Competitive Strengths

Our Directors believe that we are well-positioned to compete with our competitors for the following reasons.

Our ability to produce a range of products, in different forms and dosages, from the natural active ingredient Sodium Aescinate to cater to the different needs of individual patients

With our strong R&D capabilities, we have been able to produce a range of products in different forms from the natural active ingredient, Sodium Aescinate, extracted from our GMP certified production process. Sodium Aescinate is currently available as a lyophilised powder for injection and a gel. We launched Okai, a tablet form of Sodium Aescinate, in March 2004 and intend to launch Arginine Aescin for Injection, an improved formulation of the lyophilised powder for injection, by September 2005.

In addition, we are able to produce our main product, Sodium Aescinate for Injection (Maitongna) in four different dosages, 5mg, 10mg, 15mg and 25mg. Olai (Compound Sodium Aescinate Gel) is also available in 10mg and 20mg preparations. The availability of different dosages caters to the different needs of each individual patient and hence improves the usage convenience of the drugs.

Our main product, Sodium Aescinate for Injection (Maitongna), is a market leader with a large market share

Sodium Aescinate for Injection (Maitongna) constitutes 41.7% of our Group turnover for FY2003. Despite the fact that we are able to charge a high price under the PRC price control system as a result of the compound's patent status, this product has attained a large market share of approximately 68%, 74% and 77% market share in FY2001, FY2002 and FY2003 respectively.

This is a testimony to the high quality of the drug. The GMP certification for our lyophilised powder injection production line and process together with the state and provincial awards which we have received have enhanced customer confidence. We have continually sought to improve our product through R&D and the SFDA approvals are proofs thereof. To-date, we have successfully tendered to supply Sodium Aescinate for Injection (Maitongna) to about 1,300 hospitals throughout the PRC. Tenders are normally called for at the end or beginning of the year and the supply period under each tender is generally for one year.

Our established and extensive distribution network is supported by a 245 member sales and marketing team

Over the years, we have built up an efficient and extensive distribution network in the PRC. This enables us to distribute our products quickly and extensively. Our major distributors have been with us for more than five years and they were selected based on whether they satisfy the national GSP requirements, have sufficient financial resources, a comprehensive distribution network and transport facilities. We review the performance of our distributors annually and we may discontinue the services of non-performing distributors.

As at 31 December 2003, we have a total of approximately 250 distributors in the PRC. Our products are sold directly and through our distributors to approximately 1,300 hospitals throughout the PRC and are available in 30 provinces, municipals and autonomous regions. As of 31 December 2003, our distribution network is supported by a 245-strong team of sales and marketing personnel located in 35 sales support offices in 30 provinces, municipals and autonomous regions to support, manage and monitor our distribution network. 60% of our sales and marketing staff have tertiary education and the relevant medical backgrounds.

Established track record and brand name

With over nine years of experience in the pharmaceutical industry, we have built up our reputation by maintaining an effective quality control system for our products. In particular, our drugs marketed under our Luye brand for use in the fields of orthopaedics, neurology, gastroenterology and hepatology have gained recognition from both customers and industry experts. As at 31 December 2003, we have a large customer base comprising over 1,300 hospitals, as well as drug retail outlets.

As a testimony of our good track record, we have won various awards from government authorities.

Strong R&D capabilities

As of 31 December 2003, our R&D centre employs 89 researchers, 17 of whom are Masters degree holders and four are doctorates. The remaining personnel have medical or pharmaceutical qualifications.

Our R&D centre is equipped with advanced facilities and equipment which enable us to conduct pre-clinical evaluation processes in-house without having to outsource to third parties.

As a testament to our R&D capabilities, we were approved as a Post-doctorate Scientific Research Workstation by the State Personnel Ministry in 1999. This accreditation is only awarded to research centres which meet certain R&D capability requirements. Our R&D centre was also recognised by the Shandong Science and Technology Committee as a "Shandong Natural Drug Engineering Research and Development Centre" in 2000. In addition, we sell our R&D results and/or patents for new drugs and provide contract research services.

Currently, our R&D centre is focussing on research in the areas of new drugs manufactured from natural active ingredients and drugs with new formulations.

Good quality management system

Our manufacturing processes comply with GMP standards to ensure the quality, safety and effectiveness of our products. We have received GMP certification for all our production lines, including the production lines for lyophilised powders, tablets, capsules, granules, gel and Sodium Aescinate. We have implemented a stringent quality management system to ensure that our manufacturing processes are in accordance with our stipulated standards and procedures.

Experienced and professional management team

We have an experienced management team which is familiar with our business and which we believe would be able to lead our Group forward to continued growth and profitability. Our Executive Directors, Messrs Liu Dianbo and Yuan Huixian each have more than 15 years of relevant experience. Believing that a strong management team is a key factor in ensuring our continued success, Mr Liu, our Executive Chairman, has also groomed a dedicated and dynamic management team to assist him in the daily management of our business. Each of our Executive Officers has more than 13 years of relevant experience.