TAIH.L Regulatory News (TAIH)

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 2012 before the release of its financial results for the 12 months ended 31 December 2012

Forsythia

The second harvest from the first plantation was 940 tonnes (2011: 986 tonnes) and the entire crop was sold before the end of the year at an average price of RMB 29.8/kg excluding sales tax.

The second forsythia plantation has been handed over to Taihua and we now have the opportunity to manage both plantations as a single economic unit. Whilst there are significant inflationary pressures in China it is hoped that as our experience grows in managing the plantations we can minimise overhead increases.

There were no bad debts in 2012 associated with the Forsythia sales made in 2011. The sales in 2012 were to the same customers as in 2011. However, in accordance with the Company's bad debt policy, a provision has been made of RMB 1.38m

The current wholesale price for forsythia remains stable.

Traditional Chinese Medicines

Our Beijing distributor of Bian Tong Pian was overstocked coming into 2012 so it was agreed to reduce the price to the distributor in 2012. To give some offset against this reduction, the commissions paid to the Taihua sales team were also reduced. The net effect was approximately RMB 1 per box reduction in margin to Taihua

Bian Tong Pian sales were RMB 4.4m (2011: 8.3m) but the box sale reduction was 25% due to the distributor clearing excess inventory accumulated in 2011.

Total sales of Traditional Chinese Medicines in 2012 were RMB 6.6m (2011: RMB 12.5m).

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

By the end of 2012, the situation regarding development of the Bian Tong Pian market was as follows:

Province/Market Development

Beijing Approved for sale, Distributor appointed

Guangzhou Military Approved for sale, Distributor appointed

Yunnan Approved for sale

Shanxi Approved for sale

Shaanxi Approved for sale

Sichuan Approved for sale

Ningxia Approved for sale

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

Active Pharmaceutical Ingredients (APIs)

The market for Paclitaxel has become very competitive in the past 18 months with the wholesale price falling significantly along with volumes. The Company anticipates that it will need to recognise a significant write down in the Balance Sheet value of its yew tree plantation in the 2012 statutory accounts due to lower forecast sales.

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

Given the outlook for APIs generally the Board are pleased that they have been able to change the focus of the company onto TCMs

The completion of the handover of the second forsythia plantation completes Taihua's expansion into this particular raw material. However, there are plantations of other raw materials in the Province and Taihua is actively researching and assessing these to determine whether or not they would make a good strategic fit.

Whilst Bian Tong Pian sales have not pushed on in 2012 due to overstocking by the Beijing distributor the Provincial approvals lead the Company to be optimistic about its future. In addition, the Board are optimistic given the identification of two further TCMs in Taihua's range that the Board consider are suitable for broader distribution

The cash position remains robust, even after the payment for the second forsythia plantation so the Company is well placed to move quickly to acquire further biological assets should the right opportunity present itself.

For more information please contact:

Nicholas Lyth, Taihua plc +44 (0) 776 990 6686

Katy Mitchell, WH Ireland Limited +44 161 832 2174