In the wholesale segment which accounted for 80% of net revenues in the third quarter, the Company believes demand will continue to increase given the increases in distributor and product offerings, as well as increasing demand from existing distributors. In response to market conditions, unit average price of wholesale drugs in this segment decreased to follow deflation in raw material costs from the beginning of this year. As a result of our success in reducing purchase prices for drugs we sell but produced by third parties, prices we offer to our distributors have reduced and remained stable since the beginning of 2009, indirectly increasing incentives for them to promote our drugs. In addition, our cost reductions have proven to be effective as we managed to reduce selling expenses by reducing commissions paid to our sales representatives. Offsetting the impact of a 42% decrease in average unit selling price resulted in higher sales volume by 39% in the past nine months. The impact of these combined efforts resulted in EBIT margin in this quarter being 41%, compared to 22% in the same period last year.

In the retail segment which accounted for 19% of net revenues in the third quarter, although there was a 4% decrease from the same period last year, Lotus believes the demand for drugs treating influenza is expected to increase through the remainder of 2009 due to the upcoming of influenza season.

SOURCE Lotus Pharmaceuticals, Inc.