[Graphic Omitted] Dragon Pharmaceutical Inc. Announces
2002 Fourth Quarter and Full Year Results
Vancouver, BC- April 24, 2003. Dragon Pharmaceutical Inc. (TSX: DDD; OTC BB:
DRUG) today announced results for the three-month and twelve-month periods
ending December 31, 2002.
2002 Highlights
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o Generated revenues of $7.36 million, representing significant growth from
$3.07 million in 2001.
o Enhancement of gross margin in 2002 to 86.7% from 81% in 2001.
o Reported a first ever operating profit of $118,968 in 2002 compared to an
operating loss of $4.02 million in 2001 for the Company's principal
Erythropoietin Alfa ("EPO") business.
o Net loss in 2002 was $5.25 million or $0.26 per share, compared to $3.98
million or $0.21 per share in 2001, reflecting the increase in research and
development efforts in pipeline products, particularly Insulin and G-CSF
and Company's decision to write down the repayment of the Hepatitis B
Vaccine project to a nominal value of $100 from $3.29 million.
o Announced continued realignment and strengthening of the Management team
and organization with the appointment of Dr. Alexander Wick as the new
President and subsequent to year-end, Mr. James Harris III as the Vice
President of Sales and Marketing.
o Obtained a Toronto Stock Exchange ("TSX") listing under the symbol `DDD'
o Added three new Licensees to fourteen Licensees internationally covering
136 countries worldwide.
o Submitted an application for marketing approval of EPO in surgical patients
and new dosage of 6000IU for the new indication to the Chinese State Drug
Administration ("SDA")
o Delivered a landmark order for supplying bulk EPO to a major pharmaceutical
company for research purposes.
Financial Review
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Fourth Quarter of 2002
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During the quarter, the Company posted revenues of $1.19 million, a 16% increase
from the same period in 2001. We continued to record improvement in gross margin
for the quarter in 2002, which was at 87.1%, up from 83.6% recorded for the same
period in 2001. Net loss from the quarter was $4.11 million, or $0.20 per share,
compared to the net loss of $1.17 million, or $0.07 per share in the fourth
quarter in 2001. (See Write off of Hepatitis B Vaccine Project below)
Full Year of 2002
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Revenues in 2002 were $7.36 million, representing a very significant increase
from the $3.07 million revenues of 2001. Sales in China and outside of China
were $3,002,898 and $4,359,350, respectively for 2002 compared to $2,630,182 and
$443,703, respectively for 2001. The sales outside of China during 2002
primarily increased due to a breakthrough order worth $3.7 million to a major
pharmaceutical company for new drug research and development.
Gross Margin for full year 2002 was 86.7% presenting 570 basis points
improvement from 2001, which is mainly due to the efficiency gained from the
continued upgrade and improvement invested in the existing cGMP (current Good
Manufacturing Practices) production facility in Nanjing, China.
The Company recorded an operating profit of $118,968 in 2002 compared to the
operating loss of $4.02 million in 2001 for the Company's principal business in
EPO, reflecting the significant $3.7 million order to the major pharmaceutical
company. Net loss of 2002 was $5.25 million or $0.26 per share compared to $3.98
million or $0.21 per share in 2001. The main reasons for the large loss recorded
were the Company's research and development expenses in Insulin and G-CSF and
the decision to write-down $3.29 million owed by Dr. Liu, the Chairman of the
Company, for the repayment of the Hepatitis B Vaccine project. Pursuant to an
agreement dated June 5, 2001, Dr. Liu exercised his right to repurchase the
Hepatitis B Vaccine project for the original purchase price of $4.0 million. Dr.
Liu paid $0.5 million, with the balance of $3.5 million (which was written down
to the book value of $3.29 million), due in September 2003. Although Dr. Liu has
reaffirmed his intention to pay the amount owing plus accrued interest, when
due, the Company chose to conservatively write down the amount owing due to the
significant amount involved and the lack of security.
"I am delighted to announce the remarkable growth of revenue, continued
enhancement of gross profit margin and more importantly, the first ever
operating profit recorded for our EPO business. Based on the solid foundation we
built up over the last four years, we continued to demonstrate strong execution
of business opportunities that enhances the growth in revenue and improvement of
margin and profitability throughout 2002." said, Dr. Wick, President of Dragon
Pharmaceutical Inc. "In 2003, we will continue to capture existing and future
opportunities to achieve our stated goal of turning profitable for the year."
Operational Review
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Following the appointment of Dr. Alexander Wick as the President of Dragon in
October, 2002, we announced the appointment of Mr. James Harris III, a 22-year
veteran in the biotech and pharmaceuticals industry, as the Vice President of
Sales and Marketing in early 2003. "We will continue to strengthen the
management team and organization and are determined to realign the Company
resources to meet our corporate objectives in 2003." said, Dr. Wick.
As previously announced, during the second quarter of 2002, Dragon received
approval and began trading on the Toronto Stock Exchange, under the symbol
"DDD". Listing on a senior stock exchange not only raises our corporate profile
in the investment community but also support our efforts to increase the
institutional following of our Company.
Sales and Marketing Review
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In 2002, Dragon's EPO was approved and marketed for use in the treatment of
anemia related to chronic renal failure in China, India, Egypt and Peru.
Subsequent to the year end, we received approval and began our first shipment of
order to Brazil. We also added three international Licensees during 2002, which
brings the total number of Licensees to fourteen, covering 136 countries
worldwide.
During the year, we have submitted an application to the Chinese State Drug
Administration for the use of EPO in surgical patients as well as approval for a
new dosage of 6000IU, which will be used for this new indication. Furthermore,
clinical trials are on-going for cancer radio and chemotherapy patients in
China. These data will be submitted to the SDA for approval in 2003 together
with the new 10000 IU dosage. "In addition to obtaining additional international
market approvals in several key markets in 2003, we anticipate to receive a new
drug license in China for the new indication as well as the new dosage shortly."
said Dr. Wick.
Year 2002 marked a remarkable breakthrough for Dragon when the Company
successfully entered the bulk EPO market for drug research and development
purposes other than in the field of anemia with a $3.7 million order from a well
established pharmaceutical company. During 2003, Dragon will continue to
actively pursue the market opportunities in the highly prospective bulk EPO and
EPO derivatives market.
"2003 is going to be an important milestone year in Dragon's corporate history.
Based on the new business strategies as well as the continued competitive
advantages that we enjoy in China, we are confident that the Company will
achieve profitability this year." said Dr. Wick. "In addition to profitable EPO
sales, one of the other long term potentials for Dragon relies with the
successful outcome of our research partners' ability to develop new applications
for our EPO and to demonstrate the therapeutic validity of these new
indications."
About Dragon Pharmaceutical
Dragon Pharmaceutical Inc. is an international biopharmaceutical corporation
engaged in the discovery, development and commercialization of genetically
engineered human proteins for therapeutic use. Based on its proprietary protein
expression technology, Dragon believes that it has become one of the world's
most competitive producers of Erythropoietin (EPO) a breakthrough drug that has
revolutionized the treatment of anemia. Dragon is also applying its platform
technology to the development of other generic and novel protein drugs.
For greater detail, please refer to the Company's 10-K, which has been filed
with the U.S. Securities and Exchange Commission and the Ontario Securities
Commission. The full financial statements will also be available on Dragon's
website at www.dragonbiotech.com. The Company's financial statements comply with
U.S. GAAP (Generally Accepted Accounting Principles) and all dollar amounts are
expressed in U.S. currency.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995: All statements, other than historical
facts, included in the foregoing press release are forward-looking statements.
These statements are based on management's beliefs and assumptions, and on
information currently available to management. Such forward-looking statements
include, but are not limited to, the continued growth in sales of EPO and the
development of new EPO uses, Dragon's ability to pursue sales in non-patented
countries and Dragon's ability to achieve rapid and low cost product approval in
China that Dragon will receive a new drug license in China, and Dragon's
research partners' ability to develop new applications for EPO. Forward-looking
statements are not guarantees of future performance. They involve risk,
uncertainties and assumptions including risks discussed under "Risks Associated
With Dragon Pharmaceuticals" in the Company's annual report on Form 10-K, SEC
File No.: 0- 27937, all of which are incorporated herein by reference. The
Company does not undertake the obligation to publicly revise these
forward-looking statements to reflect subsequent events or circumstances.
SUMMARIZED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Year Ended December 31
2002 2001
---- ----
US$ US$
Sales 7,362,248 3,073,885
Cost of sales 978,637 583,878
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Gross Profit 6,383,611 2,490,007
Selling, general and
administrative expenses (5,015,029) (5,328,110)
Depreciation of fixed assets and
amortization of license and permit (736,361) (597,042)
Net write off of land-use right and fixed
Assets (6,731) (1,012)
New market and EPO development
expenses (200,109) (316,290)
Provision for doubtful accounts (216,709) (57,300)
Loan interest expense (70,944) (154,644)
Stock-based compensation (18,760) (51,975)
- --------------------------------------------------- ------------------- -------------------
Operating income (loss) 118,968 (4,016,366)
Development of insulin, G-CSF
and rhTPO (2,100,000) -
Write-down of amount owing from related
party - Hepatitis B Vaccine Project (3,289,900) (210,000)
Interest income 146,986 250,458
- --------------------------------------------------- ------------------- -------------------
Loss before income taxes and
minority interest (5,123,946) (3,975,908)
Income taxes 127,000 -
- --------------------------------------------------- ------------------- -------------------
Loss before minority interest (5,250,946) (3,975,908)
Minority interest - 240,603
- --------------------------------------------------- ------------------- -------------------
Net (loss) for the year (5,250,946) (3,735,305)
(Loss) per share - basic and diluted (0.26) (0.21)
Weighted average number of
common shares outstanding
Basic and diluted 20,331,750 17,810,411
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SUMMARIZED CONSOLIDATED
BALANCE SHEETS
As at December 31
2002 2001
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ASSETS US$ US$
Current Assets
Cash and short term securities 4,935,766 9,446,084
Accounts receivable 949,045 1,309,686
Inventories 1,208,277 1,095,860
Prepaid and deposits 154,551 140,340
- ----------------------------------------------------- ----------------- -------------------
Total current assets 7,247,639 11,991,970
Fixed assets 2,420,613 2,534,609
Due from related party -
Hepatitis B vaccine project 100 3,790,000
Refundable investment deposits - related party - 372,000
Patent rights - related party 500,000 -
License and permit 3,475,740 3,316,458
- ----------------------------------------------------- ----------------- -------------------
Total assets 13,644,092 22,005,037
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Liabilities
Current
Bank loans 483,162 2,887,345
Accounts payable and accrued Liabilities 1,525,404 1,318,938
Management fees payable - Related parties - 234,000
- ----------------------------------------------------- ----------------- -------------------
Total current liabilities 2,008,566 4,440,283
- ----------------------------------------------------- ----------------- -------------------
Minority interests - 688,539
- ----------------------------------------------------- ----------------- -------------------
Stockholders' Equity
Share capital
Authorized: 50,000,000 common
shares at par value of $0.001 each
Issued and outstanding: 20,334,000 20,334 20,331
common shares (December 31,
2001 - 20,331,000 common shares)
Additional paid in capital 26,644,998 26,624,741
Accumulated other comprehensive (loss) (35,011) (25,008)
Accumulated deficit (14,994,795) (9,743,849)
- ----------------------------------------------------- ----------------- -------------------
Total stockholders' equity 11,635,526 16,876,215
- ----------------------------------------------------- ----------------- -------------------
Total liabilities and stockholders' equity 13,644,092 22,005,037
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