Trading Update

Taihua plc

("Taihua" or the "Company")

TRADING UPDATE

Taihua is a China-based pharmaceutical company specialising in the cultivation of Traditional Chinese Medicine ("TCM") raw materials, manufacture of TCM and certain Active Pharmaceutical Ingredients (Paclitaxel and Homoharringtonine).

Taihua would like to update its shareholders on its progress in 2013 before the release of its financial results for the financial year ended 31 December 2013

Forsythia

The second plantation achieved its maiden harvest. This, combined with the harvest from the first plantation, totalled 1,528.6 tonnes.

The harvest per hectare was lower than in previous years due to adverse weather conditions. The spring was unusually dry and there were frosts during the key flowering period in the spring.

Despite the reduced harvest from the first plantation the addition of the harvest from the second plantation ensured that the total sales revenue generated from forsythia increased to RMB 43.28m (2012: RMB 27.2m) 

Traditional Chinese Medicines

Bian Tong Pian sales were RMB 3.6m (2012: 4.3m). Given the current focus of attention by the Chinese government on its pharmaceutical industry, distributors are reluctant to take on new products so the Company has not, at this time, entered into more distribution agreements.

Total sales of Traditional Chinese Medicines in 2013 were RMB 5.7m (2012: RMB 6.6m).

The Company has identified two TCMs in its existing range that it believes have sufficient market acceptance to enable them to be distributed in a similar way to Bian Tong Pian

At the end of 2013, the situation regarding development of the Bian Tong Pian market was as follows:

In addition, the Company has applied for approval to sell Bian Tong Pian directly in 5 further provinces.

Active Pharmaceutical Ingredients (APIs)

Paclitaxel sales in 2013 were RMB 3.5m. Whilst the market remains very competitive, the Company has succeeded in using its own plantation for the API extraction. This has generated some margin improvement over 2012

Homoharringtonine sales have been severely curtailed by the Chinese Government failing to provide GMP reaccreditation to many injectable manufacturers. Taihua continues to have ample raw material and manufacturing capacity

Outlook

The harvesting of forsythia has natural fluctuations due to specific weather events and this year's harvest was, in the opinion of the Board, unusually low. The Company is hopeful that forsythia harvests in the future will be at a higher levelif there are not adverse weather conditions.

The Chinese government are taking significant steps to raise standards in the Chinese pharmaceutical industry. During this process it is unusually difficult to expand distribution of products due to distributors' uncertainty regarding government policy. The Board hope that once the policies are implemented and understood clearly the Company can continue its progress in expanding distribution of products such as Bian Tong Pian