Good day ladies and gentlemen and welcome to the fourth quarter and year-end China Pharma 2006 conference call. My name is Shaquana and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Ms. Leslie Richardson. Please proceed ma'am.

Good morning ladies and gentlemen. My name is Leslie Richardson from CCG Elite, Investor Relations. And now I would like to welcome you to China Pharma Holdings fourth quarter and year-end 2006 conference call. Joining us today from China are China Pharma's President and CEO, Ms. Zhilin Li and Chief Financial Officer, Mr. Xinhua Wu. Joining us from San Diego is Vice President of Strategic Planning and Business Development, Donald Xu. Donald will present the prepared remarks for Ms. Li and Mr. Wu. Michelle Fang is also joining us from CCG Elite's Hong Kong office and will provide translation for the question-and-answer period, following the prepared remarks for the quarter. I would like to remind our listeners that in this call management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, due to such risks including, but not limited to, unanticipated changes in product demand, increased competition, failure to obtain or maintain intellectual property protection, downturns in the Chinese economy, uncompetitive levels of research and development, failure to obtain regulatory approvals, and other risk factors detailed from time to time in the company's future filings and filings with the United States Securities and Exchange Commission. Accordingly, although the company believes that the expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. In addition, any projections as to the company's future performance represent management's estimates as of today, March 29, 2007. China Pharma assumes no obligation to update these projections in the future, as market conditions change. For those of you unable to listen to the entire call at this time, a recording will be available via webcast on China Pharma's website for 90 days. Also, an audio replay of this call will be available for seven days. Information about the webcast audio replay is available in the press release issued earlier today. And with that, I'd now turn the call over to Donald Xu, Vice President of Strategic Planning and Business Development, who will present the management discussion section on behalf of China Pharma's President and CEO, Ms. Zhilin Li. China Direct (ticker: CHND.OB) is a diversified management and consulting company. Our mission is to create a platform to empower medium sized Chinese entities to effectively compete in the global economy. As your direct link to China, our organization serves as a vehicle to allow investors to participate directly in the rapid growth of the Chinese economy. :

Thank you, Leslie. Welcome and thank you for attending China Pharma's fourth quarter and year-end 2006 conference call. We are pleased to announce that China Pharma achieved record revenue for the quarter and full year 2006. Moreover, this was the company's third consecutive quarter of top and bottom-line growth. We feel that these results exemplify our ability to execute efficiently and effectively, including a quality portfolio of therapeutics and delivering them to the market. I'd like to start by saying that the fourth quarter of the year is typically our strongest quarter, as the winter season contributed to strong sales of the pharmaceutical products. As such, our revenue in the fourth quarter of 2006 was $8.1 million, up 62% sequentially from $5 million in the third quarter of 2006 and up 46% year-over-year from the $5.6 million in the fourth quarter of 2005. Our net income for the quarter was $3.5 million, up 104% sequentially from $1.7 million and up 9.4% from net income of $3.2 million in the fourth quarter of 2005. Fully diluted earnings per share were $0.10 compared to fully diluted earnings per share of $0.05 in the third quarter of 2006 and $0.10 in the fourth quarter of 2005. I am happy to add that during the quarter, China Pharma was approved by the government for the five-year tax holiday as a foreign enterprise. I will go into more detail on this later on the financial section of the call. For the full year 2006, revenue was $21.8 million, ahead of our guidance of $20 million and up 152% from revenue of $8.7 million generated from the date of incorporation or January 12, 2005 through December 31, 2005. Our net income for the year also came in ahead of our guidance of $8 million at $8.6…

(Operator Instructions). Your first question comes from the line of [Dennis Spurtzen]. Please proceed.

Yes, very good quarter. Question for you on G&A expense and may be I didn’t hear this in the conference call. But for the fourth quarter, it was $783,000 and in the prior year period it was a negative $125,000, for the full year it was $1.2 million. So, I am uncertain as to why it was so heavily weighted in the fourth quarter and what it consists of?

[Translated]. Well, the difference between G&A expense is really due to the bad debt expenses. For example, like for the last quarter as you see the number is inactive, because they have offset the bad debt expenses they have accrued before. So, actually it is the income rather than expenses for this quarter because the bad debt expense they accrue is bigger than that. So that's why the number as you see is increased.

Do they expect the number to be the same next year?

[Translated]. Well, the G&A expenses will grow slightly if you compare with this year and it will grow in line with our top-line.

Okay. Thank you very much.

You're welcome.

Your next question comes from the line of [Boyd Hines]. Please proceed.

Hi, good morning. I have a question about your gross margin. They fluctuated a bit this past year quarter-to-quarter. Can you give us a range of what you expect gross margin to be in 2007?

[Translated]. Well, in general, we think the gross margin of China Pharma is kind of stable in the past year, although, as you see, it has fluctuations quarter-by-quarter. As you know in this industry, we do have the seasonality issue. And regarding 2007, we think that the gross margin is in line with 2006 or maybe a slight decrease.

Okay. And when you introduce your new drugs throughout the year in 2007, how should we expect that to hurt or benefit your operating margin?

[Translated]. Well, we will expect, as you know, a very positive impact for both top line and the bottom-line with the launch of new drugs.

Okay. That's all my questions for now. Thank you.

Thank you.

(Operator Instructions). At this time, we have no further questions. I am sorry; we have a question from the line of [Mike Schellinger]. Please proceed.

Yes. I've read recently that the Chinese government has instituted some price ceilings on traditional Chinese medicine. And I believe that mostly or completely that doesn't apply to you. But I was wondering if you could confirm that it does not apply? And if it does apply to what extent it might apply? And if that has been factored into your guidance?

[Translated]. So, we just want to clarify your question, you are talking about price, right?

Yeah.

[Translated]. Well, we're going to say that all the drugs in both, our portfolio and the pipeline don't have an impact of this type of controls from the China Government.

Okay. Thank you very much. Excellent quarter.

Thanks.

Your next question comes from the line of [Avi Zhi]. Please proceed.

Hello. Hi, Leslie. This is [Avi Zhi] here from Northeast Securities.

Hi.

Hi. My question is regarding launching the new drugs in 2007. What's the forecast and if you can give us any idea about the revenue for each one of them?

[Translated]. Okay. Well, first of all, what we can definitely confirm is that the launch of the new drug will surely have a very positive impact on both the top line and the bottom line. But in terms of the detailed revenue it can generate, it's really hard for us to give you an expectation at this moment. As you know that first of all, any new drugs when they are launched into the market, the market needs some time to adapt to this new drug. And needless to say, as you know, that the Chinese Government at this moment, they are doing some anti-corruption program for the pharmaceutical companies. So, it will have an impact for the drug application approval from SFDA. So, this is going to have the impact on our timeline for us to launch the new drug as well. So, overall there were different factors that are going to impact our new drug launch. So, it is quite hard for us to give you a detailed number at this moment.

Okay. Thank you very much and please keep up the good work.

You are welcome.

Your next question comes from the line of [Peter Siris]. Please proceed.

Hi it's Peter Siris. First, I just wanted to thank you, thank the management for taking the time to take us through the facts and spending the time showing all the facilities and everything. It was very enlightening. So, that’s my first comment. And the second question was, there was a female speaker at the SFDA conference in Hainan -- everybody was talking about tightening the controls. Doesn't tightening the controls really benefit you because it will drive out a lot of the companies that have much less sophisticated facilities and much less good research of solid products than you do? Won't this process in the end make it better for you?

[Translated]. In general, we will take the actions that SFDA are doing now, positively. We think that in the long run, this is definitely a good signal for the overall industry as we do need the standardization for the whole industry and a better operating environment. And we are going to see a fair platform for all the players on this platform. In the short run, it might happen that the impact of the application will slowdown the timeline for us. But as you know, this is going to be a very temporary impact. So, in the long run, as I just mentioned, it is going to create a better and fair operating environment for all the pharmaceutical companies. And at the same time, optimize the business operation environment and try to secure better quality for the products and for the patients. So, we think this is a good action and we support the government's action.

And I also wanted to ask about the timing of generic Lipitor. I guess Lipitor has come off patent? Is that a product you are interested in?

[Translated]. Okay. Well we are quite interested in this product, and as a matter of fact we have already done some initial research on this product. As you know, this is a very good product and we are sure that it is going to have a very good market in China as well.

Thank you.

Thank you.

Your next question comes from the line of [Richard Kim]. Please proceed.

Thank you. I had just one question on taxes. I read something about proposed changes in taxes of companies in China. Will this have any affect on you and your future tax payments?

[Translated]. Well, as far as we know that the new tax policy from the central government will not have any impact for us. At the same time, as you know, we are also in a special zone of Hainan island. So, we don't see impact in terms of the tax policy for us.

So, for the year I don't think you paid any taxes, but for the fourth quarter you have like a 26% rate, I believe. Looking at 2007, for the current year, what tax rate do you think you would be paying?

[Translated]. Well, as you know that we are enjoying two-year tax free and a three-year half tax rate for us. And the government is still in the process of approval of our application, so for 2007 our tax rate will either be 7.5%, which is the 50% of tax rate or 0%. So, it will be depending on the approval of the government. Once again, it will be either 0% or 7.5%.

Thank you.

You're welcome.

Your next question comes from the line of [Ajit Gehlot]. Please proceed.

Yes, hi. I'd like to ask about the short-term note payable of $6.5 million and if you can comment on, when is that payable and the terms of that, et cetera?

[Translated]. Well, this amount of money is in fact the promise that we gave to our old shareholders that we're going to pay them some reasonable profit after we have reached a good revenue on that income. So, we haven’t paid to those shareholders yet, which we agreed with those shareholders. So, that's why we put our current liability item.

Yeah, but it increased about $2.2 million from last year. So, would it increase every year by a certain amount?

[Translated]. Okay. So, the dividend that we promised to the old shareholders is around $4 million. So the difference between $6.5 million and $4 million, that's in fact short-term debts from the banks.

Okay. Thank you.

You are welcome.

You have a follow-up question from the line of [Boyd Hines], please proceed.

Hi, can you just discuss what your current capacity is for the drugs that you have in your pipeline and you expect to manufacture for 2007?

[Translated]. We think our production capacity can fully support granisetron, the new drug launch.

Okay. And in terms of your guidance for 2007, how much of that is dependent upon these new drugs that you have mentioned, the four new drugs that you expect to go into production in 2007? How much of that guidance is based on just the new drugs?

[Translated]. Well, when we calculate the 30% growth, we really take very minimal impact from our new drug. As we know that usually it takes time for the new drug to really generate the profit. So, when we do the calculation we will more rely on our existing portfolio.

Okay. And you did a private placement earlier this year and I noticed in your 10-K that in terms of the risks you've noted that you still expect to raise more funds in the future? Do you have any plans at this point later in the year to do another private placement?

[Translated]. At this moment we don't have any detail plans for the fundraising.

Okay, thank you very much.

You're welcome.

(Operator Instructions). At this time we have no further questions.

I think that concludes our call for today.

We have a question from the line of John Herold. Please proceed.

Just one final question. Does your company plan on some sort of share buyback over the 2007 period?

[Translated]. At this moment we don't have any plan on that.

Okay. Thank you.

You are welcome.

At this time, there are no further questions.

Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.