Lotus Pharmaceuticals Announces Approval of Reverse Stock Split

Lotus Pharmaceuticals, Inc. ("Lotus" or the "Company"), a fast-growing, profitable developer, manufacturer and seller of medicine and drugs in the People's Republic of China ("PRC"), announced today that the Company will effect a two-for-one reverse split of its common stock in order to meet minimum share price requirements in connection with its application to a national U.S. securities exchange. In connection with the reverse split, the number of authorized shares of the Company's common stock will be reduced from 200,000,000 to 100,000,000 and the number of shares outstanding will be reduced from 53,399,407 to approximately 26,699,704.

The reverse split will take effect at the open of business today, December 31, 2010, at which time every two (2) shares of Lotus' common stock issued and outstanding will be converted into one (1) share of common stock. The shares will commence trading today on the OTC Bulletin Board on a post-reverse split basis under the temporary ticker symbol "LTUSD." After 20 business days, the "D" will be removed and the stock will resume trading under the ticker symbol "LTUS." No fractional common shares will be issued as a result of the reverse split.

Mr. Zhongyi Liu, Lotus' Chairman and Chief Executive Officer, stated, "We are pleased to announce this reverse split, as it is an important step toward our goal of a national securities exchange listing. We believe that we initiated the process at an appropriate time and that it is in the best interests of our stockholders and the Company's future growth. With the reverse split approved, we are one step closer to completing the listing process."

Lotus Pharmaceuticals Announces Change of Directors

Lotus Pharmaceuticals, Inc. ("Lotus" or the "Company"), a fast-growing, profitable developer, manufacturer and seller of medicine and drugs in the People's Republic of China ("PRC"), today announced the resignation of four members of its board of directors and the subsequent appointment of four new directors.

Mr. Michael Toups, Mr. Lijun Fan, Mr. Zhaohui Li, and Mr. Jun Lu have been appointed to serve on the Company's board of directors. They will replace current directors Ms. Li Ping, Mr. Liu Jin, Ms. Xian Xuemei, and Mrs. Song Zhenghong.

Lotus' Chairman and Chief Executive Officer, Mr. Zhongyi Liu, commented, "We sincerely appreciate the contribution that Ms. Li, Mr. Liu, Ms. Xian and Mrs. Song have made to Lotus over the years, and we wish them great success in their future endeavors. We felt that this strategic decision was necessary to further strengthen our management team as we prepare to apply for a listing on a national securities exchange in the near future. We are excited to add Mr. Toups, Mr. Fan, Mr. Li, and Mr. Lu, all of whom are seasoned business professionals in their respective fields, to our board of directors. We believe they are well-qualified and will provide valuable guidance and advice to the Company."

Michael Toups is an accounting and corporate finance executive with 20 years of experience in senior management with specialties in business strategy, M&A and international trade. He has middle-market corporate finance experience across a variety of industries as both principal and advisor and has served in roles as the CFO, COO, and director of private and publicly traded companies. His expertise includes PCAOB audits, SEC reporting, Sarbanes-Oxley compliance and investor relations. Mr. Toups is also well-versed in Chinese business practices and has directed strategic planning for Asia-based companies for over 12 years.

Most recently, Mr. Toups has served as the CFO for Longwei Petroleum Investment Holding Limited, a China-based petroleum distributor. Mr. Toups also currently serves as the CFO of China Bilingual Technology & Education Group, a China-based education company operating K-12 private boarding schools. Mr. Toups holds an MBA in Finance from the University of Notre Dame and a BBA in Finance from Texas Christian University.

Mr. Lijun Fan currently serves as President and CEO of Jolyvia International, Inc., which manufactures independent brand cosmetics and operates Jolyvia Beauty SPA national chain stores in China. From 2003 to 2009, he was the general manager and director of Jourdeness International Inc., where he was responsible for the expansion of direct-to-consumer cosmetics and beauty chain SPA in China. Previously, he was the general manager and founder of Zhuhai Yi Sheng Development Co., a sales distributor for cosmetics and personal care products, and sales manager for Zhuhai Dong Da Biological Pharmaceutical Co. Mr. Lijun holds a Bachelor of Science degree in biology from Jinan University.

Since 1998, Mr. Zhaohui Li has served as a professor and the director of the Department of Assisted Reproduction at China Three Gorges University School of Medicine. Previously, Mr. Zhaohui has served as Assistant to the General Manager and Director of Marketing at Guangdong Zhuhai Dong Da Biological Pharmaceutical Co. and General Manager at Guangdong Zhuhai Dong Wu Pharmaceutical Co. He holds a Master of Science degree from the Institute of Biochemistry at the Chinese Academy of Sciences and a Bachelor of Science degree in biology from Peking University.

Mr. Jun Lu has been the head of research and development for Lotus Pharmaceuticals since 2006 and previously worked at Beijing Double-Crane Pharmaceutical Co., Ltd. Mr. Lu holds both a master's and a bachelor's degree in pharmacy from ShenYang Pharmaceutical University. His research focuses on various new pharmaceutical dosage forms, especially in osmotic pump-controlled release. Mr. Lu has published six papers in well-known peer-reviewed journals and filed four patents, two of which have been granted.

Lotus Pharmaceuticals, Inc. (LTUS) Receives Phase I Approval for Asthma Drug

Lotus Pharmaceuticals, Inc. reported that the company has received approval from the regulatory authorities in China to begin Phase I clinical trials for one of its drug candidates – R-Bambuterol Hydrochloride, which is used to treat Asthma

Lotus Pharmaceuticals, Inc. said that the Phase I trials would include studying the tolerance of the drug in humans, and pharmacokinetics, which is the study of what the body does to the drug after dosage.

Lotus Pharmaceuticals, Inc. said that research conducted by a third party indicated that the Asthmamarket in China is approximately $300 million annually, and as many as 40 million suffer from the condition.

The Beijing Zenith International Medical Science and Technology Development Company Limited will conduct the Phase I clinical trials. Lotus Pharmaceuticals, Inc. said that R-Bambuterol Hydrochloride is a Class I drug, which gives Lotus Pharmaceuticals, Inc. patent protection for 22 years.

Lotus Pharmaceuticals, Inc. does business through Liang Fang Pharmaceutical, Ltd. and En Ze Jia Shi Pharmaceutical, two controlled entities. The company is also working on drugs to treat cerebro-cardiovascular diseases and diabetes.

Lotus Pharmaceuticals, Inc. Again Awarded GSP Certification

BEIJING, - Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or the "Company") a growing developer and producer of prescriptions drugs and licensed national seller of pharmaceutical products in the People's Republic of China, today reported it received a Good Supply Practices ("GSP") certificate from the Chinese State Food & Drug Administration ("SFDA") for the second time since 2003.

Liang Fang Pharmaceutical, Ltd., operated by Lotus, passed the SFDA's GSP field inspection and documentation requirement for, among other items, its sales management system, storage and transportation system, qualifications of medical and management personnel, drugs quality control system, drugs labeling and packaging. To maintain drugs safety, post sale services and systematic quality control of drugs out of production into the circulation, the SFDA requires licensed drug distributors to follow the international principles and guidelines of GSP. The SFDA focuses on quality assurance systems, tracking systems, storage and transportation systems and handling procedures and inspects drugs distributors every five years.

"We are delighted to be awarded with GSP certification because it represents the highest honor that a licensed pharmaceutical sales enterprise is eligible to receive in China for its compliance with the government's high quality standards and efficient management system control," commented Dr. Zhongyi Liu, Chairman and CEO of Lotus. "We are committed to providing safe drugs and in addition to our current state-of-art warehouse, we are planning on the construction of a high standard modern storage facility of 10000 sqm in Inner Mongolia in order to meet the increasing demand for our drugs."

Lotus Pharmaceuticals, Inc. Reports First Quarter 2009 Financial Results

BEIJING, - Lotus Pharmaceuticals, Inc. (OTC Bulletin Board: LTUS) ("Lotus" or the "Company") a company that controls and operates pharmaceutical companies in the People's Republic of China ("PRC"), today reported its financial results for the first quarter ended March 31, 2009.

    First Quarter 2009 Highlights and Recent Developments:

    -- Diluted EPS of $0.07

    -- Net income of $3.6 million, up 258% from first quarter 2008

    -- Improved cash flows from operating activities of $7.0 million, up

       $10.6 million from first quarter 2008

    -- Submitted application and received formal notice from the Chinese

       State Food and Drug Administration ("SFDA") that it has started

       pre-clinical evaluation of Gliclazide-Controlled Release Tablets

       (antidiabetic agent)

    -- Participated in the April 2009 61st PHARMCHINA in Zhengzhou, the

       largest exhibition in Chinese pharmaceutical industry with a history

       of over 30 years, and entered sales agreements with 5 new

       distributors which the Company believes may increase the Company's

       market share

    -- Completed integration of Yipubishan-Octreotide Acetate Injection's

       distribution channels

    -- Appointed Ms. Yan Zeng as fulltime CFO and Bagell, Josephs, Levine &

       Company, L.L.C. as new independent auditor

Revenues for the first quarter of 2009 increased 1% to $11.8 million, up from $11.7 million in the first quarter of 2008. Both wholesale revenues (76% of total net revenues for the first quarter of 2009) and retail revenues (18% of total net revenues for the first quarter of 2009) increased 6%, but other revenues (6% of total revenues for the first quarter of 2009) decreased 41% for the first quarter of 2009 as compared to the first quarter of 2008. The increase in wholesale revenues was mainly attributed to strong sales in Valsartan Capsules, Brimonidine Tartrate Eye Drops and Yipubishan-Octreotide Acetate Injection. The Company holds intellectual property rights to these three drugs and the Company believes these drugs have gained an excellent reputation among users for their safety, efficacy and stability. Under the Company's newly adjusted pricing policy for the year of 2009, average unit selling price decreased 38% in the first quarter of 2009 over the same period of 2008, and 67% increase in wholesale volume over the first quarter 2008.

The increase in retail revenues was attributable to the following four factors:

    1) China has carried out pilot health care reforms to separate drugs

       dispensing and medical practice in the past three years, as a result,

       some prescription drugs are no longer only available in hospitals,

       but can be purchased at retail pharmacies;

    2) Liang Fang is headquartered in Beijing where the local government

       allocates pharmacies in a way such that each pharmacy serves a

       residential community of around 20,000 people;

    3) Consumers' purchasing power increases; and

    4) Liang Fang established at the end of last year an OTC division

       responsible for promoting OTC drugs to pharmacies in Beijing, not

       limited to Liang Fang's ten drugs stores.

The decrease in other revenues was mainly due to the decrease in lab testing services, research and development and manufacturing for third parties as many of the Company's repeat customers have built new facilities to make their own drugs. The Company believes other revenues will continue to decline for the rest of the year.

Gross profit in the first quarter increased 68% year over year to $6.6 million from $3.9 million. Gross margin increased to 56% in the first quarter 2009 from 34% of total net revenues in the prior year period. The increase in gross profit was attributable to the decrease in cost of sales as a percentage of revenue. The decrease in cost of sales as a percentage of revenue was primarily the result of improved purchase pricing management and more efficient production cost controls.

"Our products are of medical necessity and long-term control. Our goal is to improve health and quality of life. We are committed to increasing long term shareholders' value with our growth strategy of expanding geographically, building strong brands, bringing new drugs to the market, and reaching out new customers while adding value for our customers through the leverage of economies of scale." commented Dr. Zhongyi Liu, Chairman and CEO of Lotus. "We believe that the implementation of our cost reduction strategy and customer-centered strategy work have helped us to gain market share in sales units and improve managerial efficiency."

Total operating expenses for the first quarter 2009 were $2.4 million, a decrease of $9,974 from the first quarter of 2008. This decrease was principally a result of zero third party research and development expenses occurred, which was offset by the increase of selling expenses, general and administrative expenses.

Net income for the 2009 first quarter was $3.6 million, or $0.07 per diluted share, compared with $1.0 million, or $0.02 per diluted share, in the first quarter of 2008.

The Company's cash position at the end of the first quarter was $1.2 million.

Dr. Liu commented, "The majority of our wholesale customers pay us upfront and our business has no problem in generating cash quickly. Although we have historically funded our capital expenditures from our working capital, we are seeking financing for expansion needs.

"We believe that our growth will benefit from the Chinese government's $124.3 billion universal health plan package which we believe will generate increased demand for our products. We also believe we may benefit from the Chinese government's May 13 endorsement of 62.8 billion yuan (or $9.2 billion) by 2010 into stimulating the country's biological technology development in areas including medicine. This is another move that China has made to manage and maintain steady growth amid the global economic downturn," said Dr. Liu.

"We continue to bring meaningful innovated medicine to commercialization, and improve our marketing efforts in ways that we believe will strengthen our portfolio for the long term," said Dr. Liu. "We are pleased to have submitted and received the notification from the SFDA for its start of pre-clinical evaluation of Gliclazide. This indicates our first step taken towards commercializing Gliclazide. Gliclazide is a modified controlled-release antidiabetic drug to treat type 2 diabetes. The market size of diabetes drugs is estimated to be around $1 billion in China(1) and continues to grow as living standards have improved. We believe the market demand for Gliclazide should remain strong until 2020."

Dr. Liu added, "We are pleased with the addition of Ms. Yan Zeng as a fulltime CFO. She brings more than ten years of managerial and financial expertise to the Company. Mr. Adam Wasserman 's resignation as CFO was effective April 30 and he continues to serve as a financial consultant for the Company. I want to thank him for his important contributions during the past two years. We believe that appointment of Bagell, Josephs, Levine as the Company's new independent auditor will help the Company improve its financial reporting."

    (1) Source: CHINA ANTI-DIABETIC DRUG MARKET REPORT prepared by Life

        Science Intelligence

2009 Earnings Guidance

For the fiscal year 2009, Lotus maintains its forecast of net income to range from $16.6 million and $17.9 million, and expects sales to range from $55.4 to $59.7 million. This expectation is based on the assumption that the Company benefits from the tax preferential policy offered in Inner Mongolia, strong profitability due to cost saving initiatives, and continued growth in demand for the Company's prescription and OTC drugs.