Speech at Dawnrays Pharma’s Year 2009 Work Plan Meeting

Speech at Dawnrays Pharma’s Year 2009 Work Plan Meeting
21st November 2008

Presented by Ms. LI Kei Ling, the Chairman of
Dawnrays Pharmaceutical (Holdings) Limited

Fellow colleagues,

Good evening, everyone!

We invite you to attend the meeting today with the main objective of letting all of you to have a relatively clear understanding on the company’s different budget and business targets in the coming year, so as to allow you to have adjustment in thinking, get prepared with concerted efforts and strive to scale new heights for our business results in 2009 based on the 2008 results.

In the summer of 2008, the rarest financial tsunami in a century broke out in the United States, bringing the global economy from its historical height to hit the rock bottom that led to a near collapse of financial system and a near-frozen credit market, and the working capital chain from various industry and business sectors was under great pressure. There have also been considerable impacts to the China’s economy, leading to the slackened economic growth and the setback in domestic demand. In order to sustain a proper economic growth in the coming year, the Central Government announced last week measures for boosting domestic demand and in fostering economic growth, which mentioned to reinforce the development of the primary medical and healthcare system. While it is anticipated that the China’s overall economic growth rate will certainly fall at a slower pace in the forth quarter of 2008, but in the longer term, market size of the pharmaceutical industry will remain at a double-digit percentage annual growth in the next five years.

Indeed, in the outgoing 2008, under the influence from the two drivers of macroeconomic performance and internal core value upgrade of industry, the Chinese pharmaceutical industry can be said to enjoy a steady growth. The health insurance expansion in 2008 has effectively improved the affordability of consumers, extended the pharmaceutical domestic demand and adjusted the pharmaceutical product portfolio. According to the estimation of Southern Medicine Economic Institute from SFDA, the gross industrial output of pharmaceutical industry in 2008 will reach approximately RMB 708 billion, representing an 18% increase compared with the corresponding period of last year.

During this period, I would like to say Dawnrays Pharma did quite a good job in our business, however, there is still some distance from our target in 2008. I hope all of you can exert your efforts to the full strength, tap the potential in specific targets and strive to accomplish the tasks set in 2008 in the remaining one more month of this year. Meanwhile, on behalf of the company’s Board of Directors, I would like to take this opportunity to extend my heartfelt gratitude to all our management and colleagues from various divisions and units for their dedications to the daily duties through their arduous efforts and contribution.

In the recent years, there have been rapid advances in China’s development. The speed of change, the breadth of impact and the depth of influence are far beyond one’s imagination and expectation. In such a macro environment, we, being the corporate management and team leaders, should always aware of the latest development of our industry and remain conscious to the behavior of the counterparts on one hand; while we should also study, explore and closely monitor the different measures as implemented by the government in the aspects of social, financial and economical policies, etc. on the other hand. Only if we have done a good job to collect, assimilate and utilize different market and product information on all fronts, we can then formulate a well justified budget and medium to long term of development planning in line with the corporate resources, capacity and development needs for our company, our team and our future development.

All of us will be well aware that the healthcare reform has been initiated in 2008. This move will no doubt bring about far-reaching impacts to the industry. With the further advancement in community health, the initial establishment of medical insurance system for urban residents and the basic coverage of the “New Rural Cooperative Medical Scheme”, the medical and healthcare demand from people can be liberated, which will gather tremendous momentum for the expansion of pharmaceutical market in the coming years. According to an announcement from the Ministry of Labour and Social Security of the P.R. China, taking into account the urbanization factor, it is anticipated that by the end of 2010, the rural population in China will reach 695 million, in that case the annual funds raised for the “New Rural Cooperative Medical Scheme” will be amounted to RMB 626 million, representing an increment of RMB 263 million compared with 2007. Therefore, our management should attach great importance and follow closely to the trend of the government policy, and also initiate the mechanism for the necessary measures to be taken in response.

Moreover, while we are in the process of corporate planning, we should take the adjustment and renovation efforts in the product portfolio with sufficient seriousness and to ensure the proper implementation. As in recent years, the surging prices in raw materials and energy, the additional pressure on environmental protection and the year by year increase in labour cost, exerting upward pressure on the production cost of bulk medicines. In addition, the increasing pressure on market competition stemming from disorderly, low-level and overlapping production activities in China and the domestic bulk medicines manufacturers unduly reliant on bulk medicine business can be a crisis lurking behind for the enterprises.

On the other hand, as to our product lines, the product portfolio of our common drug products has a growing product homogeneity due to the increased supply channels. With respect to this kind of product line, they are more susceptible to the factors arising from the pricing and tendering policies, etc. Therefore, our management should incorporate in-depth consideration on how to optimize our product portfolio fundamentally and strive to tackle the challenge in product development for enhancing our competitiveness.

If we can broaden our horizons, we can find that under the convergence of favorable forces from the policies of the “New Rural Cooperative Medical Scheme”, the new community healthcare system, the healthcare reform and the universal health insurance, etc., the expansion of “new terminals” has been a path of development for some of the pharmaceutical companies. In fact, new terminal is also a form of market penetration and extension of sales segment. Therefore, to realize the exact market positioning of the company and to devise the profit-making model are the fundamentals for the survival and development of the company.

What I mentioned above is some of the main points that I believe our management should be aware of during the process of planning the company’s business development. In fact, we understand that the “budget” or “plan” made by the management is their painstaking efforts through the gathering of product and market information and conducting analysis on the corporate development’s need after their serious deliberations with a well-defined objective in mind. It is a short term or medium to long term “vision” of the company’s development to a businessman. Whether this “vision” can be realized will depend on various internal and external factors. A competent company and management personnel can overcome constraints from external challenges and stand out above the rest by creating market myths and profits for the company. I believe that in the process of executing different projects, only if our management team and departmental heads can enhance the internal communication skill, establish the awareness on close cooperative teamwork and take the lead to set an example in cultivating a pragmatic work culture and reinforcing the capability in internal and external resource utilization, we can then on top of the market and realize the vision.

I believe you all have observed that the Group’s construction projects have coming on line on after another, with positive and aggressive progress in recent years. It is true that the company’s Board of Directors has all along recognized that “health” is always the focus of people’s concern and the pharmaceutical industry is an evergreen sunrise industry. We have strong expectation and full confidence in the development of the pharmaceutical business in China. The commencement of different construction projects of the company is to create the superior and first class hardware strength for realizing our vision.

This day in 2008 is a historical opportunity to us. The old business model, product portfolio and process capabilities will be incessantly adjusted, optimized and updated; Old objects will be replaced by the new. As such, we sometimes face difficulties in our progress and are feeling powerless. Nonetheless, we must adopt the unique development strategy in terms of the Chinese market and policies as a starting-point and at the same time focus on applying and developing this strategy in other countries with an aim to promote the harmonious and stable development of the company.

Sometimes I would ask myself, how the world will look like after ten years? I believe at that time China will become the focus of the world attention and an exciting region. The Chinese economy may scale new commanding height of the world. Confronted with the unique opportunity and challenge, China is bestowed to become a competing platform for the global innovative enterprises. Subject to the condition of reshuffling of the global economy, many important innovative activities will come from the national characteristic companies or the multinational corporations in China.

I hope all of you are well-prepared with wholehearted involvement, so as to give full play to the strength of the company. Let us reach a new high in 2009 and jointly welcome the commemoration for the 60th anniversary of the founding of the People’s Republic of China!

Thank you!