Sihuan 1H Results

Sihuan’s 1H08 profit before tax jumps 65% on rising demand across all business segments

Well-executed plan to broaden product offerings and improve marketing helps double revenue at half-time

Shenzhen Sihuan and associate Beijing Purenhong also contributed positively, lifting both revenue and profits

Launch of new drugs including GM-1 expected to propel medium-term revenue and earnings

SINGAPORE, 31st July 2008 Mainboard-listed Sihuan Pharmaceutical Holdings Group Ltd (Sihuan, the Group, 四环医药控股集团有限公司), a leading manufacturer of cardio cerebral vascular (CV) drugs in China, delivered yet another impressive set of results for the first half-year ended 30 June2008 (1H08). Its profit before tax was RMB127.9 million in 1H08, up 65% a year ago, as the Group enjoyed robust demand for a broad range of its drugs. Its net attributable profit surged 37% to RMB113.8 million.

Sihuan’s strategic marketing efforts to penetrate niche but high-margin segments have clearly paid off, drawing in RMB69 million in additional revenues. This – together with the Group’s extensive range of non-CV products, largely from Shenzhen Sihuan Pharmaceutical Co., Ltd (Shenzhen Sihuan) – powered a 104% hike in Sihuan’s 1H08 revenue to RMB237.3 million, up from RMB116.4 million a year ago. Shenzhen Sihuan recorded a net profit of RMB9.5 million on sales of RMB52.0 million in 1H08.

CV drugs grew solidly, chalking up a 83% rise in 1H08 sales, thanks to wider acceptance of and stronger demand for Kelinao, Chuanqing and Anjieli. Non-CV drugs recorded a 320% jump in sales to RMB 43.1 million, as a broadened drug offering – made possible through the acquisition of Shenzhen Sihuan last October – captured demand from new market segments.

Dr Che Fengsheng (车冯升), Sihuan’s Executive Chairman and Chief Executive Officer, said: “These results reflect the healthy fruition of the strategic investments we have made to beef up distribution and investment in the right products. For instance, the acquisitions of Shenzhen Sihuan and Beijing Purenhong have greatly increased the depth of our distribution and widened our product mix. This will serve to generate even stronger demand for both our CV and non-CV drugs, and further entrench Sihuan’s position in the PRC’s pharmaceutical sector.

We believe the launch of GM-1* and other new drugs will add to our portfolio of successful CV drugs and sharpen our edge in the sector. We are confident that Sihuan’s strong branding and established distribution network will help these new drugs establish astrong footing in the market and contribute positively to earnings.”The improved results and the Group’s ongoing active capital management efforts allowed Sihuan’s operations to generate healthy net cash of RMB112.5 million, up from 1H 07’s RMB68.8 million. The Group remained in a net cash position, with cash reserves of RMB229.8 million at the end of June 2008, which will help fund strategic investments innew drug research, the acquisition of more product rights and the expansion of the distribution network.

Despite the competitive operating environment, Dr Che remains excited about the future. He commented: “The consolidation in China’s pharmaceutical industry will throw up opportunities for Sihuan to capture further market share. It will also strengthen our lead in the sector, especially given our concerted efforts to beef up our upstream R&D capabilities and expand our network of distributors.”

In April 2008, Sihuan acquired a 60% stake in Shandong R&D Company for RMB62.5 million that will pave the way for the Group to advance into the international healthcare market. The Group will continue to invest in Shandong R&D to beef up its R&D edge as well as increase its staff strength. As of today, Shandong R&D Company has filed applications for more than 500 PRC or international patents.