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**SPEAKERS**

**PRESENTATION**

| Coordinator                 | Good                  day, ladies and gentlemen and welcome to the China Medicine Corporation                  Second Quarter Earnings conference call. My name is Becky and I                  will be                  your coordinator for today. At this time, all participants are                  in a                  listen-only mode. We will be facilitating a question and answer                  session                  towards the end of this conference. (Operator’s instructions.) As a                  reminder, this conference is being recorded for replay purposes.                  I would                  now like to turn the presentation over to your host for today’s call, Mr.                  Crocker Coulson. You may proceed. |
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| C.                  Coulson | Thank                  you very much. Good morning, everybody. Good evening to those of                  you                  joining us from China and welcome all of you to China Medicine’s Second                  Quarter 2008 Earnings conference call.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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|                        | With                  me today are China Medicine’s Chairman and CEO, Mr. Senshan Yang and China                  Medicine’s CFO, Ms. Huizhen Yu. Before I turn the call over to Mr. Yang,                  I’d like to remind our listeners that in this call, management’s prepared                  remarks contain forward-looking statements within the meaning of                  the                  Private Securities Litigation Reform Act of 1995, which are statements                  about the future.                                                                                                                                                                                                                                   |
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|   | For                  that reason, these statements involve risks and uncertainties as                  future                  events cannot be accurately predicted. Words such as “plans,” “intends,”                  “will,” “hopes,” “seeks,” “believes,” and the like often identify such                  forward-looking statements.                                                                                                                                                                                                                         |
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|   | These                  forward-looking statements include those concerning plans and objectives                  with respect to the present and future operations of China Medicine                  and                  its subsidiaries and affiliates, and statements which will express                  or                  imply that such present and future operations will or may produce                  revenues, income or profits. Numerous factors and future events                  could                  cause the company to change such plans and objectives or fail to                  successfully implement them. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Therefore,                  the company claims the protection of the Safe Harbor for forward-looking                  statements concerning the company’s business, products and financial                  results. All such forward-looking statements are expressly qualified                  in                  their entirety by this cautionary statement and the risks factored                  detailed in the company’s filings with the SEC.                                                                                                                                                                        |
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|   | Further,                  China Medicine assumes no duty to revise or update any forward-looking                  statements to reflect events or circumstances after the date of                  this                  release.                                                                                                                                                                                                                                                                                                                                                                                                            |
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|   | With                  those formalities now out of the way, it’s my pleasure to turn the call                  over to Mr. Yang, who will make some very brief opening remarks                  in                  Chinese, which will be translated by Melissa Kong. I’ll then come back to                  present the remainder of Mr. Yang’s remarks in English.                                                                                                                                                                                                                                                     |
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| S.                  Yang | Hello.                  (Comments given in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                           |
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| M.                  Kong | Thank                  you, everyone. Welcome to everyone and thank you for joining us                  today. I’m                  very happy to report that China Medicine experienced a strong second                  quarter in 2006 with significant increases in revenue and net                  income.                                                                                                                                                         |
|                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                     | We                  continue to implement our sales strategy and push further into                  rural and                  municipal regions of Guangdong in order to maintain our position                  as a                  leading developer and distributor of pharmaceutical products in                  China.                                                                                                                                                 |
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| S.                  Yang | (Comments                  given in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| M.                  Kong | We                  also made some progress in our lab experiments for recombinant                  Aflatoxin                  Detoxifizyme, an innovative product we are developing that has                  the                  potential to detoxify Aflatoxin, which is a potential cancer causing                  agent                  in food and feed.                                                                                                             |
|                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                     | However,                  due to the temporary band on toxicity testing that was implemented                  by                  Chinese Government because of the Olympic Games, our schedule has                  changed.                  We now expect to launch trial sales later at the end of this                  year/beginning of next year. We remain optimistic about the prospects                  for                  commercialization as we will discuss. |
|                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                     | In                  July, we achieved a major milestone, being granted a patent for                  rADTZ in                  Australia, which is valid through January 2025.                                                                                                                                                                                                                                                                                                 |
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| S.                  Yang | (Comments                  given in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                  |
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| M.                  Kong | In                  order to become vertically integrated, we are actively evaluating                  pharmaceutical manufacturing facilities for acquisition. We are                  confident                  that we have the right management team in place to implement our                  plans and                  are committed to maximizing value for our shareholders.                                                                                        |
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|                        | Now                  that I have completed translating for Mr. Yang’s initial comments, I would                  like to turn the conference call over to Crocker                  Coulson.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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| C.                  Coulson | Great.                  Thank you, Mr. Yang and thank you, Melissa. I’ll now present the rest of                  the comments on behalf of the management.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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|                        | During                  the second quarter, China Medicine continued to successfully execute                  our                  strategy and delivered exceptionally results that were driven by                  strong                  performance in our pharmaceutical distribution business.                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                        | Revenues                  increased 40.8% year-over-year to $11.6 million. Our gross profit                  increased 72.8% year-over-year to $4.2 million. Operating income                  increased                  107% to $3 million while our net income increased 118.8% year-over-year                  to                  $2.5 million or a full $0.16 per diluted share. Before we review                  our                  financial results in more detail, I’d like to provide a brief overview of                  our business, as well as our market outlook.                                                                                                                               |
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|                        | As                  many of you already know, China Medicine is a leading pharmaceutical                  distributor in China and has shown tremendous growth since going                  public in                  2006. Following with the rapid growth in the pharmaceutical industry                  in                  China, we started to invest in research and development of new                  pharmaceutical products and have become a developer now of innovative                  new                  products. As a result, we currently have four patents registered                  with the                  SFDA in China and seven more patents that are pending                  approval. |
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|                        | Our                  strong top line growth during the quarter was driven by increased                  sales of                  pharmaceutical products. Drugs and dietary supplements accounted                  for 93.4%                  of revenues in the second quarter followed by sales of medical                  formulas,                  which made up 4.9% of sales. Sales of medical equipment accounted                  for 1.7%                  of sales in the quarter.                                                                                                                                                                                                                           |
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|   | Our                  breakdown in the drugs and dietary category is as follows: Western                  prescription products made up 61.8% of sales in this category followed                  by                  traditional Chinese medicine prescription products at 18.2%; TCM                  over-the-counter products at 8.7% and Western over-the-counter                  products at                  4.3%. Overall, we experienced strong sequential and year-over-year                  growth                  for both drugs and dietary supplements.                                                                                                                                                                    |
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|   | Our                  top selling drugs for the quarter were Lopamidol injections, which                  accounts for about 13% of sales and are used to help diagnose heart,                  brain, blood and nervous system disorders when using x-rays or                  CT scans;                  Sanqi, Panax Notoginseng for injection, which promotes blood circulation                  and resolves blood stasis and ... granules for the treatment of coughs,                  headaches and dizziness, each of which contributed about 7% of                  sales.                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | And                  then Levocarnitine for injection, a nutritional supplement used                  to treat                  carnitine deficiency, which can lead to liver, heart and muscle                  problems                  accounts for about 5% of sales. Collectively, these top selling                  drugs                  accounted for 32% of our revenues.                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Sales                  in pharmaceuticals obtained through the Guangdong Sunshine Medicine                  Public                  Internet Bidding System contributed to 35% of total revenues. Sales                  of                  pharmaceutical products for which we have national distribution                  rights                  made up 35.7% of total revenues and sales of products for which                  we have                  manufacturing licenses accounted for $5.6% of total revenues. Sales                  of                  pharmaceutical products for which we have exclusive regional level                  distribution rights made up the remaining 23.7% of                  revenues. |
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|   | During                  the second quarter, we successfully maintained exclusive rights                  to                  distribute the existing 2,300 pharmaceutical products currently                  included                  in our product catalog. As a result, we were able to enjoy higher                  margins                  since less expense was related to rolling out new products was                  incurred.                  This is evident in our 6.6 percentage point year-over-year improvement                  in                  gross margin to 35.7% during the quarter. Gross margin also improved                  from                  33% in Q1 of 2008.                                  |
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|   | Going                  forward, we continue to participate in the online bidding system                  in order                  to maintain our rights to the existing products and add more products                  to                  our portfolio over time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | Turning                  to our new product pipeline, we’re currently in the process of launching                  our new proprietary weight loss food supplement called Be Thin                  in the                  United States. This is the first time we’ve introduced a product to the                  U.S. market and we consider it a major accomplishment. Be Thin’s active                  ingredients include L-Carnatine, a special amino acid manufactured                  by the                  human body essential for the production of energy. The other active                  ingredient is Hydrocitric Acid or HCA, extracted from a fruit called                  the                  garcinia cambogia.              |
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|   | Since                  Be Thin is patented as a food supplement, we’re not required to obtained                  U.S. FDA approval. Instead, we simply need to submit the necessary                  documentation to the U.S. FDA for recordkeeping purposes. We’ve already                  engaged a local drug distributor in the U.S. to launch trials sales                  of Be                  Thin and we will plan our marketing strategy based on this initial                  response. We hope Be Thin will be well received in the U.S. market,                  as                  obesity is the second largest leading cause of preventable death                  in the                  U.S. where 127 million adults are overweight. |
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|   | In                  terms of our developments in the overseas market, we also approval                  from                  Pakistan’s SFDA to export Levocarnitine to prevent liver, heart and muscle                  problems. The company is currently submitting a pricing proposal                  to                  Pakistan’s Healthcare Department and we anticipate to receive approval                  soon. In addition, we’ve received an initial order to supply 50,000 units.                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | We                  achieved another major milestone in the quarter by obtaining a                  patent for                  recombinant Aflatoxin Detoxifizyme or rADTZ in Australia that’s valid                  through January 13, 2025. This is in addition to a patent granted                  early                  2004 from the State Intellectual Property Office in                  China.                                                                                                                                                                                                                                                                                                                                                         |
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|   | We’ve                  applied for patents now in 13 different countries and regions,                  including                  Australia, Canada, the European Union, Indonesia, Israel, Japan,                  South                  Korea, Mexico, Russia, South Africa, the U.S., Hong Kong and India.                  We are                  currently testing rADTZ on animal feed and are scheduled to begin                  working                  with the Chinese Department of Agriculture on a large-scale experiment                  in                  order to meet national standards and apply for production                  permits.                                                                                                                                                      |
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|   | As                  Mr. Yang noted, due to the Beijing 2008 Olympic Games, the application                  for                  production permit will be delayed since the Chinese Government                  mandated                  that all toxicity tests and experiments would be temporarily halted                  during                  the Olympics. We have already been approached, however, by several                  potential customers for rADTZ, including a very large-scale chicken                  farm                  in Guangzhou Province, ... a global provider of food, agriculture and risk                  management products and services, and an international manufacturer                  of                  enzymes for the detergent, textile and food and feed industry. |
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|   | Introducing                  rADTZ into the animal feed industry is relatively straightforward                  since we                  required approval only from the Department of Agriculture in China                  as                  opposed to entering the food for human industry, where the process                  may                  take years. Therefore, our target market is currently China’s entire feed                  industry that accounts for approximately 274 billion RMB or approximately                  $39.8 billion in total sales of feed products. In the next three                  years, we                  hope that rADTZ will be able to capture approximately 20% of the                  animal                  feed market share.                               |
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|   | Now,                  I’d like to talk in a little bit more detail about our financial                  results.                  Revenues for the second quarter grew 40.8% to $11.6 million from                  $8.3                  million in the second quarter of 2007. The increase was attributable                  to                  overall growth in sales from the company’s pharmaceutical product                  portfolio. Product sales totals $11.1 million and accounted for                  95.1% of                  total net revenues.                                                                                                                                                                                                                                              |
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|   | Sales                  of Western-style prescription products and OTC made up 66.1% of                  revenues                  and sales of TCM prescription and OTC accounted for 26.9% of total                  revenues. Medical formula sales totaled just $0.57 million, accounting                  for                  4.9% of total revenues, representing an increase of 14.2% over                  the prior                  year period.                                                                                                                                                                                                                                                   |
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|   | Gross                  profit in the second quarter of 2008 was $4.2 million, an increase                  of                  72.8% over Q2 of 2007. Our gross margin increased significantly                  to 35.7%                  versus 29.1% for the year-ago period. The increase in gross margin                  was                  attributable to the company’s strategy of restructuring our product                  portfolio mix to include higher margin prescription pharmaceutical                  products and reduce the percentage of OTC and generic pharmaceutical                  products.                                                                            |
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|   | Operating                  expenses in Q2 were $1.2 million, up 21.5% from $0.96 million in                  Q2 of                  2007. The increase was due to higher selling, general and administrative                  expenses, but less than the increase in revenues for the quarter.                  Operating expenses represented 10% of total sales in Q2, down from                  11.6%                  in Q2 of 2007.                                                                                                                                                                                                                                                                   |
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|   | As                  a result, operating income was $3 million in Q2, up 107% from $1.4                  million                  in Q2 of 2007. Our operating margin was very strong, 25.7% compared                  to                  17.5% for the prior year period. Net income for Q2 was $2.5 million,                  or                  $0.16 per fully diluted share, up 119% from $1.1 million, or $0.08                  per                  diluted share in Q2 of 2007. Earnings per share reflects an increase                  of                  $1.4 million in diluted average shares compared to Q2 of 2007 primarily                  due to the exercise of warrants and options. |
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|   | Now,                  turning to our balance sheet. As of June 30, China Medicine had                  $34.2                  million of working capital, up 20% from December 31. Also as June                  30,                  China Medicine had $2.8 million in cash and cash equivalents as                  compared                  to $5.8 million at year-end.                                                                                                                                                                                                                                                                                                                                |
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|   | For                  the six-months ended June 30, 2008, cash used in operating activities                  was                  $3 million compared to $3.1 million in the six-months ended 2007.                  This was                  related to the company’s outstanding accounts receivable and advances to                  suppliers. Stockholders’ equity as of June 30, 2008 was $37.1 million, an                  increase of 20% over $30.1 million as of December 31,                  2007.                                                                                                                            |
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|   | In                  summary, we’re very pleased with these outstanding financial results in                  the quarter and with the execution of China Medicine’s business strategy.                  We’re committed to becoming a leading pharmaceutical distributor and                  developer of innovative pharmaceutical products in China.                                                                                                                                                                                                                                                                              |
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|   | Moving                  forward, we plan to enhance our profitability based on our ability                  to                  continue to develop new products internally and secure additional                  exclusive distribution rights. In addition, we’re looking forward to                  expanding our business into the international arena. We’ve identified the                  strategy to capture international markets through introducing food                  supplement products and technology transfers.                                                                                                      |
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|   | As                  we’ve previously discussed, acquisitions represent another important                  opportunity for growth. We are actively evaluating a number of                  pharmaceutical manufacturing facilities as potential acquisition                  targets                  to complement our existing pharmaceutical distribution capabilities                  and                  enhance our manufacturing. We intend to be very disciplined about                  this                  process, but we remain very optimistic about our prospects to successfully                  complete such a transaction. |
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|   | As                  we enter into the second half of the year, we remain confident                  in the                  outlook of our business and look forward to reporting positive                  results in                  the quarters ahead. Based on our outstanding first half of 2008                  performance, we feel extremely confident that we will meet our                  guidance of                  25% to 35% revenue growth and 30% to 35% gross margins for the                  entire                  fiscal 2008.                                                                                             |
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|                       | In                  addition, based on our strong second quarter profitability, we                  now expect                  to exceed our prior net income guidance of 20% to 22% for 2008.                  With that,                  I’m now going to open up your call to the questions that you may                  have for                  the company’s CEO, Mr. Yang or the company’s CFO, Ms. Yu.                  Operator?                     |
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| Coordinator                | (Operator’s                  instructions.) Your first question comes from the line of Norm                  Groons. You                  may proceed.                                                                                                                                                                                                                                                                                                                        |
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| N.                  Groons | This                  is Norm Groons ... Global Fund. I have three questions, two that I e-mailed                  yesterday. One was regarding the directors, directors Robert Adler                  and Dr.                  Rachel Gong. Are they restricted from buying shares on the open                  market                  now?                                                                                                                                   |
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| M.                  Kong   | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                |
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| S.                  Yang   | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| H.                  Yu     | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| M.                  Kong   | Yes.                  The company actually received your inquiry regarding if the directors                  are                  restricted. They’ve actually already sent the question to the lawyers. So,                  they will get back to you on this question tomorrow because they                  are not                  sure about this. They will get back to you tomorrow.                                                                                 |
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| N.                  Groons | Okay.                  Thank you. The second quarter was regarding the online bidding                  system and                  distribution rights. This was a long question that I had e-mailed,                  but the                  first part was roughly what percent of the 2,300 products that                  we gained                  exclusive distribution rights for did we exclusively supply before                  the                  online bidding? |
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| M.                  Kong   | Before                  the online bidding?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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| N.                  Groons | That’s                  right.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
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| M.                  Kong   | Okay.                  (Translates question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| S.                  Yang   | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong   | Okay.                  So, he said that all of the 2,300 products is all from the online                  bidding                  system and it’s accumulated throughout the year.                                                                                                                                                                                                                                                                                                                                                                       |
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| N.                  Groons | Okay.                  The question is for the online bidding system, did we exclusively                  supply                  most of those products?                                                                                                                                                                                                                                                                                                                                                                                                       |
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong   | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| S.                  Yang   | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong   | So,                  actually, it’s a new system in Guangdong province where all the products                  have to go through the online bidding system in order for you to                  receive                  the distribution rights. Of the 2,300 products, ten of them are                  from the                  online bidding system. I’m not sure if that answers your                  question.                                                                                                                            |
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| N.                  Groons | Perhaps                  I’ll follow-up on that later. The second part of that was looking                  at the                  downside scenario, what the impact on the business would be if                  we’re out                  bid in the future. How much time would we have to sell our inventory                  before the distribution rights transfer and does the possibility                  of losing                  that right change the safety, the sensibility of our large purchase                  commitments? |
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| M.                  Kong    | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| M.                  Kong    | Usually,                  the company minimize their risk in terms of the ... inventory based on the                  average sales of the product that they have the distribution rights.                  Usually, the distribution rights last us for one to three years.                  The                  company does see this as a very big risk for them because they                  are                  managing it through the average sales that they are looking and                  they                  haven’t been encountering any problems yet. |
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| N.                  Groons  | Okay.                  How long before the rights expire? Are they renewed? Does the bidding                  system--?                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| M.                  Kong    | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| M.                  Kong    | The                  way the bidding system works, you have to bid for the products                  every year                  and whoever bids the lowest price will get the product and the                  company has                  been getting products from giving the best big price. That’s how it                  works.                                                                                                                                                                                                                                      |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| C.                  Coulson | Operator,                  maybe we can move to the next question and we’ll certainly come back to                  you later if you have additional follow-up questions.                                                                                                                                                                                                                                                                                                                                                                                                      |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| N.                  Groons  | Okay.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| Coordinator                 | (Operator’s                  instructions.) Your next question comes from the line of Boyd Heinz.                  You                  may proceed.                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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| B.                  Heinz   | Hello.                  Thanks for taking my question. In the press release, the company                  discussed                  its breakdown of sales in terms of Western medicine versus traditional                  Chinese medicine. Can you give us a breakdown of prescription versus                  OTC                  in the quarter and year-to-date?                                                                                                                                                                                                                                                                             |
|-----------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| C.                  Coulson | Sure.                  I don’t know if we have that on a year-to-date basis, but we certainly                  have it for the quarter. As we said, within the drug category,                  Western                  prescription products were 61.8% of sales and the TCM prescription                  was                  18.2%. TCM over-the-counter was 8.7% and Western over-the-counter                  was                  4.3%.                                                                                                                                                                                                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| B.                  Heinz   | Okay.                  So, I’ll just try to back into that then.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| C.                  Coulson | Yes.                  The drugs in general were 93.1% of revenues. I think you can get                  that                  pretty easily.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| B.                  Heinz   | Okay.                  Let me switch gears and ask you about the outlook for operating                  expenses                  in the second half of the year. You did a very nice job controlling                  those                  expenses in the first half. Is it reasonable to expect that your                  operating                  expenses are going to stay at about a 10% to 11% of revenue rate                  for the                  second half of the year?                                                                                                                                                       |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| M.                  Kong    | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| M.                  Kong    | Okay.                  The company expects the operating expense to maintain similar to                  the first                  half of 2008. However, this is not taking into account if they                  will need                  to spend more in terms of marketing the new Be Thin product in                  the U.S. or                  if they have come to a point to acquire new facilities or if rADTZ                  would                  need more expenses. But if all this ... is not going to second happen second                  half of 2008, then they expect that it will remain                  stable. |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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| B.                  Heinz | Okay.                  It appears that the company did a very nice job collecting ... account                  receivables during the quarter. Can you talk a little bit about                  what your                  expectation is for cash flow from operations for the year? Given that you                  have about $2.8 million on your balance sheet cash as of the end                  of the                  quarter, how do you expect to handle the increase in expenses in                  terms of                  marketing, in terms of research and development and testing over                  the next                  six to twelve months? |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| M.                  Kong  | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| S.                  Yang  | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| M.                  Kong  | Talking                  about the cash the company has, looking for R&D expenses, it’s pretty                  much going to maintain the same unless they get the approval from                  the                  Department of Agriculture in China to go ahead with the ... action for                  rADTZ. They will expect another maybe 2.2 million RMB to 3 million                  RMB of                  expenses and also, they’re looking into the possibility of acquiring a                  facility, but the money will be spent only if they find one.                                                                              |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                      | Also,                  they will also focus on securing more high margin products in order                  to                  increase the profitability of the company because last year, the                  sales to                  more over-the-counter products has depressed the gross margin.                  They see                  securing high margin products as an important strategy for                  them.                                                                                                                                                                                                                                           |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| B.                  Heinz | Okay.                  You mentioned that the company is looking at possibly acquiring                  a company.                  I think they mentioned that in the first quarter. Can you give                  us a sense                  of how big that facility would be and how much it might cost the                  company                  to acquire it?                                                                                                                                                                                                                                                                                                         |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| M.                  Kong  | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| S.                  Yang  | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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| M.                  Kong      | Regarding                  the acquisition, there are two criteria that that facility has                  to meet. It                  has to support the production of the company’s rADTZ and also at the same                  time, it can also manufacture pharmaceutical products and also                  all the                  specifications in place so that they can easily operate the facility.                  They’re looking at somewhere 200 million RMB, but they are still                  evaluating and looking at targets. It’s not solid yet. |
|-------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| B.                  Heinz     | Okay.                  I will get back in queue. Thank you.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| M.                  Kong      | Okay.                  Thank you.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| Coordinator                   | Your                  next question comes from the line of John Henderson. You may                  proceed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| J.                  Henderson | Yes,                  hello, guys. I just had a couple of questions regarding your largest                  customers. It looks like in 2007, the five largest customers accounted                  for                  a little under 40% of revenues. Can you give a breakdown for the                  first six                  months of the year with the largest customer so far?                                                                                                                                                                                                    |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| M.                  Kong      | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| S.                  Yang      | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| H.                  Yu        | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| M.                  Kong      | The                  five largest customers for the six months is approximately 40.5%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| J.                  Henderson | Okay.                  In terms of the stock, how much percent of the stock do the insiders                  own?                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

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| M.                  Kong      | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                            |
|-------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |                                                                                                                                                                                                                                                                                                                                            |
| S.                  Yang      | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                             |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| H.                  Yu        | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                             |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong      | It’s                  around 43%.                                                                                                                                                                                                                                                                                                         |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| J.                  Henderson | With                  the stock sitting around $2 for the last three to six months or                  so, has                  there been any insider buying by management and if not,                  why?                                                                                                                                   |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong      | Insider                  buying by management?                                                                                                                                                                                                                                                                                                  |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| J.                  Henderson | Yes.                                                                                                                                                                                                                                                                                                                                            |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong      | Okay.                  (Translates question into Chinese.)                                                                                                                                                                                                                                                                                      |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| S.                  Yang      | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                             |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong      | Well,                  he answered that he doesn’t have ... count. He didn’t buy any of the stock                  within that three to six months.                                                                                                                                                                             |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| J.                  Henderson | Okay.                  As a follow-up to that, I mean if he’s of the opinion that the stock is                  very cheap at $2 and business prospects look good, it seems interesting                  that he wouldn’t be looking to buy more of his stock. That’s just a                  perspective from a shareholder. |
|                          |                                                                                                                                                                                                                                                                                                                                            |
|                          | Final                  question; do you guys have any plans to get the stock at some point                  listed                  on an actual exchange?                                                                                                                                                                                      |
|                          |                                                                                                                                                                                                                                                                                                                                            |
| M.                  Kong      | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                            |
|                          |                                                                                                                                                                                                                                                                                                                                            |

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| S.                  Yang      | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                               |
|-------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| M.                  Kong      | You                  mentioned that the price is low, valuation is good, the company                  should buy                  their own stock. Mr. Yang just commented that if he could loan                  some money                  from other people, he would definitely buy his own stock. Unfortunately,                  this is not the case.                                                     |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
|                          | About                  the upgrade to a major exchange, the company definitely would love                  to                  upgrade to NASDAQ. That’s only if they can achieve the $4 per share stock                  price. Then, they’ll be eligible to upgrade to NASDAQ. That’s something                  that he’s working forward to and working very hard too.                |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| J.                  Henderson | All                  right. Great. Thanks a lot. I appreciate you taking my questions.                                                                                                                                                                                                                                                                                                                            |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| C.                  Coulson   | Thank                  you.                                                                                                                                                                                                                                                                                                                                                                                       |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| Coordinator                   | Your                  next question comes from the line of Norm Groons. You may                  proceed.                                                                                                                                                                                                                                                                                                         |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| N.                  Groons    | Hello.                  Thanks for patiently answering all these questions. Let me wrap                  up with                  the inventory.                                                                                                                                                                                                                                                                  |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| M.                  Kong      | Hello?                  Sorry; the line is breaking up.                                                                                                                                                                                                                                                                                                                                                           |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| C.                  Coulson   | Can                  you speak up, Norm?                                                                                                                                                                                                                                                                                                                                                                          |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |
| N.                  Groons    | Yes.                  Can you hear me? Okay. Let me wrap up the inventory question and                  then ask                  briefly about capital raising. For the inventory, the concern was                  ability                  to sell our inventory if we lose the distribution rights. How many                  months                  does the bidding take place before the rights transfer? |
|                          |                                                                                                                                                                                                                                                                                                                                                                                                              |

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| M.                  Kong    | Hello?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| C.                  Coulson | Yes.                  Could you hear him, Melissa?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| M.                  Kong    | Now,                  I can hear. Can you repeat the question? I couldn’t hear anything just                  now.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| N.                  Groons  | Sure.                  Sorry. It may be a bad connection from Sydney here. The concern                  was                  ability to sell the inventory if we lose distribution rights. How                  many                  months does the auction take place before the rights transfer?                  How many                  months would we know that we’re going to lose the rights? How many months                  would we have to sell through the inventory and that’s on the balance                  sheet and comes from advances to suppliers? Does that make                  sense?                    |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| M.                  Kong    | Yes.                  (Translates question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| M.                  Kong    | Answering                  your question, Mr. Yang indicated that if they have this ... inventory and                  they will lose the distribution rights, usually they can actually                  send the                  things that they have in inventory back to the manufacturer so                  that the                  manufacturer can give it to the new distributor. They do not have                  the risk                  in terms of having this product in inventory and cannot sell it                  because                  the distribution rights have transferred to someone                  else. |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                        | On                  that point, the company, like the best selling product, Lopamidol,                  they                  have secured the national distribution rights for this product                  since the                  year 2000. They deciding point to let them have this distribution                  right                  for almost eight years is because they have been selling this product.                  The                  revenue has been very high and they have been helping this manufacturer.                  They would not take the distribution rights back                  easily.                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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| N.                  Groons  | Okay.                  Excellent. Thank you. My question is related to capital raising.                  Would you                  like me to jump back in queue, or go ahead?                                                                                                                                                                                                                                                                                                                        |
|-----------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| C.                  Coulson | No,                  go ahead.                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| N.                  Groons  | Okay.                  The two questions were from a shareholder’s perspective; it’s nice to see                  growth without dilution in the number of shares outstanding. Is                  the                  company considering raising capital from partnering with the large                  pharmaceutical companies instead of selling additional                  shares?                                                                                                |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| M.                  Kong    | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| M.                  Kong    | About                  capital raising, the company would see if they need capital, the                  first                  that they would go is to get a loan from the bank. That would be                  their                  first choice. If they do not have enough money from the bank and                  their own                  income cannot fund whatever operations they have, then they would                  maybe                  consider going to the capital markets. |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                        | Let                  me confirm in terms of the partnering with pharmaceutical companies.                  When                  you said that, what form of partner are you talking                  about?                                                                                                                                                                                                                                                                                           |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| N.                  Groons  | Sure.                  The chairman had a very nice comment on the Web site about creating                  a                  win-win solution. What I was alluding to was partnering some of                  the                  products. For example, raising $20 million in exchange for 20%                  or what                  have you share of some of the promising proprietary products under                  development. Does that make sense?                                   |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

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| M.                  Kong    | Okay.                  Yes. (Translates question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| M.                  Kong    | So                  yes, definitely this is something that they would evaluate because                  this is                  not going to dilute the shareholders. So, if possible, he would                  definitely                  go for something like this.                                                                                                                                                                                                                                                                                                                                                                                                                           |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| N.                  Groons  | Okay.                  Then my final question; I feel like I’ve asked too many. Is it okay to                  continue?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| C.                  Coulson | Go                  ahead.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| N.                  Groons  | All                  right. The final one; if we do raise capital from the capital markets,                  one                  way to concede to the company is the net tangible asset value on                  the                  balance sheet and then the additional value from intangibles and                  patents                  and management’s great experience of growing this. If we do raise more                  capital, is the intent to raise capital only at something above                  the net                  tangible asset value that describes some value to the company’s intangible                  asset? Does that question make sense? |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| M.                  Kong    | Let                  me ask Mr. Yang.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| C.                  Coulson | If                  they raise capital, are they going to do that to a premium to book                  value I                  think is his question.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| N.                  Groons  | Yes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| M.                  Kong    | (Translate                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| M.                  Kong    | Mr.                  Yang indicated it should be above book value. However, because                  they                  haven’t engaged anyone or spoke to anyone about capital raising and they                  haven’t had a very solid plan for the acquisition target, so this will                  be                  something that they will look into once it gets closer.                                                                                                                                                                                                                                                                                                                                                                                                    |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| N.                  Groons  | Okay.                  Very good. Thank you very much and let me just congratulate you                  on what                  appears to be very thoughtful growth.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| C.                  Coulson | Thank                  you.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| M.                  Kong    | (Translates                  comment.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| S.                  Yang    | (Responds                  to comment.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| Coordinator                 | Your                  next question comes from the line of Boyd Heinz. You may                  proceed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| B.                  Heinz   | Hello.                  Thanks. I have just a couple of other follow-up questions. In the                  press                  release this morning, the target market for Aflatoxin was discussed.                  What                  it said was that it was the hope that in three years, they were                  going to                  capture 20% of the animal feed market and the entire market was                  discussed                  as being $40 billion. My question is that obviously, Aflatoxin                  is not                  animal feed, but it’s an additive to it. I wanted to kind of get some                  clarification from the company about what the true market size                  is for this                  particular drug. |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| M.                  Kong    | True                  market size in terms of--                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| C.                  Coulson | The                  point, Melissa, is that the $40 million, that’s the size of the animal                  feed market. We were just describing the size of the animal feed                  market,                  not the addressable market of how much rADTZ would be required                  to treat                  all of that feed. I think that’s what Boyd is trying to figure out. What’s                  the real addressable market size if ADTZ was used on all of the                  animal                  feed in China? What would that add up to?                                                                                                                                                                                                      |
|                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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| M.                  Kong    | Okay.                  (Translates question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
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| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| M.                  Kong    | Boyd,                  the company hasn’t really estimated in actual numbers how big is the rADTZ                  market. What he can only say is that ADTZ is not only used for                  the feed                  industry. It can be used in the food industry and that industry                  itself is                  ten times bigger than the feed industry. He’s just expecting that it’s a                  large market. There’s no actual numbers yet.                                                                                                                                                                                             |
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| B.                  Heinz   | Has                  the company thought about pricing for rADTZ?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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| M.                  Kong    | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
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| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| M.                  Kong    | Based                  on the experiment that they did for 20-liter experiment of animal                  feed                  using pricing of 50 RMB to remove the Aflatoxin per ton of feed,                  the                  expected gross margin is around 69% to 71%. Based on the 50-liter                  experiment, they see the gross margin actually increase from 91%                  to 95%.                  The company is thinking about maybe pricing the product to around                  70 RMB.                  That will increase the gross margin even higher. So, based on the                  experiment, this is the pricing that the company came out with. |
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| C.                  Coulson | You                  say it’s 50 RMB to 70 RMB per liter that treats a ton of animal                  feed?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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| M.                  Kong    | ...Is                  $50 to $70 to treat a ton of animal feed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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| C.                  Coulson | RMB                  or dollars?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
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| M.                  Kong    | RMB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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| C.                  Coulson | Okay.                  From that, you can probably get some sort of rough market sizing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| B.                  Heinz   | Yes,                  and the gross margins could be as high as 93%?                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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| M.                  Kong    | It                  can be more than that if it’s $70.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
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| C.                  Coulson | I                  think he said 69 at 50 RMB.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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| M.                  Kong    | Yes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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| B.                  Heinz   | Okay.                  The last question; I just want to talk about your share structure.                  Can you                  give us a fully diluted share count with all the anti-dilutive                  warrants                  and options that are still out there?                                                                                                                                                                                                                                                                                                      |
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| M.                  Kong    | Okay.                  (Translates question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
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| H.                  Yu      | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
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| M.                  Kong    | Okay.                  The ... shares outstanding is around 50.4 million. There’s another 3.2                  million of warrants outstanding and one million for the employee                  stock                  options.                                                                                                                                                                                                                                                                                                                                               |
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| B.                  Heinz   | Okay,                  and in terms of how much of those 4.2 million warrants and options                  are                  included in the fully diluted share count, what I could see from                  the Q,                  after the first quarter there were about three million warrants                  whose                  exercise price was $2.43. None of those were in the share count                  as of the                  end of the quarter. How many of the one million options are included                  in                  the share count? |
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| M.                  Kong    | (Translates                  question into Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                        |
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| S.                  Yang    | (Responds                  to question in Chinese.)                                                                                                                                                                                                                                                                                                                                                                                                         |
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| M.                  Kong    | Fully-fully                  diluted numbers is approximately 19.6 million.                                                                                                                                                                                                                                                                                                                                                                                 |
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| C.                  Coulson | Just                  to make it clear, there’s about 3.4 million of warrants outstanding and                  the average exercise price is $2.35. There’s about 815,000 options                  outstanding and the average exercise price is $1.91. The basic                  shares                  outstanding were just about 15 million for the quarter.                                                                              |
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| B.                  Heinz   | Okay.                  Thank you, everyone, for answering my questions. Nice                  quarter.                                                                                                                                                                                                                                                                                                                                                      |
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| C.                  Coulson | Thank                  you very much.                                                                                                                                                                                                                                                                                                                                                                                                                       |
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| Coordinator                 | (Operator’s                  instructions.) At this time, I’m showing you have no further                  questions.                                                                                                                                                                                                                                                                                                                           |
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| C.                  Coulson | Great.                  Well, we have had a lot of questions on today’s call and we’re very                  pleased at the level of interest that we have in China Medicine’s results.                  If anybody would like to have a more detailed conversation with                  the                  management team, we’re more than happy to coordinate that and provide you                  translate if you need it. |
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|                        | Again,                  thanks to all of you and we look forward to coming back to in mid-November                  and talking about our progress during the third quarter. This does                  conclude our call for today. Thank you.                                                                                                                                                                                                             |
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| M.                  Kong    | Thank                  you.                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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| Coordinator                 | Thank                  you for your participation in today’s conference. This concludes the                  presentation. You may now disconnect. Good day.                                                                                                                                                                                                                                                                                          |
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