We are a leading domestic developer, manufacturer and marketer of orthopedic implants in China measured by 2009 sales, according to a report by Frost & Sullivan commissioned by us. We believe our “Kanghui” and “Libeier” brands are two of the most recognized orthopedic implant brands among hospitals and surgeons in China. As a leading domestic player in China, we believe we are well positioned to capitalize on the trend toward increasing usage of domestically produced implants in the Chinese orthopedic market. We are also one of the first Chinese companies to enter the global orthopedic implant market, and our business is diversified geographically with international sales across Asia, Europe, South America and Africa. We are strategically targeting densely populated, fast-growing emerging markets for sales of our proprietary products, although we do not derive material net revenue from these markets at present. We believe our success in the Chinese and international markets is primarily due to our broad product portfolio, brand name, high quality and reliability, and competitive pricing.

We primarily sell two lines of proprietary orthopedic implant products, trauma and spine, with more than 30 product series covering a wide array of orthopedic implants and associated instruments. Our major trauma products, used in the surgical treatment of bone fractures, include a wide range of nails, plates and screws. Our major spine products, used in the surgical treatment of spine disorders, include screws, meshes, interbody cages and fixation systems. Sales of our proprietary products accounted for 94.3%, 88.7% and 91.5% of our net revenue in 2008, 2009 and the first quarter of 2010, respectively. Sales of our trauma and spine products accounted for approximately 69.4% and 30.6%, respectively, of our net revenue generated from our proprietary products in 2009, and 73.1% and 26.9%, respectively, of our net revenue generated from our proprietary products in the first quarter of 2010.

 As is typical for the medical device market in China, we sell our orthopedic implants to third-party distributors, who then sell these products to hospitals directly or through sub-distributors. As of June 30, 2010, we had an extensive network of 237 distributors that cover 30 of 31 provinces, municipalities and autonomous regions in China. Our distributor management and marketing team, consisting of over 50 people in four strategic locations in China, focuses on the training and active management of our distributors, as well as marketing efforts such as sponsoring academic conferences and exhibiting at trade shows. In addition, we have a dedicated team that handles medical affairs, such as providing surgeon training and interfacing with key orthopedic surgeons in China. As of June 30, 2010, internationally, we had a network of 27 distributors that sell our products in 24 countries.

 We have strong research and development capabilities, focused on developing new proprietary products, including new product lines, extensions of our existing product lines and enhancements of existing products. Since 2008, we have launched nine new products (four trauma products and five spine products), and we expect to maintain a similar pace of development with seven more new products expected to be launched by the end of 2011. Moving forward, we will target our product development efforts on increasing our portfolio of spine implant products, expanding the scope of our product offerings for China’s Top Tier hospitals, which refer to the top 100 Tier I hospitals that we believe have the highest orthopedic surgery volume, and expanding our product lines to include joint implant products.

In addition to selling our proprietary orthopedic implant products, we manufacture products and components, including implants, implant components and instruments, for some of the world’s leading original equipment manufacturers, or OEMs, based on their product designs and specifications. Sales of our OEM products accounted for 5.7%, 11.3% and 8.5% of our net revenue in 2008, 2009 and the first quarter of 2010, respectively.

We manufacture our products in accordance with international quality standards, yet typically price our products lower than leading global orthopedic implant manufacturers. In addition, our production facilities, manufacturing processes and products must pass rigorous quality inspection audits by our OEM customers, which we believe validates our manufacturing processes and product quality. All of our implant products have received approval from the State Food and Drug Administration, or SFDA, in China. Our China-based operations provide us with a distinct competitive advantage over leading global manufacturers by enabling us to benefit from low-cost engineering, labor and overhead costs.