respectively, representing a CAGR of 55.0% over the three years from 2007 to 2009 and an increase of 45.2% in the six months ended 30 June 2010 over the same period in 2009, and our net profit margin was 16.8%, 20.7%, 21.6% and 25.1% in the respective period.

Our business and results of operations during the Track Record Period relied heavily on two in-licensed products and a small number of suppliers. Please refer in the section headed “Risk Factors — Risks relating to our business — We rely on suppliers and other third parties with respect to our in-licensed products. If we cannot maintain our relationships with our suppliers and such other third parties, it may impair our ability to renew the exclusive promotion and selling rights in respect of our existing in-licensed products upon expiry or obtain promotion and selling rights for new products” in this prospectus. As part of our growth strategy, we seek to expand our product portfolio by obtaining exclusive promotion and selling rights from international and domestic pharmaceutical companies for new in-licensed products with high growth potential. We currently aim to add an average of two additional products to our portfolio every year. Since late 2006, we managed to add six new key in-licensed products to our product portfolio. As our product portfolio expands, we reduce the risks associated with our reliance on a limited number of products and the expanding portfolio is expected to continue to contribute to our growth.

# Recent regulatory development

Four of our key in-licensed products are included in the Insurance Catalogue, namely, Deanxit, Ursofalk, GanFuLe and Salofalk, and are therefore subject to price control in China, which typically involves the imposition of retail price ceilings by the PRC government. For each of the three years ended 31 December 2007, 2008 and 2009 and the six months ended 30 June 2010, sales of these four key in-licensed products accounted for approximately 84.1%, 85.2%, 82.3% and 76.2% of our Group’s turnover for the respective period. Please refer to the section headed “Regulatory Framework — Legal supervision relating to the pharmaceutical industry in the PRC — Price control” in this prospectus for further details.

During the Track Record Period, the retail price ceiling of Ursofalk was adjusted downwards twice by the PRC government. Similarly, the retail price ceiling of Salofalk also endured PRC government imposed adjustments before we obtained the exclusive rights to promote and sell the product in the PRC in September 2008. Our Group’s results of operations during the Track Record Period were not affected by any price adjustments imposed by the PRC government in relation to our products included in the Insurance Catalogue. There was a gap between the retail price ceiling and our Group’s selling price for all of our products included in the Insurance Catalogue, which left us with meaningful room to absorb the price ceiling reductions imposed during the Track Record Period. However, we cannot assure you that the selling prices of our products will not be adversely affected should the PRC government impose any further price control on any of our products, including expanding the list of our products subject to price control and further significantly lowering the retail price ceilings of our products that are included in the Insurance Catalogue. To mitigate the risks associated with any potential price control measures imposed on our products and to lower the resulting potential impact to our business and results of operations, we strive to expand our product portfolio and increase the number of in-licensed products that we promote and sell so that we reduce our reliance on any single or a small group of products.

On 1 June 2010, the NDRC issued the “Consultation Paper in relation to the Administrative Measures on the Prices of Pharmaceutical Products” (《藥品價格管理辦法(徵求意見稿)》) to seek public opinions on new price control measures in respect of pharmaceutical products included in the Insurance Catalogue. The Consultation Paper is still at a preliminary stage and it is uncertain what measures will be adopted by the NDRC eventually. Further, on 17 June 2010, in response to substantial price increases in respect of certain pharmaceutical products immediately prior to or soon after their admission to the Insurance Catalogue in 2009, the NDRC released a news article on