ERYE PHARMACEUTICALS

The cornerstone of our China pharmaceuticals business is the 51% ownership interest we acquired in Erye in October 2009. Erye was founded more than 50 years ago and represents an established, vertically-integrated pharmaceutical business. Historically, Erye has concentrated its efforts on the manufacturing and distribution of generic antibiotic products and has received approximately 150 production certificates from the State Food and Drug Administration of China, or SFDA, covering both antibiotic prescription drugs and active pharmaceutical intermediates. Erye's revenue for the twelve months ending September 30, 2009 was $58.1 million.

The China Pharmaceuticals Market
The antibiotics market in China was approximately $8.8 billion in 2007, with an annual average growth rate of approximately 24 percent for the previous three years. The overall pharmaceuticals market in China is forecasted to triple in size by 2013, to become the third largest drug market in the world (behind the U.S. and Japan). In 2009, the Chinese government announced that improving healthcare for its citizens would be a major priority and China's State Council approved the spending of $124 billion on its healthcare system between 2009 and 2011. This spending initiative, coupled with a population approaching 1.4 billion, creates a large market opportunity for our products and services. An important element of the initiative has been the creation of the New Rural and Urban Cooperative Medical Insurance System that provides prescription drug cost coverage for citizens. Over sixty percent of Erye's drug portfolio qualifies for reimbursement coverage under the new insurance system.