LONGBIN LIU, M. D.
                     5968 Marine Drive, West Vancouver, British Columbia
                            Telephone: (604) 921-4124




April 6, 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:  Proposed Transactions

Based  upon our recent  discussions,  the  following  is  intended  to outline a
possible  arrangement with Dragon  Pharmaceuticals  Inc.  ("Dragon")  concerning
several   biotechnology-based   pharmaceutical   products   which  I  have  been
developing,  either  alone or in  conjunction  with  others,  some of which have
previously been  transferred to Dragon.  This letter sets out the terms which we
have discussed and to which we are prepared to agree to deal with these assets.

1.   G-CSF and Insulin

     These two projects have previously been transferred to Dragon. Expenditures
     on these projects which have been budgeted by Dragon are US$1.5 million for
     G-CSF  and  US$2.0  million  for  Insulin.  I  will  assist  Dragon  in the
     development of these projects on a contract research basis as follows:

     (a) G-CSF - Initial  funding of  US$500,000  will be  provided by Dragon at
     commencement  of  research.  A  further  US$500,000  will  be  funded  when
     cell-line and related technology is established and animal  experimentation
     commences.  A final  US$500,000 will be funded when the permit for clinical
     trial has been issued by the State Drug  Administration  of China  ("SDA").
     Estimated  time for  completion  of this  project and  granting of the drug
     licence is approximately three years.

     (b) Insulin - Initial  funding of US$750,000  will be provided by Dragon at
     commencement  of research.  A further  US$750,000  will be funded by Dragon
     when  cell-line  and the  related  technology  is  established  and  animal
     experimentation  commences.  A final  US$500,000  is to be funded  when the
     permit for clinical  trial is issued by SDA.  Estimated time for completion
     of this  project and  granting of the drug  licence is  approximately  four
     years.

     Dragon  will  inform Dr. Liu in  writing  indicating  the date on which the
     development of these  projects shall commence and on which initial  funding
     will be received.

     Upon the occurrence of one of the following:

     (i)  application  for  certification  for drug  quality is not made  within
          three years in the case of G-CSF or four years in the case of Insulin;

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     (ii) official rejection for technical and scientific reasons (as opposed to
          change in  regulations  or  policies)  is received  from the SDA to an
          application for  certification of drug quality and the SDA declines to
          accept any resubmission of drug samples; or

     (iii) termination of the G-CSF or the Insulin projects by myself;

     I agree to refund,  without interest or deduction,  the amounts advanced by
     Dragon on each  project  within six months from the earlier to occur of the
     foregoing in respect of such project.

     Compensation for my services is to be mutually agreed upon and incorporated
     into  a  comprehensive   consulting   arrangement  referred  to  below  and
     negotiated inaccordance with Dragon's Human Resources Policy as accepted by
     the Board of Directors  at the Board of Directors  Meeting held on December
     12, 2000.  As a part of the  compensation  package,  a bonus of  US$500,000
     would be paid at my  direction by Dragon if I obtain the G-CSF drug licence
     in less than 2 years and a bonus of US$500,000 if I obtain the insulin drug
     licence in less than three years.

2.   TPA Project

     The  US$400,000  which  Dragon has paid to date in funding  the TPA project
     will be refunded to Dragon  within six months of the date of  execution  of
     this letter.

     Dragon  will be  granted  the  "right  of first  offer"  to  provide  up to
     one-third of the amount of any future  financing  done by the company which
     holds the TPA project.

3.   New Research and Development Projects

     All other biotechnology based  pharmaceutical  projects which are currently
     or may in the future be developed by me will be done through my own private
     company (R&D  Company),  which will initially be funded by me. I propose to
     grant to Dragon the right to acquire a free project patent  (related to the
     discovery  of a new gene or protein) for one of these  projects  (the "Free
     Project  Patent") when a patent  application is filed in the United States.
     My R&D Company will bear all of the development  costs for the Free Project
     Patent up to the time that a patent application for the Free Project Patent
     is  filed  in the  United  States.  For  greater  certainty,  Dragon  would
     reimburse me for the legal costs  incurred by me related to  obtaining  the
     patent for the selected project.

     Dragon may  select any single  project  patent  application  (the  "Project
     Patent  Application")  which it wishes to acquire from the R&D Company,  at
     any time  within  the next  three  years  after  the  date of  signing  the
     Definitive  Agreement.  For greater certainty,  after acquiring the Project
     Patent  Application,  Dragon will have the right to any future  patents and
     patent applications that are related to the Project Patent Application.  In
     consideration for this option,  Dragon would pay to me US$500,000 and issue
     to me a warrant  exercisable  for 1,000,000  shares of Dragon at a price of
     US$2.50 per share for a term of five years.  Selection of a project  patent
     must be made by  Dragon  within  60 days of  Dragon  receiving  the  patent
     application,  failing  which  Dragon will forfeit the right to acquire that
     project patent. If for any reason Dragon does not select any project patent
     within the three year  period,  the  warrants  may be cancelled at Dragon's
     election  upon notice to me at any time after  completion of the three year
     period.


<PAGE>

     I agree that if after selecting a patent  application such patent is denied
     Dragon may, for no additional  consideration,  select an additional  patent
     application of the R&D Company to be transferred to Dragon.

     I agree to cause the R&D  Company to grant to Dragon a right of first offer
     for a term of three years for any project  patents of the R&D company which
     would require the R&D company to offer a project  patent to Dragon prior to
     being  allowed to sell such  project  patent to a third  party on terms not
     more favourable than those offered to Dragon.

4.   Dragon and I will mutually agree on a consulting arrangement as a condition
     of the foregoing  transactions  in accordance with the terms and conditions
     of the Human Resources  Policy of Dragon.  The commitment of time by me and
     the amount of compensation  will depend upon those projects set forth above
     which Dragon elects to proceed with. The  arrangement  shall also include a
     covenant   not  to  compete   with  Dragon  on  those   biotechnology-based
     pharmaceutical projects which Dragon holds or has elected to acquire.

5.   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.

6.   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 any later date as agreed to in writing by both parties.

7.   This  letter of intent  will be open for  acceptance  until  April 9, 2001,
     following which it will lapse.


Yours truly,


Longbin Liu, M.D.


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


DRAGON PHARMACEUTICALS INC.


Per: /s/  Ken Cai
     Authorized Signatory