proposed sale of the equity interests of Rongheng, must be posted on a regional property exchange, in this case the Shanghai United Assets and Equity Exchange, or the Shanghai Exchange, whereupon the assets are sold to the highest qualified bidder. On May 11, 2006, we entered into an agreement with Shanghai CAS and Orient International. Under the terms of the agreement, the parties agreed that, if we are the winning bidder following the posting of the proposed sale on the Shanghai Exchange, the parties will enter into definitive transactional documents regarding the proposed acquisition promptly thereafter. On December 14, 2006, the proposed sale of Rongheng was posted on the Shanghai Exchange. On January 16, 2007, we were notified that we were the winning bidder of the proposed sale. On March 15, 2007, the parties executed definitive documents and the transaction was submitted to the Chinese government for approval. The transaction is subject to a number of conditions, including the receipt of Chinese regulatory approval and is expected to close during the second half of 2007.

GPC Joint Venture

On January 27, 2007, Alliance BMP Limited entered into a Joint Venture Contract, or the GPC JV Contract with Guangzhou Pharmaceutical Limited Company, or GP Limited, a Contract for the Transfer of Capital Contribution of Guangzhou Pharmaceuticals Corporation, or the GPC Capital Contribution Transfer Contract with several shareholders of Guangzhou Pharmaceuticals Corporation, or GPC, a Chinese limited liability company, and a Contract for the Increase of Registered Capital of Guangzhou Pharmaceuticals Corporation with GP Limited, or the GPC Capital Increase Contract.

Alliance BMP Limited is a joint venture between the Company and Alliance Boots PLC, or AB. On January 18, 2007, the Company, AB and Alliance BMP Limited entered into a Shareholders’ Agreement, or the Shareholders’ Agreement that sets forth the terms and purpose of the joint venture. Alliance BMP Limited is a newly-formed United Kingdom-based investment vehicle. The primary purpose of Alliance BMP Limited is to acquire a 50% interest in GPC and to manage its investment in GPC. The Company and AB have agreed to do or cause to be done all reasonable acts necessary or desirable to consummate the joint venture with GPC.

These agreements provide that all shareholders of GPC, other than GP Limited, will transfer to Alliance BMP an aggregate of 9.91% of GPC’s total registered capital, representing the entire holdings of these shareholders. Immediately thereafter, GPC will increase its registered capital by approximately 100% and Alliance BMP Limited will purchase the entire increase at a purchase price of approximately $69 million. GPC will then be converted from a wholly-Chinese owned limited liability company to a Sino-foreign equity joint venture limited liability company, or reorganized GPC, and each of GP Limited and Alliance BMP Limited will own a 50% interest in GPC. The completion of these transactions is subject to approval by the Chinese authorities and certain other conditions, and is expected to occur in the second half of 2007.

It is expected that reorganized GPC will have eight directors. Each of GP Limited and Alliance BMP Limited will have the right to appoint four directors. Alliance BMP Limited is also entitled to designate (i) the Chairman of the Board of Directors and (ii) the Financial Director of reorganized GPC, and GP Limited will have the right to designate (i) Deputy Chairman of the Board of Directors and (ii) the General Manager of reorganized GPC. It is expected that David Gao will initially serve as the Chairman of reorganized GPC.

Under the Shareholders’ Agreement, subject to government approval of the GPC Agreement and certain other conditions, the Company will obtain 99,998 ordinary shares of Alliance BMP Limited for a total purchase price of $13.8 million, and AB will obtain 399,992 ordinary shares of Alliance BMP Limited for a total purchase price of $55.2 million, such that the Company will have 20% interest and AB will have 80% interest in Alliance BMP Limited. The Company is in the process of reviewing its alternatives to fund Alliance BMP Limited.

Alliance BMP Limited will be jointly managed by the Company and AB. Until the parties agree otherwise, the Board of Directors of Alliance BMP Limited will have no more than four directors within two years of closing of the GPC Agreements and thereafter for so long as the Company is the holder of not less than 10% of the total issued shares of Alliance BMP Limited. During such time the Company will have the right to appoint and remove one director. AB will have right to appoint and remove three directors provided that it holds between 50% and 90% of the total issued shares of Alliance BMP Limited. The initial directors of Alliance BMP Limited are David Gao (Chief Executive Officer and a director of the Company) as the Company’s designated director, and Marco Pagni, Stephen Roberts and Roger Phillips as the AB designated directors.

In addition, under the Shareholders’ Agreement, for so long as David Gao remains an employee of the Company and for the period in which the Company is entitled to appoint directors as described above, the Company will cause David Gao to provide services from time to time to Alliance BMP Limited as its Board of Directors may reasonably request. The provisions of such services will be at no charge to Alliance BMP Limited. If the Company ceases to invest in Alliance BMP Limited, the Company will continue to cause David Gao to provide such services to Alliance BMP Limited for twelve months thereafter. If David Gao ceases to be involved with the Company in any capacity, the Company has agreed not to prevent David Gao’s continuing involvement with Alliance BMP Limited.

Pico

On March 15, 2007, the Company entered into a non-binding letter of intent with Guangzhou Biaodian Medical Information Co., Ltd., or Biaodian, with respect to a proposed joint venture transaction. As proposed, Biaodian will consolidate two of its subsidiaries, Guangzhou Shimei Medical Information Co., Ltd. and Guangzhou Shipu Medical Information Co., Ltd., into one company, and will further convert that newly formed company into a Sino-foreign equity joint venture, or the JV. The Company and Biaodian proposed to acquire 49% and 51% of the equity interest in the JV, respectively. The board of directors of the JV is expected to consist of members appointed by both the Company and Biaodian. The parties also agreed to exclusive negotiation of the proposed joint venture for 90 days starting from March 15, 2007.

Sunstone

On April 23, 2007 the Company entered into a non-binding letter of intent with Sunstone Pharmaceutical Co., Ltd., or Sunstone, to acquire a minority stake in the company. Sunstone is a privately held manufacturer of primarily over-the-counter medicines, with operations in Tangshan, Hebei Province, People’s Republic of China. Under the terms of the agreement, Beijing Med-Pharm will assist Sunstone in the formation of a new entity, Sunstone China Ltd., to be registered in the Cayman Islands, which will acquire 100% of the equity interest of Sunstone. Following the completion of the transactions contemplated by the agreement, we would own up to 49 % of the common stock of Sunstone China Ltd. Because Sunstone is privately owned, the transaction does not require the approval of the Chinese central government and is expected to close in the third quarter of 2007. The closing of the transactions contemplated by the agreement are subject to various conditions, including negotiation of definitive documentation regarding Sunstone China Ltd., satisfactory completion of due diligence by Beijing Med-Pharm and the issuance by Sunstone China Ltd. of audited financial statements.

On July 14, 2007, the Company entered into a Sale and Purchase Agreement, or the Purchase Agreement, by and among the Company, Han Zhiqiang, or Zhiqiang, and Tong Zhijun, the owners, or the Sellers, of Sunstone, to acquire 49% of the issued share capital of Hong Kong Fly International Health Care Limited, or Hong Kong Health Care, a Hong Kong corporation that holds a 100% equity interest in Sunstone, for $32 million U.S. dollars, or the Purchase Price. The Company made an initial payment of $4.8 million U.S. dollars of the Purchase Price within five business days of signing the agreement. The closing of the transactions contemplated by the Purchase Agreement, or

the Closing, is subject to certain conditions that are to be met by September 30, 2007, which include (1) the restructuring of the board of directors of Sunstone to permit the Company to appoint two of the five members and (2) Zhiqiang and Sunstone entering into a License Agreement on Trademarks and a License Agreement on Patents, whereby Zhiqiang irrevocably licenses to Sunstone certain trademarks, patents and intellectual property rights free of any charge.

Pursuant to the Purchase Agreement, the Sellers, the Company, Hong Kong Health Care and Sunstone entered into a Shareholders’ Agreement, or the Shareholders Agreement. The Shareholders Agreement establishes the composition and responsibilities of the board of directors of Sunstone and Hong Kong Health Care, including permitting the Company to appoint two of the five members of each board of directors, and sets forth the responsibilities and appointment of the management of Sunstone. The Shareholders Agreement also provides a preemptive right to the non-transferring shareholders of Hong Kong Health Care (pro rata in proportion to their share ownership) to purchase any shares of Hong Kong Health Care being transferred by the Sellers and the Company, pro rata in proportion to the non-transferring persons.

Our Opportunity

We believe that a significant opportunity exists to obtain an increased market share in the Chinese pharmaceutical marketing and distribution markets by offering a distribution chain solution that combines our market development services with market fulfillment services. We believe that our acquisition of Wanwei was an important step in the implementation of this solution.

We believe that our acquisition of Wanwei has enabled us to differentiate ourselves from many of our competitors in China’s highly fragmented pharmaceutical distribution market by combining the marketing services that we offer with the distribution of pharmaceutical products to hospitals and other authorized healthcare providers. Our opportunity to establish a strong presence in China’s pharmaceutical distribution market is largely due to the highly fragmented nature of this market. China’s pharmaceutical distribution market is in an early developmental stage. In addition, the Chinese government passed legislation that required pharmaceutical wholesale and retail enterprises to obtain Good Supply Practices, or GSP, certification. We believe that the pharmaceutical distribution permit and GSP certificate that we acquired from the acquisition of Wanwei provides us with a strategic advantage over many of our competitors in China’s pharmaceutical distribution market.

Our Strategy and Solution

Our strategy is to become a complete solutions provider for foreign and domestic pharmaceutical manufacturers in China. The key elements of our strategy and solution include the following:

	•		combine our market development sources with market fulfillment services;

	•		use our marketing arm to create demand for products that we offer exclusively through our distribution arm on a national basis in China;

	•		grow both internally and through strategic acquisitions of product marketing and distribution rights and of other distributors; and

•

provide an experienced management team and transparent financial reporting through the reports that we are required to file as a reporting company under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Our Product Portfolio

We provide clinical and/or market development services with respect to the following products:

	•		Propess. Propess vaginal insert, or Propess, is a vaginal insert used to ripen the cervix in preparation for childbirth when labor is induced. The manufacturer of Propess is Cytokine PharmaSciences, Inc., or Cytokine. We entered into an agreement with Cytokine in August 2005 to market and distribute Propess in China. We began marketing Propess and recorded revenues with respect to this product during the first six months of 2006.

	•		Anpo. Anpo, or ritodrine hydrochloride, is a muscle relaxant available in both injectable and oral forms, and is used for managing pre-term labor. In July 2006, we entered into an agreement with Taiwan Biotech Co. Ltd. to serve as the exclusive distributor of Anpo in mainland China. We began marketing Anpo and recorded revenues with respect to this product during the last six months of 2006.

	•		Misopess. Misopess vaginal insert, or Misopess, is a vaginal insert under investigation in several countries for cervical ripening and induction of labor. The manufacturer of Misopess is Cytokine. We entered into an agreement with Cytokine in November 2006 to conduct late-stage clinical development, registration, sales, marketing and distribution in China. Under terms of the agreement, we will initiate a Chinese registration trial of Misopess, with the expectation that, once Mispoess receives US FDA approval, data from this single trial will permit a regulatory application with the SFDA in late 2008 or 2009.

	•		Fentora. Fentora, or fentanyl buccal tablet, received US FDA approval in September 2006 for the management of breakthrough pain in patients with cancer. The manufacturer of Fentora is Cephalon, Inc, or Cephalon. We entered into a service agreement with Cephalon in December 2006 under which we will complete the clinical development and registration process for Fentora in China.

	•		Clindesse. Clindesse™, or clindamycin phosphate vaginal cream, is indicated for the treatment of bacterial vaginosis in non-pregnant women. The manufacturer of Clindesse is KV Pharmaceutical Company (KV). Under the terms of the agreement we entered into with KV in July 2007, we will complete late stage clinical development and registration of Clindesse(TM) with the SFDA prior to assuming responsibilities for sales, marketing and distribution in China.

	•		Ondansetron. Ondansetron Flashtab^®, is a generic form of Zofran^®, a 5-HT(3) antagonist used to reduce nausea and vomiting induced by cytotoxic chemotherapy and radiotherapy and to prevent post-operative nausea and vomiting. The manufacturer of Orndestron is Shanghai Ethypharm (Ethypharm). Under the terms of the agreement we entered into with Ethypharm in July 2007, Ethypharm will pursue registration of Orndansetron and we will then be responsible for sales, marketing, distribution and supply in China.

	•		Galake.Galake is currently approved for marketing in China and is indicated for the relief of pain associated with conditions including trauma, surgery, cancer, lower back pain, arthritis and headache. The manufacturer of Galake is Lotus Healthcare, Inc. (Lotus). Under the terms of the agreement we entered into with Lotus, we will promote and sell Galake in China.

There are numerous risks to our business plan and obstacles that we will face in implementing it. We have highlighted these risks under “Risk Factors” as described in this report in Part II, Item 1A. “Risk Factors” and in Part I, Item 1A. “Risk Factors – Risks Relating to Our Business” in our Annual Report on Form 10-K filed as of March 26, 2007. In particular, we have a history of operating losses and anticipate that we will continue to incur significant operating losses. As of June 30, 2007, our accumulated deficit since our inception was approximately $19.2 million. We may be unable to effectively implement our business strategy of becoming a provider of both market development and market fulfillment services. Even if we are successful in becoming a provider of these services, we may never generate sufficient sales revenue to achieve and then maintain profitability. We expect to incur operating losses for the foreseeable future.

Critical Accounting Policies

Uncertainty in Income Taxes

The Company adopted the provisions of FASB Interpretation 48,Accounting for Uncertainty in Income Taxes, on January 1, 2007. Previously, the Company had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5,Accounting for Contingencies. As required by Interpretation 48, which clarifies Statement 109,Accounting for Income Taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied Interpretation 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of FIN 48, the Company did not recognize an adjustment to both beginning retained earnings and the tax liability for the unrecognized tax benefits because the Company has a full valuation allowance against the related deferred tax assets.

The amount of unrecognized tax benefits as of January 1, 2007, was $215,000. The amount includes $77,000 of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate. There have been no material changes in unrecognized tax benefits since January 1, 2007.

At June 30, 2007, the balance of unrecognized tax benefits had increased to approximately $265,000. The increase from the beginning of the year is the result of a $50,000 first quarter increase in unrecognized tax benefit for positions related to the current period. The June 30, 2007 balance of unrecognized tax benefits includes $77,000 of unrecognized tax benefits which, if ultimately recognized, will reduce the Company’s annual effective tax rate.

The Company is subject to U.S. Federal income taxes, and income taxes in various state and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. This evaluation in accordance with FIN 48 was performed for tax years ended December 31, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions. The Company is not currently under examination by U.S. Federal and state tax authorities. The Company is currently under a routine tax inspection by China’s Tax Authority. No material adjustments are expected as a result of this inspection.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses for all periods presented. The Company has not accrued interest and penalties related to unrecognized tax benefits as of June 30, 2007.

Revenue Recognition

We recognize distribution revenues and related cost of sales at the later of (a) the time of shipment or (b) when title passes to the customers, provided that there is evidence of a final arrangement, there are no uncertainties surrounding acceptance, collectability is probable and the price is fixed. Revenues consist of gross sales less provisions for estimated customer returns, discounts, vendor payments and volume rebates. Amounts billed to a customer for shipping and handling are reported as revenue. We recognize commission revenue, net of returns, on products delivered by the distribution provider at the time of delivery, provided that there is evidence of a final arrangement, there are no uncertainties surrounding acceptance, collectability is probable and the price is fixed. Under the terms of these agreements payments are due from customers within 30 to 60 days of delivery. We estimate the reserve for product returns at the time revenue is recognized based on various market data, historical trends, and information from customers.

Results of Operations

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006

Net Revenue:

Net revenue was approximately $7,180,000 for the three months ended June 30, 2007 as compared to approximately $5,399,000 for the three months ended June 30, 2006. Distribution revenue for the three months ended June 30, 2007, excluding Propess and Anpo, was $6,509,000 as compared to $5,282,000 for the three months ended June 30, 2006. The Company provides sales and marketing and distribution services for Propess and Anpo which revenue totaled $651,000 for the three months ended June 30, 2007 as compared $103,000 for the three months ended June 30, 2006. This increase was the result of continued sales and marketing efforts promoting Propess and our initiating sales of Anpo during the third quarter of 2006. As of June 30, 2007 there were 348 hospitals selling Propess versus 173 as of June 30, 2006. The remaining revenue represents registration fees and commission sales generated by sales and marketing for products not distributed by Wanwei.

Cost of Sales:

Cost of sales was approximately $6,631,000 for the three months ended June 30, 2007 as compared with $5,222,000 for the three months ended June 30, 2006. This increase is primarily attributable to Wanwei’s revenue growth during the three months ended June 30, 2007 and the increase in Propess and Anpo sales during the same period. The cost of sales component consists of inventory cost of sales for distribution services and sales and marketing efforts to promote Propess and Anpo. The combined gross margin for distribution and sales and marketing was 7.6% for the three months ended June 30, 2007 as compared to 3.3% for the three months ended June 30, 2006. The increase for the period ended June 30, 2007 as compared to June 30, 2006 was primarily due to increased Propess and Anpo sales which have a higher gross margin than those which we only provide distribution service and reduction in promotion costs on a per unit basis.

Sales and Marketing Expenses:

Sales and marketing expenses were approximately $306,000 for the three months ended June 30, 2007 as compared with $281,000, for the three months ended June 30, 2006. The increase resulted from increased staffing to support increased revenues.

General and Administrative Expenses:

General and administrative expenses were approximately $1,896,000 for the three months ended June 30, 2007 as compared to $1,539,000 for the three months ended June 30, 2006. Salaries and related benefits and taxes increased $202,000 for the three months ended June 30, 2007 as compared to the three months ended June 30, 2006 which reflects an expansion of our administrative and corporate staff in China and salary and benefit increases in 2007. SFAS 123R stock-based compensation for the three months ended June 30, 2007 was $356,000 as compared to $197,000 for the three months ended June 30, 2006. During the three months ended June 30, 2007 printing and listing fees increased $39,000 as we incurred a filing fee for our S-3 Registration Statement and the cost to produce and distribute our Annual Reports increased as our shareholder based significantly expanded. Corporate communications increased by $38,000 for the three months ended June 30, 2007 as we had a significant increase in announcements during 2007.

Interest Income:

Our interest income primarily consists of income earned on our cash and cash equivalents. In December 2006, we completed a private placement of our shares of common stock to investors of $14,088,000, net of issuance costs. In October 2005, we completed a private placement of our shares of common stock to investors of $5,941,000, net of issuance costs. We received interest income, of approximately $119,000 during the three months ended June 30, 2007 and $42,000 for the three months ended June 30, 2006.

Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

Net Revenue

Net revenue was approximately $12,865,000 for the six months ended June 30, 2007, an increase of $2,743,000 as compared with approximately $10,122,000 for the six months ended June 30, 2006. Distribution revenues generated $11,788,000 during the six months ended June 30, 2007 versus $9,959,000 for the six months ended June 30, 2006. The Company provides sales and marketing and distribution services for Propess and Anpo which revenue totaled $1,057,000 for the six months ended June 30, 2007 as compared $172,000 for the three months ended June 30, 2006. This increase was the result of continued sales and marketing efforts promoting Propess and our initiating sales of Anpo during the third quarter of 2006. As of June 30, 2007 there were 348 hospitals selling Propess versus 173 as of June 30, 2006. The remaining revenue represents registration fees and commission sales generated by sales and marketing for products not distributed by Wanwei.

Cost of Sales:

Cost of sales was $11,856,000 for the six months ended June 30, 2007, an increase of $2,082,000, as compared with $9,774,000 for the six months ended June 30, 2006. This increase is primarily attributable to Wanwei’s revenue growth during the six months ended June 30, 2007 and the increase in Propess and Anpo sales during the same period. The cost of sales component consists of inventory cost of sales for distribution services and sales and marketing efforts to promote Propess and Anpo. The combined gross margin for distribution and sales and marketing was 7.8% for the six months ended June 30, 2007 as compared to 3.4% for the six months ended June 30, 2006. The increase for the period ended June 30, 2007 as compared to June 30, 2006 was primarily due to increased Propess and Anpo sales which have a higher gross margin than those which we only provide distribution service and reduction in promotion costs on a per unit basis.

Sales and Marketing Expenses:

Sales and marketing expenses were $727,000 for the six months ended June 30, 2007, an increase of $137,000, as compared with $590,000 for the six months ended June 30, 2006. The increase was the increased staff to support revenue growth and additional development of licensed products.

General and Administrative Expenses:

General and administrative expenses were $3,755,000 for the six months ended June 30, 2007 an increase of $816,000, as compared to $2,939,000 for the six months ended June 30, 2006. Our general and administrative compensation expenses increased by $412,000 for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006, which was primarily the result of hiring of senior management during 2007 and 2006, salary increases and an expansion of our administrative and corporate staff in China. SFAS 123R stock-based compensation for the six months ended June 30, 2007 was $672,000 as compared to $567,000 for the six months ended June 30, 2006. During the six months ended June 30, 2007 our printing and license fee expense increased $70,000, as compared to the six months ended June 30, 2006, as we incurred NASDAQ fees which were new in 2007 as we were initially listed on NASDAQ in August 2006. In addition, our cost to produce and distribute our Annual Reports increased as our shareholder base significantly expanded. Corporate communications related to investor relations was initiated in 2006 and expanded in 2007 with an increase of $61,000 for the six months ended June 30, 2007 as compared to six months ended June 30, 2006. Office rent and related expenses increased by $41,000 for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006 as we expanded our facilities in Beijing.

Interest Income and Expense:

Our interest income primarily consists of income earned on our cash and cash equivalents. In December 2006, we completed a private placement of our shares of common stock to investors of $14,088,000, net of issuance costs. In October 2005, we completed a private placement of our shares of common stock to investors of $5,941,000, net of issuance costs. We received interest income, of approximately $270,000 during the six months ended June 30, 2007 and $92,000 for the three months ended June 30, 2006.

Liquidity and Capital Resources

As of June 30, 2007, we had unrestricted cash and cash equivalents of approximately $10.4 million, which represented 41.1% of our total assets. Our cash and cash equivalents are highly liquid investments with a maturity of three months or less at the time of purchase and are primarily invested in short-term money market instruments and investments. However, we do not anticipate any losses with respect to such cash balances because the balances are invested in highly-rated securities.

Since we acquired BMP China in February 2004, we have funded our operations primarily through the issuance of shares of our common stock. In March 2004, we completed a private placement of 8,695,652 shares of our common stock at a purchase price of $1.15 per share, which yielded gross proceeds to us of approximately $10.0 million and net proceeds to us of approximately $8.8 million. On October 19, 2005, we completed a private placement of 4,199,981 shares of our common stock to a group of institutional and individual accredited investors, for gross proceeds of $6.3 million and net proceeds of approximately $5.9 million. The investors also received warrants to purchase an aggregate of 1,049,828 shares of common stock, half of which had an exercise price equal to $1.875 and the balance of which had an exercise price equal to $2.25. On December 20, 2006, we completed a private placement of 3,333,306 shares of our common stock to a group of institutional and individual accredited investors, for gross proceeds to us of $15.0 million and net proceeds to us of approximately $14.1 million. The investors also received warrants to purchase an aggregate of 1,116,611 shares of common stock, which have an exercise price equal to $5.625.

The use of our cash flows has primarily consisted of salaries and wages for our employees, professional fees, fees related to sales and promotion of ur current products and the acquisition of Wanwei.

We currently plan to use the remaining proceeds primarily to fund:

	•		Our operating expenses and general working capital;

	•		The marketing of our current and future products;

	•		Our pursuit of internal growth and strategic acquisition of Shanghai Rongheng Pharmaceutical Company Limited (Rongheng); and

	•		The expenses necessary to maintain our status as an Exchange Act reporting company.

We anticipate that our June 30, 2007 balance of approximately $10.4 million in unrestricted cash and cash equivalents will be sufficient to fund our current level of operations for at least the next 12 months. Our future capital requirements will depend on many factors, including those factors described in this report in Part II, Item 1A. “Risk Factors,” in Part I, Item 1A. “Risk Factors – Risks Relating to Our Business” in our Annual Report on Form 10-K filed March 26, 2007 and elsewhere in this report as well as our ability to maintain our existing cost structure and return on sales, fund obligations for additional capital that will occur on additional product licenses and acquisitions and execution of our business and strategic plans as currently conceived.

To date, we have had negative cash flows from operations.

Net cash used in operating activities was $4,020,000 for the six months ended June 30, 2007. This amount principally reflected our net loss of $3,246,000, partially offset by $872,000 in non-cash charges including stock-based compensation expense of $672,000, intangible amortization of $128,000, depreciation of $52,000 and loss on disposal of assets of $20,000. In addition, we generated $489,000 of operating cash as a result of changes in certain of our operating assets and liabilities during the six months ended June 30, 2007. The most significant changes were the decrease in value added tax receivable of $240,000, other receivables of 62,522 and inventory of $99,000 and increases in deferred revenue of $62,000, accrued professional fees of $47,000 and accrued other of $39,000. Offsetting these changes were increases in accounts receivable of $1,587,000 and prepaid expenses and other current assets of $483,000 and a decrease in accounts payable of $116,000. Cash used in investing activities was $1,072,000 of which $214,000 was paid to the Chinese Taxing Authority for taxes related to the Wanwei acquisition, $199,000 was for the acquisition of equipment and a note receivable with Rongheng. Cash generated from financing activities was $51,000 and reflects $801,000 from the exercise of warrants offset by $357,000 in reduction of notes payable and $391,000 increase in restricted cash.

Our capital requirements are likely to increase, particularly as we pursue internal growth, fund inventory purchases, support increased levels of accounts receivables prior to receiving collections from our customers and proposed acquisitions. To complete the announced planned joint ventures for GPC, Sunstone, Pico and Rongheng we are considering raising additional funds in the next six months through public or private equity offerings, debt financings or from other sources. There is no assurance that such funding will be available on favorable terms or at all to the Company. If we are not able to raise additional capital through fund raising activities we could be forced to curtail some of the currently anticipated expenditures in the above mentioned areas and our anticipated future growth will be adversely affected.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Exchange Rate Sensitivity

We are exposed to cash flow and earnings fluctuations resulting from foreign exchange rate variation because our operations are in China. This exposure arises from the translation of financial statements of our foreign subsidiary, BMP China, from RMB, the functional currency of China, into United States dollars, or USD, the functional currency of our parent entity. On July 21, 2005, China increased the value of its currency, the RMB, by 2.1% to RMB 8.11 to one USD, and announced that its currency, the RMB will no longer be pegged to one USD, but will be allowed to float in a band (and, to a limited extent, increase in value) against a basket of foreign currencies. Any devaluation of the RMB could adversely affect the value of our common stock in foreign currency terms because we will receive substantially all of our revenues in RMB. Fluctuations in exchange rates also could adversely affect the value, translated or converted into United States dollars, of our net assets, earnings and any declared dividends. In addition, a devaluation of the RMB is likely to increase the portion of our cash flow required to satisfy any foreign currency denominated obligations.

Interest Rate Sensitivity

We invest in high-quality financial instruments, primarily money market funds, federal agency notes, corporate debt securities, bank certificates of deposit, commercial paper and United States treasury notes, which we believe are subject to limited credit risk. We currently do not hedge interest rate exposure. Due to the short-term nature of our investments, we do not believe that we have any material exposure to interest rate risk arising from our investments.

ITEM 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during our second fiscal quarter that materially affected, or is reasonably likely to material affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1A. Risk Factors

You should carefully consider the risks described below, in addition to the other information contained in this report, and risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. The risks described herein and in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

We may be unsuccessful in our strategy of expanding our product portfolio, acquiring complementary businesses or integrating acquired businesses.

Our business strategy includes expanding our business capabilities through both internal growth and the acquisition of complementary businesses and licensing pharmaceutical products for marketing and distribution in China. We may be unable to find additional complementary businesses to acquire or we may be unable to enter into additional agreements to market and distribute pharmaceutical products.

Future acquisitions or joint ventures, including our potential transactions with Rongheng, Alliance Boots PLC, Sunstone and Biaodian, may result in substantial per share financial dilution of our common stock from the issuance of equity securities. Completion of future acquisitions also would expose us to potential risks, including risks associated with:

	•		the assimilation of new operations, technologies and personnel;

	•		unforeseen or hidden liabilities;

	•		the diversion of resources from our existing businesses;

	•		the inability to generate sufficient revenue to offset the costs and expenses of acquisitions; and

	•		the potential loss of, or harm to relationships with, employees, customers and suppliers as a result of the integration of new businesses.

The commercial success of our products depends upon the degree of market acceptance among the medical community. Failure to attain market acceptance among the medical community would have an adverse impact on our operations and profitability.

The commercial success of our products depends upon the degree of market acceptance they achieve among the PRC medical community, particularly physicians and hospitals. Physicians might not prescribe or recommend our products to patients, and procurement departments of hospitals might not purchase our products. The acceptance of any of our products among the medical community will depend upon several factors, including:

	•		the safety and effectiveness of the product;

	•		the effectiveness of our efforts to market our products to hospitals and physicians;

	•		the product’s cost effectiveness;

	•		the product’s perceived advantages and disadvantages relative to competing products or treatments; and

	•		the prevalence and severity of side effects.

If our products fail to attain market acceptance among the medical community, our operations and profitability would be adversely affected.

We may continue to experience delays in product introduction and marketing or interruptions in supply.

We have experienced, and are continuing to experience, longer than expected periods of product introduction and delays in marketing certain products in our product portfolio. Our revenues are dependent on the ability of the manufacturers and distributors with which we associate to supply and distribute product to our customers.

If delays continue to occur, or manufacturers and distributors are unable to supply and distribute product to our customers in a timely manner, our operating results and financial condition will suffer. In addition, our contracts with pharmaceutical owners and manufacturers relating to some of the products in our product portfolio have a limited duration and have minimum sales requirements that, if not met, could lead to termination or non-renewal of the contract, or the ability of the manufacturer to render the contract non-exclusive, which could harm our revenues.

We may be unsuccessful in attracting or retaining key sales, marketing and other personnel.

The success of our business is dependent on our ability to attract and retain highly skilled managers and sales and marketing personnel. BMP China’s and Wanwei’s sales personnel carry out critical promotional and sales activities of BMP China and Wanwei. We depend, and will continue to depend in the foreseeable future, on the personal efforts and abilities of David Gao, our president and chief executive officer, Fred M. Powell, our chief financial officer, and other officers and key employees. The loss of either of these officers or our other key management persons could harm our business and prospects for growth. There is intense competition for qualified sales and marketing personnel, and we may be unable to attract, assimilate or retain additional qualified sales and marketing personnel on a timely basis. Our inability to retain key personnel or the failure to attract additional qualified personnel could harm our development and results of operations. In addition, as we plan to expand in China, we will need to attract additional qualified managerial staff and other personnel. We may have difficulty in hiring and retaining a sufficient number of qualified personnel to work in China. This may impede the development of our distribution business and the expansion of our business in China.

If we are unable to satisfy the regulatory requirements relating to internal controls, or if our internal controls over financial reporting are not effective, our stock price could decline.

The existence of any significant deficiencies in our internal control over financial reporting could, and the existence of material weaknesses in our internal control over financial reporting would, preclude management from concluding that our internal control over financial reporting in the relevant time period is effective. In connection with the audit of our financial statements for the year ended December 31, 2006, our independent registered public accounting firm noted significant deficiencies in our internal control over financial reporting principally related to our need to improve our accounting information technology systems and our oversight over our PRC reporting functions. We are in the process of remediating these deficiencies; however, these efforts may not be sufficient to avoid future findings of significant deficiencies or material weaknesses in our internal control over financial reporting. If management or our independent auditors ultimately determine that our internal control over financial reporting is not effective in future periods, our stock price could decline and we could be subject to investigations or sanctions by regulatory authorities, which could have a negative impact on our business.

We may not achieve our projected development goals in the time frames we announce and expect.

We set goals for timing of the accomplishment of objectives material to our success, such as the receipt of regulatory approval for our acquisitions, commencement and completion of clinical trials, anticipated regulatory submission and approval dates and timing of product launches. The actual timing of these events can vary dramatically due to factors beyond our control, such as delays or failures in our clinical trials, the uncertainties inherent in the regulatory approval process and delays in achieving manufacturing or marketing arrangements sufficient to commercialize our products. There can be no assurance that our clinical trials will be completed, that we will make regulatory submissions or receive regulatory approvals as planned or that we will be able to adhere to our current schedule for the launch of any of our products. If we fail to achieve one or more of these milestones as planned, the price of our shares could decline.

We may be unable to acquire, or may be delayed in acquiring, Shanghai Rongheng Pharmaceutical Company Limited, or Rongheng.

On March 15, 2007, we entered into a definitive agreement for the acquisition of Rongheng with Orient International Holding Shanghai Rongheng International Trading Co., Ltd. and Shanghai CAS Shenglongda Biotech (Group) Co., Ltd. to purchase a 63% equity interest in Rongheng. In May 2007, we submitted the transaction to the Chinese government for approval. The transaction is subject to a number of conditions, including the receipt of Chinese regulatory approval, and is expected to close during the third quarter of 2007. The completion of the proposed acquisition of Rongheng is subject to closing conditions that are outside of our control, such as review and approval by the relevant examination and approval authorities in China. As a result, we can provide no assurance that our proposed acquisition of Rongheng will be completed in the expected time frame or at all. In addition, our proposed acquisition of Rongheng involves industries in which foreign investment has been limited, and clear guidance on foreign investment in the pharmaceutical distribution business in China does not exist. As a result, we cannot predict how the examination and approval authorities would exercise their discretion in examining this proposed acquisition. Our inability to acquire, or delays in acquiring, Rongheng also would impact adversely our ability to execute our business strategy and, consequently, the marketability and market price of our common stock.

We may be unable to complete the joint venture transaction contemplated by (i) the Shareholders’ Agreement among the Company, Alliance BMP Limited and Alliance Boots PLC, or the Shareholders’ Agreement, (ii) the Joint Venture Contract, or the GPC JV Contract, with Alliance BMP Limited and Guangzhou Pharmaceuticals Corporation and (iii) the related agreements.

In January 2007, we entered into the Shareholders’ Agreement with Alliance Boots PLC to form Alliance BMP Limited, of which we will own 20% interest and Alliance Boots PLC will own an 80% interest and Alliance BMP Limited executed the GPC JV Contract and related agreements with Guangzhou Pharmaceuticals Limited Company, or GP Limited, to form the reorganized GPC joint venture. Under these agreements, if the transaction is completed, Alliance BMP Limited and GP Limited will each own 50% interest in the reorganized Guangzhou Pharmaceuticals Corporation, or GPC. The consummation of the joint venture transaction contemplated by these agreements is conditioned upon, among other things, satisfaction of all closing conditions, including the lack of adverse regulatory actions that will materially prohibit, restrict, or delay the completion of the joint venture transaction. There can be no assurance that we will obtain approvals from the Chinese authorities, that there will be no materially adverse regulatory actions or that we will be able to complete the joint venture transaction as contemplated by the agreements. Our inability to complete the joint venture transaction may impact adversely our ability to execute our business strategy and, consequently, the marketability and market price of our common stock.

We may not be able to complete the joint venture transaction contemplated by our non-binding letter of intent with Biaodian Medical Information Co., Ltd., or Biaodian.

In March 2007, we entered into a non-binding letter of intent with respect to a proposed joint venture transaction with Biaodian. Pursuant to the proposed joint venture, we will purchase a 49% interest in Biaodian. This transaction is subject to execution of definitive agreements and, even if we and Biaodian do enter into definitive transaction documents, the consummation of the joint venture transaction may depend on various factors, such as obtaining approvals from the Chinese government and our raising sufficient funds to pay for the equity purchase price. There is no assurance that the proposed joint venture transaction with Biaodian will be completed as contemplated by the letter of intent.

We may be unable to acquire, or may be delayed in acquiring, a minority interest in Sunstone.

On July 14, 2007, we entered into a definitive agreement for the acquisition of 49% of the issued share capital of Hong Kong Fly International Health Care Limited, a Hong Kong corporation that holds a 100% equity interest in Sunstone Pharmaceutical Co., Ltd. Sunstone is a privately held manufacturer of primarily over-the-counter medicines, with operations in Tangshan, Hebei Province, People’s Republic of China. Because Sunstone is privately owned, the transaction does not require the approval of the Chinese central government and is expected to close in the third quarter of 2007. The closing of the transactions contemplated by the agreement are subject to various conditions, including satisfactory completion of due diligence by Beijing Med-Pharm and the issuance by Sunstone China Ltd. of audited financial statements. As a result, we can provide no assurance that our proposed acquisition of

Sunstone will be completed in the expected time frame or at all. In addition, our proposed acquisition of Sunstone involves industries to which foreign investment has had limited access, and clear guidance on foreign investment in the pharmaceutical distribution business does not exist. As a result, we cannot predict how the examination and approval authorities would exercise their discretion in examining this proposed acquisition. Our inability to acquire, or delays in acquiring, Sunstone also would impact adversely our ability to execute our business strategy and, consequently, the marketability and market price of our common stock.

If we are successful in acquiring a minority interest in Sunstone, we may be exposed to liability from Sunstone’s historical operations.

To date, Sunstone has been operated as a closely held corporation. In advance of entering into a definitive agreement for the acquisition of a minority interest in Sunstone, we conducted extensive due diligence into Sunstone’s historical operations. We have identified several historical practices which we require confirmation have been discontinued or need to be changed prior to completion of the transaction. Our due diligence uncovered issues regarding internal controls, tax irregularities and unauthorized payments to physicians. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and our employees, consultants, sales agents or distributors may engage in conduct for which we might be held responsible. Sunstone may be subject to litigation or regulatory review for its pre-acquisition activities. In addition, the action of Sunstone employees after we make our investment in Sunstone could expose us to liability under the U.S. Foreign Corrupt Practices Act, or FCPA, lead to a government investigation or otherwise expose us to liability as an affiliate of Sunstone, including successor FCPA liability. To the extent Sunstone may be subject to civil or criminal penalties as a result of its historical practices or activities prior to closing, Sunstone and our investment in it will be negatively impacted which may impact our financial performance. These penalties may be material to Sunstone and us. Pursuant to the Sunstone purchase agreement, we may seek indemnification for any losses relating to pre-acquisition liabilities of Sunstone from the Sunstone selling shareholders, namely, Han Zhiqiang and Tong Zhijun; however, for a number of reasons, we may not be able to enforce these indemnification rights, including an inability to proceed against assets of the sellers, the existence of liabilities in excess of the sellers’ ability to provide indemnity payments or technical and legal problems of enforcing indemnity agreements in China. Moreover, even the sellers’ indemnification may not be meaningful in the event of criminal sanctions against Sunstone or its employees and would adversely affect Sunstone’s ability to conduct its business and operations in the future.

We will not be able to acquire Sunstone without reasonable assurance that Sunstone has undertaken particular remedial measures to prevent recurrences of certain of its historical business practices.

In the course of our due diligence activites in connection with the Sunstone acquisition, we learned that certain Sunstone employees made unauthorized payments to hospitals and physicians in order to promote Sunstone’s products. Prior to the completion of our acquisition of the 49% interest in Sunstone, we intend to require Sunstone to supplement existing remedial measures with the necessary elements of a compliance program, or to discontinue its hospital sales program, or both, in order to provide us with reasonable assurance that no such practices will occur at Sunstone after we acquire our 49% interest. If Sunstone fails to implement these measures prior to the closing and these practices continue thereafter, in addition to any liabilities Sunstone may face under Chinese law, to the extent that Sunstone employees make any illicit payments to government-owned hospitals or government-employed physicians, we may be exposed to liabilities under the FCPA. Any determination that we violated the FCPA could subject us to civil and criminal penalties, including fines and debarment from certain United States government programs and licenses, any or all of which could have have a material adverse effect on our business, financial condition and results of operations.

Because we are purchasing a minority interest in Sunstone, we will not have control over Sunstone’s operations or financial reporting function.

We have agreed to acquire a minority stake in Sunstone. Pursuant to the Sunstone purchase agreement, at the closing of the transaction, we will be entitled to nominate two of the five members of Sunstone’s board of directors. We will not be able to exercise control over the day to day operations of Sunstone. Sunstone may not be operated in a manner in which we always agree.

Sunstone has not yet generated US GAAP financial statements or been subject to an audit. In addition, Sunstone has not yet been subject to disclosure controls or internal controls. If we are successful in acquiring the 49% minority interest in Sunstone, Sunstone will be required to develop effective financial reporting and compliance functions. If Sunstone is unable to prepare US GAAP compliant financial statements in a timely manner, we may not be able to comply with our SEC reporting obligations, which will adversely affect our operations and financial condition.

Because we do not or will not initially have majority control of a number of our subsidiaries and joint ventures, we are dependent on the majority owners of these subsidiaries and joint ventures to operate these enterprises in a manner consistent with our plans and requirements.

Although our agreements with the other owners of these subsidiaries and joint ventures give us certain rights to influence their management and operations, ultimately these enterprises may not be operated in a manner with which we agree or consistent with our own business plans and goals. The other owners might not take sufficient action to prevent the occurrences of illicit activities by their employees and agents, and they may not maintain financial controls and reporting functions and compliance functions sufficient to meet our requirements as a publicly-traded company in the United States. Any of these activities, or failures to take action, by the majority owners of these enterprises that is inconsistent with our plans or requirements could have a material adverse effect on our operations and financial condition. Moreover, under certain circumstances we could be forced to dispose of our minority interests in these subsidiaries and joint ventures, and there can be no assurance that we would be able to dispose of these interests on terms favorable to us or at all.

We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.

We are subject to the FCPA and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute for the purpose of obtaining or retaining business. We have operations, agreements with third parties and make sales in China, which is known to experience corruption. Our activities in China create the risk of unauthorized payments or offers of payments by one of the employees, consultants, sales agents or distributors of our Company or the companies in which we invest may engage that could be in violation of various laws including the FCPA, even though these parties are not always subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents or distributors of our Company or the companies in which we invest may engage may engage in conduct for which we might be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the government may seek to hold BMP liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

Anti-corruption measures taken by the PRC government to correct improper sales practices in the pharmaceutical industry could adversely affect our revenue and reputation.

The PRC government has recently taken anti-corruption measures to correct corrupt practices. In the pharmaceutical industry, such practices include, among others, acceptance of kickbacks, bribery or other illegal gains or benefits by the hospitals and medical practitioners from pharmaceutical distributors in connection with the prescription of a certain drug. While we maintain strict anti-corruption policies, these policies may not be effective. We are aware of past violations of these anti-corruption measures by employees of companies we have acquired or are in the process of acquiring. If the PRC government takes enforcement action against us as a result of improper sales practices, our inventory may be seized and our practices may be investigated. If this occurs, our sales and reputation may be materially and adversely affected.

In addition, PRC government-sponsored anti-corruption campaigns from time to time could have a chilling effect on our efforts to reach new hospital customers. Our sales representatives primarily rely on hospital visits to better educate physicians on our products and promote our brand awareness. Recently, there have been occasions on which our sales representatives were denied access to hospitals in order to avoid the perception of corruption. If this

attitude becomes widespread among our potential customers, our ability to promote our products will be adversely affected.

ITEM 4. Submission of Matters to a Vote of Security Holders

(a) The Annual Meeting of the Stockholders of the Company was held on April 26, 2007.

(b) All director nominees were elected

For

Against

Withheld

Abstain

Broker
Non-Votes

Election of Directors

David (Xiaoying) Gao

22,811,944

—

Martyn D. Greenacre

22,811,914

—

Michel Y. de Beaumont

21,782,397

1,029,547

Jack M. Ferraro

22,811,696

250

Frank J. Hollendoner

22,809,944

2,000

John W. Stakes III, M.D.

22,811,944

—

Albert Yeung

22,811,944

—

Approval of the Company’s 2007 Omnibus Equity Compensation Plan

16,158,608

44,571

5,800


*		Not Applicable

ITEM 5. Other Information

None.

ITEM 6. Exhibits

2.1		Sale and Purchase Agreement, dated as of July 14, 2007, by and among Beijing Med-Pharm Corporation, Han Zhiqiang and Tong Zhijun (Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 14, 2007).

10.1		Shareholders’ Agreement, dated as of July 14, 2007, by and among Beijing Med-Pharm Corporation, Han Zhiqiang, Tong Zhijun, Hong Kong Fly International Health Care Limited and Sunstone Pharmaceutical Co., Ltd. (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on July 14, 2007).

31.1		Certificate of the Chief Executive Officer of Beijing Med-Pharm Corporation required by Rule 13a-14(a) under the Exchange Act.

31.2		Certificate of the Chief Financial Officer of Beijing Med-Pharm Corporation required by Rule 13a-14(a) under the Exchange Act

32.1		Certificate of the Chief Executive Officer of Beijing Med-Pharm Corporation required by Rule 13a-14(b) under the Exchange Act

32.2		Certificate of the Chief Financial Officer of Beijing Med-Pharm Corporation required by Rule 13a-14(b) under the Exchange Act

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Beijing Med-Pharm Corporation
Date: August 14, 2007	/s/ DAVID GAO
	David Gao
	Chief Executive Officer (Principal Executive Officer)



Date: August 14, 2007	/s/ FRED M. POWELL
	Fred M. Powell
	Chief Financial Officer (Principal Financial and Accounting Officer)

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. sophomore Good

BMP Sunstone (BJGP) Inactive 10-Q2007 Q2 Quarterly report

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