Filed pursuant to Rule 425
and deemed filed pursuant to Rule 14a-12
Subject Company: Oriental Wave Holdings, Ltd.
Filing Person: Dragon Pharmaceutical, Inc.
File No.: 0-27937
Dragon and Oriental Wave Announce the Signing of Definitive Agreement
to Create a Competitive and Growth Oriented Pharmaceutical Company
Vancouver, British Columbia - June 14, 2004 - Dragon Pharmaceutical Inc. (TSX:
DDD, OTCBB: DRUG) ("Dragon") and Oriental Wave Holding Limited ("Oriental
Wave"), the holding company of Shanxi Weiqida Pharmaceutical Co., Ltd., are
pleased to announce today that they have signed a definitive agreement providing
for a business combination of the two companies.
TRANSACTION SUMMARY
-------------------
Under the terms of the definitive agreement, Dragon will issue approximately
44.4 million shares to Oriental Wave shareholders to acquire all of the shares
outstanding of Oriental Wave Holding Limited, which will become a wholly owned
subsidiary of Dragon assuming the transaction is consummated. As a result of the
transaction, Oriental Wave's shareholders will own approximately 68.35% of
Dragon on a fully-diluted basis. The new Board of Directors of Dragon, after the
transaction, will consist of two existing directors of Dragon and three
appointed directors from Oriental Wave. Dragon intends to hold its annual
meeting of shareholders during the third quarter of 2004 to seek approval to
issue the shares in connection with the business combination, along with the
election of directors and ratification of independent accountant proposals. In
addition, because Dragon does not, at this time, have a sufficient number of
authorized common stock, it will seek shareholder approval to increase the
number of authorized shares of common stock at the annual meeting.
The Boards of Directors of both companies have approved the definitive
agreement. The transaction is subject to approval by Dragon shareholders and
regulatory authorities, and the satisfaction of other customary closing
conditions. Subject to the satisfaction of these conditions, the transaction is
expected to close by the end of the third quarter of 2004.
The business combination brings together Dragon and Oriental Wave with similar
business strategies of capturing the market potential of the generic drug sector
by producing pharmaceutical products competitively in China, achieving material
access to the Chinese market and, at the same time, targeting international
market opportunities.
"The combining of the strengths and competitive advantages of both companies
without any fundamental change in strategies comes as a natural transformation
except that the combined company now has better vision for growth, more diverse
and proven product lines, expanded production facilities and operations in
China, and stronger revenues and earnings, all of which position the combined
company better to deliver shareholder value based on the critical mass achieved"
said Dr. Alexander Wick, President and CEO of Dragon. "To Dragon's shareholders,
this transaction is expected to be accretive and represents an exciting
opportunity to participate in a pharmaceutical company positioned for further
growth captured under the Pharma, Chemical and Biotech divisions of the combined
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company. We expect that these businesses will drive revenue and profitability
growth and increase the value of the combined company beyond what could be
achieved separately."
Commenting on the transaction, Mr. Yanlin Han, Chairman of Oriental Wave said,
"We are extremely excited about this transaction which, we believe, represents
an important step to strengthen the combined company's position to become a
competitive player in the global pharmaceutical industry. Oriental Wave and its
subsidiary has been an active participant in the consolidation of the
Pharmaceutical industry in China in the past and have, therefore, accumulated
substantial experience and expertise in making sure the transition of this
business combination goes smoothly in order to realize the expected benefits and
synergies as planned."
KEY BENEFITS FROM THE BUSINESS COMBINATION
------------------------------------------
Enhanced Financial Position and Achievement of Critical Mass to Better Compete
in the Global Pharmaceutical Industry
Based on the pro-forma financial statement prepared by Dragon's management,
assuming the transaction occurred at the beginning of 2003, the combined company
would have 2003 pro-forma revenues of $29.7 million and a net profit of $5.6
million (or $0.09 per share based on 64.9 million shares), which is
significantly enhanced from revenues of $3.7 million and a net loss of $2.0
million (or ($0.10) per share calculated based on 20.3 million shares) for
Dragon as a stand alone company. The combination not only enhances Dragon's
value by creating a company with stronger fundamental and growth potential than
Dragon alone but also allows the company to achieve the critical mass to better
compete in the global pharmaceutical industry.
Complementary Product Offerings
The combined company will offer a diversified and proven product line of 40 key
pharmaceutical, chemical and biotech products. In addition, after the
transaction, the combined company will have a portfolio of 293 product permits
from the Chinese State Food and Drug Administration ("SFDA"), including the
in-licensed G-CSF. We believe the breadth and complementary nature of the
product portfolio not only mitigates the combined company's overall business
risk profile as a result of diversification but also enables the company to
focus on near-term and long-term revenue and earnings growth.
Complementary Sales Platform
Combining the Oriental Wave's comprehensive sales network with over 1,200 sales
representatives in China and Dragon's strong international licensing networks
covering 130 countries will enable the combined company to have a strong sales
presence in both Chinese and international markets.
Complementary Management Expertise
Following the Transaction, we will combine the management teams of Oriental
Wave, which has extensive experience in pharmaceutical product manufacturing
operation and sales and marketing in China, and those of Dragon, which has
extensive experience in international regulatory affairs and international
market development for pharmaceutical products from China.
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Revenue and Cost Synergies
Immediate revenue synergy includes cross selling Dragon's EPO in China through
Oriental Wave's sales network of over 1,200 sales representatives while mid-term
and long-term opportunities include selling Oriental Wave's Chemical products
and Pharma products through Dragon's international licensing network. We expect
that the cross-selling of each other's products will achieve additional revenues
without incurring proportional selling expenses. In addition, we believe that
the combined company will achieve other cost synergies through combining and
unifying certain corporate management functions and responsibilities, the sales
and marketing network in China as well as the operations management of the three
business divisions.
Capturing Multiple Growth Opportunities
The generic drug and chemical sectors of the pharmaceutical industry are
characterized by the competitiveness of the producers from developing countries,
especially China and India, due to their respective advantages, such as lower
production and environmental costs. The combination of Dragon and Oriental Wave
fits in the current industry trend of accessing global opportunities in the
growing generic drug and chemical sectors with businesses based in the cost
competitive jurisdictions.
Unique Capital Market Proposition
The combined company will be one of a few public pharmaceutical companies traded
in North America that produces generic pharmaceutical drugs, biotech generic
drugs and bulk pharmaceutical chemical competitively, and has access to the most
prominent Chinese markets while also targeting a number of international
markets. Investors, especially those from North America, will be able to invest
directly in this pharmaceutical company with China as a core market without
participating in the stock markets outside of North America, where the rules and
regulation of the capital market system could be very different.
Enhanced Capital Market Opportunities
The critical mass achieved, lower risk profile due to diversification of
businesses and better business prospects with multiple growth opportunities will
enhance the combined company's ability to attract, if required, additional
funding and seek out other business opportunities, such as obtaining a listing
status on a more senior stock exchange in the U.S.
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PROFILE OF DRAGON AFTER THE TRANSACTION
--------------------------------------
Dragon, after the transaction, will continue to be quoted on Over-the-counter
Bulletin Board (Ticker: DRUG) and listed on the Toronto Stock Exchange ("TSX")
(Ticker: DDD). The company may also seek a listing on a more senior stock
exchange in the U.S. when it fulfills the listing requirements. Here are some
highlights of Dragon, after the transaction:
------------------------------------------------------------------------------------------------------------------
Pro-forma financials, assuming the 2003 full year results:
transaction occurred at the |X| Revenues of $29.7 million
beginning of 2003 |X| Net profit of $5.6 million (Net profit margin of 18.8%)
|X| Earning per share of $0.09 (based on 64.9 million shares)
------------------------------------------------------------------------------------------------------------------
Number of employees |X| Approximately 1,850 (excluding approximately 1,200 sales
representatives)
------------------------------------------------------------------------------------------------------------------
Major product offering: |X| 35 pharmaceutical products (mainly anti-infectious drugs, including 13
prescription drugs and 22 over-the-counter drugs)
|X| 2 chemical products (Clavulanic Acid and 7-ACA)
|X| 2 biotech products (EPO & G-CSF)
------------------------------------------------------------------------------------------------------------------
Product permits issued by Chinese 293 product permits in 9 categories:
State Food and Drug |X| 130 types of tablets
Administration (SFDA) |X| 14 types of granules
|X| 10 types of suppositories
|X| 23 types of capsules
|X| 1 type of powder
|X| 54 types of powder for injections
|X| 15 types of bulk drugs
|X| 44 types of injection
|X| 2 types of biotech injectables (including in-licensed G-CSF)
------------------------------------------------------------------------------------------------------------------
Sales network |X| 63 sales offices covering all 31 provinces/regions with over 1,200
sales representatives in China
|X| Licensing arrangement covering over 130 countries
------------------------------------------------------------------------------------------------------------------
Manufacturing facilities and Pharma division
capabilities ---------------
|X| Powder for Injection with an annual capacity of 80 million vials
|X| Tablets with an annual capacity of 520 million units
|X| Capsules with an annual capacity of 90 million units
|X| Granules with an annual capacity of 47 million sachets
|X| Suppositories with an annual capacity of 10 million units
|X| Sterilized bulk drug with an annual capacity of 180 tons
Chemical division
-----------------
|X| Clavulanic Acid with an annual capacity of 30 tons
|X| 7-ACA with an annual capacity of 400 tons (currently under final
installation of equipment)
Biotech division
----------------
|X| EPO with an annual capacity of 5.4 million vials
------------------------------------------------------------------------------------------------------------------
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Dragon, after the transaction, will continue to have its Corporate Headquarters
in Vancouver, Canada and its major business will be reorganized under three
business units, namely, a Pharma division, a Chemical division (formerly
referred as the Chemical Drug division and the Chemical Intermediate division
respectively in previous press releases) and a Biotech division. The Corporate
Headquarters in Vancouver will continue to perform the functions of
international sales and marketing, international regulatory affairs, finance and
compliance, investor relations and business development for the expanded
businesses of Dragon. A new corporate office will be set up in Beijing, China to
unify the management of the manufacturing facilities and operations of the three
business units as well as the sales and marketing activities in China.
In anticipation of the transformation of Dragon from a pure biotech company to a
diversified, fully integrated pharmaceutical company, a new URL,
www.dragonpharma.com, has been added to reflect such transition. Starting
immediately, our corporate website can be accessed through www.dragonbiotech.com
and www.dragonpharma.com. ---------------------
--------------------
POSTPONEMENT OF DRAGON'S ANNUAL GENERAL MEETING
-----------------------------------------------
In anticipation of the holding of a shareholders' meeting during the third
quarter of 2004 to vote on certain matters related to the proposed business
combination, Dragon's Board of Directors has decided to postpone the company's
Annual General Meeting in order to minimize the expenses of running two separate
shareholders' meeting within a short period of time. It is currently anticipated
that the Annual General Meeting will be held in September, 2004 at Dragon's
Headquarters in Vancouver, Canada, subject to regulatory approvals from the
Securities and Exchange Commission and Toronto Stock Exchange.
Dragon and Oriental Wave are in the process of preparing the proxy
statement/prospectus, with detailed information regarding the transaction, the
business of Oriental Wave and its subsidiary and its financial statements, which
will be filed with the U.S. Securities and Exchange Commission and circulated to
the shareholders of Dragon in connection with a general meeting of shareholders.
About Oriental Wave Holding Limited.
-----------------------------------
Oriental Wave Holding Limited is a privately held holding company of its
operating subsidiary, Shanxi Weiqida Pharmaceutical Co. Ltd. The Company engages
in production and sales of pharmaceutical and chemical products with 3
production facilities in Datong city, China. Under U.S. GAAP, Oriental Wave had
audited revenues of US$26.1 million and earnings of US$7.6 million in 2003 which
was solely contributed by the Pharma division as the brand new Chemical division
commenced its operation starting January, 2004.
About Dragon Pharmaceutical Inc.
--------------------------------
Dragon Pharmaceutical Inc. is an international biopharmaceutical company
headquartered in Vancouver, Canada, with a GMP production facility in Nanjing,
China. Dragon's EPO is currently approved to treat anemia due to renal failure
and surgery in 5 countries: China, India, Brazil, Egypt and Peru. Dragon is in
final preparation to enter the European Union market and is in progress to
obtain additional regulatory approvals throughout Central and Eastern Europe,
Asia, Latin America, the Middle East and Africa. In addition, Dragon also owns
the worldwide licensing right, excluding China, for the recombinant G-CSF
produced by Suzhou Zhongkai Bio-pharmaceuticals Company Limited, with which
Dragon is actively developing its market potential outside of China.
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For further information, please contact Garry Wong (email: ir@dragonbiotech.com)
at (604) 669-8817 or North American toll free at 1-877-388-3784 or visit our web
site at www.dragonpharma.com or www.dragonbiotech.com
-------------------- ---------------------
Forward Looking Statement:
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995: All statements, other than historical
facts, included in this press release are forward-looking statements. These
forward looking statements include, but are not limited to, that Dragon and
Oriental Wave will consummate the business combination, achieve the Key Benefits
of the Business Combination as discussed herein, increase shareholder value and
increase revenues and profitability. Forward-looking statements are not
guarantees of future performance. They involve risk, uncertainties and
assumptions including risks discussed under "Risks Associated With Dragon
Pharmaceutical" in the Company's annual report on Form 10-KSB, SEC File No.: 0-
27937 and other documents filed with the SEC. The Company does not undertake the
obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances.
The foregoing may be deemed to be offering materials of Dragon and Oriental Wave
in connection with their business combination pursuant to and subject to the
conditions set forth in a Share Purchase Agreement dated June 11, 2004 among
Dragon and the shareholders of Oriental Wave. This disclosure is being made in
connection with Regulation of Takeovers and Security Holder Communications
(Release Nos. 33-7760 and 34-42055) adopted by the Securities and Exchange
Commission ("SEC") and Rule 14a-12 under the Securities Exchange Act of 1934, as
amended. Dragon and Oriental Wave shareholders are urged to read the proxy
statement/prospectus that Dragon will file with the SEC in connection with the
proposed business combination because it will contain important information
about Dragon, Oriental Wave and related matters. Dragon and its directors and
executive officers may be deemed to be participants in Dragon's solicitation of
proxies from Dragon shareholders in connection with the proposed business
combination. Information regarding the participants and their security holdings
can be found in Dragon's most recent Form 10-KSB filed with the SEC, which is
available from the SEC and Dragon as described below, and the proxy
statement/prospectus when it is filed with the SEC. After it is filed with the
SEC, the proxy statement/prospectus will be available for free, both on the SEC
web site (http://www.sec.gov) and from Dragon as follows:
Garry Wong
Dragon Pharmaceutical, Inc
1900 - 1055 West Hastings Street, Vancouver, British Columbia, Canada V6E 2E9
Telephone: 1-877-388-3784 (North American Toll-free) or +1-604-669-8817
In addition to the proposed proxy statement/prospectus, Dragon files annual,
quarterly and special reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements or other information filed by
Dragon at the SEC's public reference rooms at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or at the SEC's other public reference rooms in New York
and Chicago. Please call the SEC at 1-800-SEC-0330 for further information on
the public reference rooms. Dragon filings with the SEC are also available to
the public from commercial document-retrieval services and on the SEC's web site
at http://www.sec.gov.
------------------
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