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

                                    Form 10-Q

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

     For the quarterly period ended June 30, 2003

                                       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 [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12 b-2 of the Exchange act). Yes [ ]   No [X]

Number of shares of common stock outstanding as of June 30, 2003:  20,334,000



<PAGE>

Item 1. Financial Information

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Consolidated Balance Sheets
June 30, 2003 and December 31, 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
<S>                                                                                             <C>                   <C>
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                June 30,             December 31,
                                                                                                    2003                     2002
----------------------------------------------------------------------------------------------------------------------------------
ASSETS

Current
  Cash and short term securities                                                    $          3,870,273      $         4,935,766
  Accounts receivable                                                                            936,732                  949,045
  Inventories                                                                                  1,186,940                1,208,277
  Prepaid and deposits                                                                           157,956                  154,551
----------------------------------------------------------------------------------------------------------------------------------
Total current assets                                                                           6,151,901                7,247,639

Fixed assets                                                                                   2,257,798                2,420,613

Due from related party - Hepatitis B vaccine project                                                 100                      100

Patent rights - related party                                                                    500,000                  500,000

Licence and permit                                                                             3,199,994                3,475,740
----------------------------------------------------------------------------------------------------------------------------------
Total assets                                                                        $         12,109,793      $        13,644,092
==================================================================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities

Current
  Bank loans                                                                        $                  -      $           483,162
  Accounts payable and accrued liabilities                                                     1,440,544                1,525,404
----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities                                                                      1,440,544                2,008,566
----------------------------------------------------------------------------------------------------------------------------------
Commitments (Note 13)

Stockholders' Equity

Share capital
  Authorized:  50,000,000 common shares at
    par value of $0.001 each
  Issued and outstanding:  20,334,000 common shares                                               20,334                   20,334

Additional paid in capital                                                                    26,644,998               26,644,998

Accumulated other comprehensive (loss)                                                          (30,836)                 (35,011)

Accumulated deficit                                                                         (15,965,247)             (14,994,795)
----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity                                                                    10,669,249               11,635,526
----------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity                                          $         12,109,793      $        13,644,092
==================================================================================================================================

The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

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

Balance, December 31, 2001               20,331,000  $20,331   $26,624,741           -   $(9,743,849)  $(25,008)   $16,876,215

Exercise of stock options for cash            3,000        3         1,497           -             -          -          1,500

Stock based compensation                          -        -        18,760           -             -          -         18,760

Components of comprehensive income (loss)
 - foreign currency translation                   -        -             -     (10,003)            -    (10,003)       (10,003)

- net (loss) for the year                         -        -             -  (5,250,946)   (5,250,946)         -     (5,250,946)
---------------------------------------------------------------------------------------------------------------------------------

Comprehensive (loss)                                                       $(5,260,949)
                                                                           ============

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

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

</TABLE>


<PAGE>


DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
<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'
                                               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

Components of comprehensive income (loss)
 - foreign currency translation                     -          -              -        4,175              -      4,175        4,175

- net (loss) for the year                           -          -              -     (970,452)      (970,452)         -     (970,452)
------------------------------------------------------------------------------------------------------------------------------------

Comprehensive (loss)                                                               $(966,277)
                                                                                   ==========

Balance, June 30, 2003                     20,334,000    $20,334    $26,644,998                $(15,965,247)  $(30,836) $10,669,249
================================================================================               =====================================

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


</TABLE>

<PAGE>

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES

Consolidated Statement of Operations
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
<S>                                                                 <C>               <C>               <C>                <C>

------------------------------------------------------------------------------------------------------------------------------------
                                                                Three Months      Three Months       Six Months         Six Months
                                                                    Ended             Ended             Ended             Ended
                                                                   June 30,          June 30,          June 30,           June 30,
                                                                    2003              2002              2003               2002
------------------------------------------------------------------------------------------------------------------------------------

Sales                                                            $1,007,686       $ 1,026,159        $1,672,009         $2,398,966

Cost of sales                                                       326,988           174,465           528,269            364,989
------------------------------------------------------------------------------------------------------------------------------------

Gross profit                                                        680,698           851,694         1,143,740          2,033,977

Selling, general and
  administrative expenses                                          (723,743)       (1,316,578)       (1,692,302)        (2,413,037)

Depreciation of fixed assets and
  amortization of licence and
  permit and land-use right                                        (183,896)         (180,449)         (369,195)          (362,107)

Net write off of land-use right and fixed assets                          -                 -                 -             (1,225)

Research expenses                                                         -        (1,015,796)                -         (1,771,368)

New market development                                               (8,234)         (109,735)          (23,713)          (162,323)

Provision for doubtful debts                                        (10,701)          (54,693)          (41,412)           (80,549)

Loan interest expense                                                  (929)          (15,605)           (4,389)           (56,015)

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

Operating loss                                                     (246,805)       (1,841,162)         (987,271)        (2,812,647)

Interest income                                                      10,381            16,295            16,819             49,902
------------------------------------------------------------------------------------------------------------------------------------

Net (loss) for the period                                         $(236,424)      $(1,824,867)        $(970,452)       $(2,762,745)
====================================================================================================================================

(Loss) per share
      Basic and diluted                                           $   (0.01)        $   (0.09)        $   (0.05)         $   (0.14)
====================================================================================================================================

Weighted average number of
  common shares outstanding
      Basic and diluted                                          20,334,000        20,331,000        20,334,000         20,331,000
====================================================================================================================================

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

</TABLE>


<PAGE>

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended June 30, 2003 and 2002
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
<S>                                                                                          <C>                        <C>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                2003                    2002
-----------------------------------------------------------------------------------------------------------------------------

Cash flows from (used in) operating activities
   Net (loss) for the year                                                          $       (970,452)        $    (2,762,745)
   Adjustments to reconcile net loss to
     net cash used in operating activities:
     - depreciation of fixed assets and amortization of
          licence and permit                                                                 477,415                 362,107
     - net write off of land-use right and fixed assets                                            -                   1,225
     - provision for doubtful debts                                                           41,412                  80,549
  Changes in non-cash working capital items:
     - accounts receivable                                                                   (29,098)                240,074
     - inventories                                                                            21,337                 (81,875)
     - prepaid expenses and deposits                                                          (3,405)                (82,736)
     - accounts payable and accrued liabilities                                              (84,860)                (79,566)
     - management fees payable - related parties                                                   -                (138,167)
-----------------------------------------------------------------------------------------------------------------------------

                                                                                            (547,651)             (2,461,134)
-----------------------------------------------------------------------------------------------------------------------------

Cash flows used in investing activities
  Purchase of fixed assets                                                                   (38,559)               (133,444)
  (Increase) decrease in restricted funds                                                    510,000               2,449,955
  Acquisition of Patent rights                                                                     -                (500,000)
  Acquisition of balance of Huaxin                                                                 -              (1,400,000)
  Refundable investment deposits                                                                   -                 400,000
  Recovery from Hepatitis B Vaccine Project                                                        -                 500,000
-----------------------------------------------------------------------------------------------------------------------------

                                                                                             471,441               1,316,511
-----------------------------------------------------------------------------------------------------------------------------


Cash flows from financing activities
Loan proceeds                                                                               (483,162)             (2,234,880)
-----------------------------------------------------------------------------------------------------------------------------

Foreign exchange (gain) loss on cash
  held in foreign currency                                                                     3,879                  (4,342)
-----------------------------------------------------------------------------------------------------------------------------

 Decrease in cash and cash equivalents                                                      (555,493)             (3,383,845)

Cash and cash equivalents, beginning of period                                             4,425,766               6,306,129
-----------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                                           $       3,870,273        $      2,922,284
=============================================================================================================================

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

</TABLE>

<PAGE>

DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(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 June 30 , 2003,  and the results of operations
     and cash flows for the interim periods ended June 30, 2003 and 2002.

     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, 2002
     included in the annual report previously filed on Form10-K.

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

2.   Restricted Funds
<TABLE>
<CAPTION>
<S>                                                                                  <C>              <C>


      ---------------------------------------------------------------------------------------------------------
                                                                                   June 30,      December 31,
                                                                                       2003              2002
      ---------------------------------------------------------------------------------------------------------

      Cash and cash equivalents                                                 $ 3,870,273       $ 4,425,766
      Term deposits held as collateral against bank loans                                 -           510,000
      ---------------------------------------------------------------------------------------------------------

      Cash and short term securities                                            $ 3,870,273       $ 4,935,766
      =========================================================================================================

3.   Accounts Receivable

     ---------------------------------------------------------------------------------------------------------
                                                                                   June 30,      December 31,
                                                                                       2003              2002
     ---------------------------------------------------------------------------------------------------------

     Trade receivables                                                          $ 1,162,073       $ 1,141,896
                                                                                   (320,439)         (279,018)
     Allowance for doubtful accounts
     ---------------------------------------------------------------------------------------------------------
                                                                                    841,633           862,878
                                                                                     95,099            86,167
     Other receivables
     ---------------------------------------------------------------------------------------------------------
                                                                                   $936,732         $ 949,045
     =========================================================================================================


</TABLE>

<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S>                                                                                   <C>            <C>

4.   Inventories

     ---------------------------------------------------------------------------------------------------------
                                                                                   June 30,     December 31,
                                                                                       2003             2002
     ---------------------------------------------------------------------------------------------------------

     Raw materials                                                                $ 155,412        $ 135,710

     Finished goods                                                                  98,287           88,857

     Work in progress                                                               933,241          983,710
     ---------------------------------------------------------------------------------------------------------
                                                                                 $1,186,940      $ 1,208,277
     =========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
<S>                                                          <C>                   <C>                   <C>

5.   Fixed Assets

     ----------------------------------------------------------------------------------------------------------
                                                                              June 30, 2003
                                                ---------------------------------------------------------------
                                                                                Accumulated            Net book
                                                             Cost              depreciation              value
     ----------------------------------------------------------------------------------------------------------
     Motor vehicles                                        $ 140,406               $ 63,350            $ 77,056
     Office equipment and furniture                          415,042                182,903             232,139
     Leasehold improvements                                1,067,093                396,129             670,964
     Production and lab equipment                          2,063,318                785,679           1,277,639
     ----------------------------------------------------------------------------------------------------------
                                                         $ 3,685,859            $ 1,428,061          $2,257,798
     ==========================================================================================================


     ----------------------------------------------------------------------------------------------------------
                                                                            December 31, 2002
                                                ---------------------------------------------------------------
                                                                                Accumulated            Net book
                                                             Cost              depreciation              value
     ----------------------------------------------------------------------------------------------------------
     Motor vehicles                                        $ 140,388               $ 50,103            $ 90,285
     Office equipment and furniture                          385,462                144,199             241,263
     Leasehold improvements                                1,065,313                336,503             728,810
     Production and lab equipment                          2,052,260                692,005           1,360,255
     ----------------------------------------------------------------------------------------------------------
                                                         $ 3,643,423            $ 1,222,810          $2,420,613
     ==========================================================================================================
</TABLE>

     For the six months  ended June 30,  2003,  depreciation  expenses  totalled
     $201,374  (2002 -  $146,489).  The  majority of fixed assets are located in
     China.


<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

6.   Due from Related Party - Hepatitis B Vaccine Project

     ---------------------------------------------------------------------------------------------------------
                                                                                 June 30,         December 31,
                                                                                     2003                 2002
     ---------------------------------------------------------------------------------------------------------

     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
     =========================================================================================================
</TABLE>

(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.

<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(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.

8.   Licence and permit

     ---------------------------------------------------------------------------
                                                   June 30,       December 31,
                                                       2003               2002
     ---------------------------------------------------------------------------

     Original cost                               $5,012,582         $5,012,582
     Accumulated amortization                     1,812,588          1,536,842
     ---------------------------------------------------------------------------

                                                $ 3,199,994        $ 3,475,740
     ===========================================================================

     Amortization  expenses  for the licence and permit for the six months ended
     June 30, 2003 was $276,041 (2002 - $275,956)

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

         2003 (balance of the year)     $276,000
         2004                           $552,000
         2005                           $552,000
         2006                           $552,000
         2007                           $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.


<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

9.   Bank Loans
<TABLE>
<CAPTION>
<S>                                                                                      <C>              <C>

     ----------------------------------------------------------------------------------------------------------
                                                                                       June 30,    December 31,
                                                                                           2003            2002
     ----------------------------------------------------------------------------------------------------------

     RMB 4,000,000, bearing interest at 3.394% per annum and due on February
     26, 2003. The loan was secured by the term deposit.                                 $    -       $ 483,162
     ----------------------------------------------------------------------------------------------------------

     Total                                                                               $    -       $ 483,162
     ==========================================================================================================
</TABLE>

     The weighted average interest rate was 3.394% and 5.265% for the six months
     ended June 30, 2003 and 2002.

10.  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 June 30,
          2003,   $3.7   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 June  30,  2003,  the  company  has  estimated  losses,  for tax
          purposes,  totalling  approximately  $8,200,000,  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:
<TABLE>
<CAPTION>
<S>                                                                                <C>            <C>


          -------------------------------------------------------------------------------------------------
                                                                                 June 30,    December 31,
                                                                                     2003            2002
          -------------------------------------------------------------------------------------------------
                                                                              $ 2,790,000     $ 2,560,000
           Tax losses carried forward
           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                                           (3,914,400)     (3,684,400)
          -------------------------------------------------------------------------------------------------
                                                                              $         -    $          -
          =================================================================================================
</TABLE>

<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

10.  Income Taxes (continued)

     A  reconciliation  of the  federal  statutory  income tax to the  Company's
     effective  income tax rate,  for the three  months  ended June 30, 2003 and
     2002 are as follows:

     ---------------------------------------------------------------------------
                                                      2003               2002
     ---------------------------------------------------------------------------

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

      Effective income tax rate                         -                  -
     ===========================================================================


11.  Stock Options and Warrants

     (a)  Stock Options Plans

          During the six months ended June 30, 2003 the Company  granted options
          to purchase  500,000  shares at a price of $0.68 per share,  at a time
          when the market price was $0.48 per share.

          The  following is a summary of the employee  stock option  information
          for the period ended June 30, 2003:
<TABLE>
<CAPTION>
<S>                                                                         <C>                 <C>

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

           Options outstanding at December 31, 2001                       2,969,500            $   1.92
           Granted                                                          920,000            $   1.70
           Forfeited                                                       (598,500)           $   2.30
           Exercised                                                         (3,000)           $   0.50
          ------------------------------------------------------------------------------------------------

           Options outstanding at December 31, 2002                       3,288,000            $   1.82
           Granted                                                          500,000            $   0.68
           Forfeited                                                       (296,000)           $   1.67
          ------------------------------------------------------------------------------------------------

           Options outstanding at June 30, 2003                           3,492,000              $ 1.67
          ================================================================================================
</TABLE>
<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

11.  Stock Options and Warrants (continued)
<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     1,716,500      1.94            $   0.55          1,591,500        $   0.54
     $1.01 - $2.00       440,500      3.82            $   1.70            440,500        $   1.70
     $2.01 - $3.00        60,000      1.36            $   2.50             60,000        $   2.50
     $3.01 - $4.00     1,275,000      2.38            $   3.13           1,275,000       $   3.13
                       ----------   ------            ---------          ----------      ---------
                       3,492,000      2.32            $   1.67           3,367,000       $   1.71
                       ==========   ======            =========          ==========      =========

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

     ---------------------------------------------------------------------------
                                                     June 30,        June 30,
                                                         2003            2002
     ---------------------------------------------------------------------------
       Net (loss) for the period:
       - as reported                              $ (970,452)       $(2,762,745)
       - pro-forma                                $ (970,452)        (2,762,745)
     ---------------------------------------------------------------------------
       Basic and diluted (loss) per share:
       - as reported                              $(0.05)           $(0.14)
       - pro-forma                                $(0.05)           $(0.14)
     ---------------------------------------------------------------------------

     (b)  Warrants

          Share purchase warrants outstanding as at June 30, 2003:
<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------

           Number         Underlying      Exercise Price
        of Warrants         Shares         Per Share        Expiry Date
        -----------       ----------      --------------    -------------
         3,500,000         1,750,000         $2.00          September 13, 2003
            50,000            50,000         $1.70          November 15, 2004
         1,000,000*        1,000,000         $2.50          January 14, 2007


     *    See Note 7

12.  Related Party Transactions

     (a)  The Company  incurred the following  expenses to a director (2002: two
          directors) of the Company:

          ----------------------------------------------------------------------
                                                    June 30,       June 30,
                                                        2003          2002
          ----------------------------------------------------------------------

          Management fees                           $ 40,000      $115,000
          ======================================================================


     (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:

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

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

          (iii)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

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

          (v)  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:

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

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

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

<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------


12.  Related Party Transactions (continued)

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

          (v)  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:

          (i)  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;

          (ii) 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 June 30, 2003,  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.

     (c)  see Notes 6 and 7 also.

13.  Commitments

     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:

                   2003                         $ 274,240
                   2004                           491,659
                   2005                           492,928
                   2006                           496,736
                   2007                           369,134
                   2008 - 2009                    470,841
                   ---------------------------------------
                   Total                      $ 2,595,938
                   =======================================

<PAGE>
DRAGON PHARMACEUTICALS INC. & SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2003
(Expressed in U.S. Dollars)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------


14.  Segmented Information

     The Company  operates  exclusively  in the biotech  sector.  The  Company's
     assets and revenues are distributed as follows:
<TABLE>
<CAPTION>
<S>                                                                                   <C>                   <C>
                                                                                June 30, 2003        December 31,2002
     -----------------------------------------------------------------------------------------------------------------
     ASSETS
     North America                                                               $  3,425,332             $ 4,144,668
     China                                                                          7,812,546               9,020,882
     Others                                                                           871,915                 478,542
     -----------------------------------------------------------------------------------------------------------------
     Total                                                                       $ 12,109,793             $13,644,092
     =================================================================================================================


     ------------------------------------------------------------------------------------------------------------------
                                                                             Six months ended        Six months ended
                                                                                June 30, 2003           June 30, 2002
     ------------------------------------------------------------------------------------------------------------------
     REVENUE
     North America                                                                $         -             $         -
     China                                                                          1,031,242               1,351,966
     Others                                                                           640,767               1,047,000
     ------------------------------------------------------------------------------------------------------------------
     Total                                                                        $ 1,672,009             $ 2,398,966
     ==================================================================================================================
</TABLE>

15.  Comparative Figures

     Certain 2002 comparative  figures have been  reclassified to conform to the
     financial statement presentation adopted for 2003.

<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        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-K for the fiscal year ended December 31, 2002.

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 by improving a
proprietary  high-yield  mammalian cell line and  "vectoring  process" which has
been  developed  by  Dragon.  The  Company   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.

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 June 30, 2003 was  $1,007,686 compared to $1,026,159 for the  three-month
period  ending June 30,  2002.  Sales in and outside of China were  $576,894 and
$430,792, respectively during the three-month period ending June 30, 2003. Sales
during the  three-month  period  ending June 30, 2002 were $826,659 in China and
$199,500  outside of China.  Cost of sales for the  three-months  ended June 30,
2003 of $326,988 is attributed  to the  production  costs of the  pharmaceutical
products.  The cost of  sales  for the  three-months  ended  June  30,  2002 was
$174,465. The gross profit margin was 68% for the three-month period ending June
30, 2003 and 83% for the  three-month  period  ended June 30,  2002.  The profit
margin decreased during the three months ended June 30, 2003 because the Company
decided to sell and sold some product with short-term  expiry dates at a reduced
price.
<PAGE>

Revenue for the six-month period ending June 30, 2003 was $1,672,009 compared to
$2,398,966 for the six-month  period ending June 30, 2002.  Sales in and outside
of China were $1,031,242 and $640,767,  respectively during the six-month period
ending June 30, 2003.  Sales during the  six-month  period  ending June 30, 2002
were  $1,351,966 in China and  $1,047,000  outside of China.  The overseas sales
during the six-month period ending June 30, 2002 included delivery of a $700,000
bulk order to be used by the purchaser for new drug research and development.

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.
Interest  income for the  three-months  period  ended June 30,  2003 was $10,381
compared to $16,295 for the  three-month  period ended June 30,  2002.  Interest
income for the  six-months  period  ended June 30, 2003 was $16,819  compared to
$49,902 for the six-month period ended June 30, 2002.

Interest  income has  decreased as interest  rates have declined and as the cash
balance has decreased to fund the Company's operations.

Expenses. Total operating expenses for the three-months ended June 30, 2003 were
$927,504.  The major expenses incurred in the second quarter of 2003 was selling
expenses of $287,667  representing  31% of total  expenses.  The remaining major
expense items are represented by administrative expenses.

Significant operating expenses for the three-months ended June 30, 2003 included
rent of $123,912, salaries and benefits of $198,586, $34,055 in travel costs and
a bad debts  provision  of $10,701.  Management  fees of $20,000  were paid to a
director for services during the second quarter of 2003.

Other  significant  expenses for the second quarter include the  depreciation of
fixed assets and amortization of license and permit of $183,896.

Comparatively, total operating expenses for the three-months ended June 30, 2002
were $2,692,855.  The major expenses incurred in the second quarter of 2002 were
research and  development  expenses of  $1,015,796  and the selling  expenses of
$473,911   representing   38%  and   18%  of   total   expenses,   respectively.
Administrative expenses represent the remaining major expense items.

Significant operating expenses for the three-months ended June 30, 2002 included
consulting  fees of  $162,543,  loan  interest  of  $15,605,  rent of  $109,906,
salaries and benefits of $124,270,  $184,100 in travel costs and management fees
of $58,443.  Management  fees  include  $57,500  incurred to two  directors  for
services during the second quarter of 2002.

Other  significant   expenses  for  the  second  quarter  of  2002  include  the
depreciation of fixed assets and amortization of license and permit and land-use
rights of $180,449.

Total operating expenses for the six-months ended June 30, 2003 were $2,131,011.
The major  expense  incurred  in the first half of 2003 was  selling  expense of
$793,339  representing  37% of total expenses.  The remaining  expense items are
primarily administrative expenses.
<PAGE>

Significant  operating  expenses for the six-months ended June 30, 2003 included
rent of $212,111,  salaries  and benefits of $389,978,  $100,393 in travel costs
and a bad debts provision of $41,412.  Management fees of $40,000 were paid to a
director for services during the first half of 2003.

Other  significant  expenses  for  the  first  half  of  the  year  include  the
depreciation of fixed assets and amortization of license and permit of $369,195.

Comparatively,  total operating expenses for the six-months ended June 30, 2002,
were  $4,846,624.  The major  expenses  incurred  in the first half of 2002 were
research and  development  expenses of  $1,771,368  and the selling  expenses of
$951,107   representing   37%  and   20%  of   total   expenses,   respectively.
Administrative expenses represent the remaining expense items.

Significant  operating  expenses for the six-months ended June 30, 2002 included
bad debt write offs of $80,549,  consulting  fees of $311,280,  loan interest of
$56,015, rent of $171,452, salaries and benefits of $265,956, $262,490 in travel
costs and management fees of $132,636.  Management fees include $115,000 paid to
two directors for services during the six-months ended June 30, 2002.

Other significant  expenses for the second half of 2002 include the depreciation
of fixed assets of and amortization of license and permit and land-use rights of
$362,107 and new market development of $162,323.

Overall, expenditures have decreased in 2003 from 2002 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
$236,424 for the three-month  period ending June 30, 2003 compared to $1,824,867
for the same period last year.

The Company's net and  comprehensive  loss of $970,452 for the six-month  period
ending June 30, 2003 compared to $2,762,745 for the same period last year.

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
three-month  and six-month  periods ended June 30, 2003.  The loss per share for
the three-month  period ended June 30, 2003 was $0.01 and the loss per share for
the six-month  period ended June 30, 2003 was $0.05.  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
<PAGE>

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 June 30, 2003,  the Company had $3,870,237 in cash  available.  This cash,
the $936,732 in accounts  receivable and anticipated  sales will be used to fund
the  ongoing  operations  and  research  and  development.  Working  capital was
$4,711,357 at June 30, 2003.

During the six months  ended  June 30,  2003,  the  Company  incurred  losses of
$970,452  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. Quantitative and Qualitative Disclosures About Market Risks

The Company is exposed to market risk,  primarily  related to foreign  exchange.
The Company  maintains its  accounting  records in their  functional  currencies
(i.e., U.S.  dollars,  Renminbi Yuan, and Canadian dollars  respectively).  They
translate foreign currency  transactions  into their functional  currency in the
following manner.

At  the  transaction  date,  each  asset,  liability,  revenue  and  expense  is
translated  into the  functional  currency  by the use of the  exchange  rate in
effect at that date.  At the period end,  monetary  assets and  liabilities  are
translated into the functional  currency by using the exchange rate in effect at
that date.  The  resulting  foreign  exchange  gains and losses are  included in
operations.

The following  table sets forth the  percentage of the Company's  administrative
expense by  currency  for the years  ended  December  31,  2001 and 2002 and the
six-months ended June 30, 2003 and 2002.

By Currency


                                       December 31,            December 31,
                                       2001                    2002

U.S. Dollar                            31%                     27%

Canadian Dollar                        12%                     46%

Renminbi Yuan                          57%                     27%

Total                                  100%                    100%




                                       June 30, 2002           June 30, 2003

U.S. Dollar                            26%                     15%

Canadian Dollar                        48%                     66%

Renminbi Yuan                          26%                     19%

Total                                  100%                    100%

<PAGE>

Such  administrative  expense by currency may change from time to time. Further,
the  Company  incurred  expenses in China of  $1,334,159  and  $965,968  for the
six-months ended June 30, 2003 and 2002, respectively, all of which were paid in
RMB.

The Company has not entered  into any  material  foreign  exchange  contracts to
minimize  or  mitigate  the  effects of  foreign  exchange  fluctuations  on the
Company's operations. The Company exchanges Canadian dollars to fund its Chinese
operations.  Based on prior  years,  the  Company  does not  believe  that it is
subject to material foreign exchange fluctuations.  However, no assurance can be
given that this will not occur in the future.



Item 4. Controls and Procedures
-------------------------------

Within the 90 days prior to the date of this Form 10-Q, the Company  carried out
an evaluation, under the supervision and with the participation of the Company's
management, of the design and operation of the Company's disclosure and internal
controls  and  procedures  pursuant  to  Exchange  Act Rule  13a-14.  The review
identified a number of areas where there could be  improvements  to increase the
effectiveness  of  controls  and the  Company  is  currently  in the  process of
improving the controls and procedures in these areas. Notwithstanding the above,
the  Company's  President and Chief  Executive  Officer along with the Company's
Chief Financial  Officer have concluded that the Company's  disclosure  controls
and  procedures  are  sufficient  enough  to  ensure  adequate  and  appropriate
disclosure  of  material  information  relating to the  Company  (including  its
consolidated subsidiaries) required to be included in this Form 10-Q.

There have been no significant  changes in the Company's internal controls or in
other factors,  which could significantly affect internal controls subsequent to
the  date the  Company  carried  out its  evaluation,  other  than  those  being
undertaken to increase the effectiveness of controls as discussed above.


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

None

Item 2.  Changes in Securities and Use of Proceeds.

None

Item 3.  Defaults Upon Senior Securities.

None
<PAGE>

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

On June 26 2003, the shareholders elected the following five persons to serve as
directors until the next annual meeting:

                                   In Favour        Against     Withheld
                                   ---------        -------     --------
         Dr. Alexander Wick        9,249,115            0        49,694
         Dr. Longbin Liu           8,578,115            0       720,694
         Dr. Ken Z. Cai            9,249,615            0        49,194
         Dr. Y.K. Sun              9,249,815            0        48,994
         Mr. Philip Yuen           9,249,615            0        49,194

In addition, the shareholders ratified the reappointment of Moore Stephens Ellis
Foster Ltd. as the Company's independent accountants as follows:

                  In Favour            Against              Withheld
                  ---------            -------              --------
                  9,257,076             22,400                  0


Item 5.  Other Information.

None

Item 6.  Exhibits and Reports on From 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 8K.

          On May 29,  2003,  the  Company  filed a  Current  Report on Form 8-K,
          regarding first quarter results for 2003.

<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.


                                              /s/ Matthew Kavanagh
Dated:   August 14, 2003                      ----------------------------------
                                              Matthew Kavanagh
                                              Director of Finance and Corporate
                                              Compliance and Corporate Secretary
                                              (duly authorized Officer and
                                              Principal Financial Officer)