Benda Pharmaceuticals (PINK:BPMA)

Net revenue decreased by $2.51 million (or 12.6%) to $17.35 million for the nine months ended September 30, 2009 from $19.86 million for the nine months ended September 30, 2008, while the net revenue decreased by $0.73 million (or 11.0%) to $5.90 million for three months ended September 30, 2009 from $6.63 million for three months ended September 30, 2008 Decrease in revenue is principally attributed by the following factors:

1. One of the Benda’s subsidiaries, Benda Ebei’s net revenue decreased $3.82 million (or 21.9%) and $1.09 million (or 18.2%) to $13.62 million and $4.89 million for the nine months and three months ended September 30, 2009 respectively from $17.44 million and $5.97 million for the nine months and three months ended September 30, 2008 respectively. It was mainly due to the keen competition in generic medicine and the seasonal factors; however the management believes that the overall year revenue of 2009 will remain the same level as year 2008.

2. One of the Benda’s subsidiaries, Jiangling Benda which resumed its production in October 2007 and achieved $0.8 million and $0.6 million for the nine months ended September 30, 2009 and 2008, respectively. Jiangling Benda plans to produce four types of active pharmaceutical ingredients and they are Ribavirin, Asarin, Levofloxacin and Ribose whereas the production of Ribose does not require the GMP certificate, but the production of the other three products do require the GMP certificate. On April 9, 2008, Jiangling Benda received the approved GMP Certificate from the Chinese State Food and Drug Administration ("SFDA") which authorizing the production of Ribavrin. The other two products, Asarin and Levolfozacin, are still under the stage of GMP certificate approving process. The management could not estimate the exact timing for obtaining those certificates.

3. One of the Benda’s subsidiaries, Yidu Benda ceased operation due to the fact that the plant was closed since mid January of 2007 to upgrade its waster water treatment system to comply with new environmental standards enforced by PRC local government. Yidu Benda has completed its upgrading of the waster water system and passed the government’s verification and testing of equipments in October 2007. It is now permitted for the testing on actual production process. Once the actual products are produced, then the environmental government bodies will re-test the production results. The management could not estimate the exact timing for obtaining the final approval on the actual production process. Furthermore, the management is searching for new products to be produced in Yidu Benda which with higher profit margin.

4. One of the Benda’s subsidiaries, Beijing Shusai which incorporated on July 15, 2006. China’s State Food and Drug Administration (SFDA) recently experienced an overhaul in its policies and regulatory systems in an effort to fight against corruption in Chinese pharmaceutical industry. Beijing Shusai’s operation has been adversely affected by this recent policy changes which prohibits some state-owned hospitals from forming alliances with private companies. The management could not estimate that such situation could be resolved in the coming future.

5. One of the Benda’s subsidiaries, SiBiono, acquired and effective since April 1, 2007, net revenue increased $1.10 million (or 60.9%) and $0.36 million (or 56.7%) to $2.91 million and $0.99 million for the nine months and three months ended September 30, 2009 respectively from $1.81 million and $0.63 million for the nine months and three months ended September 30, 2008 respectively. The main reason for the increase in net revenue is mainly due to the fact that SiBiono was previously underwent a process of re-engineering of the production department during the year of 2008 which improved its production process and also the company put more effort in the marketing SiBiono GMP - On October 16, 2003, SiBiono successfully obtained a New Drug License from the State Food & Drug Administration of China (SFDA), and then, in April 4, 2004, SiBiono obtained “Manufacture Certificate” and “Certificate of GMP for Pharmaceutical Product”, so far being fully qualified for the market launch of Recombinant Human Ad-p53 Injection, trademarked as Gendicine ® in China. Gendicine ® is the commercialized gene therapy product approved in the PRC government agency. On May 19, 2008, SiBiono received an official notice from the PRC State of SFDA in which it mentioned that during the random inspection performed by the PRC State of SFDA on April 8 to April 10, 2008, the PRC State of SFDA discovered there were several production procedures that did not meet the requirement stated in GMP, thus it required SiBiono to perform necessary improvements in order to fulfill the GMP requirements and the PRC State of SFDA collected back the distributed GMP certificate until the necessary improvements being carried out and passed the examination that conducted by SFDA. On June 10, 2008, SiBiono received another official notice from Guangdong Province SFDA and they demanded the same requirements as stated in the official notice which issued by the PRC State of SFDA dated on May 19, 2008. On November 24, 2008, SiBiono received another official notice from Guangdong Province SFDA which mentioned that after the examination conducted by Shenzhen City SFDA, the Guangdong Province SFDA consent SiBiono to carry out production on a trial basis. It further required SiBiono strictly to follow the requirements of GMP to organize trail production and follow the procedures to apply for GMP Certificate verification.