Future Plans

To remain competitive, we intend to adopt the following strategies and future plans:

Continue to strengthen our R&D capabilities

Our R&D capability is one of the main engines for our future growth. With increased competition and the need for product differentiation, we will continue to strengthen our R&D capabilities by investing in advanced technology, where necessary, to facilitate the development of new products and improve the efficiency of our production process.

We plan to increase the strength of our current R&D team by recruiting additional professionals with relevant skills and expertise to augment the knowledge of our existing team as well as to train and update our staff with the latest developments, trends and advances in our industry.

In addition, we intend to maintain and pursue alliances with universities, research institutions and hospitals in the PRC, particularly in the R&D of drugs manufactured from natural active ingredients and drugs with new formulations. In addition to technical and clinical trial support, our Directors believe that these alliances would offer our Group access to emerging technological advances and promising research projects that could be complementary to our Group’s R&D.

Continue to increase our product offering

In order to maintain and increase our competitiveness in the fields of orthopaedics, neurology, gastroenterology and hepatology, we will continue to expand our product offering by continuing to introduce on the average one to two new products per year. This could consist of newly developed drugs or drugs with new formulations developed in-house. For example, we introduced Nuosen (Sodium Pantoprazole for Injection) in 1999, Olai (Compound Sodium Aescinate Gel) in 2002, Lutingnuo (Reduced Glutathione for Injection) in 2003, and Okai (Sodium Aescinate tablet) ( TM ) in March 2004. Currently, we have five new products in the pipeline which are expected to be launched in the near future or are currently under development.

Market expansion

To further penetrate the PRC market, we intend to expand our distribution network and increase sales to distributors, hospitals and drug retail outlets. Market expansion will be carried out through increased marketing activities such as promotional events, seminars, conferences and sponsorship of relevant medical research papers. We will continue to allocate specific sales support teams to market our products in the different fields and train our marketing staff with detailed product knowledge to enable them to effectively market these products. In addition, we also intend to increase our overseas sales of active ingredients by participating in exhibitions and through direct marketing.

Expansion of our production capacity

We plan to increase our production capacity to achieve higher cost savings through economies of scale and to meet the anticipated demand for our products. We plan to acquire additional equipment and are in the process of constructing a number of production lines and ancillary facilities including a new production line for the manufacture of drugs for injection. Baring unforeseen circumstances, we expect to complete the planned expansions by 2005.