ALPHATECH BIOENGINEERING LIMITED
                            45 Des Voeux Road Central
                                   11th Floor
                                    Hong Kong




March 22, 2001


The Board of Directors
Dragon Pharmaceuticals
c/o 1200, 543 Granville Street
Vancouver, BC
V6C 1X8

Attention:  Dr. Ken Cai and Mr. Greg Hall

Dear Sirs:

Re:  Hepatitis B Vaccine Project

Based  upon our recent  discussions,  the  following  is  intended  to outline a
proposed  amendment to that certain agreement (the "Agreement") dated October 6,
2000 entered into between  Alphatech  Bioengineering  Limited  ("Alphatech") and
Dragon  Pharmaceuticals Inc. ("Dragon") pursuant to which Dragon acquired all of
Alphatech's  interests in the Hepatitis B Vaccine Project.  This letter sets out
the terms which we have discussed and to which we are prepared to agree to amend
the Agreement.

1.   Dragon  requests  nine  months  from the date of the  Definitive  Agreement
     (defined below) to explore  different  options available to the Company for
     the Hepatitis B Vaccine Project (the  "Project")  including but not limited
     to joint venture  partnerships,  establishing  a production  facility,  and
     selling  the  project  to a  third  party.  Dr.  Longbin  Liu,  one  of the
     principals of Alphatech, demands to repurchase the Project on the merits of
     its future  revenue and market  potential  if the Company  fails to find an
     option  suitable to the Company within the nine months from the date of the
     Definitive  Agreement.  The Project shall be in the same  condition as when
     Dragon  acquired  it from  Alphatech  and Dr. Liu will  assume  operational
     development  of the  Project.  The purchase  price will be US$4.0  million,
     which was the purchase price which Dragon originally paid to Alphatech. The
     US$4.0 million would be paid by Dr. Liu as follows:

     (a)  US$500,000 at the date of  repurchase,  which shall be that date which
          is nine months after the date of the Definitive Agreement; and

     (b)  the balance to be paid within 18 months of the date of repurchase.

     Annual interest of 6% would accrue on the balance owing commencing 6 months
     after the date of repurchase of the Project. The Intellectual  Property (as
     defined in the  October 6, 2000  agreement)  will  remain the  property  of
     Dragon if Dr. Liu fails to pay the balance  within 18 months of the date of
     repurchase.

     Dragon  agrees to provide  Dr.  Liu with  notice of any offer  received  by
     Dragon from a third party for the  purchase  of the  Project  which  Dragon
     elects not to accept.  In the event Dr. Liu wish to accept the third  party
     offer,  Dragon  agrees  to  transfer  the  project  to  Dr.  Liu  or at his
     discretion  forthwith for US$4.0  million on the terms set out above and to
     assign to Dr. Liu the right to accept such third party offer.

<PAGE>

2.   The  Definitive  Agreement  shall also  include a covenant  whereby  Dragon
     agrees  not to  compete  in the  Project  with Dr.  Liu or any third  party
     purchaser.

3.   The terms set forth  above will be the  subject of a  definitive  agreement
     ("Definitive  Agreement")  incorporating the substance of the terms of this
     letter of intent with such amendments as may be mutually agreed between us,
     acting reasonably. The Definitive Agreement will include:

     (a)  terms   respecting  the  procedures   necessary  to  implement   these
          transactions; and

     (b)  customary representations and warranties by each party.

4.   By  executing  this letter,  both parties  confirm  their  intentions  with
     respect to the  transactions  described,  but neither party shall incur any
     obligations until such time as the Definitive  Agreement is executed.  Both
     parties agree to exercise best efforts to complete the Definitive Agreement
     by May 15, 2001 or a later date as agreed to in writing by both parties.

5.   This  letter of intent  will be open for  acceptance  until  April 2, 2001,
     following which it will lapse.


Yours truly,

/s/   Longbin Liu, M.D.

Longbin Liu, M.D.


Alphatech Bioengineering Limited


Per:    /s/  Longbin Liu
        Authorized Signatory


Agreed and accepted this 9th day of April, 2001.


DRAGON PHARMACEUTICALS INC.


Per: /s/   Ken Cai
     Authorized Signatory