U.S. Securities and Exchange
                        Commission Washington, D.C. 20549

                                   Form 10-QSB

[X]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

     For  the quarterly period ended March 31, 2004

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT
     OF 1934

                  For the transition period from _____ to _____

                           Commission file number 0-27937

                           DRAGON PHARMACEUTICAL INC.
        (Exact name of small business issuer as specified in its charter)



          Florida                                          65-0142474
          -------                                          ----------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

                      1055 West Hastings Street, Suite 1900
                           Vancouver, British Columbia
                                 Canada V6E 2E9
                    ----------------------------------------
                    (Address of principal executive offices)


                                 (604) 669-8817
                           --------------------------
                          (Issuer's telephone number)

                  (Former address if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be  filed by  Section  13 or 15(d) of the  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes [ X ] No [ ]


Number of shares of common stock outstanding as of March 31, 2004:  20,462,000



<PAGE>

                                     PART I.

Item 1.  Financial Documents

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2004 and December 31, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
                                        March 31, 2004       December 31, 2003
--------------------------------------------------------------------------------

ASSETS

Current
  Cash and short term securities            $   3,015,951        $    3,126,667
  Accounts receivable                           1,262,137             1,265,676
  Inventories                                   1,126,767             1,090,464
  Prepaid and deposits                            103,326               139,595
--------------------------------------------------------------------------------
Total current assets                            5,508,181             5,622,402

Fixed assets                                    2,005,689             2,089,352

Due from related party -
   Hepatitis B vaccine project                        100                   100

Patent rights - related party                     500,000               500,000

Licence and permit                              2,786,163             2,924,198
--------------------------------------------------------------------------------
Total assets                                $  10,800,133        $   11,136,052
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Current
  Accounts payable and accrued liabilities      1,342,567             1,428,257
--------------------------------------------------------------------------------
Commitments (Note 12)

Stockholders' Equity

Share capital
  Authorized:  50,000,000 common shares at
    par value of $0.001 each
  Issued and outstanding: 20,462,000
    common shares                                20,462                 20,462

Additional paid in capital                   26,708,870             26,708,870

Accumulated other comprehensive (loss)          (32,813)               (32,007)

Accumulated deficit                         (17,238,953)           (16,989,530)
--------------------------------------------------------------------------------
Total stockholders' equity                     9,457,566              9,707,795
--------------------------------------------------------------------------------

Total liabilities and stockholders' equity  $ 10,800,133        $    11,136,052
================================================================================
The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>


DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
<S>                                           <C>           <C>          <C>          <C>         <C>         <C>             <C>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Accumulated
                                                                                    Compre-                    other          Total
                                               Common stock           Additional    hensive                   compre-        Stock-
                                           ---------------------        paid-in     income        Deficit     hensive      holders's
                                             Shares        Amount       capital     (loss)    accumulated      income        equity
-----------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2002                 20,334,000    $ 20,334    $26,644,998         -  $(14,994,795)    $(35,011)  $11,635,526

Exercise of stock options for cash            128,000         128         63,872         -            -             -        64,000

Components of comprehensive income (loss)
 - foreign currency translation                     -          -               -      3,004            -        3,004         3,004

- net (loss) for the year                           -          -               - (1,994,735)  (1,994,735)          -    (1,994,735)
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive (loss)                                                            $(1,991,731)
                                                                                =============
Balance, December 31, 2003                   20,462,000    $ 20,462  $26,708,870             $(16,989,530)   $(32,007)   $9,707,795
================================================================================             ======================================
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       3


<PAGE>

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
(Expressed in U.S. Dollars)

<TABLE>
<CAPTION>
<S>                                           <C>           <C>          <C>          <C>         <C>         <C>             <C>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Accumulated
                                                                                    Compre-                    other          Total
                                               Common stock           Additional    hensive                   compre-        Stock-
                                           ---------------------        paid-in     income        Deficit     hensive      holders's
                                             Shares        Amount       capital     (loss)    accumulated      income        equity
-----------------------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2003                 20,462,000    $20,462     $26,708,870        -   $ 16,989,530)   $ (32,007)   $9,707,795

Components of comprehensive income (loss)
- foreign currency translation                      -          -              -      (806)             -        (806)         (806)

- net (loss) for the period                         -          -              -   (249,423)    (249,423)             -    (249,423)
-----------------------------------------------------------------------------------------------------------------------------------
Comprehensive (loss)                                                             $(250,229)
                                                                                ===========
Balance, March 31, 2004                    20,462,000    $20,462     $26,708,870             $(17,238,953)   $(32,813)   $9,457,566
================================================================================             ======================================
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       4


<PAGE>


DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
                                          Three Months             Three Months
                                        Ended March 31,          Ended March 31,
                                             2004                     2003
--------------------------------------------------------------------------------

Sales                                  $    878,270            $     664,322

Cost of sales                               246,741                  201,282
--------------------------------------------------------------------------------

Gross profit                                631,529                  463,040

Selling, general and
  administrative expenses                  (678,887)                (968,559)

Depreciation of property and equipment and
  amortization of licence and permit       (179,442)                (185,299)

Research and development expenses              (535)                       -

New market development                             -                 (15,479)

Provision for doubtful debts                (27,073)                 (30,710)

Interest expense                               (769)                  (3,460)

Stock-based compensation                          -                        -
--------------------------------------------------------------------------------

Operating loss                             (255,177)                (740,467)

Interest and other income                     5,754                    6,440
--------------------------------------------------------------------------------

Net (loss) for the period               $  (249,423)              $ (734,027)
================================================================================

(Loss) per share
      Basic and diluted                 $     (0.01)              $    (0.04)
================================================================================

Weighted average number of
  common shares outstanding
      Basic and diluted                   20,462,000               20,334,000
================================================================================
The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                        <C>                                                               <C>                   <C>
                                                                                         Three Months           Three Months
                                                                                         Ended March 31,      Ended March 31,
                                                                                               2004                   2003
-----------------------------------------------------------------------------------------------------------------------------

Cash flows from (used in) operating activities
   Net (loss) for the period                                                            $   (249,423)     $        (734,027)
   Adjustments to reconcile net loss to
     net cash used in operating activities:
     - depreciation of property and equipment and amortization
          of licence and permit                                                               231,568                239,008
     - provision for doubtful debts                                                            27,073                 30,710
  Changes in non-cash working capital items:
     - accounts receivable                                                                   (23,533)                161,310
     - inventories                                                                           (36,303)               (31,886)
     - prepaid expenses and deposits                                                           36,268                (1,076)
     - accounts payable and accrued liabilities                                              (85,690)                 12,292
-----------------------------------------------------------------------------------------------------------------------------
                                                                                            (100,040)              (323,669)
-----------------------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities
  Purchase of property and equipment                                                         (10,448)               (16,912)
  (Increase) decrease in restricted funds                                                           -                510,000
-----------------------------------------------------------------------------------------------------------------------------
                                                                                             (10,448)                493,088
-----------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Loan proceeds                                                                                       -              (483,162)
-----------------------------------------------------------------------------------------------------------------------------
Foreign exchange (gain) loss on cash
  held in foreign currency                                                                      (228)                    730
-----------------------------------------------------------------------------------------------------------------------------
 Decrease in cash and cash equivalents                                                      (110,716)              (313,013)

Cash and cash equivalents, beginning of period                                              3,126,667              4,425,766
-----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                           $        3,015,951     $        4,112,753
=============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.

                                       6
<PAGE>
DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

1.   Basis of Presentation

     The accompanying unaudited interim consolidated balance sheets,  statements
     of  operations  and cash flows  reflected  all  adjustments,  consisting of
     normal  recurring  adjustments  and other  adjustments,  that  are,  in the
     opinion of management,  necessary for a fair  presentation of the financial
     position of the Company,  at March 31, 2004,  and the results of operations
     and cash flows for the interim periods ended March 31, 2004 and 2003.

     The  accompanying  unaudited  consolidated  financial  statements have been
     prepared in accordance  with the  instruction for Form 10-Q pursuant to the
     rules and regulations of Securities and Exchange Commission and, therefore,
     do not  include  all  information  and notes  normally  provided in audited
     financial  statements and should be read in conjunction  with the Company's
     consolidated  financial  statements  for the year ended  December  31, 2003
     included in the annual report previously filed on Form10-KSB.

     The  results  of  operations  for the  interim  periods  presented  are not
     necessarily indicative of the results to be expected for the full year.

2.   Proposed Business Combination

     The Company has entered into an letter of intent with Oriental Wave Holding
     Ltd.  ("Oriental")  whereby  the  Company  would  issued  common  shares in
     exchange  for all the  issued  and  outstanding  shares  of  Oriental.  The
     transaction  is subject to the parties  agreeing on a definitive  agreement
     and approval by shareholders and the regulatory authorities.

     The transaction  will result in the former  shareholders of Oriental owning
     68.35%  of the  issued  and  outstanding  shares  of the  combined  Company
     resulting in accounting  principles applicable to reverse acquisition being
     applied to record the transaction. Under this basis of accounting, Oriental
     would be the acquirer and,  accordingly,  the consolidated  entity would be
     considered  to be a  continuation  of  Oriental  with the net assets of the
     Company deemed to have been acquired and recorded at fair market value.


3.   Accounts Receivable


     ---------------------------------------------------------------------------
                                                March 31,          December 31,
                                                  2004                  2003
     ---------------------------------------------------------------------------
     Trade receivables                         $ 1,542,580         $ 1,524,465

     Allowance for doubtful accounts              (333,245)           (298,284)
     ---------------------------------------------------------------------------
                                                 1,209,335           1,226,181

     Other receivables                              52,802              39,495
     ---------------------------------------------------------------------------
                                               $ 1,262,137         $ 1,265,676
     ===========================================================================

                                       7
<PAGE>

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

4.   Inventories

     ---------------------------------------------------------------------------
                                                  March 31,        December 31,
                                                    2004                2003
     ---------------------------------------------------------------------------

     Raw materials                               $ 144,021           $ 129,650

     Finished goods                                 88,453             107,833

     Work in progress                              894,293             852,981
     ---------------------------------------------------------------------------
                                                 1,126,767         $ 1,090,464
     ===========================================================================

5.   Property and equipment

     ---------------------------------------------------------------------------
                                                     March 31, 2004
                                         ---------------------------------------
                                                      Accumulated       Net book
                                         Cost         depreciation        value
     ---------------------------------------------------------------------------

     Motor vehicles                     $ 126,444       $ 72,041       $ 54,403
     Office equipment and furniture       414,512        239,413        175,099
     Leasehold improvements              1088,803        449,290        639,513
     Production and lab equipment       1,619,647        745,058        874,589
     Idle equipment                       555,339        293,254        262,085
    ---------------------------------------------------------------------------
                                       $3,804,745     $1,799,055     $2,005,689
    ===========================================================================


    ---------------------------------------------------------------------------
                                                     December 31, 2003
                                         ---------------------------------------
                                                      Accumulated       Net book
                                         Cost         depreciation        value
    ----------------------------------------------------------------------------
    Motor vehicles                     $140,423        $ 75,996        $ 64,427
    Office equipment and furniture      414,759         221,076         193,683
    Leasehold improvements            1,089,006         418,888         670,118
    Production and lab equipment      1,595,450         708,841         886,609
    Idle equipment                      555,339         280,824         274,515
    ----------------------------------------------------------------------------
                                    $ 3,794,977      $1,705,625      $ 2,089,352
    ============================================================================

     For the three-months ended March 31, 2004,  depreciation  expenses totalled
     $94,112  (2003 -  $100,987).  The  majority of fixed  assets are located in
     China.

                                       8

<PAGE>

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

6.   Due from Related Party - Hepatitis B Vaccine Project

     ---------------------------------------------------------------------------
                                                  March 31,        December 31,
                                                    2004                2003
     ---------------------------------------------------------------------------
     Hepatitis B Vaccine Project               $4,000,000           $4,000,000

     Less : Repayment                           (500,000)            (500,000)
            Valuation allowance               (3,499,900)          (3,499,900)
    ----------------------------------------------------------------------------
                                                  $  100               $  100
    ============================================================================

     (a)  Pursuant to an  agreement  dated  October 6, 2000,  the  Company  paid
          $4,000,000  for the  acquisition  of  certain  assets  and  technology
          relating to the  production of Hepatitis B vaccine.  The vendor of the
          transaction  was a company  named  Alphatech  Bioengineering  Limited,
          incorporated  in  Hong  Kong,  with  two  shareholders  who  are  both
          directors of the Company.

     (b)  Pursuant to an amended agreement dated June 5, 2001, in the event that
          the  Company  failed  to find a joint  venture  partner,  establish  a
          production  facility for the vaccine  project or sell the project to a
          third  party  within  nine  months  from  the  date  of  this  amended
          agreement,  Dr.  Longbin Liu, a director of the Company (and President
          and CEO of the Company at the time of the  transaction) and one of the
          shareholders of Alphatech, demanded to repurchase the project from the
          Company. The repurchase price of $4.0 million is payable as follows:

          (i)  $500,000 at the date of repurchase; and

          (ii) the balance to be paid within eighteen (18) months of the date of
               repurchase  with  interest at 6% per annum.  The interest will be
               accrued from six months after the date of repurchase.

     The Company  decided not to pursue the project and Dr. Liu has  repurchased
     the project on the agreed terms.

     The amount  owing by Dr. Liu to the Company is  unsecured.  The Company has
     chosen, given the significant amount involved and the lack of security,  to
     conservatively  value the amount  owing and has set up a provision  for the
     full amount, less a nominal amount of $100. The amount owing was not repaid
     on the due date and the Company is pursuing collection. See note 15 also.

                                      9
<PAGE>
DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

7.   Patent Rights - Related Party

     Pursuant to an agreement dated January 14, 2002, the Company entered into a
     Patent  Development  Agreement  with the Dr. Longbin Liu, a director of the
     Company  (and  President  and  CEO  of  the  Company  at  the  time  of the
     transaction) and a company  controlled by the Dr. Liu entitling the Company
     to acquire one patent filed in the United  States  related to the discovery
     of a new gene or protein. Consideration for the right to acquire the patent
     was payment of  US$500,000  (paid) and the  issuance of warrants to acquire
     1,000,000  common shares of the Company at a price of $2.50 per share for a
     period of five years.  The patent may be acquired prior to January 14, 2005
     at no additional  cost other than the  reasonable  legal costs of obtaining
     the patent.

     The issuance and exercise of the warrants to acquire 1,000,000 common stock
     of the Company is contingent  upon the success of the patent  applications.
     The  US$500,000  will be refunded to the Company if no patent  applications
     have been filed by January 14, 2005. See note 15 also.

8.   Licence and permit

     ---------------------------------------------------------------------------
                                                  March 31,        December 31,
                                                    2004                2003
     ---------------------------------------------------------------------------
     Original cost                                $5,012,582         $5,012,582
     Accumulated amortization                     (2,226,419)        (2,088,384)
     ---------------------------------------------------------------------------
                                                  $2,786,163        $ 2,924,198
     ===========================================================================

     Amortization  expense for the licence and permit for the three months ended
     March 31, 2004 was $137,456 (2003 - $138,021)

     The estimated  amortization  expense for each of the five succeeding fiscal
     years is as follows:

         2004     (balance of the year)                       $414,000
         2005                                                 $552,000
         2006                                                 $552,000
         2007                                                 $552,000
         2008                                                 $552,000

     The above amortization  expense forecast is an estimate.  Actual amounts of
     amortization  expense may differ from  estimated  amounts due to additional
     intangible asset acquisitions,  changes in foreign currency exchange rates,
     impairment of intangible  assets,  accelerated  amortization of licence and
     permit, and other events.

                                       10
<PAGE>
DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

9.   Income Taxes

     (a)  Kailong and Huaxin are subject to income taxes in China on its taxable
          income  as  reported  in  its  statutory  accounts  at a tax  rate  in
          accordance with the relevant income tax laws.

          Allwin and Biotrade are not subject to income  taxes.  As at March 31,
          2004,   $3.8   million  of   unremitted   earnings   attributable   to
          international  companies were considered to be indefinitely  invested.
          No  provision  has been made for taxes  that might be payable if these
          earnings were remitted to the United States.  The company's  intention
          is  to  reinvest  these  earnings  permanently  or to  repatriate  the
          earnings when it is tax effective to do so. It is not  practicable  to
          determine the amount of incremental  taxes that might arise were these
          earnings to be remitted.

          As at March 31,  2004,  the  company  has  estimated  losses,  for tax
          purposes,  totalling  approximately  $8,500,000,  which may be applied
          against future taxable income. The potential tax benefits arising from
          these losses have not been recorded in the financial  statements.  The
          Company  evaluates its valuation  allowance  requirements on an annual
          basis based on projected future operations.  When circumstances change
          and  this  causes  a  change  in  management's   judgement  about  the
          realizability of deferred tax assets,  the impact of the change on the
          valuation allowance is generally reflected in current income.

          (b)  The tax  effect of  temporary  differences  that give rise to the
               Company's deferred tax asset (liability) are as follows:

     ---------------------------------------------------------------------------
                                                  March 31,        December 31,
                                                    2004                2003
     ---------------------------------------------------------------------------

     Tax losses carried forward                 $ 3,345,000         $ 3,237,000
     Stock-based compensation                         6,400               6,400
     Provision for amount owing from Hepatitis
       B Vaccine Project                          1,118,000           1,118,000
     Less: valuation allowance                   (4,469,000)         (4,361,400)
     ---------------------------------------------------------------------------
                                                $        -          $         -
     ===========================================================================

          A reconciliation  of the federal statutory income tax to the Company's
          effective  income tax rate,  for the three months ended March 31, 2004
          and 2003 are as follows:

    ---------------------------------------------------------------------------
                                                       2004            2003
    ---------------------------------------------------------------------------

    Federal statutory income tax rate                  34%              34%
    Benefit of loss carry forward                     (34%)            (34%)
    ---------------------------------------------------------------------------
    Effective income tax rate                         -                  -
    ===========================================================================

                                       11
<PAGE>

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

10.  Stock Options and Warrants

     (a)  Stock Options Plans


          There were no options  granted during the three months ended March 31,
          2004.

          The  following is a summary of the employee  stock option  information
          for the period ended March 31, 2004:

    ---------------------------------------------------------------------------
                                                               Weighted Average
                                                   Shares       Exercise Price
    ---------------------------------------------------------------------------

    Options outstanding at December 31, 2002      3,288,000         $  1.82
    Granted                                         500,000         $  0.68
    Forfeited                                    (1,061,000)        $  0.90
    Exercised                                      (128,000)        $  0.50
    ---------------------------------------------------------------------------
    Options outstanding at December 31, 2003
    and March 31, 2004                            2,599,000         $ 2.04
    ===========================================================================

<TABLE>
<CAPTION>
<S>      <C>               <C>        <C>           <C>              <C>         <C>
               Options Outstanding                          Options Exercisable
    -------------------------------------------   ----------------------------------------
                                    Weighted
                                    Average       Weighted                      Weighted
       Range of                     Remaining     Average                       Average
       Exercise          Number     Contractual   Exercise         Number       Exercise
        Prices        Outstanding     Life        Price         Exercisable       Price
    -------------------------------------------   ----------------------------------------

     $0.01 - $1.00       888,500      2.52        $   0.60         763,500       $   0.59

     $1.01 - $2.00       375,500      3.07        $   1.70         375,500       $   1.70

     $2.01 - $3.00        60,000      0.61        $   2.50          60,000       $   2.50

     $3.01 - $4.00     1,275,000      1.62        $   3.13       1,275,000       $   3.13
                       -----------  -----------   ------------   ----------      --------

                       2,599,000      2.12        $   2.04       2,474,000        $   2.11
                       ===========  ===========   ============   ==========       ========
</TABLE>

     The Company  accounts for its stock-based  compensation  plan in accordance
     with APB  Opinion No. 25,  under which no  compensation  is  recognized  in
     connection with options granted to employees  except if options are granted
     with a strike price below fair value of the underlying  stock.  The Company
     adopted  the  disclosure   requirements   SFAS  No.  123,   Accounting  for
     Stock-Based Compensation. Accordingly, the Company is required to calculate
     and  present the pro forma  effect of all awards  granted.  For  disclosure
     purposes,  the fair value of each option  granted to an  employee  has been
     estimated as of the date of grant using the  Black-Scholes  option  pricing
     model with the  following  assumptions:  risk-free  interest  rate of 5.5%,
     dividend yield 0%, volatility of 90%, and expected lives of approximately 0
     to 5 years.  Based on the  computed  option  values  and the  number of the
     options issued, had the Company recognized

                                       12
<PAGE>

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

10.  Stock Options and Warrants (continued)

     compensation  expense,  the  following  would  have been its  effect on the
     Company's net loss:

     ---------------------------------------------------------------------------
                                                 March 31,           March 31,
                                                   2004                2003
     ---------------------------------------------------------------------------

     Net (loss) for the period:
     - as reported                              $(249,423)           $(734,027)
     - pro-forma                                $(249,423)           $(734,027)

     ---------------------------------------------------------------------------
     Basic and diluted (loss) per share:
     - as reported                                 $(0.01)              $(0.04)
     - pro-forma                                   $(0.01)              $(0.04)
     ---------------------------------------------------------------------------

     (b)  Warrants

          Share purchase warrants outstanding as at March 31, 2004:

            Number           Underlying     Exercise Price
          of Warrants         Shares          Per Share           Expiry Date
          -----------       -----------     --------------    ------------------
             50,000            50,000           $1.70          November 15, 2004
          1,000,000*        1,000,000           $2.50          January 14, 2007

          * See Notes 7 and 15

11.  Related Party Transactions

     (a)  The  Company  incurred  the  following  expenses  to a director of the
          Company:

     ---------------------------------------------------------------------------
                                                 March 31,           March 31,
                                                   2004                2003
     ---------------------------------------------------------------------------
     Management fees                                $-                $20,000
     ===========================================================================

     (b)  Pursuant to an agreement  dated January 14, 2002, the Company  entered
          into a Project Development Agreement with Dr. Longbin Liu ("Dr. Liu"),
          a director of the Company (and President and CEO of the Company at the
          time of the  transaction)  to continue the research and development of
          G-CSF and Insulin for the  Company.  The Company will make payment for
          the development of G-CSF as follows:

          (iii)US$500,000 to be provided at the  commencement of the research in
               the G-CSF Project (paid);

                                       13
<PAGE>

DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

11.  Related Party Transactions (continued)

     (iv) US$500,000  to be provided when  cell-line  and related  technology is
          established and animal experimentation commences in the G-CSF Project;
          and

     (v)  US$300,000 to be provided when a permit for clinical  trials for G-CSF
          has been issued by the State Drug Administration of China ("SDA"); and

     (vi) US$200,000  to be provided when a new drug license for G-CSF is issued
          to Dragon by the SDA.

     (vii)US$500,000  to be paid  as a bonus  if the  SDA  issues  the new  drug
          license for G-CSF to Dragon before January 14, 2005.

     The Company will make payment for the development of Insulin as follows:

     (viii) US$750,000 to be provided by at the  commencement of the research in
          the Insulin Project (paid);

     (ix) US$750,000  to be provided when  cell-line  and related  technology is
          established  and  animal  experimentation  commences  in  the  Insulin
          Project (paid);

     (x)  US$300,000  to be  provided  when a permit  for  clinical  trials  for
          Insulin has been issued by the SDA;

     (xi) US$200,000  to be  provided  when a new drug  license  for  Insulin is
          issued to Dragon by the SDA; and

     (xii)US$500,000  to be paid  as a bonus  if the  SDA  issues  the new  drug
          license for Insulin to Dragon before January 14, 2005.

     For both the G-CSF and Insulin Projects:

     (xiii) If the Company  elects to cease  development  of the project it will
          forfeit any payments  made and lose  ownership of the Project,  but it
          will not be obligated to make any further payments toward the Project;

     (xiv)if an  application  for permit for  clinical  trials is not  submitted
          within  three  years with  respect to the G-CSF  Project or four years
          with respect to the Insulin Project or if the SDA rejects the Projects
          for technical or scientific  reasons or If  development of the Project
          is  terminated by Dr. Liu, then Dr. Liu will refund to the Company all
          amounts  paid,  without  interest or  deduction,  with  respect to the
          Project within six months.

     As at March  31,  2004,  the  Company  has paid a total of  $1,500,000  and
     $500,000 towards the Insulin and G-CSF Projects,  respectively. The Company
     has paid an  additional  $100,000  to a company  controlled  by Dr.  Liu to
     produce Insulin samples for drug registration purposes.

                                       14
<PAGE>
DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

11.  Related Party Transactions (continued)

     (c)  see Notes 6, 7 and 15 also.

12.  Commitments

     (a)  The Company has entered into operating  lease  agreements with respect
          to Huaxin's  production  plant in Nanjing,  China for an amount of RMB
          2,700,000  (US$326,200)  per  annum  until  June  11,  2009,  and  the
          Company's administrative offices in Vancouver for an amount escalating
          from  CDN$200,000 to CDN$230,000  (US$136,000 to US$157,000) per annum
          until March 31, 2007.  Minimum payments  required under the agreements
          are as follows:

              2004                                       $ 373,105
              2005                                         502,727
              2006                                         370,664
              2007                                         326,205
              2008                                         326,205
              2009                                         144,738
             -----------------------------------------------------
              Total                                    $ 2,043,644
             =====================================================

     (b)  The Company has contracted with a European Institute of Biotechnology,
          which may develop a high yield  proprietary  cell line and  production
          process  technology  for the Company.  Product from this most advanced
          technology  will be used by the Company to enter the European  market,
          once  certain   competitor's   patents  expire.   The  total  cost  of
          development  will be $615,000 (EUROS 500,000) of which $492,000 (EUROS
          400,000) remains unpaid at March 31, 2004.

                                       15
<PAGE>
DRAGON PHARMACEUTICAL INC. & SUBSIDIARIES
Notes to Consolidated Statements of Cash Flows
March 31, 2004
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

13.  Segmented Information

     The Company  operates  exclusively  in the biotech  sector.  The  Company's
     assets and revenues are distributed as follows:

                                           March 31, 2004       December 31,2003
    ----------------------------------------------------------------------------
    ASSETS
    North America                            $ 3,286,891              $3,156,953
    China                                      7,087,715               7,079,241
    Others                                       425,527                 899,858
    ----------------------------------------------------------------------------
    Total                                   $ 10,800,133             $11,136,052
    ============================================================================


    ----------------------------------------------------------------------------
                                     Three months ended       Three months ended
                                        March 31, 2004           March 31, 2003
    ----------------------------------------------------------------------------
    REVENUE
    North America                        $      -                  $     -
    China                                  701,870                  454,347
    Others                                 176,400                  209,975
    ----------------------------------------------------------------------------
    Total                                $ 878,270                $ 664,322
    ============================================================================

14.  Comparative Figures

     Certain 2003 comparative  figures have been  reclassified to conform to the
     financial statement presentation adopted for 2004.

15.  Subsequent Event

     The Company has entered  into an agreement  with Dr.  Longbin Liu to settle
     the amount owing to the Company  from his  acquisition  of the  Hepatitis B
     Project  (note 8) as well as cancel  the  Patent  and  Project  Development
     agreements  between  the  parties.   Under  the  terms  of  the  settlement
     agreement,  the G-CSF,  Insulin and  Hepatitis B  Projects,  including  the
     rights of ownership and development obligations would revert to Dr. Liu.

     In exchange, Dr Liu will pay to the Company the $3,710,000 in principal and
     interest  owing  under the  Hepatitis  B Project as well as  reimburse  the
     Company  $1,330,000  that had been paid  previously  under the  Patent  and
     Project Development  agreements.  All amounts are due December 31, 2004 and
     Dr. Liu has agreed to provide 2,600,000 common shares of the Company, to be
     held in escrow,  as security for the amounts owing. The warrants granted to
     Dr. Liu under the Patent Development  agreement will be cancelled.  It is a
     condition of the agreement that  2,200,000  common shares of the Company be
     placed in escrow by June 30, 2004.

                                       16
<PAGE>


Item 2. Management's Discussion and Analysis and Plan of Operations

The  following  discusses  the  Company's  financial  condition  and  results of
operations based upon the Company's consolidated financial statements which have
been prepared in accordance with generally accepted  accounting  principles.  It
should be read in conjunction  with the Company's  financial  statements and the
notes thereto and other  financial  information  included in the Company's  Form
10-KSB for the fiscal year ended December 31, 2003.

Overview

The Company (or  "Dragon")  was formed on August 22, 1989,  under the name First
Geneva  Investment  Inc.  First  Geneva  Investment's  business  was to evaluate
businesses for possible  acquisition.  On July 28, 1998, First Geneva Investment
entered into a share exchange agreement with Allwin Newtech.  Allwin Newtech was
formed in 1998 for the purpose of developing and marketing  pharmaceutical drugs
for sale in China.  Prior to the  acquisition  of Allwin  Newtech,  First Geneva
Investment had no  operations.  On September 21, 1998,  First Geneva  Investment
changed its name to Dragon Pharmaceutical Inc.

On  July  27,  1999,   Dragon   acquired  a  75%  interest  in  Nanjing   Huaxin
Bio-pharmaceutical  Co. Ltd.  ("Huaxin"),  which  manufactures EPO in China. The
Company  increased the  efficiencies  in the production of EPO and  successfully
achieved  commercial  production  during the last quarter of calendar  1999.  In
January 2002 the Company purchased the balance of Huaxin for $1,400,000.

On September 6, 2000,  Dragon  incorporated  Allwin Biotrade Inc.  ("Biotrade").
Biotrade  was  incorporated  for  the  purpose  of  marketing  and  distributing
biopharmaceutical   products  outside  China.  On  September  15,  2000,  Dragon
incorporated  Dragon  Pharmaceutical  (Canada) Inc.  ("Dragon  Canada").  Dragon
Canada was  incorporated  for the  purpose of  researching  and  developing  new
biopharmaceutical products.

The Company has contracted with a European Institute of Biotechnology,  that may
develop a high yield proprietary cell line and production process technology for
the Company.  Product from this most advanced technology available today will be
used by the Company to enter the  European  market,  once  certain  competitor's
patents expire.

Recent Events

Letter of Intent to Acquire  Oriental  Wave Holding  Ltd. On March 24, 2004,  we
announced  that we  entered  into a letter of intent to  acquire  Oriental  Wave
Holding  Ltd.  in a  merger  in which we will be the  survivor  company.  If the
proposed merger is consummated,  the resulting ownership of the combined company
will be approximately  31.65% for Dragon  shareholders and approximately  68.35%
for Oriental Wave shareholders.

Oriental Wave Holding Ltd,  incorporated  in the British  Virgin  Islands,  is a
holding  company  of  a  China-based   pharmaceutical  company  engaged  in  the
production of chemical  intermediates and active pharmaceutical  ingredients and
formulation,  marketing and sale of chemical  generic  drugs.  Based on its 2003
audited  financial  statements,  Oriental Wave Group had revenues of $26 million
and earnings of $7.5 million.

                                       17
<PAGE>
Oriental Wave Group currently has two Chinese State Food and Drug administration
("SFD&A")  certified  GMP  production  facilities  on stream:  a  pharmaceutical
facility  with a capacity of  producing  1.6 billion  tablets and  capsules,  80
million injectables and 10 million  suppositories per year as well as a chemical
plant producing  clavulanic acid by a fermentation  process. A third facility is
under   construction  for  the  production,   by  fermentation,   of  7-ACA,  an
intermediate for Cephalosporin  antibiotics.  Oriental Wave Group has a total of
approximately  280 drug  approvals  from the  SFD&A of which  about  35,  mainly
anti-infectious drugs, were actively exploited in China in 2003.

On completion of the proposed  merger,  the combined company will be reorganized
into three major divisions:  a Chemical Drug division,  a Chemical  Intermediate
division and a Biotech division

Completion of the proposed merger is subject to a number of conditions including
entering into a definitive agreement and all required regulatory and shareholder
approvals.

Settlement  agreement  with Dr. Liu. In view of the slow  progress in developing
new drugs, the  availability of alternative  drugs, the desire to avoid conflict
of interest issues in the future and, in some cases,  the high investment  costs
associated  with bringing the drugs into  production,  the Company has reached a
settlement with its research partners to discontinue  further development of the
drugs under  development and recover some of the development costs paid to date.
On April 4, 2004, the Company entered into an agreement with Dr. Longbin Liu and
his affiliate to settle the amount owing to the Company from his  acquisition of
the  Hepatitis  B Vaccine  Project  as well as  cancellation  of the  Patent and
Project  Development  agreements  between  the  parties.  Under the terms of the
settlement agreement, the G-CSF, Insulin and Hepatitis B Projects, including the
rights of ownership and development obligations would revert to Dr. Liu.

In exchange,  Dr Liu will pay to the Company the  $3,710,000  in  principal  and
interest bearing 1% owing under the Hepatitis B Project as well as reimburse the
Company  $1,330,000 that had been paid  previously  under the Patent and Project
Development  agreements.  All amounts are due December 31, 2004 and the warrants
granted to Dr. Liu under the Patent Development agreement will be cancelled. Dr.
Liu has agreed to provide 2,600,000 common shares of the Company,  to be held in
escrow,  as security for the amounts  owing.  It is a condition of the agreement
that  2,200,000  common  shares of the  Company  be placed in escrow by June 30,
2004.

Results of Operations

Revenues.  Revenue  is  generated  from the sale of EPO in China by  Huaxin  and
throughout the developing world by Biotrade.  Revenue for the three-month period
ending  March 31, 2004 was  $878,270  compared to $664,322  for the  three-month
period  ending March 31, 2003.  Sales in and outside of China were  $701,870 and
$176,400,  respectively  during the  three-month  period  ending March 31, 2004.
Sales during the three-month period ending March 31, 2003 were $454,347 in China
and $209,975 outside of China.  Cost of sales for the  three-months  ended March
31, 2004 of $246,741 is attributed to the production costs of the pharmaceutical
products.  The cost of sales  for the  three-months  ended  March  31,  2003 was
$201,282.  The gross profit  margin was 72% for the  three-month  period  ending
March 31, 2004 and 70% for the  three-month  period  ended March 31,  2003.

                                       18
<PAGE>
Interest  income is related  primarily to interest  earned on cash received from
the private  placement of common stock received during the third quarter of 2001
and cash from  operations  received  since.  Interest  and other  income for the
three-month  period  ended March 31, 2004 was $5,754  compared to $6,439 for the
three-month period ended March 31, 2003.

Interest  income has  decreased as interest  rates have declined and as the cash
balance has decreased through the funding of operations.

Expenses.  Total operating  expenses for the  three-months  ended March 31, 2004
were  $886,706.  The major  expenses  incurred in the first  quarter of 2003 was
selling expenses of $263,453  representing 30% of total expenses.  The remaining
major expense items are represented by administrative expenses.

Significant  operating  expenses  for the  three-months  ended  March  31,  2004
included  rent of  $84,027,  legal fees of  $25,175,  salaries  and  benefits of
$181,905,  $30,685  in  travel  costs,  insurance  of  $14,315  and a bad  debts
provision  of $27,073.  There were no  management  fees of $20,000  were paid to
directors for services during the first quarter of 2004.

Other  significant  expenses for the first quarter  include the  depreciation of
fixed assets and amortization of license and permit of $179,442.

Comparatively,  total operating  expenses for the  three-months  ended March 31,
2003 were $1,203,507.  The major expenses  incurred in the first quarter of 2003
were  selling  expenses  of $505,672  representing  42% of total  expenses.  The
remaining major expense items are represented by administrative expenses.

Significant  operating  expenses  for the  three-months  ended  March  31,  2003
included rent of $88,199,  salaries and benefits of $191,393,  $66,338 in travel
costs,  insurance of $30,166 and a bad debts  provision  of $30,710.  Management
fees of $20,000 were paid to a director for services during the first quarter of
2003.

Other   significant   expenses  for  the  first  quarter  of  2003  include  the
depreciation of fixed assets and amortization of license and permit and land-use
rights of $185,299.

Overall, expenditures have decreased in 2004 from 2003 levels as the Company has
streamlined operations,  closed its Beijing and Hong Kong representative offices
and diligently pursued cutting costs in all areas, where practical.

Net and Comprehensive  Loss.  Dragon had a net loss and a comprehensive  loss of
$249,423 for the three-month period ending March 31, 2004.

The Company's net and comprehensive  loss for the three-month period ended March
31, 2003 was $734,027.

Basic and Diluted Net Loss Per Share

The  Company's net loss per share has been computed by dividing the net loss for
the  period by the  weighted  average  number of shares  outstanding  during the
three-month period ended March 31,

                                     19
<PAGE>
2004.  The loss per share for the  three-month  period  ended March 31, 2004 was
$0.01.  Common stock  issuable  upon the  exercise of common  stock  options and
common  stock   warrants  have  been  excluded  from  the  net  loss  per  share
calculations as their inclusion would be anti-dilutive.

Liquidity and Capital Resources

Dragon is a development stage pharmaceutical and  biotechnological  company that
has commenced the manufacture and marketing of pharmaceutical  products in China
through its 100%  equity  interest in Nanjing  Huaxin  Bio-pharmaceuticals  Ltd.
Previously,  the Company has raised funds through equity  financings to fund its
operations  and to provide  working  capital.  The Company  may  finance  future
operations through additional equity financings.

As of March 31, 2004, the Company had $3,015,951 in cash  available.  This cash,
the $1,262,137 in accounts receivable and anticipated sales will be used to fund
the  ongoing  operations  and  research  and  development.  Working  capital was
$4,165,614 at March 31, 2004.

During the three-months ended March 31, 2004, the Company incurred losses of
$249,423 and the Company will continue to incur losses until sales for its
products increase. The Company will continue to fund its operations through
working capital.

Item 3. Controls and Procedures

We carried out an evaluation,  under the supervision and with the  participation
of our management,  including our Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure  controls and
procedures  (as defined by  Exchange  Act Rule  13a-15(e))  as of the end of our
first fiscal quarter  pursuant to Exchange Act Rule  13a-15(b).  Based upon that
evaluation,  our Chief Executive  Officer and Chief Financial  Officer concluded
that our  disclosure  controls and  procedures  are  effective in ensuring  that
information  required to be  disclosed  by us in reports  that we file or submit
under the Exchange Act is recorded,  processed,  summarized and reported  within
the time periods specified in the Securities and Exchange Commission's rules and
forms.

There have been no changes in our  internal  control  over  financial  reporting
identified in connection  with our  evaluation as of the end of the first fiscal
quarter that occurred during such quarter that have materially affected,  or are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.

                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Dragon  Pharmaceutical  Inc. v. Longbin Liu, Supreme Court of British  Columbia,
Canada,  No.  S036057,  filed  November 10, 2003.  On November  2003, we filed a
complaint  against our Director and former  Chairman for payment of  $3,500,000,
plus interest  calculated at 6% per annum, due on September 5, 2003, pursuant to
the terms of the  Acquisition  Agreement  related to Hepatitis B Vaccine Project
entered into by the Company and the  defendant on October 6, 2000, as amended on
June 5, 2001. The Company has served the complaint against the defendant but has
suspended
                                       20
<PAGE>

the action,  pursuant to the terms of Settlement Agreement.  See Part I. Item 2.
Recent Events - Settlement Agreement with Dr. Liu for more details.

Item 2. Changes in Securities.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K.

     (a)  Exhibits.

          Exhibit No.

          31.1 Certification  by the  Principal  Executive  Officer  Pursuant to
               Section 302 of the Sarbanes-Oxley Act

          31.2 Certification  by the Principal  Accounting  Officer  Pursuant to
               Section 302 of the Sarbanes-Oxley Act

          32   Certification by the Principal  Executive and Financial  Officers
               Pursuant to Section 906 of the Sarbanes-Oxley Act

     (b)  Reports on Form 8-K.

          Form 8-K for March 24, 2004 reporting entering into a Letter of Intent
          with Oriental Wave Holdings Ltd.

          Form  8-K for  April  22,  2004  reporting  announcing  2003  year end
          results.

                                       21
<PAGE>


                                   Signatures

In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.

                                        DRAGON PHARMACEUTICAL INC.
                                        (registrant)


Dated:   May 6, 2004                    /s/ Matthew Kavanagh
                                        ---------------------------------------
                                        Matthew Kavanagh
                                        Director of Finance and Corporate
                                        Compliance and Corporate Secretary
                                        (Duly authorized Officer and
                                        Principal Financial Officer)

                                       22