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Position

President, Chief Executive Officer and Director

Fred M. Powell

Chief Financial Officer

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K


þ		ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2006


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From TO

Commission file number 000-51409

BEIJING MED-PHARM CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware		20-0434726
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

600 W. Germantown Pike, Suite 400
Plymouth Meeting, Pennsylvania		19462
(Address of Principal Executive Offices)		(Zip Code)

(610) 940-1675
Registrant’s telephone number, including area code

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Rule S-K is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ

The aggregate market value of Common Stock held by non-affiliates of the registrant as of the registrant’s stock on June 30, 2006 (based on the last reported sale price on Over the Counter Bulletin Board as of such date) was $64,446,997 assuming all officers, directors and persons deemed to be the beneficial owner (beneficial ownership determined in accordance with the rules of the Securities and Exchange Commission) of 10% or more of our capital stock are affiliates. As of March 1, 2007 there were 26,641,191 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the registrant’s 2007 annual meeting of stockholders to be filed within 120 days after the end of the period covered by this Annual Report on Form 10-K are incorporated by reference into Part III of this Annual Report on Form 10-K.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical facts or statements of current condition, this report and the documents into which this report is and will be incorporated contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements contained in this report constitute our expectations or forecasts of future events as of the date this report was filed with the Securities and Exchange Commission (the “SEC”) and are not statements of historical fact. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “will,” “estimate,” “expect,” “project,” “intend,” “should,” “plan,” “believe,” “hope,” and other words and terms of similar meaning in connection with any discussion of, among other things, future operating or financial performance, strategic initiatives and business strategies, regulatory or competitive environments, our intellectual property and product development. In particular, these forward-looking statements include, among others, statements about:

	•		our business strategy;

	•		our potential acquisition of a majority interest in Rongheng which is expected to close in the 2^nd quarter of 2007;

	•		our proposed joint venture transaction with Guangzhou Biaodian Medical Information Co., Ltd.;

	•		competition in the Chinese pharmaceutical distribution industry and our ability to compete;

	•		our belief regarding the significance of our acquisition of Wanwei;

	•		our belief that a significant opportunity exists to obtain an increased market share in the Chinese pharmaceutical marketing and distribution markets by offering a distribution chain solution that combines our market development services with market fulfillment services;

	•		our expectation to continue to incur significant and increasing operating expenses and capital expenditures;

	•		our expectation that substantially all of our revenues, profits, cash flows and assets will continue to be derived in China and be dominated in Chinese currency;

	•		our belief regarding the significance of brand recognition;

	•		our ability to renew any Good Supply Practices certificate or any pharmaceutical distributor permit to conduct business as a pharmaceutical distributor or to maintain this certificate or permit;

	•		our expectation that we may incur operating losses for the foreseeable future;

	•		our future financial and operating results;

	•		the dependence of our future success on obtaining additional promotional and market research agreements and licensing rights for China and on acquiring additional distribution companies;

	•		our ability to fund our current level of operations for the next twelve months through our cash and cash equivalents;

	•		our expectation regarding our cash and cash equivalents;

	•		impact of recent accounting pronouncements;

	•		expected timing of the closing of the Guangzhou Pharmaceutical Corporation, or GPC, joint venture transaction;

	•		the board composition of reorganized GPC;

	•		our expectation regarding our Exchange Act reporting obligations; and

	•		any other statements regarding matters not of historical fact.

The words “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” and similar expressions may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Forward-looking statements involve known and unknown risks, uncertainties and achievements, and other factors that may cause our or our industry’s actual results, levels of activity, performance, or achievements to be materially different from the information expressed or implied by these forward-looking statements. While we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that these statements are based on a combination of facts and factors currently known by us and projections of the future about which we cannot be certain. Many factors affect our ability to achieve our objectives, including:

	•		difficulties in acquiring complementary businesses or in integrating acquired businesses;

	•		our inability to obtain additional capital when necessary;

	•		delays in product introduction and marketing or interruptions in supply;

	•		a decrease in business from our major clients;

	•		our inability to compete successfully against new and existing competitors or to leverage our marketing capabilities with our distribution capabilities;

	•		adverse economic, political or social conditions in China;

	•		our inability to renew our GSP certificate or our pharmaceutical distributor permit to conduct business as a pharmaceutical distributor or to maintain this certificate and permit;

	•		our inability to manage our growth effectively;

	•		our inability to attract and retain key personnel;

	•		our inability to effectively market our services or obtain and maintain arrangements with manufacturers; and

	•		a slowdown in the Chinese economy.

In addition, you should refer to the “Risk Factors” section of this report for a discussion of other factors that may cause our actual results to differ materially from those implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. In addition, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, if at all. We may not update these forward-looking statements, even though our situation may change in the future.

PART I

ITEM 1. BUSINESS

Overview

Beijing Med-Pharm Corporation, a Delaware Corporation, is a pharmaceutical marketing and distribution company based in China. Our services, which we offer through Beijing Medpharm Co. Ltd., or BMP China, and Beijing Wanwei Pharmaceutical Co., Ltd., or Wanwei, which we acquired on December 6, 2005, to foreign and domestic pharmaceutical manufacturers in China, focus primarily on marketing and promotional services and distribution services. These services include:

	•		pre-market entry analysis;

	•		clinical trial management;

	•		product registration;

	•		market research;

	•		pharmaceutical marketing to physicians, hospitals and other healthcare providers; and

	•		pharmaceutical distribution.

We were incorporated in the State of Delaware in November 2003 as a wholly-owned subsidiary of Just Great Coffee, Inc., a New Jersey corporation. In January 2004, Just Great Coffee, Inc. merged with and into us and we were the surviving corporation. BMP China was incorporated in China in May 1994. In December 2001, Abacus acquired a 100% equity interest in BMP China. In February 2004, we acquired all of the equity interests of BMP China from Abacus in exchange for our issuance to Abacus of 7,807,509 shares of our common stock, which represented approximately 90% of our common stock at the time of the exchange. As a result of this exchange, BMP China became our wholly-owned subsidiary. In December 2005, we completed our acquisition of Wanwei.

Through Wanwei, we have distribution relationships with over 120 distributors located throughout China and access to most major hospitals in Beijing. Wanwei distributes over 900 products to more than 340 customers. These distribution services include the distribution of:

	•		western medicines;

	•		traditional Chinese medicines;

	•		bio-chemical medicines; and

	•		medical applications.

BMP China is headquartered in Beijing, China. Our sales staff in China is located primarily in the following areas:

	•		Beijing

	•		Chengdu

	•		Chongqing

	•		Fuzhou

	•		Guangxi


	•		Guangzhou

	•		Hangzhou

	•		Kunming

	•		Nanjing

	•		Shanghai

	•		Shenyang

	•		Tianjin

	•		Wuhan

	•		Xi’am

	•		Xiamen

On August 31, 2005, we entered into a non-binding letter of intent with Orient International Holding Shanghai Rongheng International Trading Co., Ltd. or Orient International, and Shanghai CAS Shenglongda Biotech (Group) Co., Ltd., or Shanghai CAS, to purchase a majority interest in Shanghai Rongheng Pharmaceutical Company Limited, or Rongheng. Orient International and Shanghai CAS currently own approximately 90% of the equity interests in Rongheng. Rongheng is a pharmaceutical distribution enterprise with operations in Shanghai, China, a municipality of more than 17 million permanent residents. Rongheng was established in 1999 and distributes to over 250 hospitals in Shanghai, including almost all top tier hospitals in Shanghai.

On May 11, 2006, we entered into an agreement with Shanghai CAS and Orient International. Under the terms of the agreement, the parties agreed that, if we are the winning bidder following the posting of the proposed sale on the Shanghai Exchange, the parties will enter into definitive transactional documents regarding the proposed acquisition promptly thereafter. On December 14, 2006, the proposed sale of Rongheng was posted on the Shanghai Exchange. On January 16, 2007, we were notified that we are the winning bidder of the proposed sale. On March 15, 2007, the parties executed definitive documents and the transaction will be submitted to the Chinese government for approval. The transaction is subject

to a number of conditions, including the receipt of Chinese regulatory approval and is expected to close during the second quarter of 2007.

On January 27, 2007, Alliance BMP Limited entered into a Joint Venture Contract, or the GPC JV Contract with Guangzhou Pharmaceutical Limited Company, or GP Limited, a Contract for the Transfer of Capital Contribution of Guangzhou Pharmaceuticals Corporation, or the GPC Capital Contribution Transfer Contract with several shareholders of Guangzhou Pharmaceuticals Corporation, or GPC, a Chinese limited liability company, and a Contract for the Increase of Registered Capital of Guangzhou Pharmaceuticals Corporation with GP Limited, or the GPC Capital Increase Contract.

Alliance BMP Limited is a joint venture between the Company and Alliance Unichem Group Limited, or AB. On January 18, 2007, the Company, AB and Alliance BMP Limited entered into a Shareholders’ Agreement, or the Shareholders’ Agreement that sets forth the terms and purpose of the joint venture. Alliance BMP Limited is a newly-formed United Kingdom-based investment vehicle. The primary purpose of Alliance BMP Limited is to acquire a 50% interest in GPC and to manage its investment in GPC. The Company and AB have agreed to do or cause to be done all reasonable acts necessary or desirable to consummate the joint venture with GPC.

These agreements provide that all shareholders of GPC, other than GP Limited, will transfer to Alliance BMP an aggregate of 9.91% of GPC’s total registered capital, representing the entire holdings of these shareholders. Immediately thereafter, GPC will increase its registered capital by approximately 100% and Alliance BMP Limited will purchase the entire increase at a purchase price of approximately $69 million. GPC will then be converted from a wholly-Chinese owned limited liability company to a Sino-foreign equity joint venture limited liability company, or reorganized GPC, and each of GP Limited and Alliance BMP Limited will own a 50% interest in GPC. The completion of these transactions is subject to approval by the Chinese authorities and certain other conditions, and is expected to occur in the second half of 2007.

It is expected that reorganized GPC will have eight directors. Each of GP Limited and Alliance BMP Limited will have the right to appoint four directors. Alliance BMP Limited is also entitled to designate (i) the Chairman of the Board of Directors and (ii) the General Manager of reorganized GPC, and GP Limited will have the right to designate (i) Deputy Chairman of the Board of Directors and (ii) the Financial Director of reorganized GPC. It is expected that David Gao will initially serve as the Chairman of reorganized GPC.

Under the Shareholders’ Agreement, subject to government approval of the GPC Agreement and certain other conditions, the Company will obtain 99,998 shares of ordinary shares of Alliance BMP Limited for a total purchase price of $13.8 million, and AB will obtain 399,992 shares of ordinary shares of Alliance BMP Limited for a total purchase price of $55.2 million, such that the Company will have 20% interest and AB will have 80% interest in Alliance BMP Limited. The Company is in the process of reviewing its alternatives to fund Alliance BMP Limited.

Alliance BMP Limited is jointly managed by the Company and AB. Until the parties agree otherwise, the Board of Directors of Alliance BMP Limited will have no more than four directors within two years of closing of the GPC Agreements and thereafter for so long as the Company is the holder of not less than 10% of the total issued shares of Alliance BMP Limited. During such time the Company will have the right to appoint and remove one director. AB will have right to appoint and remove three directors provided that it holds between 50% and 90% of the total issued shares of Alliance BMP Limited. The initial directors of Alliance BMP Limited are David Gao (Chief Executive Officer and a director of the Company) as the Company’s designated director, and Marco Pagni, Stephen Roberts and Roger Phillips as the AB designated directors.

In addition, under the Shareholders’ Agreement, for so long as David Gao remains an employee of the Company and for the period in which the Company is entitled to appoint directors as described above, the Company will cause David Gao to provide services from time to time to Alliance BMP Limited as its Board of Directors may reasonably request. The provisions of such services will be at no charge to Alliance BMP Limited. If the Company ceases to invest in Alliance BMP Limited, the Company will continue to cause David Gao to provide such services to Alliance BMP Limited for twelve months thereafter. If David Gao ceases to be involved with the Company in any capacity, the Company has agreed not to prevent David Gao’s continuing involvement with Alliance BMP Limited.

into a Sino-foreign equity joint venture (the “JV”). The Company and Biaodian proposed to acquire 49% and 51% of the equity interest in the JV, respectively. The board of directors of the JV is expected to be consisted of members appointed by both the Company and Biaodian. The parties also agreed to exclusive negotiation for 90 days starting from March 15, 2007, and to formally execute relevant transactional documents by the end of April 2007.

Our Opportunity

We believe that a significant opportunity exists to obtain an increased market share in the Chinese pharmaceutical marketing and distribution markets by offering a distribution chain solution that combines our market development services with market fulfillment services. We believe that our acquisition of Wanwei was an important step in the implementation of this solution.

We believe that our acquisition of Wanwei will enable us to differentiate ourselves from many of our competitors in China’s highly fragmented pharmaceutical distribution market by combining the marketing services that we offer with the distribution of pharmaceutical products to hospitals and other authorized healthcare providers. Our opportunity to establish a strong presence in China’s pharmaceutical distribution market is largely due to the highly fragmented nature of this market. China’s pharmaceutical distribution market is in an early developmental stage. The distribution infrastructure in China is fragmented and undercapitalized. According to the Certification Committee for Drugs, or CCD, of China’s State Food and Drug Administration, or SFDA, China’s pharmaceutical market had approximately 7,200 distributors as of February 2007, many of which we believe were small and unprofitable. This number is considerably lower than the approximately 16,000 distributors we believe existed in China’s pharmaceutical market in 2002. In addition, the Chinese government passed legislation that required pharmaceutical wholesale and retail enterprises to obtain Good Supply Practices, or GSP, certification. We believe that the pharmaceutical distribution permit and GSP certificate that we acquired as a result of our acquisition of Wanwei provides us with a strategic advantage over many of our competitors in China’s pharmaceutical distribution market.

Our Strategy and Solution

Our goal is to become a premier distribution chain solution provider for foreign and domestic pharmaceutical companies in China. The key elements of our strategy and solution include the following:

Expanded distribution chain services. We believe that we are well-positioned to expand our existing client base and introduce new products through the distribution channels we acquired in our acquisition of Wanwei. As a result of our acquisition of Wanwei, we are able to offer clients an enhanced range of services, including drug importation, drug registration, marketing to the prescribing doctor and distribution to hospitals and other authorized healthcare providers. We also plan to broaden our distribution and other capabilities through a combination of internal growth and other strategic acquisitions or joint ventures. We believe that our established track record of registering and marketing western pharmaceuticals and traditional Chinese medicines will enable us to implement this expansion strategy. Our initial focus is to create exclusive distributor relationships for ethical (prescription) western drugs, western medical devices and, to a lesser extent, for high growth traditional Chinese medicines.

Exclusive market development and market fulfillment relationships. We plan to pursue exclusive market development and market fulfillment relationships with manufacturers of ethical western drugs and western medical devices wishing to access the Chinese market. Our goal is to use our marketing arm to create demand for products that we will offer exclusively through our distribution arm on a national basis in China. We believe this will present new business opportunities in China’s otherwise fragmented pharmaceutical distribution market. We intend to incorporate any additional distribution companies that we may acquire in the future that provide market fulfillment services with the market development services we currently offer.

Growth potential. We believe that we are well-positioned to expand our client base and introduce additional products through the distribution channels we acquired as part of our acquisition of Wanwei and may acquire in any future acquisitions. We intend to leverage our existing marketing arm by layering new products into the current sales force. Our sales strategy includes internal growth and growth through strategic acquisitions in the distribution market, specifically in major urban markets in China. We believe this consolidation strategy presents an opportunity to achieve significant gains in efficiency.

Experienced management team and Exchange Act reporting. We expect to benefit from having a management team experienced in understanding the concerns of foreign pharmaceutical companies. Our President and Chief Executive Officer, David Gao, has experience in a wide range of management areas, including organizational structure, operational efficiencies and personnel. Mr. Gao was previously General Manager of the Integrated Electronics System division of Motorola Asia Pacific and sat on the Supervisory Boards of Motorola for China and East Asia. Certain members of our executive team have a strong background in pharmaceutical sales at various foreign and state-owned pharmaceutical companies, including a history of increasing sales. We also believe that, as an Exchange Act reporting company, our customers and potential customers have access to significantly more information about us as compared to our competitors that are privately-held. We believe that this transparency of information about us will provide us with a competitive advantage as we continue to conduct business in China.

Drug Distribution. Through Wanwei, we acquired GSP certification to operate as a pharmaceutical distributor throughout China, as well as the fixed assets to provide an expanded logistics base. We believe that GSP certification will enable us to capture revenue from the distribution of pharmaceutical products and should enable us to significantly expand the number of products that we can offer through our existing marketing channels.

Drug Marketing. Our sales and marketing sales staff, which consisted of 84 people at December 31, 2006, provides a marketing presence in major urban areas. Our staff are experienced in all aspects of drug promotion and possess a strong knowledge of the domestic pharmaceutical environment. We believe that our staff is capable of expanding our product offerings through the use of targeted marketing and the organization of national seminars and conferences.

Clinical and Regulatory Services. We will seek to expand our current ability to assist with pre-market-entry analysis and the registration of new drugs in the Chinese market to position ourselves, with the addition of further financial and human resources, to provide a distribution chain solution to foreign companies, including product testing for claims and proof of ingredients, clinical research trials, medical publication and submission and clinical consulting.

Product Marketing

We provide comprehensive marketing services to manufacturers and distributors who wish to stimulate market demand with respect to their products. These services primarily fall into two areas:

Physician-Oriented Marketing. Physician-oriented marketing consists primarily of in-person visits by drug company representatives, advertising in journals and conducting continuing medical education events. Pharmaceutical industry-sponsored programs play an important role in informing and updating physicians on drug developments. These include medical symposia, hospital grand rounds, visits to clinical faculty, round-table discussions, journal articles and special supplements, single-issue publications, scientific exhibits, slide and audio tape presentations, press kits, conferences, video news releases and other methods of disseminating information about products. We also specialize in the compilation of literature and the organization of national seminars and conferences to effectively market specific drugs to doctors and hospital executives in China.

In addition, we employ medical representatives who promote clients’ drugs by providing in-person visits to hospitals and local doctors, a useful service to foreign pharmaceutical manufacturers who may not have, or may not wish to have, the necessary infrastructure to ensure that local prescribers have the required understanding of new or highly specific pharmaceutical products.

We also provide clients with introductions to leading healthcare providers in China, which enables clients to further demonstrate the efficacy of their products through direct service arrangements with the health care providers.

Government Promotion. China’s central government has authorized a substantial number of pharmaceutical companies to receive reimbursement from state-controlled insurance companies. Drugs for which reimbursement is available are listed in a catalogue, which we refer to as the “Insurance Catalogue.” Provincial and municipal governments are allowed a 10% “local readjustment” to alter the national reimbursement list. As a result, pharmaceutical companies strive to have widely used drugs remain on this list, as it enhances a drug’s chances of being prescribed.

Many foreign pharmaceutical companies enter into joint ventures with local manufacturing partners, facilitating their involvement in the regulatory approval process and increasing prospects for obtaining greater market share. We believe that, through our numerous contacts with local pharmaceutical manufacturers, we may be able to provide significant value to foreign manufacturers looking to benefit from a formal association with a domestic partner. In addition, we also lobby provincial government agencies on behalf of foreign clients to keep particular drugs in the Insurance Catalogue.

Clinical and Regulatory Services

We offer the following two categories of clinical services:

Pre-Market Entry Analysis. We provide foreign and domestic pharmaceutical companies with a comprehensive analysis service relating to the introduction of pharmaceutical products into the Chinese market. These studies offer a market assessment for a potential entrant, with a “go” or “don’t go” recommendation to the client. We assess the risks and benefits of introducing specific drugs or drug groupings, potential end-user demand profiles and any constraints imposed by the regulatory environment. Regulatory controls, distribution channels, competition, advertising and promotion and ongoing trade practices are standard features of these studies.

Product Registration. We provide clients with services relating to the registration of drugs for use within China. These services include:

	•		evaluation prior to application to SFDA;

	•		full document preparation;

	•		quality control analysis; and

	•		obtaining an import drug license.

We charge our clients a non-commission fee for this service. The size of the fee depends on the class of the particular drug and the duration of the registration process.

We have more than seven years of experience in providing clinical and regulatory services and have provided such services to pharmaceutical manufacturers from the United States, United Kingdom, India, Germany and Switzerland, among others. We have registered drugs and compounds for various foreign manufacturers, including Biomet Merck, Haw Par Healthcare, Ltd., and Galerma S.A.

Supply Partners

Our suppliers, some of which having an indirect relationship with us through an intermediary, generally fall into the following three categories:

	•		Large Foreign Pharmaceutical Manufacturers. Although these companies have global marketing and sales capabilities, we believe that they are usually only able to effectively market a limited number of their products in a market such as China. Other products must therefore be marketed by way of a co-operative agreement with a local agent.

	•		Smaller Foreign Pharmaceutical Manufacturers. These companies generally have limited internal marketing ability and may therefore depend solely on agreements with local marketing partners to promote their products in foreign markets.

	•		Domestic Pharmaceutical Companies. These companies also have limited marketing capabilities and therefore frequently outsource this function to local agents.

Listed below marketing revenue categorized by suppliers who represented approximately 10% or more of our marketing revenues in each of 2005 and 2006; among these companies, Biomet Merck is an indirect supplier of ours through our, market promotion and distribution agreement, with Xiamen International Economic and Trade company.


	Percentage of Total Marketing Revenues
Name of Client	2006			2005
Cytokine PharmaScienics, Inc.		57	%		0	%
Taiwan Biotech Co.		40	%		0	%
Biomet Merck		2	%		72	%
Zhonghuo High Tech Corp.		4	%		16	%
MCM Klosterfrau GmbH		0	%		17	%

Our Product Portfolio

We provide clinical and/or market development services with respect to the following products:

Propess

Propess is a vaginal insert used to ripen the cervix in preparation for childbirth when labor is induced. The manufacturer of Propess is Cytokine PharmaScienics, Inc. We entered into an agreement with Cytokine in August 2005, under which we have the exclusive right to market, promote and distribute Propess in China. The term of this agreement is five years, subject to earlier termination, among other things, by Cytokine in the event that we do not meet certain minimum annual purchase requirements set forth in the agreement during any two consecutive years. The agreement will automatically renew for two-year terms unless earlier terminated as described above or unless either party gives notice of termination at least six months prior to the beginning of the particular renewal period.

Anpo

Anpo, or ritodrine hydrochloride, is a muscle relaxant available in both injectable and oral forms, and is used for managing pre-term labor. In July 2006, we entered into an agreement with Taiwan Biotech Co. Ltd. to serve as the exclusive distributor of Anpo in mainland China. The terms of this agreement is five years, subject to earlier termination, among other things, by Taiwan Biotech Co. Ltd. in the event that we do not meet certain minimum annual sales requirements set forth in the agreement.

Misopess

Misopess vaginal Insert, or Misopess, is a vaginal insert under investigation in several countries for cervical ripening and induction of labor. The manufacturer of Misopess is Cytokine. We entered into an agreement with Cytokine in November 2006 to conduct late-stage clinical development, registration, sales, marketing and distribution in China. Under terms of the agreement, we will initiate a Chinese registration trial of Misopess, with the expectation that, once Mispoess receives US FDA approval, data from this single trial will permit a regulatory application with the SFDA in late 2008 or 2009. The terms of this agreement is ten years, subject to earlier termination. The agreement will automatically renew for two-year terms

unless earlier terminated as described above or unless either party gives notice of termination at least six months prior to the beginning of the particular renewal period.

Fentora

Fentora, or fentanyl buccal tablet, received US FDA approval in September 2006 for the management of breakthrough pain in patients with cancer. The manufacturer of Fentora is Cephalon, Inc, or Cephalon. We entered into a service agreement with Cephalon in December 2006 under which we will complete the clinical development and registration process for Fentora in China. The term of this agreement is three years unless terminated by any reason upon 30 days written notice by either party.

Competition

While the Chinese pharmaceutical distribution market currently is highly fragmented, it is also highly competitive and has few barriers to entry. We anticipate that competition in this market will continue to intensify. We are aware of a limited number of competitors who currently directly provide a suite of services comparable to the distribution chain solution that we will provide as a result of the completion of our acquisition of Wanwei. These competitors include China National Pharmaceutical Group Corporation, Shanghai Pharmaceutical Group Company Ltd., Guangzhou Pharmaceutical Company Ltd., Shanghai Leiyunshang Company Ltd. and Anhui Huayuan Pharmaceutical Company Ltd. We are not aware of any foreign-owned company that offers a more comprehensive distribution chain solution in China. However, significant competition exists on an individual basis with respect to the marketing and promotion and distribution services that we provide. These competitors include national and regional pharmaceutical promotion companies and small companies. We also anticipate substantial new competition from foreign and domestic competitors entering the Chinese pharmaceutical marketing and distribution market. Our most significant competitors in the marketing and promotional services sector include Zuellig Pharma Pharmaceutical Service Co., Ltd. and Shenzhen Zhanhong Pharmaceutical Co., Ltd. Our most significant competitors in the distribution services sector in the Beijing area are Beijing Medical Group, Beijing Fengkecheng Medical Ltd., National Pharmaceuticals Group, Beijing Shuanghe, Beijing Jinxiang Fuxing, Beijing Keyuan Xinhai, and Beijing Tongrentang. Our most significant competitors in the distribution services sector on a national basis include China National Pharmaceutical Group Corporation, Shanghai Pharmaceutical Group Company Ltd., Guangzhou Pharmaceutical Company Ltd., Shanghai Leiyunshang Company Ltd. and Anhui Huayuan Pharmaceutical Company Ltd., among others.

We expect to compete on, among other things, our ability to offer a suite of both market development services and market fulfillment services, our established track record of registering and marketing western pharmaceuticals and traditional Chinese medicines, our sales and growth strategies, the effectiveness of our experienced management team and our belief that we will be more transparent to potential customers than certain rival privately-held distributors due to our financial reporting requirements in the United States.

Competing successfully will depend on our continued ability to attract and retain skilled and experienced personnel, to identify and secure marketing and distribution arrangements on acceptable terms and to increase our business in connection with our expansion strategy, either through internal growth or strategic acquisitions.

Many of our competitors are more established than we are, and have significantly greater financial, technical, marketing, and other resources than we do. Many of our competitors have greater name recognition and a larger customer base than us. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional and distribution activities, offer more attractive terms to customers, and adopt more aggressive pricing policies.

Wanwei

Background

Wanwei was incorporated in January 1999. Wanwei’s term of business set forth in its current business license is 20 years from the date it received its business license, or January 1999 through January 2019.

On December 15, 2004, we entered into a share transfer and debt restructuring agreement with Wanhui Group, an 80% equity holder of Wanwei, and a share transfer agreement with Wen Xin, the holder of the remaining 20% equity interest in Wanwei. On October 18, 2005, we were notified by China’s Ministry of Commerce that our acquisition of Wanwei had been approved. On October 25, 2005, we received a business license from Beijing Municipal Administration for Industry and Commerce, permitting us to operate Wanwei and consolidate its financial operations. On December 6, 2005, the Company completed its acquisition of all of the outstanding equity interests of Wanwei from Wanhui Group and Wen Xin. However, for accounting and tax purposes, the Company acquired Wanwei from Wanhui Group and Wen Xin upon issuance of the business license on October 25, 2005. As required under the share transfer and debt restructuring agreement with Wanhui Group, on December 15, 2004, the Company paid Wanhui Group RMB 2,400,000, or $290,328 as of that date.

December 6, 2005, the Company completed the acquisition of Wanwei by making final payment of the purchase price, net of certain estimated tax liability. On June 29, 2006, the Company paid Wanhui Group, RMB 3,290,300, or $412,100 as of that date, as the estimated tax obligation was reduced by the same amount. On January 10, 2007, the Company paid $214,227 to the Chinese Tax Authority as the final payment related to the acquisition of Wanwei.

We have acquired the necessary pharmaceutical distribution permit and GSP certificate to enable us to operate as an authorized distributor of pharmaceutical products in China.

Wanwei Business

The major business activity of Wanwei is pharmaceutical product distribution, which includes the distribution of:

	•		western medicines;

	•		traditional Chinese medicines;

	•		bio-chemical medicines; and

	•		medical applications.

Specifically, the business scope of Wanwei, as described its current business license, is the wholesale of western medicine preparations, prepared Chinese medicines, chemical feedstock medicines, bio-chemical medicines, medical appliances, material for packing, chemical products, health foods and biological products approved by the Ministry of Public Health; technical development and technical consultation of western medicine preparations, prepared Chinese medicines, chemical feedstock medicines, medical appliances and new materials for medicine packing.

Wanwei normally enters into a master agreement with pharmaceutical manufacturers at the beginning of each year. The master agreement provides the general terms and conditions for transactions in the ensuing year and estimated quarterly value of purchases. The parties to the master agreement enter into separate purchase and sale agreements each time Wanwei purchases products. As part of its wholesale selling, Wanwei actually takes title to the goods and books them as inventory. Wanwei will sell the medicines it purchases to hospitals, drug stores and other pharmaceutical wholesalers that have established wider distribution channels with respect to certain medicines.

Even though there is no restriction as to the distribution area of Wanwei, due to various reasons, including the preference of pharmaceutical manufacturers to engage local distributors for the manufacturers’ products and the regional protectionism, for the time being, Wanwei only acts as the agent in Beijing, on an exclusive or non-exclusive basis, for certain products of its suppliers. Wanwei has an import license permitting us to receive western products to be distributed in China.

Wanwei Product Portfolio

Patients purchasing medicines listed in the Insurance Catalogue are entitled to reimbursement of all or part of the cost of these medicines from the social medical fund. As a result, patients generally prefer to purchase medicines listed in the Insurance Catalogue rather than non-listed medicines. Approximately 32.8% and 36.9% of all the medicines distributed by Wanwei were listed in the Insurance Catalogue during the fiscal years ended December 31, 2006 and 2005, respectively, representing 58.2% and 60.2% of Wanwei’s total revenues.

In China, medicines also are divided into over-the-counter medicines and prescription medicines according to medicine type, specification, the relevant condition that they are designed to treat, dosage and method of administration. To better distribute medicines classified as over-the-counter medicines, which represented approximately 18.6% of Wanwei’s products in 2006, Wanwei typically engages other distributors that have distribution channels that accommodate the distribution of over-the-counter medicines, in addition to selling directly to drug stores.

Wanwei currently distributes over 900 products to more than 340 customers, the following of which are the five highest revenue producers:

	•		Glurenorm. Glurenorm, manufactured by Beijing Shuanghe under a license from Boehringer Ingelheim, is an oral antidiabetic medication used to treat patients with adult maturity onset or non-insulin dependent diabetes. Wanwei began distributing this product in 2002 under a non-exclusive agreement covering Beijing. The contract is renewable annually on December 3 and is subject to minimum annual sales. Sales of Glurenorm amounted to 19.8% and 14.1% of Wanwei’s total sales for 2006 and 2005.

	•		Ferrous Succinate Tablets. Ferrous Succinate Tablets, manufactured by Jinling Pharmaceutical Joint Stock Company, are used to prevent and treat anemia due to lack of iron. Wanwei began distributing this product in 1997 under a non-exclusive distribution arrangement covering Beijing. The contract is renewed annually on December 31 and is not subject to minimum annual sales. Sales of Ferrous Succinate Tablets amounted to 5.0% and 6.2% of Wanwei’s total sales for 2006 and 2005.

	•		Runsu Eye Drops. Runsu Eye Drops are manufactured by Shangdong Zhengda Pharmaceutical Company. Wanwei began distributing this product in 2001 under a non-exclusive distribution arrangement covering Beijing. The contract is renewed annually and is not subject to minimum annual sales. Sales of Runsu Eye Drops amounted to 4.3% and 5.3% of Wanwei’s total sales for 2006 and 2005.

	•		Tramadol Hydrochloride. Tramadol Hydrochloride, manufactured by Huasheng Pharmaceutical Co. Ltd. of Shijiazhuang Pharmaceutical Group, is an analgesic used to treat acute and chronic pain. Wanwei began distributing this product in 2000 and has an exclusive distribution arrangement covering Beijing. The contract is renewed annually at December 31 and is subject to minimum annual sales. Sales of Tramadol Hydrochloride amounted to 4.2% and 2.4% of Wanwei’s total sales for 2006 and 2005.

	•		Famotidine. Famotidine, manufactured by Ansitailai Pharmaceutical Co., Ltd, and is a histamine H₂ receptor antagonist that inhabits stomach acid production, and is commonly used in the treatment of peptic ulcer disease. Wanwei began distributing this product in 2002 under a non-exclusive distribution arrangement covering Beijing. The contract is renewed annually and is not subject to minimum annual sales. Sales of Famotidine amounted to 3.7% and 3.9% of Wanwei’s total sales for 2006 and 2005.

Regulation of the Pharmaceutical Distribution Industry in China

The following discussion describes certain Chinese laws, rules and regulations. We believe that we are currently in material compliance with each of the laws, rules and regulations described below as they apply to us.

Protocol on Accession of China into the World Trade Organization

China acceded to the World Trade Organization, or WTO, on December 11, 2001. According to Annex 9 of the Protocol, China allows foreign invested enterprises to distribute pharmaceutical products directly in China.

Regulation of Foreign Ownership of Pharmaceutical Distribution Companies in China

Under the Administrative Measures on the Foreign Investment in Commercial Sector adopted on April 16, 2004 and effective as of December 11, 2004, foreign enterprises were permitted to establish or invest in wholly foreign-owned enterprises or joint ventures that engage in wholesale or retail sales of pharmaceuticals in China and, therefore, we

were no longer restricted from engaging in pharmaceutical distribution. Previously, we offered marketing and promotional services.

Regulatory Framework

The law of China on the Administration of Pharmaceuticals was promulgated on September 20, 1984 by the Executive Committee of the National People’s Congress and amended on February 28, 2001. The amendments came into effect on December 1, 2001. This law sets out the basic legal framework for the administration of the production and sale of pharmaceuticals in China and covers areas including the manufacture, distribution, packaging, pricing and advertising of pharmaceutical products in China. The Implementation Rules on the Administration of Pharmaceuticals were promulgated on August 4, 2002, and came into effect subsequently on September 15, 2002 to set out the detailed implementation rules with respect to the administration of pharmaceuticals in China.

The State Drug Administration, or SDA, was established in 1998 to assume the supervisory and administrative functions previously carried out by the Ministry of Health, the State Administration Bureau for Pharmaceuticals and the State Administration Bureau for Traditional Chinese Medicine. In March 2003, China’s SFDA was established to assume the functions previously carried out by the SDA. The primary responsibilities of the SFDA include:

	•		formulating, and supervising the implementation of, regulations and policies concerning drug administration;

	•		promulgating standards for pharmaceutical products and medical appliances;

	•		categorizing drugs and medical appliances for regulation purposes;

	•		registering and approving new drugs, generic drugs, and imported and Chinese medicines;

	•		granting approvals for the production of pharmaceutical products and medical appliances; and

	•		approving the manufacture and distribution by companies of pharmaceutical products.

Permits and Licenses for Pharmaceutical Distribution Enterprises

Before any pharmaceutical distribution enterprise, including any wholesaler or retailer, can distribute pharmaceutical products in China, it must obtain a pharmaceutical distribution permit issued by the appropriate provincial or county level State Food and Drug Administration where the pharmaceutical distribution enterprise is located. The granting of a pharmaceutical distribution permit is subject to an inspection of the premises and facilities, warehouse, hygiene environment, quality control systems, personnel and equipment of such enterprise. The pharmaceutical distribution permit is valid for five years. Pharmaceutical distribution enterprises must apply for renewal of their pharmaceutical distribution permit no later than six months prior to the expiration date of the license with the appropriate governmental authority. Wanwei’s pharmaceutical distribution permit was renewed on March 31, 2005.

In addition to the pharmaceutical distribution permit, pharmaceutical distribution enterprises also must obtain a business license from the appropriate administration bureau for industry and commerce to commence its business.

Good Supply Practice Standards

Good Supply Practice, or GSP, standards were established to regulate pharmaceutical wholesale and retail enterprises to ensure the quality of distribution of pharmaceutical products in China. The current applicable GSP standards, which were passed by the SDA, came into effect on July 1, 2000. Under these standards, wholesale and retail enterprises in China must implement strict control on the distribution of pharmaceutical products with respect to, among other things, staff qualifications, distribution premises, warehouse, inspection equipment and facilities, management and quality control in order to obtain a GSP certificate to carry out business in China. The SDA began accepting applications for GSP certification on March 1, 2002 and in accordance with the Notice on the Accelerating of GSP Certification Steps and Advancing the Supervision and Implementation Work of GSP, issued on October 15, 2001, the SDA required all pharmaceutical wholesale and retail enterprises to comply with GSP standards by December 31, 2004 and obtain GSP certification. The pharmaceutical distribution qualifications of pharmaceutical distribution enterprises that fail to obtain GSP certification may be revoked.

The GSP certificate is valid for five years, except that the certificate of a newly established pharmaceutical distribution enterprise is only valid for one year. Pharmaceutical distribution enterprises must apply for renewal of their GSP certificates

no later than three months prior to the date of expiration of their GSP certificates, subject to reassessment by the appropriate Chinese governmental authority.

Wanwei obtained its GSP certificate on April 3, 2003 and its certificate remains valid until April 3, 2008.

Bidding System for Drug Purchases by Medical Organizations

In accordance with the Notice on Issuing Certain Regulations on the Trial Implementation of Centralized Tender Purchase of Drugs by Medical Organizations, promulgated on July 7, 2000, and the Notice on Further Improvement on the Implementation of Centralized Tender Purchase of Drugs by Medical Organizations promulgated on July 23, 2001, non-profit medical organizations established by county or higher level government in China are required to implement bidding processes for the purchase of pharmaceuticals. In principle, medical organizations are required to join together to organize bids to purchase pharmaceuticals in bulk volume. The bids are to be assessed by a committee formed by pharmaceutical experts who are recognized by the relevant authorities, with reference to, most importantly, drug quality, and other criteria, including price, service and quality of the drug manufacturers. For the same type of drugs, two or three products under different brands may be selected. Any reduction in drug purchase price by medical organizations as a result of competitive bidding by suppliers under the bidding system is intended to bring about a corresponding reduction in the retail price for the benefit of patients. As indicated in the above notice, it is intended that the implementation of such bid purchase system should be extended gradually and should cover, among other pharmaceuticals, those consumed in large volume and commonly used for clinical uses.

Several Provisions on Further Regulating the Centralized Tender Purchase of Drugs by Medical Organizations, promulgated on September 23, 2004, provides that pharmaceutical wholesalers must have the due authorization of the pharmaceutical manufacturers to participate in the bidding process. Pharmaceutical manufacturers can participate in the bidding process on their own, which, by eliminating the middle layer, reduces the bidding price.

Wanwei has been authorized by certain pharmaceutical manufacturers for which it currently distributes products to participate in the bidding events organized by various hospitals and other medical institutions in the area of Beijing. A successful bid by Wanwei will result in the distribution by Wanwei of the particular drug to the hospital or medical institution that organized the bidding event.

Insurance Catalogue

Pursuant to the Decision of the State Council on the Establishment of the State Basic Medical Insurance System for Urban Employees and the Implementation Measures for the Administration of the Scope of Medical Insurance Coverage for Pharmaceuticals for Urban Employees, the Ministry of Labor and Social Security in China established the Insurance Catalogue. The Insurance Catalogue is divided into Parts A and B. The medicines included in Part A are designated by the Chinese governmental authorities for general application. Local governmental authorities may not adjust the content of medicines in Part A. Although the medicines included in Part B are designated by Chinese governmental authorities in the first instance, provincial level authorities may make limited changes to the medicines included in Part B, resulting in some regional variations in the medicines included in Part B from region to region.

Patients purchasing medicines included in Part A are entitled to reimbursement of the costs of such medicines from the social medical fund in accordance with relevant regulations in China. Patients purchasing medicines included in Part B are required to pay a predetermined proportion of the costs of such medicines.

The medicines included in the Insurance Catalogue are selected by the Chinese government authorities based on the factors including treatment requirements, frequency of use, effectiveness and price. Medicines included in the Insurance Catalogue are subject to price control by the Chinese government. The Insurance Catalogue is revised every two years. In connection with each revision, the relevant provincial drug authority collects proposals from relevant enterprises before organizing a comprehensive appraisal. The SFDA then makes the final decision on any revisions based on the preliminary opinion suggested by the provincial drug administration.

Approximately 32.8% and 36.9% of all the medicines distributed by Wanwei were listed in the Insurance Catalogue during the fiscal years ended December 31, 2006 and 2005, respectively, representing 58.2% and 60.2% of Wanwei’s total revenues.

Price Controls

Certain medicine products sold in China, primarily those included in the Insurance Catalogue and those whose production or trading will constitute monopolies, are subject to price control by the Chinese government. The maximum prices of such medicine products are published by the state and provincial administration authorities from time to time. The prices of other medicines that are not subject to price control are determined by the pharmaceutical manufacturers, subject, in certain cases, to providing notice to the provincial pricing authorities.

The upper limit of prices of medicines subject to price control are set by the pricing authorities to create a reasonable profit margin for pharmaceutical enterprises, after taking into account the type and quality of the products, their production costs, the prices of substitute products, and other similar factors.

Application for Registration of Imported Medicines

Application for the registration of imported medicines produced by foreign manufacturers is allowed only if these medicines have already been approved to be sold in the manufacturer’s home country, unless the relevant medicine is considered by the SFDA to be safe, effective and under high clinical demand. Imported medicines must also comply with the relevant requirements of the good manufacturing practice, or GMP, standards adopted by the manufacturer’s home country as well as those required in China. Revised GMP standards in China were passed by the SDA and came into effect on August 1, 1999. These GMP standards require manufacturing enterprises in China to implement strict controls on the production of medicines with respect to, among other things, staff qualifications, production premises and facilities, equipment, raw materials, hygiene environment, production management, quality control and procedures for dealing with customer complaints.

The registration of imported medicines requires the support of clinical research and approval from the SFDA to conduct clinical research for the medicine that it proposes to import. After the completion of clinical research on the subject medicine, application may be made for approval to import the subject medicine by submitting, among other things, relevant clinical research information and drug samples to the SFDA. The drug examination laboratory appointed by the SFDA will examine the drug samples and report the results to the SFDA. The SFDA will then conduct a final assessment of the application to consider approving the registration of the subject medicine proposed to be imported. If the SFDA is satisfied with its final assessment of the application, the applicant will be granted a Certificate of Registration of Imported Medicine or a Certificate of Registration of Pharmaceutical Product.

BMP China has provided its clients with services related to the registration of medicines for use within China in accordance with Chinese law.

Employees

Substantially all of our employees are located in China. As of December 31, 2006, we had 185 full time employees, 76 of whom were management, finance or administrative employees, and 109 of whom were sales and marketing employees. We have not experienced any strikes or other labor disturbances that have interfered with our operations, and we believe that the relationship between our management and our employees is good.

We are required to contribute a portion of its employees’ total salaries to the Chinese government’s social insurance funds, including medical insurance, unemployment insurance and job injuries insurance, and a housing assistance fund, in accordance with relevant regulations. In the last three years, we contributed the following amounts to these funds:


Year	Contribution in US Dollars*		Contribution in RMB
2006	$	181,853	RMB	1,405,542
2005	$	43,330	RMB	348,303
2004	$	23,074	RMB	185,478


*		Based on exchange rates in effect at March 1 of the following year. For the 2006 contributions the March 1, 2007 exchange rate was used.

We expect the amount of contribution to the government’s social insurance funds to increase in 2007 as we expand our workforce and operations.

Executive Officers

The following table identifies our current executive officers:

David (Xiaoying) Gao has served as our President and Chief Executive Officer since February 2004. Since February 2002, Mr. Gao has served as Chairman of BMP China’s board of directors. Mr. Gao served as President and director of Abacus Investments, Ltd., a private wealth management company, from August 2003 until June 2004, and as Chief Executive Officer of Abacus from July 2003 to June 2004. From 1989 to 2002, Mr. Gao held various positions at Motorola, Inc., a publicly-traded company specializing in wireless, broadband and automotive communications technologies and embedded electronic products, including: Vice President and Director, Integrated Electronic System Sector, Asia-Pacific operation, from 1998 to 2002; Member, Motorola Asia Pacific Management Board, Management Board of Motorola Japan Ltd., from 2000 to 2002; and Motorola China Management Board from 1996 to 2002. Mr. Gao holds a BSC in Mechanical Engineering from the Beijing Institute of Technology, a BSC in Mechanical Engineering from Hanover University, Germany, and an M.B.A. from The Massachusetts Institute of Technology.

Fred M. Powell, CPA, joined us as our Chief Financial Officer in January 2005. From May 2002 until December 2004, Mr. Powell served as the Chief Financial Officer of Eximias Pharmaceutical Corporation, a privately-held biopharmaceutical company. From April 1999 to May 2002, Mr. Powell served as the Senior Vice President, Finance and Administration, of InnaPhase Corporation, a technology solutions provider for life sciences companies that was acquired by Thermo-Electron Corporation in 2004. From March 1993 to April 1999, Mr. Powell held various positions at Premier Research Worldwide, a publicly-traded company specializing in providing clinical and diagnostic services to the pharmaceutical and biotech industries, including: Director of Finance and Administration, from 1993 to 1996, and Chief Financial Officer, from 1996 to 1999. Mr. Powell is a Certified Public Accountant and holds a BS in Accounting from Pennsylvania State University.

ITEM 1A. RISK FACTORS

Investing in our common stock involves significant risks. In addition to all of the other information contained or incorporated by reference in this prospectus, you should carefully consider the risks and uncertainties described below, which constitute what we believe are the material risks associated with an investment in our common stock, before deciding to invest in our common stock. If any of the following risks actually occur, they may materially harm our business, our financial condition or our results of operations which in turn could adversely affect the market price of our common stock.

Risks Relating to Our Business

We have a history of operating losses and anticipate that we will continue to incur losses for the foreseeable future.

We are an early stage company with a limited operating history. Since our inception, we have incurred significant operating losses. As of December 31, 2006, we had an accumulated deficit of approximately $16.0 million. We expect to continue to incur significant and increasing operating expenses and capital expenditures, including operating expenses relating to attracting and retaining a larger employee workforce. In the next 24 months, our capital requirements are likely to increase, particularly as we pursue internal growth, add personnel, fund inventory purchases and support increased levels of accounts receivables prior to receiving collections from our customers and expend additional funds to maintain our status as a reporting company under the Exchange Act. Our future capital requirements will depend on many factors, such as the risk factors described in this section, including our ability to maintain our existing cost structure and return on sales and to execute our business and strategic plans as currently conceived.

As a result, we will need to generate significant revenues to achieve profitability. Even if we achieve profitability, we may be unable to maintain or increase profitability on a quarterly or annual basis. If we are unable to achieve and then maintain profitability, the market value of our common stock may decline.

We may be unable to acquire, or may be delayed in acquiring, Rongheng.

On August 31, 2005, we entered into a non-binding letter of intent with Orient International and Shanghai CAS to purchase a majority interest in Rongheng. Under Chinese law, a proposed sale of state-owned assets, such as the proposed sale of Rongheng, must be posted on a regional property exchange, whereupon the assets are sold to the highest qualified bidder. On May 11, 2006, we entered into an agreement with Shanghai CAS and Orient International. Under the terms of the agreement, the parties agreed that, if we are the winning bidder following the posting of the proposed sale on the Shanghai Exchange, the parties will enter into definitive transactional documents regarding the proposed acquisition promptly thereafter.

On December 14, 2006, the proposed sale of Rongheng was posted on the Shanghai Exchange. On January 16, 2007, we were notified that we are the winning bidder of the proposed sale. On March 15, 2007, the parties executed definitive documents and the transaction will be submitted to the Chinese government for approval. The transaction is subject to a number of conditions, including the receipt of Chinese regulatory approval and is expected to close during the second quarter of 2007. The completion of the proposed acquisition of Rongheng would likely be subject to closing conditions that would be outside of our control, such as review and approval by the relevant examination and approval authorities in China. As a result, we can provide no assurance that our proposed acquisition of Rongheng will be completed in the expected time frame or at all. In addition, our proposed acquisition of Rongheng involves industries to which foreign investment has had limited access, and clear guidance on foreign investment in the pharmaceutical distribution business does not exist. As a result, we cannot predict how the examination and approval authorities would exercise their discretion in examining this proposed acquisition. Our inability to acquire, or delays in acquiring, Rongheng also would impact adversely our ability to execute our business strategy and, consequently, the marketability and market price of our common stock.

We may be unable to complete the joint venture transaction contemplated by the Shareholders’ Agreement, the GPC JV Contract and the related agreements. In addition, we may not be able to complete the joint venture transaction contemplated by our non-binding letter of intent with Biaodian.

In January 2007, we entered into the Shareholders’ Agreement with AB to form Alliance BMP Limited, of which we will own 20% interest and AB will own an 80% interest and Alliance BMP Limited executed the GPC JV Contract and related agreements with GP Limited to form reorganized GPC joint venture. Under these agreements, if the transaction is completed, Alliance BMP Limited and GPC Limited will each own 50% interest in reorganized GPC. The consummation of the joint venture transaction contemplated by these agreements is conditioned upon, among other things, approvals by the Chinese authorities and the lack of adverse regulatory actions that will materially prohibit, restrict, or delay the completion of the joint venture transaction. There can be no assurance that we will obtain approvals from the Chinese authorities, that there will be no materially adverse regulatory actions or that we will be able to complete the joint venture transaction as contemplated by the agreements. Our inability to complete the joint venture transaction may impact adversely our ability to execute our business strategy and, consequently, the marketability and market price of our common stock.

In addition, with respect to our proposed joint venture transaction with Biaodian, while we and Biaodian have entered into a letter of intent, such letter of intent is non-binding. In addition, even if we and Biaodian do enter into transactional documents, the consummation of the joint venture transaction may depend on various factors, such as obtaining approvals from the Chinese government and our raising sufficient funds to pay for the equity purchase price. There is no assurance that the proposed joint venture transaction with Biaodian will be completed as contemplated by the letter of intent.

We may be unsuccessful in our strategy of expanding our product portfolio, acquiring complementary businesses or integrating acquired businesses.

Our business strategy includes expanding our business capabilities through both internal growth and the acquisition of complementary businesses and licensing pharmaceutical products for marketing and distribution in China. We may be unable to find additional complementary businesses to acquire or we may be unable to enter into additional agreements to market and distribute pharmaceutical products.

Future acquisitions or joint ventures, including our potential transactions with Rongheng and AB, may result in substantial per share financial dilution of our common stock from the issuance of equity securities. Completion of future acquisitions also would expose us to potential risks, including risks associated with:

	•		the assimilation of new operations, technologies and personnel;

	•		unforeseen or hidden liabilities;

	•		the diversion of resources from our existing businesses;

	•		the inability to generate sufficient revenue to offset the costs and expenses of acquisitions; and

	•		the potential loss of, or harm to relationships with, employees, customers and suppliers as a result of the integration of new businesses.

We may continue to experience delays in product introduction and marketing or interruptions in supply.

We have experienced, and are continuing to experience, longer than expected periods of product introduction and delays in marketing certain products in our product portfolio. For example, supply interruptions from the manufacturer of Fem 7 had a significant negative impact on our revenues from sales of Fem 7 during 2004 through March 2005. These interruptions were caused by a delay in production relating to China-specific product packaging. In April 2005, the distributor of Fem 7 received supplies of Fem 7 from the manufacturer and we have begun to provide them to our customers. Our revenues are dependent on the ability of the manufacturers and distributors with which we associate to supply and distribute product to our customers.

If these and other delays continue to occur, or if these manufacturers and distributors are unable to supply and distribute product to our customers in a timely manner, our operating results and financial condition will suffer. In addition, our contracts with pharmaceutical owners and manufacturers relating to some of the products in our product portfolio have a limited duration and have minimum sales requirements that, if not met, could lead to termination or non-renewal of the contract, or the ability of the manufacturer to render the contract non-exclusive, which could harm our revenues.

We may be unable to compete successfully against new and existing competitors.

We operate in a highly competitive market with few barriers to entry. We expect that competition will continue to intensify. As we expand our operations in the pharmaceutical distribution business, we will encounter competition from other companies in the distribution business, and we may face future competition from new foreign and domestic competitors entering the pharmaceutical promotion and distribution market in China. Some of our competitors are more established than we are, and have significantly greater financial, technical, marketing, and other resources than we do. Many of our competitors, including China National Pharmaceutical Group Corporation, Shanghai Pharmaceutical Group Company Ltd., Guangzhou Pharmaceutical Company Ltd., Shanghai Leiyunshang Company Ltd. and Anhui Huayuan Pharmaceutical Company Ltd., have greater name recognition and a larger customer base than we do. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional and distribution activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. Competition could reduce our market share or force us to lower our prices to unprofitable levels.

If we fail to increase our brand recognition, we may face difficulty in obtaining new customers and business partners.

We believe that establishing, maintaining and enhancing our brand in a cost-effective manner is critical to achieving widespread acceptance of our current and future services and is an important element in our effort to increase our customer base and obtain new business partners. We believe that the importance of brand recognition will increase as competition in our market develops. Some of our potential competitors already have well-established brands in the pharmaceutical promotion and distribution industry. Successful promotion of our brand will depend largely on our ability to maintain a sizeable and active customer base, our marketing efforts and our ability to provide reliable and useful services at competitive prices. Brand promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building efforts, in which case our business, operating results and financial condition would be materially adversely affected.

Our operating results may fluctuate as a result of factors beyond our control.

Our operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are beyond our control. These factors include:

	•		the costs of pharmaceutical products and development;

	•		the relative speed and success with which we can obtain and maintain customers, merchants and vendors for our services and manufacturers and suppliers of products to market to our customers;

	•		capital expenditures for equipment;

	•		marketing and promotional activities and other costs;

	•		changes in our pricing policies, suppliers and competitors;

	•		the ability of our suppliers to provide products in a timely manner to our customers;

	•		changes in operating expenses;

	•		increased competition in our markets; and

	•		other general economic and seasonal factors.

We may be unable to obtain additional capital when necessary and on terms that are acceptable to us.

We anticipate that our December 31, 2006 cash and cash equivalents in unrestricted cash and cash equivalents will be sufficient to fund our current level of operations for at least the next twelve months. Our future capital requirements will depend on many factors, including our ability to maintain our existing cost structure and return on sales and execute our business and strategic plans as currently conceived. We expect that we will need significant additional cash resources to operate and expand our business in the future and we may attempt to raise additional funds through public or private equity financing or from other sources. The sale of additional equity securities could result in additional dilution to our stockholders. Additional indebtedness would result in additional debt service obligations and could result in operating and financing covenants that would restrict our operations. In addition, financing may not be available in amounts or on terms acceptable to us, if at all. If we are not able to raise additional capital through fund raising activities we could be forced to curtail some of

the currently anticipated expenditures in the above mentioned areas. Should we be forced to do this it could have an impact on our anticipated future growth.

We may be unsuccessful in attracting or retaining key sales, marketing and other personnel.

The success of our business is dependent on our ability to attract and retain highly skilled managers and sales and marketing personnel. BMP China’s and Wanwei’s sales personnel carry out critical promotional and sales activities of BMP China and Wanwei. There is intense competition for qualified sales and marketing personnel, and we may be unable to attract, assimilate or retain additional qualified sales and marketing personnel on a timely basis. Our inability to retain key personnel or the failure to attract additional qualified personnel could harm our development and results of operations. In addition, as we plan to expand in China, we will need to attract additional qualified managerial staff and other personnel. We may have difficulty in hiring and retaining a sufficient number of qualified personnel to work in China. This may impede the development of our distribution business and the expansion of our business in China.

We may be unable to manage our growth effectively.

Our business strategy is based on the assumption that we will acquire additional distribution channels in the future and that the number of our customers and the extent of our operations will grow. Our ability to compete effectively and to manage our future growth, if any, requires us to:

	•		continue to improve our financial and management controls and reporting systems and procedures to support the proposed expansion of our business operations as a result of our acquisition of Wanwei and the acquisition of any additional distribution channels in the future; and

	•		locate or hire, at reasonable compensation rates, qualified personnel and other employees necessary to expand our capacity in order to accommodate the proposed expansion of our business operations.

If we are unable to accomplish any of these objectives, we will be unsuccessful in effectively managing our growth, which could harm our business, operating results, and financial condition.

We only offer products and services related to pharmaceuticals and, if demand for these products and services decreases, or if competition increases, we will have no other ways to generate revenue.

Our future results depend on continued market acceptance of pharmaceutical products and services in China and our ability to continue to adapt to the changing needs of our customers. Any reduction in demand or increase in competition in the market for pharmaceutical products and services could have a material adverse effect on our business, operating results and financial condition.

Our business strategy to use our marketing arm to create demand for products that we will offer exclusively through a distribution arm may fail.

Our business strategy depends in large part on our ability to establish exclusive distribution and marketing relationships with pharmaceutical and medical device manufacturers and to leverage our marketing arm to create demand for products that we will distribute exclusively through a distribution arm. A number of factors could hinder the success of this strategy, including, among other things, our failure to:

	•		obtain a sufficient number of effective distribution channels, whether through internal growth or strategic acquisition;

	•		create sufficient demand for products that we will distribute exclusively; and

	•		enter into and maintain exclusive distribution and marketing relationships with pharmaceutical manufacturers on profitable terms.

If we are unable to implement this strategy effectively, our business, operating results and financial condition could suffer.

Because we only recently became subject to the reporting requirements of the Exchange Act, we have limited experience in complying with public company obligations. Attempting to comply with these requirements will increase our costs and require additional management resources and we still may fail to comply.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the Securities and Exchange Commission, or the SEC, adopted rules requiring public companies to include a report of management on the company’s internal control over financial reporting in their annual reports on Form 10-K. In addition, the public accounting firm auditing the company’s financial

statements must attest to and report on management’s assessment of the effectiveness of the company’s internal control over financial reporting and must separately report on the effectiveness of our control over financial reporting. Under the current SEC regulations, as an non-accelerated filer, we expect that management will be required to issue a report on managements assessment on the Company’s internal control over financial reporting effective for the year ended December 31, 2007. Additionally, the Company will begin to require an independent auditor attestation report on management’s assessment on internal controls over financial reporting effective for the year ending December 31, 2008. Our ability to maintain effective internal control over financial reporting may be limited by, among other things, differences between generally accepted accounting principles in China and generally accepted accounting principles in the United States and difficulties in implementing proper segregation of duties due to the lack of available qualified accounting personnel in the China marketplace. If we are unable to conclude that we have effective internal controls over financial reporting or if our independent auditors are unable to provide us with an unqualified report as to the effectiveness of our internal controls over financial reporting as of December 31, 2007 when management assessment is required or as of December 31, 2008 when our independent auditor attestation is required, and future year ends as required by Section 404 of the Sarbanes-Oxley Act of 2002, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our securities.

We are a small company with limited resources. While we plan to expand our staff to respond to Exchange Act reporting requirements, we may encounter substantial difficulty attracting qualified staff with requisite experience due to the high level of competition for experienced financial professionals. Furthermore, we will have to improve internal controls as they relate to the matters described in the next risk factor. Given the status of our efforts, coupled with the fact that guidance from regulatory authorities in the area of internal controls continues to evolve and that our operations are primarily in China, where the regulatory environment is different from that of the United States, we may be unable to comply with applicable deadlines.

If we are unable to satisfy the regulatory requirements relating to internal controls, or if our internal controls over financial reporting are not effective, our stock price could decline.

The existence of any significant deficiencies in our internal control over financial reporting could, and the existence of material weaknesses in our internal control over financial reporting would, preclude management from concluding that our internal control over financial reporting in the relevant time period is effective. If management or our independent auditors ultimately determine that our internal control over financial reporting is not effective in future periods, our stock price could decline and we could be subject to investigations or sanctions by regulatory authorities, which could have a negative impact on our business.

We are a holding company with no operations of our own and depend on our subsidiaries for revenue.

We are a holding company with no significant assets other than our equity interests in BMP China and Wanwei. We rely on dividends, loans and other payments to us by BMP China, Wanwei and any other future acquired entities in China. As of December 31, 2006, we had an accumulated deficit of approximately $16.0 million. Accordingly, our ability to make payments on indebtedness we may incur and to distribute dividends to our stockholders is dependent on the earnings, and the distribution of funds from, our subsidiaries. However, BMP China and Wanwei have incurred significant operating losses since their inceptions. If these losses continue, we will not be able to pay dividends or service any debt that we may incur. In addition, if BMP China, Wanwei or any future subsidiaries incur indebtedness of their own in the future, the instruments governing such indebtedness could restrict their ability to pay dividends or make other distributions to us, which in turn would limit our ability to make payments on indebtedness we may incur and to distribute dividends to our stockholders.

In addition, our corporate structure may restrict the distribution of dividends to our stockholders since Chinese regulations permit payment of dividends only out of accumulated profits as determined in accordance with Chinese accounting standards and regulations. According to these standards and regulations, BMP China and Wanwei are, and any future subsidiaries will be, required to set aside a portion of their after-tax profits to maintain certain reserve funds that may not be distributed as cash dividends.

Risks Relating to Doing Business in China

We face increased risks of doing business due to the extent of our operations in China.

Our operating subsidiaries, BMP China and Wanwei, are organized and located in China. China currently is transitioning to a market-developed socialist economy. There are significant political and economic tensions resulting from this transition that could affect the business environment in China. Our efforts to expand into China pose special risks that could adversely

affect our business. Doing business in China also will subject us to the customary risks of doing business in foreign countries. These risks include, among others, the effects of:

	•		fluctuations in foreign currency exchange rates and controls;

	•		competitive disadvantages to established foreign businesses with significant current market share and business and customer relationships;

	•		nationalization;

	•		tax and regulatory policies of local governments and the possibility of trade embargoes;

	•		political instability, war or other hostilities; and

	•		laws and policies of the United States and China affecting foreign trade and investment.

Any of these risks could cause significant interruptions in our distribution and other operations, which would adversely affect our ability to conduct business in China and our financial condition, results of operations and business.

Fluctuations in the Chinese Renminbi could adversely affect our results of operations.

Substantially all of our revenues, profits, cash flows and assets have been, and we expect will continue to be, derived in China and be denominated in Chinese currency, or RMB. The value of the RMB, which is controlled and adjusted periodically by the Chinese government, fluctuates and is subject to changes in the political and economic conditions in China. On July 21, 2005, China increased the value of the RMB by 2.1% to RMB 8.11 to the dollar and announced that the RMB would no longer be pegged to the United States dollar, but would be allowed to float in a band (and, to a limited extent, increase in value) against a basket of foreign currencies. On December 31, 2006, the exchange rate of United States dollar to RMB is approximately 1 to 7.80. Any devaluation of the RMB could adversely affect the value of our common stock in foreign currency terms because we will receive substantially all of our revenues in RMB. Fluctuations in exchange rates also could adversely affect the value, translated or converted into United States dollars, of our net assets, earnings and any declared dividends. In addition, a devaluation of the RMB is likely to increase the portion of our cash flow required to satisfy any foreign currency denominated obligations.

Government control of currency conversion could adversely affect our operations and financial results.

Substantially all of our revenues are in RMB, which currently is not a freely convertible currency. Any restrictions on currency exchange may limit our ability to use revenue generated in RMB to fund our business activities outside of China or to make dividend payments in United States dollars. Under China’s existing foreign exchange regulations, the RMB is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loan or investment in securities outside of China without the prior approval of China’s State Administration of Foreign Exchange. Foreign exchange transactions under our capital account, including foreign currency-denominated borrowings from Chinese or foreign banks and principal payments with respect to foreign currency-denominated obligations, continue to be subject to significant foreign exchange controls and require the approval of the State Administration of Foreign Exchange. These limitations could affect our ability to obtain foreign exchange through debt or equity financing, or to obtain foreign exchange for capital expenditures. In the future, the Chinese government may take measures at its discretion to restrict access to foreign currencies for current account transactions if foreign currencies become scarce in China. We may be unable to pay dividends in United States dollars or other foreign currencies to our stockholders if the Chinese government restricts access to foreign currencies for current account transactions.

The ability of our Chinese operating subsidiaries to pay dividends may be restricted due to our corporate structure.

Substantially all of our operations are conducted in China and substantially all of our revenues are generated in China. As wholly foreign-owned enterprises, BMP China and Wanwei are required to establish reserve funds and staff and workers’ bonus and welfare funds, each of which is appropriated from net profit after taxation but before dividend distributions in

accordance with Chinese law. BMP China is required to allocate at least 10% of their net profits to the reserve fund until the balance of this fund has reached 50% of BMP China’s or Wanwei’s registered capital, which, as of December 31, 2006, was approximately $2.5 million and $2.4 million, respectively.

In addition, the profit available for distribution from our Chinese subsidiaries is determined in accordance with generally accepted accounting principles in China. This calculation may differ from the one performed under generally accepted accounting principles in the United States, or GAAP. As a result, we may not receive sufficient distributions from our Chinese subsidiaries to enable us to make dividend distributions to our stockholders in the future and limitations on distributions of the profits of BMP China and Wanwei could negatively affect our financial condition and assets, even if our GAAP financial statements indicate that our operations have been profitable.

We may be restricted in our ability to transfer funds to our Chinese operating subsidiaries, which may restrict our ability to act in response to changing market conditions.

Any transfer by us of funds to our Chinese subsidiaries through a stockholder loan and the capacity for our Chinese subsidiaries to obtain an RMB loan secured by us or other foreign institutions are subject to registration with China’s State Administration of Foreign Exchange. If the sum of the aggregated medium-term and long-term external debts, the outstanding short-term external debts and RMB loans secured by foreign institution(s) of a Chinese subsidiary is less than the difference between its total investment amount and its registered capital, the Chinese subsidiary is required to apply to the appropriate examination and approval authority to increase its total investment amount. Accordingly, any transfer of funds from us, directly or indirectly, to any of our Chinese subsidiaries by means of increasing its registered capital is subject to approval by the appropriate examination and approval authorities in China. This limitation on the free flow of funds between us and our Chinese subsidiaries may restrict our ability to react to changing market conditions.

China’s economic, political and social conditions, and its government policies, could adversely affect our business.

Substantially all of our operations are conducted in China and substantially all of our revenues are derived in China. Accordingly, our results of operations, financial condition and prospects are subject, to a significant degree, to economic, political and legal developments in China. The economy of China differs from the economies of most developed countries in many respects, including:

	•		level of government involvement;

	•		economic structure;

	•		allocation of resources;

	•		level of development;

	•		inflation rates;

	•		growth rate; and

	•		control of foreign exchange.

The economy of China has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industrial development. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

A slow-down of the Chinese economy could adversely affect our growth and profitability.

Our financial results have been, and are expected to continue to be, affected by conditions in the Chinese economy and pharmaceutical industry. Although the Chinese economy has grown significantly in the past decade, there can be no assurance that this growth will continue or that any slow-down will not have a negative impact on our business.

The legal system in China has inherent uncertainties that could limit the legal protections available to us.

We currently conduct our business primarily through our wholly-owned operating subsidiaries, BMP China and Wanwei, and expect in the future to conduct our business through BMP China, Wanwei and other subsidiaries organized in China that we acquire, which are and will be organized in China. These subsidiaries generally are subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to wholly foreign-owned enterprises. In addition, we depend on several affiliated entities in China to honor their service agreements with us. Chinese law governs almost all of these agreements, and disputes arising out of these agreements are expected to be decided by arbitration in China. The Chinese legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since 1979, Chinese legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since these laws and regulations are relatively new and the Chinese legal system continues to evolve, the interpretations of many laws, regulations and rules are not always uniform, and enforcement of these laws, regulations, and rules involves uncertainties that may limit remedies available to us. Any litigation in China may be protracted and may result in substantial costs and diversion of resources and management attention. In addition, China may enact new laws or amend current laws that may be detrimental to us, which may have a material adverse effect on our business operations.

We have limited business insurance coverage in China.

The insurance industry in China is still in an early stage of development. Insurance companies in China offer limited business insurance options. As a result, we have not maintained, and currently do not maintain, any liability, hazard or other insurance covering our services, business, operations, errors, acts or omissions, personnel or properties. To the extent that we are unable to recover from others for any uninsured losses, such losses could result in a loss of capital and significant harm to our business. If any action, suit and/or proceeding is brought against us and we are unable to pay a judgment rendered against us and/or defend ourselves against such action, suit and/or proceeding, our business, financial condition and operations could be negatively affected.

Any future outbreak of health epidemics, such as Severe Acute Respiratory Syndrome, or SARS, Asian Influenza, or Asian Bird Flu, or any other epidemic in China could have a material adverse effect on our business operations, financial condition and results of operations.

From December 2002 to June 2003, China and certain other Asian countries experienced an outbreak of a new and highly contagious form of atypical pneumonia now known as SARS. In addition, recent outbreaks of the Asian Bird Flu have occurred throughout Asia. Outbreaks of SARS, Asian Bird Flu or any other epidemic in the future may disrupt our business operations and have a material adverse effect on our financial condition and results of operations. For example, a new outbreak of SARS, Asian Bird Flu or any other epidemic likely would reduce the level of economic activity in affected areas, which may lead to a reduction in our revenue if our clients cancel existing contracts or defer future expenditures. In addition, health or other government regulations may require temporary closing of our offices, or the offices of our customers or partners, which would severely disrupt our business operations and have a material adverse effect on our financial condition and results of operations.

Risks Relating to Pharmaceutical Distribution in China and Wanwei

The absence of express laws and regulations in China regarding foreign investment in China’s pharmaceutical distribution sector may cause uncertainty.

Pursuant to China’s Administrative Measures on the Foreign Investment in Commercial Sector, as of December 11, 2004, foreign enterprises are permitted to establish or invest in wholly foreign-owned enterprises or joint ventures that engage in wholesale or retail sales of pharmaceuticals in China subject to the implementation of relevant regulations. However, no specific regulation in this regard has been promulgated to date. If specific regulations are not promulgated, or if any promulgated regulations contain clauses that will cause an adverse impact to our current and future acquisitions in China, our operations and business strategy will be adversely affected.

Wanwei may be unable to obtain renewals of necessary pharmaceutical distribution permits.

Under Chinese law, all pharmaceutical wholesale and retail enterprises engaging in the pharmaceutical distribution business must obtain a pharmaceutical distribution permit, and must comply with China’s GSP standards and obtain a GSP certificate. Both the permit and certificate are valid for five years and are subject to renewal and reassessment by the relevant

Chinese authorities, and the standards of compliance required in relation thereto may from time to time be subject to change. Any changes in compliance standards, or any new laws or regulations that prohibit or render it more restrictive for Wanwei or other pharmaceutical distribution enterprises we may acquire in the future to conduct their business or that increase their compliance costs may adversely affect their or our operations and profitability.

Wanwei has previously obtained a GSP certificate and pharmaceutical distribution permit. Wanwei’s GSP certificate will expire on April 3, 2008 and its pharmaceutical distribution permit will expire on February 2, 2010. Although we do not believe that Wanwei will be unable to obtain renewals of its GSP certificate and pharmaceutical distribution permit in the future, its ability to do so is primarily outside of its or our control. Any failure by Wanwei to obtain renewals of its GSP certificate or pharmaceutical distribution permit may have a material adverse effect on its operations by restricting its ability to carry out its pharmaceutical distribution business, among other things.

Price control regulations may decrease our profitability.

The prices of certain medicines Wanwei distributes, including those listed in the Chinese government’s catalogue of medications that are reimbursable under China’s social insurance program, or the Insurance Catalogue, are subject to control by the relevant state or provincial price administration authorities. In practice, price control with respect to these medicines sets a ceiling on their retail price. The actual price of such medicines set by manufacturers, wholesalers and retailers cannot historically exceed the price ceiling imposed by applicable government price control regulations. Although, as a general matter, government price control regulations have resulted in drug prices tending to decline over time, there has been no predictable pattern for such decreases.

Revenues from products distributed by Wanwei that are subject to price controls accounted for a total of approximately 86% and 66% of Wanwei’s total revenues in the years ended December 31, 2006 and 2005. Hence, the prices of these medicines could not be increased at Wanwei’s discretion above the price ceiling without prior government approval. It is uncertain whether Wanwei would be able to obtain the necessary approvals to increase the prices of these medicines. This could affect Wanwei’s ability to maximize its profits or to profitably sell these products.

The bidding process with respect to the purchase of pharmaceutical products may lead to reduced revenue.

Chinese regulations require non-profit medical organizations established in China to implement bidding procedures for the purchase of drugs. It is intended that the implementation of a bidding purchase system will be extended gradually and will cover, among other drugs, those drugs consumed in large volume and commonly used for clinical uses. Pharmaceutical wholesalers must have the due authorization of the pharmaceutical manufacturers in order to participate in the bidding process. If, for the purpose of reducing the bidding price, pharmaceutical manufacturers participate in the bidding process on their own and enter into purchase and sales contracts with medical organizations directly without authorizing a pharmaceutical distributor, the revenue of Wanwei or any other subsidiaries that we may acquire in the future, whose main business is pharmaceutical distribution, may be adversely affected.

Even though Wanwei has established long-term business relationships with many medical organizations, if a pharmaceutical manufacturer whose products we do not distribute is awarded a contract under the bidding process, the medical organization that initiated the bidding process will be restricted under its agreement with the winning bidder from purchasing similar products from Wanwei.

If the medicines Wanwei distributes are replaced by other medicines or are removed from China’s Insurance Catalogue in the future, Wanwei’s revenue may suffer.

Under Chinese regulations, patients purchasing medicines listed by China’s state and/or provincial governments in the Insurance Catalogue may be reimbursed, in part or in whole, by a social medicine fund. Accordingly, pharmaceutical distributors prefer to engage in the distribution of medicines listed in the Insurance Catalogue. Currently, the main products that Wanwei distributes are listed in the Insurance Catalogue. The content of the Insurance Catalogue is subject to change by the Ministry of Labor and Social Security of China, and new medicines may be added to the Insurance Catalogue by provincial level authorities as part of their limited ability to change certain medicines listed in the Insurance Catalogue. If the medicines Wanwei distributes are replaced by other medicines or removed from the Insurance Catalogue in the future, Wanwei’s revenue may suffer.

Risks Relating to Our Common Stock

Sales of substantial amounts of our common stock in the public market could depress the market price of our common stock.

Since August 10, 2006, our common stock has been traded on the NASDAQ Capital Market. If our stockholders sell substantial amounts of common stock in the public market, including common stock issuable upon the exercise of outstanding warrants and options, or the market perceives that such sales may occur, the market price of our common stock could fall and we may be unable to sell our common stock in the future. We had 26,641,191 shares of common stock outstanding as of March 1, 2007. Approximately 8,640,834 of these outstanding shares are held by Abacus, who may be deemed to be our “affiliate“ as that term is defined under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, and would be subject to Rule 144. Sales of substantial amounts of our common stock over limited time periods would likely materially decrease the market price of our common stock.

If the ownership of our common stock continues to be highly concentrated, it may prevent you and other stockholders from influencing corporate decisions, such as significant corporate transactions and the election and replacement or removal of directors and management, and may also result in conflicts of interest that could cause our stock price to decline.

As of March 1, 2007, Abacus beneficially owned or controlled approximately 32.4% of our outstanding shares of common stock. If Abacus were to act on its own, it likely could control the outcome of corporate actions requiring stockholder approval, including the election, replacement or removal of directors, any merger, consolidation or sale of all or substantially all of our assets, or any other significant corporate transactions, and by virtue of its ability to control the board of directors could control and influence management composition. Abacus may have different interests than other stockholders. For example, Abacus could act to delay or prevent a change of control of us, even if such a change of control would benefit our other stockholders, could prevent or frustrate attempts to replace or remove current management, or Abacus could pursue strategies that are different from the wishes of other investors. This significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Our common stock may experience extreme price and volume fluctuations, which could lead to costly litigation for us and make an investment in us less appealing.

The market price of our common stock may fluctuate substantially due to a variety of factors, including:

	•		announcements concerning our competitors or the pharmaceutical distribution industry in general;

	•		rate of sales and customer acceptance;

	•		changing factors related to doing business in China;

	•		interruption of supply or changes in our agreements with manufacturers or distributors;

	•		new regulatory pronouncements and changes in regulatory guidelines and timing of regulatory approvals;

	•		general and industry-specific economic conditions;

	•		additions to or departures of our key personnel;

	•		variations in our quarterly financial and operating results;

	•		changes in market valuations of other companies that operate in our business segments or in our industry;

	•		lack of adequate trading liquidity;

	•		announcements about our business partners;

	•		changes in accounting principles; and

	•		general market conditions.

The market prices of the securities of early-stage companies, particularly companies like ours without consistent product revenues and earnings, could be highly volatile. In the past, companies that experience volatility in the market price of their securities have often faced securities class action litigation. Whether or not meritorious, litigation brought against us could result in substantial costs, divert our management’s attention and resources and harm our financial condition and results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our principal executive offices are located at 600 W. Germantown Pike, Suite 400, Plymouth Meeting, Pennsylvania 19462. We lease this office space under a lease with American Executive Centers, Inc. at a rent of $5,310 per month. This lease agreement expires in January 2008.

BMP China’s principal executive and business offices are located in Beijing. On October 13, 2005, BMP China entered into an office lease agreement with Beijing Shengshang Asset Management Co. Ltd. for the lease of 443.4 square meters of office space located in the Kuntai International Center at Chaowai Avenue, Chaoyang District, Beijing. The term of the office lease agreement commenced on the date of the office lease agreement and will expire on November 30, 2007. BMP China has an option to extend the lease period by an additional three years at the end of the lease period. The total monthly rental rate, including property management and associated fees, is RMB 48,000 ($6,211 month as of March 1, 2007). On November 1, 2006 BMP China entered into a lease agreement with Beijing Kuntai Jiahva Real Estate Development Co., Ltd. for the lease of 170.3 square meters of office space located in the Kuntai International Center at Chaowai Avenue, Chaoyang District, Beijing. The term of the office lease agreement commenced on the date of the office lease agreement and will expire on October 31, 2008. The total monthly rental rate, including property management and associated fees, is RMB 23,165 ($2,997 per month as of March 1, 2007)

Wanwei has a lease agreement with Wanhui Group for the lease of its office building, covering approximately 1,040 square meters. This lease agreement expires in December 2007. The rent is RMB 54,450 per month, or $7,045 per month as of March 1, 2007. Rent is required to be paid on a quarterly basis.

Wanwei has a lease agreement with Wanhui Group for the lease of its warehouse, covering an area of approximately 6,850 square meters. This lease agreement expires in December 2007. The rent is RMB 55,542 per month, or $7,187 per month as of March 1, 2007. The rent is required to be paid on a quarterly basis. We have requested of Wanhui Group the option of purchasing the warehouse in the upcoming year at a price to be determined by a mutually agreed upon appraiser in China.

Of the two pieces of land occupied by the warehouse, the land use right to one piece measuring approximately 16,350 square meters is considered an “allocated land use right” and the land use right to the other piece is considered a “granted land use right.” Under Chinese law, any transfer of allocated land use rights must be approved by the local governmental authority in charge of granting such approvals. For the purpose of transferring the allocated land use right to Wanwei, the approval of the Beijing Municipal Administration of State Land and Real Estate would need to be obtained, and Wanwei would enter into the land use right grant contract with the appropriate governmental authority and pay the land grant fee.

Under the warehouse lease agreement, Wanhui Group has agreed to pay any fees that arise in the event that the parcel of land where the warehouse is located is allocated by the state. If the warehouse lease agreement cannot be performed due to a fault of Wanhui Group, Wanhui Group will procure for Wanwei a site that satisfies the same conditions as pertain to the warehouse, such as a GSP certification, and will enable Wanwei to lease the site with the same or more favorable terms and conditions. If Wanhui Group fails to procure a replacement site, it will bear all the expenses incurred by Wanwei in obtaining a replacement site.

ITEM 3. LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to security holders for the year ended December 31, 2006.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Since August 10, 2006, our common stock has been traded on the NASDAQ Capital Market under the trading symbol “BJGP.” From February 22, 2006 to August 9, 2006, our common stock was quoted on the Over-the-Counter Bulletin Board under the trading symbol “BJGP.OB.” Prior to that, our common stock was quoted on the Pink Sheets under the symbol “BJGP.PK.” The following table shows the high and low closing sales prices of our common stock for each quarter of the fiscal year ended December 31, 2006 and for each quarter of the fiscal year ended December 31, 2005. The quotations from the Pink Sheets reflect inter-dealer prices without retail mark-up, mark-down, or commissions and may not represent actual transactions.


		High		Low
2006:
Fourth quarter, ended December 31, 2006	NASDAQ	$	6.50	$	4.16
Third quarter, ended September 30, 2006	NASDAQ from August 10, 2006		5.00		4.06
Second quarter, ended June 30, 2006	Over-the-Counter Bulletin Board		4.90		4.15
First quarter, ended March 31, 2006	Pink Sheets until February 22, 2006		5.00		3.45

2005:
Fourth quarter, ended December 31, 2005	Pink Sheets		3.95		1.39
Third quarter, ended September 30, 2005	Pink Sheets		1.80		1.49
Second quarter, ended June 30, 2005	Pink Sheets		2.50		1.75
First quarter, ended March 31, 2005	Pink Sheets		2.90		2.20

On March 23, 2007, the closing price of our common stock was $7.60. As of March 1, 2007, we had approximately 1700 holders of record of our common stock.

DIVIDEND POLICY

We have never declared any cash dividends and do not anticipate paying cash dividends in the near future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will be dependent on our results of operations, financial condition, contractual restrictions and other factors that our board of directors considers relevant.

ITEM 6. SELECTED FINANCIAL DATA

The following tables summarize the financial data with respect to us for the fiscal years ended December 31, 2006, 2005, 2004, 2003 and 2002. We derived the financial data for the fiscal years ended December 31, 2006, 2005, 2004, 2003 and 2002 from our audited financial statements. The summary financial data appearing in this section should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations section and the financial statements and related notes appearing elsewhere in this Form 10-K.


	Year Ended
	December 31,
	2006			2005			2004			2003			2002
Statement of Operations Data:
Net revenues	$	24,258,269		$	4,179,168		$	209,304		$	933,025		$	1,008,905
Cost of sales		23,700,115			4,979,911			317,777			664,813			798,713

Gross Margin (loss)		558,154			(800,743	)		(108,473	)		268,212			210,192

Operating expenses:
Sales and marketing expenses		1,299,657			406,799			63,334			36,098			69,142
General and administrative expenses		5,825,922			4,405,893			2,201,009			217,524			251,665
Bad Debt Expenses		—			—			—			6,590			58,998
Loss on disposal of assets		364,140			—			—			—			—

Total operating expenses		7,489,719			4,812,692			2,264,343			260,212			379,805

Loss from operations		(6,931,565	)		(5,613,435	)		(2,372,816	)		8,000			(169,613	)
Interest income (expense), net		101,577			(37 ,329	)		71,197			(496	)		(8,380
Other income		33,904			6,773			—			—			—
Provision for income taxes		—			(79 ,767	)		—			(2,178	)		(3,924	)

Net income (loss) applicable to common stockholders	$	(6,796,084	)	$	(5,723,758	)	$	(2,301,619	)	$	5,326		$	(181,917	)

Basic and diluted net income (loss) per common share	$	(0.30	)	$	(0.31	)	$	(0.16	)	$	0.00		$	(0.02	)

Weighted average diluted common shares outstanding*		22,864,039			18,569,353			14,742,822			7,807,509			7,807,509


*		The number of weighted average shares for the years ended December 31, 2004, 2003, and 2002 equate to the number of shares issued to Abacus upon our acquisition of BMP China, which was wholly-owned by Abacus.


	Year Ended December 31,
	2006		2005		2004		2003			2002
Balance Sheet Data:
Cash and cash equivalents	$	15,330,606	$	6,905,911	$	6,267,672	$	56,280		$	89,130
Total assets		27,516,550		16,676,681		7,552,936		104,599			123,544
Total liabilities		8,956,766		9 ,277,853		795,235		132,698			156,969
Total stockholders’ equity (deficit)	$	18,559,784	$	7,398,828	$	6,757,701	$	(28,099	)	$	(33,425	)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis as set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review Item 1A. “Risk Factors” of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by these forward-looking statements.

Overview

Beijing Med-Pharm Corporation, a Delaware corporation, is a pharmaceutical marketing and distribution company based in China. Our corporate headquarters are in suburban Philadelphia and our Chinese operations are based in Beijing. In addition, we have satellite sales offices throughout China. We were incorporated in the State of Delaware in November 2003 as a wholly-owned subsidiary of Just Great Coffee, Inc., a New Jersey corporation to develop and finance the growth of a Chinese pharmaceutical marketing and promotion company. In January 2004, Just Great Coffee, Inc. merged with and into us and we were the surviving corporation. BMP China was incorporated in China in May 1994. In December 2001, Abacus Investments Ltd. (“Abacus”) acquired a 100% equity interest in BMP China. In February 2004, we acquired all of the equity interests of BMP China from Abacus in exchange for our issuance to Abacus of 7,807,509 shares of our common stock, which represented approximately 90% of our common stock at the time of the exchange. As a result of this exchange, BMP China became our wholly-owned subsidiary in Beijing, the capital city of China.

On December 15, 2004, we entered into a share transfer and debt restructuring agreement with Beijing Wanhui Pharmaceutical Group (“Wanhui Group”), an 80% equity holder of Wanwei and a share transfer agreement with Wen Xin, the holder of the remaining 20% equity interest in Wanwei. On October 18, 2005, we were notified by the People’s Republic of China Ministry of Commerce that the acquisition of Wanwei had been approved. On October 25, 2005, we received a business license from Beijing Municipal Administration for Industry and Commerce, permitting us to operate Wanwei and consolidate its financial operations. On December 6, 2005, we completed the acquisition of all of the outstanding equity interests of Wanwei from Wanhui Group and Wen Xin. As required under the share transfer and debt restructuring agreement with Wanhui Group, on December 15, 2004, we paid Wanhui Group RMB 2,400,000 ($290,328 as of that date). In addition, on December 6, 2005, the Company paid Wanhui Group RMB 101,030, or $12,500 as of that date, which represented full payment of the remaining amount of the obligation, net of our estimated tax liability that results from the debt forgiveness between the Wanhui Group and Wanwei (the “estimated tax obligation”). On June 29, 2006, the Company paid Wanhui Group RMB 3,290,300, or $412,100 as of that date, as the estimated tax obligation was reduced by the same amount. On January 10, 2007, The Company paid $214,277 to the Chinese Tax Authority as the final payment related to the acquisition of Wanwei.

Since we acquired BMP China in February 2004, we have funded our operations primarily through the issuance of shares of our common stock. In March 2004, we completed a private placement of 8,695,652 shares of our common stock at a price of $1.15 per share, which yielded gross proceeds to us of approximately $10.0 million and net proceeds to us of approximately $8.8 million (the “First Financing”). On October 19, 2005, we completed a private placement of 4,199,981 shares of our common stock at a price of $1.50 per share, which yielded gross proceeds to us of approximately $6.3 million and net proceeds to us of approximately $5.9 million (the “Second Financing”). Investors in the Second Financing also received warrants to purchase an aggregate of 1,049,828 shares of common stock, half of which have an exercise price equal to $1.875 and the balance of which have an exercise price equal to $2.25. On December 20, 2006, we completed a private placement of 3,333,306 shares of our common stock at a price of $4.50 per share, which yielded gross proceeds to us of approximately $15 million and net proceeds to us of approximately $14.1 million (the “Third Financing”). Investors in the Third Financing also received warrants to purchase an aggregate of 1,116,611 shares of common stock, which have an exercise price equal to $5.625. Our cash resources have primarily been devoted to payment of salaries and wages for our employees, professional fees, fees related to sales and promotion of our current products and our acquisition of Wanwei.

We have an operating history of approximately 12 years, dating from the formation of BMP China in 1994. We have historically been a pharmaceutical marketing and product registration company of domestic and foreign pharmaceutical products and devices for the Chinese market. Our acquisition of Wanwei is expected to significantly expand our service offering to include pharmaceutical distribution in the Chinese Market.

Our current services, which we offer to foreign and domestic pharmaceutical manufacturers in China through BMP China and Wanwei include:

	•		pre-market entry analysis;

	•		clinical trial management;

	•		product registration;

	•		market research;

	•		pharmaceutical marketing to physicians, hospitals and other healthcare providers; and

	•		pharmaceutical distribution.

Financial Overview

Historically, we have generated a majority of our revenues from commissions related to sales of pharmaceutical products. Beginning with the acquisition of Wanwei in October 2005, the vast majority of our revenues consist of revenues from the distribution of pharmaceutical products in China through our wholly-owned subsidiary Wanwei.

The prices of certain medicines that Wanwei distributes or that we market and promote, including those listed in the Chinese government’s Insurance Catalogue, which are reimbursable under China’s social insurance program, are subject to control by the relevant state or provincial price administration authorities. In practice, price control with respect to these medicines sets a ceiling on their retail price. The actual price of such medicines set by manufacturers, wholesalers and retailers cannot exceed the price ceiling imposed by applicable government price control regulations. Although, as a general matter, drug prices have tended to decline over time, there has been no predictable pattern for such decreases.

Since our inception, we have generated significant losses. As of December 31, 2006, we had an accumulated deficit of approximately $16.0 million.

Our future success will depend on obtaining additional promotional and market research agreements and licensing rights for China, as well as acquiring additional distribution companies currently operating throughout China. During 2006 and 2005, we have pursued a strategy of broadening our range of promoted products and we are currently actively reviewing for license various branded pharmaceutical products and products in development from western pharmaceutical companies for marketing and distribution in China.

On August 19, 2005, the Company restated its financial statements as of and for the period ended December 31, 2004 principally to correct a $51,000 overstatement of revenue. As a result of the restatement, revenues reported for the fiscal year ended December 31, 2004 have been reduced from $260,000 to $209,000. The overstatement resulted from the erroneous recording of an advance payment from a distributor as revenue in the first quarter of 2004. Financial information as of and for the period ended December 31, 2004 and related comparable information included in this report give effect to this restatement.

Liquidity and Capital Resources

As of December 31, 2006, we had unrestricted cash and cash equivalents of approximately $15.3 million, which represented 56% of our total assets. Our cash and cash equivalents are highly liquid investments with a maturity of three months or less at the time of purchase and are primarily invested in short-term money market instruments and investments.

However, we do not anticipate any losses with respect to such cash balances because the balances are invested in highly-rated securities.

Since we acquired BMP China in February 2004, we have funded our operations primarily through the issuance of shares of our common stock. In March 2004, we completed a private placement of 8,695,652 shares of our common stock at a purchase price of $1.15 per share, which yielded gross proceeds to us of approximately $10.0 million and net proceeds to us of approximately $8.8 million. On October 19, 2005, we completed a private placement of 4,199,981 shares of our common stock to a group of institutional and individual accredited investors, for gross proceeds of $6.3 million and net proceeds of approximately $5.9 million. The investors also received warrants to purchase an aggregate of 1,049,828 shares of common stock, half of which had an exercise price equal to $1.875 and the balance of which had an exercise price equal to $2.25. On December 20, 2006, we completed a private placement of 3,333,306 shares of our common stock to a group of institutional and individual accredited investors, for gross proceeds to us of $15.0 million and net proceeds to us of approximately $14.1 million. The investors also received warrants to purchase an aggregate of 1,116,611 shares of common stock, which have an exercise price equal to $5.625.

The use of our cash flows has primarily consisted of salaries and wages for our employees, professional fees, fees related to sales and promotion of our current products and the acquisition of Wanwei.

We currently plan to use the remaining proceeds primarily to fund:

	•		our operating expenses and general working capital;

	•		the marketing of our current and future products;

	•		our pursuit of internal growth and strategic acquisitions including our proposed acquisition of Shanghai Rongheng Pharmaceutical Company Limited (Rongheng);

	•		our integration of Wanwei and BMP China; and

	•		the expenses necessary to maintain our status as an Exchange Act reporting company.

We anticipate that our December 31, 2006 balance of approximately $15.3 million in unrestricted cash and cash equivalents will be sufficient to fund our current level of operations for at least the next 12 months. Our future capital requirements will depend on many factors, including those factors described in Item 1A. “Risk Factors” of this Annual Report on Form 10-K as well as our ability to maintain our existing cost structure and return on sales, fund obligations for additional capital that will occur on additional product licenses and acquisitions and execution of our business and strategic plans as currently conceived.

To date, we have had negative cash flows from operations.

Net cash used in operating activities was $7,556,071 for the year ended December 31, 2006. This amount principally reflected our net loss of $6,796,000, partially offset by $1,886,000 in non-cash charges including stock-based compensation expense of $1,171,000, loss on disposal of $372,000, intangible amortization of $256,000 and depreciation of $87,000. In addition, we generated $615,000 of operating cash as a result of changes in certain of our operating assets and liabilities during the year ended December 31, 2006. The most significant changes were the increase in accounts payable $346,000, decrease in prepaid expenses and other current assets $120,000 and increases in accrued other $63,000 and accrued payroll of $57,000. Offsetting these changes were increases in accounts receivable of $2,136,000, inventory of $687,000, other receivables of $212,000 and value added taxes receivable of $191,000. Cash used in investing activities was $682,000 and reflects a payment to Wanhui Group of $450,000 for the purchase of Wanwei and the acquisition of property and equipment of $232,000. Net cash provided by financing activities was $16,608,000, consisted primarily of $14,089,000 net proceeds from the Third Financing, $2,634,000 from the exercise of warrants, and is offset by $115,000 in reduction of notes payable.

Our capital requirements are likely to increase, particularly as we pursue internal growth, add personnel, fund inventory purchases and support increased levels of accounts receivables prior to receiving collections from our customers. To support our internal growth and acquisitions, it is our expectation that we will be adding financial, marketing, product and medical managers over the next 12 months. In addition, we expect to enter into product license agreements which may involve development and milestone payments, and market and clinical research. We expect to continue to pursue strategic

acquisitions in the near term. Because of our strategic acquisitions, we will most likely require additional funds, and we may attempt to raise additional funds through public or private equity offerings, debt financings or from other sources. If we are not able to raise additional capital through fund raising activities we could be forced to curtail some of the currently anticipated expenditures in the above mentioned areas. Should we be forced to do this it could have an impact on our anticipated future growth.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets or liabilities as of the dates of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and various other factors and assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results might differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 1 to our financial statements included elsewhere in this Form 10-K, we believe the following critical accounting estimates reflect our more significant estimates and assumptions used in the preparation of our financial statements:

Revenue Recognition

We recognize distribution revenues and related cost of sales at the later of (a) the time of shipment or (b) when title passes to the customers, provided that there is evidence of a final arrangement, there are no uncertainties surrounding acceptance, collectibility is probable and the price is fixed. Revenues consist of gross sales less provisions for estimated customer returns, discounts, vendor payments and volume rebates. Amounts billed to a customer for shipping and handling are reported as revenue. We recognize commission revenue, net of returns, on products delivered by the distribution provider at the time of delivery, provided that there is evidence of a final arrangement, there are no uncertainties surrounding acceptance, collectibility is probable and the price is fixed. Under the terms of these agreements revenues are generally receivable within 90 days of delivery. We estimate the reserve for product returns at the time revenue is recognized based on various market data, historical trends, and information from customers.

Accounts Receivable and Bad Debts

Accounts receivable are stated as the amount management expects to collect from outstanding balances. We perform ongoing credit evaluations of our customers and generally require no collateral to secure accounts receivable. We maintain an allowance for potentially uncollectible accounts receivable based on our assessment of the collectibility of accounts receivable. This assessment is based upon specific identification of customer accounts and our best estimate of potential loss. We evaluate the adequacy of our allowance for doubtful accounts at least quarterly. If the financial condition of our customers were to weaken, additional allowances may be required. Moreover, if our allowance for doubtful accounts is understated, we will be required to take additional charges in future periods.

Inventory Reserve

We review our inventory reserve based on our established criteria that identifies products that have excess inventory on hand by comparing inventory on hand with the average annual sale of that product multiplied by the number of years before the product expiration date. In addition, in certain cases, additional inventory reserve charges are recorded based upon facts that would not give rise to a reserve charge under the historical reserve criteria, or if in management’s opinion, additional amounts are considered necessary based upon current industry conditions.

Contract Allowance

We have entered into market promotion and distribution agreements with Xiamen International Economic and Trade Company (Xiamen) and pharmaceutical manufacturers for the marketing and promotion of certain products. These agreements stipulate the Company is financially responsible for products that have been ordered by Xiamen at our request. We evaluate the adequacy of our contract allowance at least quarterly and assess the projected sales requirements for each product and the current inventory on hand at Xiamen. If our estimate of sales requirements are too high, our contract allowance will likely be understated and we may be compelled to record additional charges in subsequent periods. In this regard, as of December 31, 2006, the Company determined that a $463,000 allowance was required to reflect the shortfall of projected sales against inventory prior to expiration.

Deferred Taxes

Income taxes are accounted for under the Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the years in which the differences are expected to reverse. A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. Specifically, the determination to provide a valuation allowance is dependent upon our assessment of whether it is more-likely-than-not that sufficient future taxable income will be generated in the relevant tax jurisdiction to utilize the deferred tax asset. We review our internal sales forecasts and pre-tax earnings estimates to make our assessment regarding the utilization of deferred tax assets. In the event we determine that future taxable income likely will not be sufficient to utilize the deferred tax asset, we will record a valuation allowance. If that assessment were to change, we would record a benefit on the consolidated statement of earnings. As a new accounting pronouncement FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the effect FIN 48 will have on its consolidated financial position, liquidity, or results of operations.

Accounting for Stock-Based Compensation

SFAS No. 123, “Accounting for Stock-Based Compensation,” allows companies which have stock-based compensation arrangements with employees to adopt a new fair value basis of accounting for stock options and other equity instruments or to continue to apply the existing accounting rules under APB Opinion No. 25, “Accounting for Stock Issued to Employees,” but with additional financial statement disclosure.

In December 2004, the FASB issued SFAS No. 123R, Share-based payment that amends SFAS No. 123, to report stock-based employee compensation in their financial statements. On January 1, 2006, we adopted SFAS No. 123R. Stock-based compensation expense recognized under SFAS No. 123R for the year ended December 31, 2006 was $1,171,000, which consisted of stock-based compensation expense related to stock options and stock grants under our employee incentive plans. Included in stock-based compensation for the year ended December 31, 2006, the Company recognized stock-based compensation of $695,000, related to stock options issued in 2004 that was issued in the money.

During the year ended December 31, 2004, we issued options to employees and advisors to purchase 930,000 shares of common stock at an exercise of $1.15 per share. During the year ended December 31, 2005 and December 31, 2004, our compensation expense was $399,075, and $295,594 respectively, which represents the difference between the exercise price and the fair value of the common stock. Our compensation expense related to these shares was $695,000, for the year ended December 31, 2006. During 2005, we issued options to employees and board members to purchase 605,000 shares of common stock at exercise prices ranging from $1.60 to $3.66. There was no impact to the statement of operations for the issuance of these options in 2005. During the year ended December 31, 2006, we issued options to employees and board members to purchase 458,000 shares of common stock, at exercise prices ranging from $3.60 to $5.84.

Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

Net Revenue:

Net revenue was approximately $24,258,000 for the year ended December 31, 2006, as compared with approximately $4,179,000 for the year ended December 31, 2005. This significant increase was almost entirely due to the acquisition of Wanwei in October 2005. For the year ended December 31, 2006, Wanwei generated revenues of $24,189,000 from distribution activities as compared to $3,997,000 for the period October 25, 2005 through December 31, 2005. Marketing and registration revenue was $748,000 for 2006 as compared to $182,000 for 2005. The increase was the result of our license and promotion of Propess and Anpo in 2006. Offsetting these increases is an intercompany elimination of $679,000, which results from Propess and Anpo being marketed by BMP China and sold through Wanwei.

Cost of Sales:

Cost of sales was $23,700,000 during the year ended December 31, 2006 as compared with $4,980,000 during the year ended December 31, 2005. This increase is primarily attributable to our acquisition of Wanwei in October 2005. During the year ended December 31, 2006, Wanwei Cost of sales was $22,235,000 as compared to $3,515,000 for the period October 25, 2005 through December 31, 2005.

Sales and Marketing Expenses:

Sales and marketing expenses were $1,300,000 for the year ended December 31, 2006 as compared with $407,000 for the year ended December 31, 2005. The significant components of the sales and marketing expenses for the year ended December 31, 2006 were salaries and related expenses totaling $531,000, transportation expenses of $193,000 and warehouse occupancy expenses totaling $114,000. The increase was the result of our acquisition of Wanwei which was completed in October 2005. Distribution sales and marketing expenses for the year ended December 31, 2006 were $1,275,000 as compared to $339,000 for the period October 25, 2005 through December 31, 2006. Sales and marketing expenses for BMP China were $25,000 for the year ended December 31, 2006 and were reduced by $43,000 from the year ended December 31, 2005.

General and Administrative Expenses:

General and administrative expenses were $5,826,000 during the year ended December 31, 2006 as compared to $4,406,000 for the year ended December 31, 2005. Our acquisition of Wanwei in October 2005 accounted for $821,000 of the increase. During the year ended December 31, 2006, Wanwei general and administrative expenses were $973,000 as compared to $152,000 for the period October 25, 2005 through December 31, 2005. Stock based compensation recognized under SFAS No. 123R for the year ended 31, 2006 was $1,171,000 as compared to $399,000 for the year ended December 31, 2005, an increase of $772,000. Corporate communications related to investor relations was initiated in 2006 and the cost related thereto was $89,000. Increased salaries and benefits accounted for $70,000 of the increase of 2006 versus 2005. Insurance costs increased $52,000 for the year ended December 31, 2006 as compared to 2005, reflecting higher Directors and Officers and Key Man Life insurance premiums. Offsetting these increases were significant reductions in legal, accounting and other professional fees accounting for $437,000 which reflected the decision to move internal the corporate accounting function as well as the reduction in fees related to SEC registration filings in 2006.

Loss on Disposal of Asset:

Loss on disposal of asset was $364,000 for the year ended December 31, 2006, an increase of $364,000, as compared with zero for the year ended December 31, 2005. The increase was the result of our write-off of the software license and implementation cost of an Enterprise Resource Planning (ERP) system during 2006. In 2005 we identified the need to implement an ERP system to provide for the growth of the Company. In February 2006, we initiated the implementation of the ERP system, which was planned to be completed by September 30, 2006. During the system implementation, the Company was made aware of a recently released ERP system that is a better fit for our company’s operation and is expected to be more cost effective. During 2006 we made the determination to discontinue the selected ERP system and to replace it with the recently released system.

Interest Income:

Our interest income primarily consists of income earned on our cash and cash equivalents. During March 2004, we completed a private placement of shares of our common stock to investors with net proceeds of $8,800,000, net of issuance costs, and in October 2005, we completed a private placement of our shares of common stock to investors of $5,941,000, net of issuance costs. We received interest income, of $158,000 during the year ended December 31, 2006 and $177,000 in 2005.

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

Net Revenue:

Net revenue was approximately $4,179,000 for the year ended December 31, 2005, as compared with approximately $209,000 for the year ended December 31, 2004. This significant increase was entirely due to the acquisition of Wanwei in October 2005. For the period October 25, 2005 through December 31, 2006, Wanwei generated revenues of $3,997,000 from distribution activities. Marketing commissions and registration revenue was relatively unchanged with a $28,000 reduction for the year ended December 31, 2005 as compared to the year ended December 31, 2004.

Cost of Sales:

Cost of sales was $4,980,000 during the year ended December 31, 2005 as compared with $318,000 during the year ended December 31, 2004. This increase is primarily attributable to our acquisition of Wanwei in October 2004. During the year ended December 31, 2005, Wanwei Cost of sales was $3,515,000. Included in Cost of sales for BMP China for the year ended December 31, 2005 was a contract allowance of $460,000 we recorded during 2005 with respect to products that we believe may not be sold prior to their expiration. During 2005, we licensed Propess from Cytokine PharmaSciences and paid an $525,000 license fee, which is part of Cost of sales. We anticipate that our cost of sales will continue to increase as a result of our promotion efforts related to the current products we market and any additional products we acquire in the future.

Sales and Marketing Expenses:

Sales and marketing expenses were $407,000 for the year ended December 31, 2005 as compared with $63,000 for the year ended December 31, 2004. The increase was the result of our acquisition of Wanwei which was completed in October 2005. Distribution sales and marketing expenses for the year ended December 31, 2005 were $339,000. Sales and marketing expenses for BMP China were nearly unchanged increasing $4,000 for the year ended December 31, 2005 as compared to December 31, 2004.

General and Administrative Expenses:

General and administrative expenses were $4,406,000 during the year ended December 31, 2005 as compared to $2,201,000 for the year ended December 31, 2004. Our general and administrative compensation expenses increased by $381,000 for the year ended December 31, 2005 primarily because of our hiring in 2005 and 2004 of several key officers and other personnel, including our Chief Financial Officer, Vice President Sales and Marketing and the Corporate Controller. Travel related to the new administrative personnel resulted in an increase of $118,000. We commenced paying our board members during the second half of 2004 and board member compensation and related expenses increased $87,000 for the year ended December 31, 2005. In connection with the year end audit, and the preparation, and filing of two Registration Statements on Form S-1 to register shares of our common stock and warrants, due diligence on Rongheng and restatement of 2004 financial statements, legal and accounting fees and printing for the two Registration Statements on Form S-1 increased $596,000 in 2005. In addition, general and administrative expenses includes stock-based compensation to directors in the amount of $399,000 for the year ended December 31, 2005 as compared to $296,000 for the same period in 2004. In 2005 we established our US headquarters in Plymouth Meeting, Pennsylvania which accounted for $106,000 of the increase. Our acquisition of Wanwei in October 2005 accounted for $152,000 of general and administrative expense for the year ended December 31, 2005. We expect to continue to increase our general and administrative expenses as we continue to grow both internally and through any future strategic acquisition of products or distributors.

Interest Income:

Our interest income primarily consists of income earned on our cash and cash equivalents. During March 2004, we completed a private placement of shares of our common stock to investors with net proceeds of $8,800,000, net of issuance costs, and in October 2005, we completed a private placement of our shares of common stock to investors of $5,941,000, net of issuance costs. We received interest income, of $177,000 during the year ended December 31, 2006 and $80,000 in 2005.

Off-Balance Sheet Arrangements

We have entered into market promotion and distribution agreements with Xiamen International Economic and Trade Company (“Xiamen”) and pharmaceutical manufacturers for the marketing and promotion of certain products. These agreements stipulate we are financially responsible for products that have been ordered by Xiamen at our request. We do not record inventory products ordered by Xiamen or the full amount due to Xiamen should the inventory on hand remain unsold. We have established a Contract Allowance that is evaluated at least quarterly and assess the projected sales requirements for each product and the current inventory on hand at Xiamen. As of December 31, 2006, the Company determined that a $463,000 allowance was required to reflect the shortfall of projected sales against inventory prior to expiration.

Related Party Transactions

For a description of our related party transactions see “Certain Relationships and Related Transactions.”

Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments,” an amendment of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.” SFAS No. 155 simplifies accounting for certain hybrid instruments under SFAS No. 133 by permitting fair value remeasurement for financial instruments containing an embedded derivative that otherwise would require bifurcation. SFAS No. 155 eliminates both the previous restriction under SFAS No. 140 on passive derivative instruments that a qualifying special-purpose entity may hold and SFAS No. 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets,” which provides that beneficial interests are not subject to the provisions of SFAS No. 133. SFAS No. 155 also establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, and clarifies that concentrations of credit risk in the form of subordination are not imbedded derivatives. SFAS No. 155 is effective for all financial instruments acquired, issued, or subject to a remeasurement event occurring after the beginning of an entity’s fiscal year that begins after September 15, 2006. The Company has evaluated the effect of SFAS No. 155 and determined that it does not expect a material impact from the adoption to its consolidated financial position, liquidity, or results from operations.

In June 2006, the Financial Accounting Standards Board (FASB) ratified the Emerging Issues Task Force (EITF) Issue 06-3, “How Taxes Collected From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement,” (EITF 06-3). The scope of EITF 06-3 includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including but not limited to sales and value-added taxes. In EITF 06-3 a consensus was reached that entities may adopt a policy of presenting these taxes in the income statement on either a gross or net basis. If these taxes are significant, an entity should disclose its policy of presenting taxes and the amount of taxes if reflected on a gross basis in the income statement. EITF 06-3 is effective for interim and annual reporting periods beginning after December 15, 2006. The Company is required to and plans to adopt EITF 06-3 in the first quarter of 2007. The Company presents revenues net of sales and value-added taxes in its consolidated statement of operations and does not anticipate changing its policy as a result of the adoption of EITF 06-3.

time values. FIN 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the effect FIN 48 will have on its consolidated financial position, liquidity, or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. SAB 108 did not have a material impact on our results from operations or financial position.

Also in September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective the first quarter of our 2008 fiscal year with early adoption permitted. We have not yet determined the impact, if any, that the implementation of SFAS No. 157 will have on our financial statements.

In December 2006, the FASB issued FASB Staff Position No. EITF 00-19-2, Accounting for Registration Payment Arrangements (EITF 00-19-2). EITF 00-19-2 addresses an issuer’s accounting for registration payment arrangements. It specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies. The guidance in EITF 00-19-2 amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to include scope exceptions for registration payment arrangements. EITF 00-19-2 also requires additional disclosure regarding the nature of any registration payment arrangements, alternative settlement methods, the maximum potential amount of consideration and the current carrying amount of the liability, if any. This EITF is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issue of this EITF. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of this EITF, this is effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years. The implementing EITF 00-19-2 will not impact on our financial statements.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company expects to adopt this statement effective January 1, 2007 and we have not yet determined the impact, if any, that the implementation of SFAS No. 159 will have on our financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Rate Sensitivity

We are exposed to cash flow and earnings fluctuations resulting from foreign exchange rate variation because our operations are in China. This exposure arises from the translation of financial statements of our foreign subsidiaries BMP China and Wanwei, from RMB, the functional currency of China, into United States dollars, our functional currency of our parent entity. On July 21, 2005, China increased the value of its currency, the RMB, by 2.1% to RMB 8.11 to the dollar, and announced that its currency, the RMB will no longer be pegged to the US dollar, but will be allowed to float in a band (and, to a limited extent, increase in value) against a basket of foreign currencies. For additional information, see Item 1A. “Risk Factors — Risks Related to Doing Business in China — Fluctuations in the Chinese Renminbi could adversely affect our results of operations”.

Interest Rate Sensitivity

We invest in high-quality financial instruments, primarily money market funds, federal agency notes, corporate debt securities, bank certificates of deposit, commercial paper and United States treasury notes, which we believe are subject to limited credit risk. We currently do not hedge interest rate exposure. Due to the short-term nature of our investments, we do not believe that we have any material exposure to interest rate risk arising from our investments.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Financial Statements, together with the report of our independent registered public accounting firm, appear at pages F-2 through F-25, respectively, of this Annual Report on Form 10-K.

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b) Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during our fourth fiscal quarter that materially affected, or is reasonably likely to material affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identification of Directors

Information with respect to our board of directors is set forth under the caption “Election of Directors” in our definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Identification of Executive Officers

Information with respect to our executive officers is set forth in Item I of this Annual Report on Form 10-K.

Section 16(a) Beneficial Ownership Compliance

Information with respect to Section 16(a) compliance of our directors and executive officers is set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

Corporate Governance

Information with respect to our Corporate Governance is set forth under the caption “Corporate Governance” in our definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this item is set forth under the captions “Compensation of Non-Employee Directors, “Compensation Committee Interlocks and Insider Participation” and “Executive Compensation” in our definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this item is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in our definitive proxy statement to be filed pursuant to Regulation 14A, which information is incorporated herein by reference.

The following table shows certain information concerning our common stock to be issued in connection with our equity compensation plans as of December 31, 2006:

Number of Securities

Remaining Available for

Future Issuance Under

Number of Securities to

Weighted-Average

Equity Compensation

be Issued upon Exercise

Exercise Price of

Plans (Excluding

of Outstanding options,

Outstanding Options,

Securities Reflected in

Plan Category

Warrants and Rights (a)

Warrants and Rights (b)

Column (a))

Equity Compensation Plans Approved by Security Holders

2,123,000

$1.41

377,000

Equity Compensation Plans Not Approved by Security Holders

—

2,123,000

$1.41

377,000

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents Filed as Part of This Report

The following is a list of our consolidated financial statements and our subsidiaries and supplementary data included in this report under Item 8 of Part II hereof:

1. Financial Statements and Supplemental Data

See Item 8 of this Annual Report on Form 10-K.

2. Financial Statement Scheduled

Schedule II — Valuation and Qualifying Accounts

Schedule II should be read in conjunction with the consolidated financial statements and related notes thereto set forth under Item 8 of this Annual Report on Form 10-K. All other schedules are omitted because they are not applicable, not required, or the required information is included in the consolidated financial statements or notes thereto.

(b) Exhibits

The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Where so indicated by footnote, exhibits that were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated.


Exhibit
Number		Description
3.1		Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

3.2		Bylaws (Incorporated by reference to Exhibit 3.2 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.1		Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.2		Form of Warrant issued on April 26, 2004 (Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.3		Form of Subscription Agreement, dated October 14, 2005, as amended, by and between Beijing Med-Pharm Corporation and the signatories thereto (Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.4		Form of Subscription Agreement, dated December 20, 2006, by and between Beijing Med-Pharm Corporation and the signatories thereto (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2006)

4.5		Form of Warrant, dated December 20, 2006, by and between Beijing Med-Pharm Corporation and the signatories thereto (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2006)


Exhibit
Number		Description
10.1		Employment Agreement, dated October 14, 2005, between Beijing Med-Pharm Corporation and David Gao (Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.2		Consulting Agreement, dated July 1, 2004, between Beijing Med-Pharm Corporation and Ning Ning Chang (Incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.3		2004 Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.4		Share Transfer and Debt Restructuring Agreement, dated December 15, 2004, between Beijing Wanwei Pharmaceutical Group and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.5		Share Transfer Agreement, dated December 15, 2004, between Beijing Med-Pharm Corporation and Wen Xin (Incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.6		Entrusted Loan Contract, dated December 27, 2004, between Beijing Med-Pharm Calculating Co. Ltd., China International Trust and Investment Industrial Bank and Beijing Wanwei Pharmaceutical Co. Ltd. (Incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.7		Summary of Fred M. Powell Severance Terms (Incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.8		Letter Agreement, dated June 6, 2002, by and among Biomet Merck, Merck China, Xiamen International Economic and Trade Company, and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.9		Distributorship Agreement, dated August 29, 2005, by and among Cytokine PharmaSciences, Inc., Controlled Therapeutics (Scotland) Limited and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.10		Agreement, dated July 19, 2005, by and between Beijing Med-Pharm Corporation and MCM Klosterfrau GmbH, as amended on September 20, 2005 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly report on form 10-Q for the quarter ended September 30, 2005, filed with the SEC on November 14, 2005

10.11		Office Lease Agreement, dated October 13, 2005, by and between Beijing Shengshang Asset Management Co. Ltd. and Beijing Med-Pharm Market Calculating Co. Ltd. (Incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.12		Exclusive Patent and Know How License Agreement, dated October 26, 2005, by and among Psimedica Ltd., Psioncology Pte. Ltd. and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005, filed with the SEC on November 14, 2005)**


Exhibit
Number		Description
10.13		Letter Agreement, dated as of January 20, 2006, amending the terms of the Exclusive Patent and Know How License Agreement among Psimedica Ltd., Psioncology Pte. Ltd. and Beijing Med-Pharm Corporation dated October 26, 2005 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on form 8-K, filed with the SEC on January 26, 2006

10.14		Shareholders’ Agreement, dated as of January 18, 2007, among Beijing Med-Pharm Corporation, Alliance Unichem Group Limited and Alliance BMP Limited (Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 30, 2007)

21.1*		Subsidiaries of the Registrant

23.1*		Consent of Grant Thornton, Hong Kong

31.1*		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a)

31.2*		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a)

32.1*		Certification Pursuant to Section 1350 of Chapter 63 of 18 U.S.C. as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(b)

32.2*		Certification Pursuant to Section 1350 of Chapter 63 of 18 U.S.C. as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(b)

* Filed herewith

** Certain information in this exhibit has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under 17 C.F.R. Section 200.80(b)(4), 200.83 and 230.406.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Beijing Med-Pharm Corporation

We have audited the accompanying consolidated balance sheets of Beijing Med-Pharm Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders’ equity and comprehensive loss, and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Beijing Med-Pharm Corporation and subsidiaries as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. Schedule II is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

As described in Note 1 to the consolidated financial statements, the Company has adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, effective as of January 1, 2006.

/s/ GRANT THORNTON

Hong Kong
March 21, 2007

F-2



Consolidated Balance Sheets		Beijing Med-Pharm Corporation and Subsidiaries


	December 31,			December 31,
	2006			2005
Assets
Current Assets:
Cash and Cash Equivalents	$	15,330,606		$	6,905,911
Restricted Cash		108,000			108,000
Accounts Receivable, net of allowance for doubtful accounts of $0		7,237,167			5,100,851
Inventory, net of allowance for obsolescence of $0		1,969,547			1,282,867
Other Receivables		350,151			138,084
VAT Receivable		597,119			405,629
Prepaid Expenses and Other Current Assets		597,439			902,047

Total Current Assets		26,190,029			14,843,389
Restricted Cash		157,000			157,000
Property and Equipment, net		312,594			355,005
Investments, at Cost		128,205			120,482
Intangible Assets, net of accumulated amortization		728,722			984,390
Goodwill		—			216,415

Total Assets	$	27,516,550		$	16,676,681


Liabilities and Stockholders’ Equity
Current Liabilities:
Notes Payable	$	117,378		$	108,918
Related Party Notes Payable		548,422			554,737
Accounts Payable		6,063,956			5,933,977
Accounts Payable Wanhui Group		214,227			664,643
Deferred Revenue		18,159			17,552
Accrued Payroll		533,290			475,835
Accrued Professional Fees		140,349			174,650
Accrued Taxes and related expenses		85,603			73,282
Accrued Social Welfare and related expenses		204,134			204,036
Accrued Contract Allowance		462,581			447,105
Accrued Other		442,172			379,246

Total Current Liabilities		8,830,271			9,033,981

Notes Payable, long term		126,495			243,872

Total Liabilities		8,956,766			9,277,853


Stockholders’ Equity:
Common Stock, $.001 Par Value; 50,000,000 Shares Authorized; 26,522,868 and 21,880,897 Shares Issued and Outstanding at December 31, 2006 and 2005, respectively		26,523			21,882
Additional Paid in Capital		28,039,112			14,707,590
Common Stock Warrants		6,371,332			1,812,812
Accumulated Deficit		(15,964,418	)		(9,168,334	)
Accumulated Other Comprehensive Income		87,235			24,878

Total Stockholders’ Equity		18,559,784			7,398,828

Total Liabilities and Stockholders’ Equity	$	27,516,550		$	16,676,681

The accompanying notes are an integral part of these consolidated financial statements.

F-3



Consolidated Statements of Operations		Beijing Med-Pharm Corporation and Subsidiaries


For the Years Ended December 31,	2006			2005			2004
Net Revenues	$	24,258,269		$	4,179,168		$	209,304
Cost of Sales		23,700,115			4,979,911			317,777

Gross Margin (loss)		558,154			(800,743	)		(108,473	)

Sales and Marketing Expenses		1,299,657			406,799			63,334
General and Administration Expenses		5,825,922			4,405,893			2,201,009
Loss on Disposal of Asset		364,140			—			—

Total Operating Expenses		7,489,719			4,812,692			2,264,343

Loss From Operations		(6,931,565	)		(5,613,435	)		(2,372,816	)

Other Income (Expense):
Interest Income		157,503			177,051			77,906
Interest (Expense)		(55,926	)		(214,380	)		(6,709	)
Other Income		33,904			6,773			—

Total Other (Expense) Income		135,481			(30,556	)		71,197

Loss Before Provision For Income Taxes		(6,796,084	)		(5,643,991	)		(2,301,619	)
Provision For Income Taxes		—			79,767			—

Net Loss	$	(6,796,084	)	$	(5,723,758	)	$	(2,301,619	)

Basic and Fully-Diluted Loss Per Share	$	(0.30	)	$	(0.31	)	$	(0.16	)


Basic and Fully-Diluted Weighted-average Shares Outstanding		22,864,039			18,569,353			14,742,822

The accompanying notes are an integral part of these consolidated financial statements.

F-4



Consolidated Statements of Stockholders’ Equity and Comprehensive Loss		Beijing Med-Pharm Corporation and Subsidiaries


														Accumulated
														Other
														Comprehensive
	Common Stock							Common						Income Foreign		Total
	Number		$.001 Par		Additional			Stock			Accumulated			Currency		Stockholder’s
	of Shares		Value		Paid-in Capital			Warrants			Deficit			Translation		Equity
Balance as of January 1, 2004		—		—		1,114,858			—			(1,142,957	)		—		(28,099	)
Issuance of Common Stock Upon Reverse Merger of Just Great Coffee		760,005		760		(760	)		—			—			—		—
Issuance of Common Stock Upon Acquisition of BMP China		7,807,509		7,808		(7,808	)		—			—			—		—
Costs Incurred in Connection with Reverse Merger and Acquisition		417,750		418		(418	)		—			—			—		—
Common Stock Issuance in Connection with Private Placement		8,695,652		8,696		9,991,304			—			—			—		10,000,000
Costs Incurred in Connection with Stock Issuance		—		—		(1,208,175	)		—			—			—		(1,208,175	)
Stock-Based Compensation		—		—		295,594			—			—			—		295,594
Common Stock Warrants Issuance		—		—		(1,278,588	)		1,278,588			—			—		—
Net Loss		—		—		—			—			(2,301,619	)		—		(2,301,619	)


Balance as of December 31, 2004		17,680,916	$	17,682	$	8,906,007		$	1,278,588		$	(3,444,576	)	$	—	$	6,757,701
Common Stock Issuance in Connection with Private Placement		4,199,981		4,200		6,295,800			—			—			—		6,300,000
Costs Incurred in Connection with Stock Issuance		—		—		(459,068	)		—			—			—		(459,068	)
Correction of prior period misposting of related party debt payment recorded as a reduction of additional paid in capital		—		—		100,000			—			—			—		100,000
Stock-Based Compensation		—		—		399,075			—			—			—		399,075
Common Stock Warrants Issuance		—		—		(534,224	)		534,224			—			—		—
Net Loss		—		—		—			—			(5,723,758	)		—		(5,723,758	)
Other Comprehensive Loss
Foreign Currency Translation		—		—		—			—			—			24,878		24,878

Total Comprehensive Loss		—		—		—			—			—			—		(5,698,880	)


Balance as of December 31, 2005		21,880,897	$	21,882	$	14,707,590		$	1,812,812		$	(9,168,334	)	$	24,878	$	7,398,828
Common Stock Issuance in Connection with Private Placement		3,333,306		3,333		14,996,664			—			—			—		14,999,997
Costs Incurred in Connection with Stock Issuance		—		—		(911,120	)		—			—			—		(911,120	)
Stock-Based Compensation		—		—		1,171,328			—			—			—		1,171,328
Common Stock Warrants Issuance		—		—		(5,203,407	)		5,203,407			—			—		—
Warrant Exercise		1,308,665		1,308		3,278,057			(644,887	)		—			—		2,634,478
Net Loss		—		—		—			—			(6,796,084	)		—		(6,796,084	)
Other Comprehensive Loss
Foreign Currency Translation		—		—		—			—			—			62,357		62,357

Total Comprehensive Loss		—		—		—			—			—			—		(6,733,727	)

Balance as of December 31, 2006		26,522,868	$	26,523	$	28,039,112		$	6,371,332		$	(15,964,418	)	$	87,235	$	18,559,784

The accompanying notes are an integral part of these consolidated financial statements.

F-5



Consolidated Statements of Cash Flows		Beijing Med-Pharm Corporation and Subsidiaries


For the Years Ended December 31	2006			2005			2004
Cash Flows from Operating Activities:
Net Loss	$	(6,796,084	)	$	(5,723,758	)	$	(2,301,619	)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
Depreciation and amortization of Property and Equipment		87,049			39,947			7,218
Amortization of Intangible Assets		255,668			42,610			—
Stock-Based Compensation		1,171,328			399,075			295,594
Loss on Disposal of Asset		371,711			15,081			—
(Increase) Decrease in Accounts Receivable		(2,136,316	)		562,241			(23,322	)
(Increase) Decrease in Inventory		(686,680	)		294,940			—
(Increase) Decrease in Other Receivables		(212,067	)		1,097,255			(12,319	)
Increase in Value Added Tax Receivable		(191,490	)		(4,789	)		—
Decrease (Increase) in Prepaid Expenses and Other Current Assets		119,834			(884,529	)		(17,048	)
Increase (Decrease) in Accounts Payable		346,394			(1,014,188	)		13,533
Increase Deferred Revenue		607			17,552			—
Increase in Accrued Payroll		57,455			342,506			93,009
(Decrease) Increase in Accrued Professional Fees		(34,301	)		(221,521	)		396,171
Increase in Accrued Taxes and related expenses		12,321			68,770			—
Increase in Accrued Social Welfare and related expenses		98			197,305			—
Increase in Contract Allowances		15,476			447,105			—
Increase in Accrued Other		62,926			(31,911	)		41,074

Net Cash Used in Operating Activities		(7,556,071	)		(4,356,309	)		(1,507,709	)

Cash Flows from Investing Activities:
Purchase Deposit on Acquisition of Beijing Wanwei		—			1,132,530			(1,132,530	)
Acquisition payment due to Wanwei Group		(450,416	)		664,643			—
Cash paid for Acquisition, net of Cash Received		—			(1,724,136	)		—
Acquisition of Property and Equipment		(231,575	)		(183,005	)		(38,831	)

Net Cash Used In Investing Activities		(681,991	)		(109,968	)		(1,171,361	)

Cash Flows from Financing Activities:
Net Proceeds from Sale of Common Stock		14,088,877			5,940,932			8,791,825
Net Proceeds from Exercise of Warrants		2,634,478			—			—
Repayments on Note Payable		(115,232	)		(497,657	)		—
Increase (Decrease) in Due to Investors		—			(118,750	)		118,750
Increase in Restricted Cash		—			(265,000	)		—
Advances to Affiliated Entity		—			20,113			(20,113	)

Net Cash Provided by Financing Activities		16,608,123			5,079,638			8,890,462
Effect of exchange rate changes on cash		54,634			24,878			—

Net Increase in Cash and Equivalents		8,424,695			638,239			6,211,392
Cash and Equivalents, Beginning		6,905,911			6,267,672			56,280

Cash and Equivalents, Ending	$	15,330,606		$	6,905,911		$	6,267,672


Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Years for:
Income Taxes	$	49,697		$	2,117		$	1,553
Interest		53,131			3,297			—

Non-Cash Investing and Financing Activities:

During the year ended December 31, 2004, in connection with services provided associated with a private placement completed in March 2004, the Company issued common stock warrants for the purchase of 400,000 shares of common stock,

F-6

and in connection with services provided for the reverse merger completed in January 2004 and the acquisition of BMP China completed in February 2004, the Company issued a common stock warrant for the purchase of 173,913 shares of common stock. These warrants have been valued using the Black-Scholes option pricing model at $1,278,588.

During the year ended December 31, 2005, the Company completed a private placement and issued common stock warrants for the purchase of 1,049,828 shares of common stock, and in connection with services provided associated with a private placement completed October 2005, the Company issued common stock warrants for the purchase of 189,000 shares of common stock. These warrants have been valued using the Black-Scholes option pricing model at $534,224.

During the year ended December 31, 2006, the Company completed a private placement and issued common stock warrants for the purchase of 3,333,306 shares of common stock, and in connection with services provided associated with a private placement completed December 2006, the Company issued common stock warrants for the purchase of 1,116,611 shares of common stock. These warrants have been valued using the Black-Scholes option pricing model at $5,203,407.

During the year ended December 31, 2006 the Company completed the valuation of certain accounts payable balances acquired in the Wanwei transaction. Pursuant to the valuation, the Company valued certain accounts payables balances at zero that were previously listed at $216,415. The $216,415 value adjustment was netted against goodwill resulting in zero goodwill as of December 31, 2006. In managements judgment the accounts payable balances valued at zero are no longer a legal liability for the company and under Chinese tax regulations the balances have passed the statute of limitation and are no longer considered a liability.

The accompanying notes are an integral part of these consolidated financial statements.

F-7



Notes to the Consolidated Financial Statements		Beijing Med-Pharm Corporation and Subsidiaries

1. Significant Accounting Policies:

Reporting Entity: The consolidated financial statements of Beijing Med-Pharm Corporation and Subsidiary (collectively referred to as “the Company”) include the accounts of Beijing Med-Pharm Corporation (the “Parent”) and its wholly-owned subsidiaries, Beijing Med-Pharm Co. Ltd. (formerly known as Beijing Med-Pharm Marketing Calculating Co., Ltd.) (“BMP China”), Beijing Wanwei Pharmaceutical Company, Ltd. (Wanwei) and Beijing Med-Pharm Honk Kong Co., Ltd. (“ Hong Kong”). All significant inter-company balances and transactions have been eliminated in consolidation. BMP China is principally engaged in product registration, market research, pre-market entry analysis, clinical trial management and pharmaceutical marketing to physicians, hospitals, and other healthcare providers throughout The People’s Republic of China (“PRC” or “China”). The acquisition of BMP China by the Company was made in February 2004. Wanwei is principally engaged in pharmaceutical distribution services serving domestic pharmaceutical companies located in China. BMP Hong Kong is a holding Company. All amounts are presented in U.S. currency.

Cash and Equivalents and Restricted Cash: The Company maintains a cash management program, which provides for the investment of excess cash balances primarily in short-term money market instruments and investments, which, at times, may exceed federally insured limits. The Company considers such highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. As of December 31, 2006 and 2005, approximately $444,000 and $1,072,000 respectively, of the Company’s cash and equivalents are maintained in foreign banking institutions within China. Restricted cash is unavailable to the Company until certain contractual terms and conditions are met.

Restricted cash as of December 31, 2006 consists of certificate of deposit as collateral for a financing agreement for the purchase of an ERP software, first year support and implementation. The note is for $352,790 with an interest rate of 7.55% per annum and quarterly payments over 3 years. As collateral the Company set up a collateral account with a bank for $265,000 to be reduced on an annual basis as the note is repaid.

Trade Accounts Receivable and Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable. Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectibility of accounts receivable.

Inventory: Inventory is stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates actual on the first-in, first-out (FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value.

F-8

Property and Equipment: Property and equipment are recorded at cost, and consist of office equipment, furniture and fixtures, vehicles and leasehold improvements. Depreciation and amortization is calculated using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives for significant property and equipment categories are as follows:


Computers and software		3 years
Vehicles		5 years
Machinery and equipment		5 years

Investment: The Company’s investment represents an investment in a non-marketable equity interest carried at the lower of cost or net realizable value. The Company estimates that cost is less than the net realizable value as of December 31, 2006.

Goodwill: In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” the Company performs tests of goodwill to determine if impairment has occurred. Goodwill was recorded for the first time in October 2005 in connection with the Wanwei acquisition.

Intangible Assets: Intangible assets are primarily an allocation of a portion of the purchase price in connection with the Wanwei acquisition to the following identifiable intangible assets: Customer Relationships and Pharmaceutical Distribution and Good Supply Practice License. The Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. Such circumstances could include, but are not limited to: (1) a significant decrease in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value. The fair value is measured based on quoted market prices, if available. If quoted market prices are not available, the estimate of fair value is based on various valuation techniques, including the discounted value of estimated future cash flows. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.

Revenue Recognition: The Company provides comprehensive marketing and promotion services to manufacturers under exclusive agreements for specified pharmaceuticals, which are distributed through distribution agreements between the manufacturers and the distribution provider. The Company has also entered into separate cooperation agreements with the distributor. The exclusive agreements with manufacturers expire on various dates ranging from December 2006 through December 2010, subject to certain termination provisions, such as specified minimum sales targets and solvency provisions. The Company recognizes revenue, net of returns, in the form of commissions on products delivered by the distribution provider at the time of delivery, provided that there is evidence of a final arrangement, there are no uncertainties surrounding acceptance, collectibility is probable and the price is fixed. Under the terms of the agreements, revenues are generally receivable within 90 days of delivery. We estimate the reserve for product returns at the time revenue is recognized based on various market data, historical trends, and information from customers.

The Company also provides clinical and regulatory services, which include pre-market entry analysis and product registration services. Fees for such services are contractually fixed, with payment schedules generally defined in accordance with significant milestones of the contracted service. Revenue is recognized as the services are provided, and payments received in advance of such services are recorded as deferred revenue until such time the services are completed.

The Company recognizes distribution sales and related cost of sales at the later of (a) the time of shipment or (b) when title passes to the customers, provided that there is evidence of a final arrangement, there are no uncertainties surrounding acceptance, collectibility is probable and the price is fixed. Revenues are comprised of gross sales less provisions for estimated customer returns, discounts, vendor payments and volume rebates. Amounts billed to a customer for shipping and handling are reported as revenue. Any shipping, handling or other costs incurred by the Company associated with the sale, which amount to $249,808 during the year ended December 31, 2006, are expensed as cost of sales in the period when the sale occurs.

F-9

Foreign Currency Translation: The accounts of the Company’s foreign subsidiary are translated in accordance with Statement of Financial Accounting Standards No. 52, “Foreign Currency Translation” (SFAS 52). The Company has determined that the functional currency of its subsidiary should be their local currency, the Chinese RenMinBi (RMB). The translations of the functional currency financial statements of its subsidiary into United States reporting currency are performed for assets and liabilities denominated in foreign currencies using the closing exchange rates in effect at the balance sheet dates. On July 21, 2005, China increased the value of the RMB by 2.1% to RMB 8.11 to the dollar and announced that the RMB will no longer be pegged to the United States dollar, but will be allowed to float in a band (and, to a limited extent, increase in value) against a basket of foreign currencies. Income statement amounts are translated using the average exchange rate during the year. Gains and losses resulting from foreign currency exchange rates changes from the prior year are reported separately as accumulated other comprehensive income foreign currency translation in stockholders equity.

Income Taxes: The Company reports under the provisions of Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (SFAS 109), which require an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.

Fair Value of Financial Instruments: Cash, accounts receivable, accounts payable, accrued liabilities and debt are reflected in the financial statements at carrying amounts which approximate fair value.

Earnings Per Share: The Company calculates basic earnings per share based on the weighted-average number of outstanding common shares and incremental shares. The Company calculates diluted earnings per share based on the weighted-average number of outstanding common shares plus the effect of dilutive stock options and other incremental shares. Common stock equivalents have been excluded from the diluted per share calculations as of December 31, 2006 and 2005, as the Company has incurred a net loss during each the years then ended, and their inclusion would have been anti-dilutive.

Advertising Costs: The Company expenses advertising costs as incurred. During the years ended December 31, 2005 and 2004 the Company did not incur any advertising expenses. For the year ended December 31, 2006 the Company incurred $37,641 in advertising expenses.

Use of Estimates: Management has used estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities in its preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States. Actual results experienced by the Company may differ from those estimates.

Stock-Based Compensation: The Company has a stock-based employee compensation plan, the 2004 Stock Incentive Plan (the “Plan”), which provides for the issuance of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock grants and other equity-based awards (See Note 12). Effective January 1, 2006, the Company has adopted Statement of Financial Accounting Standards No. 123 (Revised 2004), “Share-Based Payment” and applied the provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 107 using the modified-prospective transition method. Prior periods were not restated to reflect the impact of adopting the new standard. As a result of the adoption of FAS 123R, stock-based compensation expense recognized during 2006 includes compensation expense for all share-based payments granted on or prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FAS 123, and compensation cost for all share-based payments granted on or subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of FAS 123R. Prior to January 1, 2006 the Company accounted for stock based compensation under SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” which amended SFAS No. 123, “Accounting for Stock-Based Compensation.” As permitted under this standard, compensation cost was recognized using the intrinsic value method described in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25).

F-10

During the year ended December 31, 2005, the Company applied the recognition and measurement principles of APB 25 and related interpretations in accounting for stock-based compensation. During the year ended December 31, 2005, the Company issued options to employees to purchase 605,000 shares of common stock at exercise prices ranging from $1.60 to $3.66 per share. During the year ended December 31, 2005, the Company did not record any compensation expense associated with such awards. Had the Company elected to recognize stock-based compensation expense based on the fair value at the grant dates for awards consistent with the method prescribed under SFAS 123R, the Company would have recorded compensation in the amount of $124,424 for the year ended December 31, 2005. During the year ended December 31, 2006, the Company recognized stock-based compensation expense of $1,171,329 related to outstanding stock options according to the provisions of FAS 123R.

We have elected the modified prospective transition method as permitted by SFAS 123R, and accordingly, prior periods have not been restated to reflect the impact of SFAS 123R. Under this method, we are required to recognize stock-based compensation for all new and unvested stock-based awards that are ultimately expected to vest as the requisite service is rendered beginning January 1, 2006. Stock-based compensation is measured based on the fair values of all stock-based awards on the dates of grant.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition of SFAS 123(R) to stock-based compensation for the years ended:


	Year Ended December 31,
	2005			2004

Net loss
As reported	$	(5,723,785	)	$	(2,301,619	)
Stock-based compensation expense included in reported net loss, net of related tax effects		399,075			295,594
Stock-based compensation expense determined under fair value based method for all awards, net of related tax effects		(716,070	)		(428,469	)

Pro forma	$	(6,040,780	)	$	(2,434,494	)


Basic and Diluted Loss Per Share
As reported	$	(0.31	)	$	(0.16	)
Pro forma	$	(0.33	)	$	(0.17	)

Prior to the adoption of FAS 123R and for the year ended December 31, 2006, no tax benefits from the exercise of stock options has been recognized as the company has a net loss for the year ended December 31, 2006. Any future excess tax benefits derived from the exercise of stock options will be recorded prospectively and reported as cash flows from financing activities in accordance with FAS 123R.

As a result of adopting SFAS 123R, our loss before income taxes and net loss for the year ended December 31, 2006 were $866,769 more than if we had continued to account for stock based compensation under APB 25. Furthermore, basic and diluted loss per share for the year ended December 31, 2006 were $0.04 more than if we had continued to account for share based compensation under APB 25.

F-11

For purposes of the above pro forma calculation, the value of each option granted through December 31, 2005 was estimated on the date of grant using the Black-Scholes option valuation model with the weighted-average assumptions for the years ended:


	Year ended December 31,
	2005			2004
Expected life (years)		3.0			10.0
Risk-free interest rate		5.00	%		4.13	%
Expected Volatility		90.00	%		0.00	%
Expected Dividend yield		0.00	%		0.00	%

The weighted-average grant-date fair value of options granted during the year ended December 31, 2006 and 2005 was $3.08 and $1.32, respectively.

Reclassifications: Certain reclassifications have been made to prior year balances in order to conform to the current year’s presentation

2. Acquisitions:

On December 15, 2004, the Company entered into a share transfer and debt restructuring agreement with Beijing Wanhui Pharmaceutical Group, or Wanhui Group, an 80% equity holder of Wanwei, and a share transfer agreement with Wen Xin, the holder of the remaining 20% equity interest in Wanwei. On October 18, 2005, the Company was notified by China’s Ministry of Commerce that the acquisition of Wanwei had been approved. On October 25, 2005, the Company received a business license from Beijing Municipal Administration for Industry and Commerce permitting the Company to operate Wanwei and consolidate its financial operations. On December 6, 2005, the Company completed its acquisition of all of the outstanding equity interests of Wanwei from Wanhui Group and Wen Xin. As required under the share transfer and debt restructuring agreement with Wanhui Group, on December 15, 2004, the Company paid Wanhui Group RMB 2,400,000, or $290,328 as of that date and, on December 6, 2005, the Company paid Wanhui Group RMB 101,030, or $12,500 as of that date which represented full payment of the remaining amount of the obligation, net of the estimated tax liability. On June 29, 2006, the Company paid Wanhui Group RMB 3,290,300, or $412,100 as of that date, as the estimated tax obligation was reduced by the same amount. On January 10, 2007, the Company paid $214,227 to the Chinese Tax Authority as the final payment related to the acquisition of Wanwei. Not included in the purchase price listed below is $1,039,000 which the Company paid in accordance with the capital contribution of share transfer and debt restructuring agreement. The $1,039,000 has been reflected in the Consolidated Statement of Cash Flows as it represents a cash flow at the time of acquisition which was required per the share transfer and debt restructuring agreement.

Reconciliation of cash paid for Wanwei acquisition:


Purchase Price	$	(994,110	)
Capital contribution in accordance with the share transfer and debt restructuring agreement		(1,039,000	)
Cash received at time of acquisition		308,924

	$	(1,724,186	)

F-12


Cash at closing, still payable	$	664,643
Acquisition costs — direct		329,467

Total Purchase Price		994,110
Less: Fair value of identifiable assets acquired:
Cash		308,974
Accounts receivable, net		5,793,789
VAT recoverable		400,840
Investments, at cost		123,916
Inventory		1,577,807
Plant & equipment		174,136

		8,379,462
Plus: Fair value of liabilities assumed:
Notes payable		1,405,181
Accounts payable		6,829,739
Accrued expenses		393,855

		8,628,775

Excess of cost over fair value of net assets acquired; intangible assets and goodwill	$	1,243,423

The following values were assigned to intangible assets; (a) customer relationships — $416,000 and (b) Pharmaceutical Distribution License and Good Supply Practice License — $611,000.

During the year ended December 31, 2006 the Company completed the valuation of certain accounts payable balances acquired in the Wanwei transaction. Pursuant to the valuation, the Company valued certain accounts payables balances at zero that were previously listed at $216,415. The $216,415 value adjustment, which approximated existing amount of goodwill, was netted against goodwill resulting in zero goodwill as of December 31, 2006. In managements judgment the accounts payable balances valued at zero are no longer a legal liability for the company and under Chinese tax regulations the balances have passed the statute of limitation and are no longer considered a liability.

Unaudited pro forma results of operations for the years ended December 31, 2005 and 2004, were as follows. The amounts are shown as if the acquisition had occurred at the beginning of the period presented:


	Year Ended December 31,
	(unaudited)
	2005			2004
Proforma revenues	$	19,821,117		$	16,861,117
Proforma net income		(5,166,588	)		(2,286,590	)
Earnings per share-basic and fully diluted proforma	$	(0.28	)	$	(0.16	)

The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the acquisition taken place as of the beginning of the periods presented, or the results that may occur in the future. Furthermore, the pro forma results do not give effect to all cost savings or incremental costs that may occur as a result of the integration and consolidation of the acquisition.

F-13

3. Property and Equipment:

Property and equipment as of December 31, 2006 and 2005, consist of the following:


		Useful Lives		2006		2005
Furniture and Equipment	3-10		Years	$	218,732	$	171,938
Motor Vehicles	10		Years		106,388		77,457
Leasehold Improvements	10		Years		194,196		187,698

					519,316		437,093
Less: Accumulated Depreciation and Amortization					206,722		82,088

				$	312,594	$	355,005

During the years ended December 31, 2006, 2005 and 2004, depreciation and amortization expense was $87,049, $39,947 and $7,218, respectively.

For the year ended December 31, 2006 the Company wrote-off the software license and implementation cost of an Enterprise Resource Planning (ERP) system. In 2005 the Company identified the need to implement an ERP system to provide for the growth of the Company. In February 2006 the Company initiated the implementation of the ERP system which was planned to be completed by September 30, 2006. During the system implementation, the Company was made aware of a recently released ERP system which is a better fit for the Company’s operation and is expected to be more cost effective. During year ended December 31, 2006 the Company made the determination to discontinue the selected ERP system and to replace it with the recently released system. As part of the write off totaling $364,140 prepaid expenses decreased by $184,774 as this represented the part of the implementation cost that was financed and accounted for as a prepaid expense.

4. Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the year ended December 31, 2006 are as follows:


	December 31, 2006
Balance as of January 1, 2006	$	216,415
Reduction of goodwill due to value adjustment on certain Accounts Payable balances		(216,415	)

Balance as of December 31, 2006	$	—

The components of intangible assets subject to amortization are:


	December 31, 2006
	Gross				Net
	Carrying		Accumulated		Book
	Amount		Amortization		Value
Licenses	$	611,000	$	237,611	$	373,389
Customer Relationships		416,000		60,667		355,333

Total	$	1,027,000	$	298,278	$	728,722

F-14

During the years ended December 31, 2006, 2005 and 2004, amortization expense was $258,875, $41,987 and $0, respectively. Amortization expense of intangible assets is estimated to be approximately $258,875, $224,504, $52,652, $52,652 and $52,652 for 2007, 2008, 2009, 2010 and 2011, respectively.

5. Long-term Obligations

The carrying value of long-term obligations was as follows:


	Year Ended December 31,
	2006		2005
Notes payable	$	792,294	$	907,527
Less current maturities		665,800		663,655

Long-term obligations, net	$	126,494	$	243,872

Future payments under notes payable agreement are as follows as of December 31, 2006:


Year Ending December 31,	Notes Payable
2007	$	665,800
2008		126,494

Total future minimum payments		792,294
Less current portion of long-term obligations		665,800

Long term portion of long-term obligations	$	126,494

In December 2005, Beijing Med-Pharm entered into a financing agreement for the purchase of a ERP software, first year support and implementation with a financing company. The note is for $352,790 with an interest rate of 7.55% per annum and quarterly payments over 3 years. As collateral the Company set up a collateral account with a bank for $265,000 to be reduced on an annual basis as the note is repaid. Certain notes payable is to related parties see the footnote on “Related Party Transactions”.

6. Income Taxes:

The provision for income taxes during the years ended December 31, 2006, 2005 and 2004 consists of the following:


	2006			2005			2004
Domestic:
Current	$	—		$	30,954		$	—
Deferred		(1,457,000	)		(1,276,000	)		(555,000	)

		(1,457,000	)		(1,245,046	)		(555,000	)


Foreign:
Current		—			48,813			—
Deferred		(616,000	)		(652,000	)		7,000

		(616,000	)		(603,187	)		7,000

Total Domestic & Foreign		(2,073,000	)		(1,848,233	)		(548,000	)
Change in Valuation Allowance		2,073,000			1,928,000			548,000

	$	—		$	79,767		$	—

As discussed in Note 1, the Company reports under SFAS No. 109. Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws.

F-15

The United States and foreign components of loss before income taxes were as follows:


	For the Years Ended December 31,
	2006			2005			2004
United States	$	(3,809,777	)	$	(3,790,523	)	$	(1,744,188	)
Foreign		(2,986,307	)		(1,853,468	)		(557,431	)

	$	(6,796,084	)	$	(5,643,991	)	$	(2,301,619	)

The temporary differences that give rise to a significant portion of the deferred income tax asset as of the year ended December 31, 2006 and 2005 are as follows:


	2006			2005
Net Operating Loss Carryforwards	$	3,970,000		$	2,248,000
Stock Based Compensation		442,000			—
Other Receivables & Accrued Expenses		517,000			608,000
Less: Valuation Allowance		(4,929,000	)		(2,856,000	)

Net Deferred Tax Asset	$	—		$	—
Other Liabilities		—			—

Net Deferred Tax Liabilities	$	—		$	—

For the years ended December 31, 2006 and 2005, a valuation allowance for deferred tax assets of $4,929,000 and $2,856,000, respectively, has been established to reduce the deferred tax assets to amounts estimated by management to be realizable.

The reconciliation of the statutory tax rate to the Company’s effective tax rate is as follows:


	2006			2005			2004
Federal Statutory Income Tax Rate		34	%		34	%		34	%
State Statutory Income Tax Rate		3	%		4	%		4	%
Permanent Items & Other		(7	%)		5	%		—
Foreign Income Tax Rate		33	%		33	%		33	%
Foreign Net Operating Losses Not Carried Forward		(33	%)		(33	%)		(33	%)
Less: Change in Valuation Allowance		(30	%)		34	%		38	%

Effective Tax Rate		0	%		(1	)%		0	%

For the year ended December 31, 2006, the Company has net operating loss carryforwards for federal and state income tax purposes of approximately $7,434,000, which are available to offset future federal and state taxable income, if any.

The domestic federal and state operating losses expire as follows:


	Federal		State
	Operating		Operating
Year of Expiration	Losses		Losses
2024	$	1,398,000	$	1,398,000
2025		3,413,000		3,413,000
2026		2,623,000		2,623,000

	$	7,434,000	$	7,434,000

The Company’s income tax provision and related reserves are based on management’s current estimates and such estimates may require adjustments in the future based on management’s evaluation of conditions and circumstances in effect at that time.

F-16

7. Common Stock:

The Company has authorized 50,000,000 shares of common stock with a par value of $0.001 per share, of which 26,522,868 shares are issued and outstanding, 2,480,000 shares are reserved for issuance upon exercise of common stock options, and 1,640,349 shares are reserved for issuance upon exercise of outstanding common stock warrants.

In January 2004, the Company issued 760,005 shares of common stock to the then existing stockholders of Just Great Coffee, Inc. in connection with the reverse merger of Just Great Coffee, Inc. with and into the Company.

In February 2004, in connection with the acquisition of BMP China, the Company issued 7,807,509 shares of common stock in exchange for 100% of the outstanding equity interest of BMP China.

In February 2004, the Company issued 157,500 shares of common stock in connection with the payment of $157,500 of the Company’s fees and expenses incurred in connection with the Just Great Coffee, Inc. merger and the acquisition of BMP China.

In March 2004, the Company issued 8,695,652 shares of common stock in a private placement at a purchase price of $1.15 per share. Gross proceeds from the private placement amounted to approximately $10,000,000, less associated costs of approximately $1,200,000.

In March 2004, the Company issued warrants to purchase an aggregate of 400,000 shares of common stock as compensation for placement agent services provided in connection with the private placement completed in February and March 2004 and a warrant to purchase 173,913 shares of common stock as compensation for services provided in connection with the reverse merger and the acquisition of BMP China, in each case at an exercise price of $1.15 per share and with an expiration date of April 26, 2009. The Company has valued the warrants using the Black-Scholes option pricing model at $1,278,588, has designated it as an equity instrument and has recorded the value of the warrant as common stock. In April 2004, the Company issued 260,250 shares of common stock as compensation for services provided in connection with the reverse merger and the acquisition of BMP China.

In October 2005, the Company issued 4,199,981 shares of common stock and 1,049,828 warrants in a private placement at a purchase price of $1.50 per investment unit. Gross proceeds from the private placement amounted to approximately $6,300,000, less associated costs of approximately $360,000.

In October 2005, the Company issued warrants to purchase an aggregate of 189,000 shares of common stock as compensation for placement agent services provided in connection with the private placement completed in October 2005.

The fair value of these warrants, in the amount of $534,234 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2004: risk-free interest rate was 4.13%, an expected dividend yield of 0%, the volatility factor of the expected market price of the Company’s common stock was 90%, and a weighed average expected life of the warrants of 3 years for each period. The assumptions for 2005: risk-free interest rate was 5%, an expected dividend yield of 0%, the volatility factor of the expected market price of the Company’s common stock was 90% and a weighted average expected life of the warrants of 1.25 years for each period.

In December 2006, the Company issued 3,333,306 shares of common stock and 666,611 warrants in a private placement at an exercise price of $5.625 per investment unit. Gross proceeds from the private placement amounted to approximately $15,000,000, less associated costs of approximately $911,000.

In December 2006, the Company issued warrants to purchase an aggregate of 450,000 shares of common stock, at an exercise price of $5.625, as compensation for placement agent services provided in connection with the private placement completed in December 2006.

The fair value of these warrants, issued in December 2006 in the amount of $5,203,407 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for 2006: risk-free interest

F-17

rate was 4.57%, an expected dividend yield of 0%, the volatility factor of the expected market price of the Company’s common stock was 120%, and a weighed average expected life of the warrants of 5 years for each period.

8. Lease Commitments:

The Company leases its executive office facility in Plymouth Meeting, Pennsylvania 19462 under a lease agreement that expires January 2008. The lease requires minimum monthly rental payments of $5,310.

The Company leases its BMP China office facility in Beijing, China under a lease agreement that expires during November 2007. The lease requires minimum monthly rental payments of $6,211. Additional office space adjacent to the existing lease is being leased under a lease agreement that expires October, 2008. The additional lease requires minimum monthly rental payments of $2,997

The Company leases its Wanwei office and warehouse facilities in Beijing, China under a lease agreement that expires during December 2007. The lease requires minimum monthly rental payments of $7,045 and $7,197, for the office and warehouse facility, respectively.

During the years ended December 31, 2006, 2005 and 2004, rent expense incurred by the Company amounted to approximately $307,500, $160,000 and $77,500 respectively.

Future minimum lease payments due under the lease agreement as of December 31, 2006 are as follows:


	Minimum
Year Ending December 31,	Payment Due
2007	$	338,909
2008		32,967

Total	$	371,876

9. Related Party Transactions:

Prior to Wanwei being acquired by the Company it was customary for some government owned enterprises to borrow funds from it’s employees and this practice was used at Wanwei. According to the share transfer agreement between the Company and Wanhui Group notes payable to employees was assumed by Wanwei as part of the acquisition on October 24, 2005. It is the intent of management to repay notes payable to the employees. The interest on the notes payable to employees is paid on a regular basis and the notes were established using prevailing market rates. As of December 31, 2006 and 2005 the notes payable to employees were $548,422 and $554,737, respectively.

10. Restrictions on Dividends:

The Company’s ability to make payments on indebtedness it may incur and to distribute dividends to its stockholders is dependent on the earnings and the distribution of funds from its subsidiaries. If BMP China, Wanwei or future subsidiaries incur indebtedness of their own in the future, the instruments governing such indebtedness could restrict their ability to pay dividends or make other distributions to the Company, which in turn would limit the Company’s ability to make payments on indebtedness it may incur and to distribute dividends to its stockholders. Further, the Company’s corporate structure may restrict the distribution of dividends to its shareholders since Chinese regulations permit payment of dividends only out of accumulated profits as determined in accordance with Chinese accounting standards and regulations. According to these standards and regulations, BMP China and Wanwei are required to set aside a portion of their after-tax profits to maintain certain reserve funds that may not be distributed as cash dividends. As of December 31, 2006 and 2005, the Company has an accumulated deficit; therefore no such reserves have yet been established.

11. Segment Information:

The Company is organized based upon the products and services it provides to its customers and substantially all of its operations are located in China. The Company operated in one significant business segment during the year ended

F-18

December 31, 2004. During the year ended December 31, 2004, 100% of the Company’s revenues were derived from sales and marketing fees. The Company’s operations are comprised of two reportable segments during the years ended December 31, 2006 and 2005: Pharmaceutical Distribution and Sales and marketing fees.

The Pharmaceutical Distribution reportable segment includes the operations of Wanwei. The Sales and Marketing reportable segment includes the operations of BMP China. Corporate reportable segment includes Parent activity.

The chief operating decision maker for the Pharmaceutical Distribution segment is the General Manager of Wanwei whose function is to allocate resources to, and assess the performance of Wanwei. This segment services both pharmaceutical manufacturers and healthcare providers in the pharmaceutical supply channel. The warehousing and distribution of pharmaceutical drugs, which are purchased from the same suppliers, is the primary business activity of Wanwei. Pharmaceutical Distribution operates in a high volume and low margin environment.

Wanwei distributes brand name and generic pharmaceuticals, over-the-counter healthcare products, and home healthcare supplies and equipment to a variety of healthcare providers.

F-19

The following tables present reportable segment information for the periods indicated:


	Revenue
Year ended December 31,	2006			2005			2004
Pharmaceutical distribution	$	24,189,128		$	3,997,346		$	—
Sales and marketing		69,141			181,822			209,304
Sales and marketing intersegment		678,751			—			—
Elimination		(678,751	)		—			—

Total Revenues	$	24,258,269		$	4,179,168		$	209,304


	Operating Income
Year ended December 31,	2006			2005			2004
Pharmaceutical distribution	$	(293,839	)	$	(46,271	)	$	—
Sales and marketing		(1,799,847	)		(1,625,045	)		(628,629	)
Corporate		(4,331,264	)		(3,942,119	)		(1,744,187	)
Eliminations		(506,615	)		—			—

Total Operating Loss	$	(6,931,565	)	$	(5,613,435	)	$	(2,372,816	)


	Assets
Year ended December 31,	2006			2005			2004
Pharmaceutical distribution	$	11,943,603		$	9,463,551		$	—
Sales and marketing		1,686,668			1,389,699			1,608,144
Corporate		24,832,532			11,392,464			5,944,792
Eliminations		(10,946,253	)		(5,569,033	)		—

Total Assets	$	27,516,550		$	16,676,681		$	7,552,936


	Depreciation
Year ended December 31,	2004			2005			2004
Pharmaceutical distribution	$	52,962		$	27,699		$	—
Sales and marketing		31,556			10,283			7,218
Corporate		2,531			1,965			—

Total Depreciation	$	87,049		$	39,947		$	7,218


	Capital Expenditures
Year ended December 31,	2006			2005			2004
Pharmaceutical distribution	$	45,780		$	11,586		$	—
Sales and marketing		17,552			56,268			38,831
Corporate		168,243			115,151			—

Total Capital Expenditures	$	231,575		$	183,005		$	38,831

The Pharmaceutical distribution segment was started in October 2005 with the acquisition of Wanwei.

F-20

12. Stock-Based Compensation

The Company’s 2004 Stock Incentive Plan provides for grants of stock options (incentive stock options and nonqualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock grants and other stock-based awards to all employees (including employees who are directors and officers), non-employee directors, consultants and independent contractors of the Company and its affiliates. The Plan authorizes the issuance of up to 2,500,000 shares of the Company’s common stock, subject to adjustment, and provides that no more than 400,000 shares of common stock may be awarded to any one individual in any calendar year if the value of the award is based solely on an increase in the value of shares of the Company’s common stock after the date of grant of the award, subject to adjustment. The Plan also provides that no more than 100,000 shares of common stock may be awarded to any one individual in any calendar year if the value of the award is not based solely on an increase in the value of shares of the Company’s common stock after the date of grant of the award, subject to adjustment. Options are generally granted for a term of ten years. Options granted under the Stock Plan generally vest 25% after the first year of the date of hire and ratably each month over the remaining 36 month period. Options granted in 2004 under the Stock Plan vest 50% after the first two years of the date of hire and ratably each month over the remaining 24 month period. The Plan is administered by the Company’s Compensation Committee. The Compensation Committee has the authority to determine the individuals who will receive grants, the type of grant, the number of shares subject to the grant, the terms of the grant, the time the grants will be made, the duration of any exercise or restriction period, and to deal with any other matters arising under the Plan. Options granted under the Plan may be “incentive stock options,” which are intended to qualify with the requirements of section 422 of the Code, and “nonqualified stock options,” which are not intended to so qualify. The Company’s board of directors may amend or terminate the Plan at any time if required under the Plan, subject to stockholder approval. Unless terminated earlier by the board of directors or extended by the board of directors, with the approval of the Company’s stockholders, no awards may be granted under the Plan after February 10, 2009.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


	Year ended December 31,
	2006			2005			2004
Expected life (years)		5.0			3.0			10.0
Risk-free interest rate		4.32-5.19	%		5.00	%		4.13	%
Expected Volatility		93.56 - 120.48	%		90.00	%		0.00	%
Expected Dividend yield		0.00	%		0.00	%		0.00	%

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

F-21

A summary of the options issued by the Company for the year ended December 31, 2006 is as follows:


						Weighted-
				Weighted-		Average
				Average		Remaining
				Exercise		Contractual		Aggregate
				Price		Term		Intrinsic
	Options			per Share		(in years)		Value
Outstanding on January 1, 2006		1,665,000		$	1.54		8.60		—
Granted		285,000		$	3.60		9.77		—

Outstanding on March 31, 2006		1,950,000		$	1.84		8.56	$	1,809,000
Granted		48,000		$	4.20		9.93		—

Exercised		(20,000	)	$	1.15		7.59		—

Outstanding on June 30, 2006		1,978,000		$	1.90		8.36	$	1,776,000
Granted		80,000		$	4.43		9.84		—

Outstanding on September 30, 2006		2,058,000		$	2.00		8.17	$	1,776,00
Granted		45,000		$	5.52		9.88		—

Outstanding on December 31, 2006		2,103,000		$	2.08		7.96	$	1,776,00

Exercisable on December 31, 2006		950,000		$	1.41		7.44	$	1,209,251

The total intrinsic value of options exercised during the year ended December 31, 2006 and 2005 was $33,000 and $0, respectively. Intrinsic value is measured using the fair market value price of the Corporation’s common stock less the applicable exercise price.

A summary of the status of the Corporation’s non-vested shares as of December 31, 2006 is presented below:


				Weighted-Average
Nonvested Shares	Shares			Grant-Date Fair Value
Nonvested at January 1, 2006		1,074,167		1.74
Granted		458,000		3.08
Vested		(379,167	)	2.52

Nonvested at December 31, 2006		1,153,000		2.46

The unrecognized share-based compensation cost related to stock option expense at December 31, 2006 is $3,405,343 and will be recognized over a weighted average of three years. The total fair value of shares vested during the year ended December 31, 2006 was $3,486,288.

13. Subsequent Events:

On January 27, 2007, Alliance BMP Limited entered into a Joint Venture Contract (the “GPC JV Contract”) with Guangzhou Pharmaceutical Limited Company (“GP Limited”), a Contract for the Transfer of Capital Contribution of Guangzhou Pharmaceuticals Corporation (the “GPC Capital Contribution Transfer Contract”) with several shareholders of Guangzhou Pharmaceuticals Corporation (“GPC”), a Chinese limited liability company, and a Contract for the Increase of Registered Capital of Guangzhou Pharmaceuticals Corporation with GP Limited (the “GPC Capital Increase Contract”).

Alliance BMP Limited is a joint venture between the Company and Alliance Unichem Group Limited (“AB”). On January 18, 2007, the Company, AB and Alliance BMP Limited entered into a Shareholders’ Agreement (the “Shareholders’ Agreement”) that sets forth the terms and purpose of the joint venture. Alliance BMP Limited is a newly-formed United Kingdom-based investment vehicle. The primary purpose of Alliance BMP Limited is to acquire a 50% interest in GPC and to manage its investment in GPC. The Company and AB have agreed to do or cause to be done all reasonable acts necessary or desirable to consummate the joint venture with GPC.

F-22

These agreements provide that all shareholders of GPC, other than GP Limited, will transfer to Alliance BMP an aggregate of 9.91% of GPC’s total registered capital, representing the entire holdings of these shareholders. Immediately thereafter, GPC will increase its registered capital by approximately 100% and Alliance BMP Limited will purchase the entire increase at a purchase price of approximately $69 million. GPC will then be converted from a wholly-Chinese owned limited liability company to a Sino-foreign equity joint venture limited liability company (“reorganized GPC”), and each of GP Limited and Alliance BMP Limited will own a 50% interest in GPC. The completion of these transactions is subject to approval by the Chinese authorities and certain other conditions, and is expected to occur in the second half of 2007.

On March 15, 2007, the Company entered into a non-binding letter of intent with Guangzhou Biaodian Medical Information Co., Ltd. (“Biaodian”) with respect to a proposed joint venture transaction. As proposed, Biaodian will consolidate two of its subsidiaries, Guangzhou Shimei Medical Information Co., Ltd. and Guangzhou Shipu Medical Information Co., Ltd., into one company (the “Information Company”), and will further convert the Information Company into a Sino-foreign equity joint venture (the “JV”). The Company and Biaodian proposed to acquire 49% and 51% of the equity interest in the JV, respectively. The board of directors of the JV is expected to be consisted of members appointed by both the Company and Biaodian. The parties also agreed to exclusive negotiation for 90 days starting from March 15, 2007, and to formally execute relevant transactional documents by the end of April 2007.

F-23

14. Recent Accounting Pronouncements:

In February 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments,” an amendment of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.” SFAS No. 155 simplifies accounting for certain hybrid instruments under SFAS No. 133 by permitting fair value remeasurement for financial instruments containing an embedded derivative that otherwise would require bifurcation. SFAS No. 155 eliminates both the previous restriction under SFAS No. 140 on passive derivative instruments that a qualifying special-purpose entity may hold and SFAS No. 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets,” which provides that beneficial interests are not subject to the provisions of SFAS No. 133. SFAS No. 155 also establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, and clarifies that concentrations of credit risk in the form of subordination are not imbedded derivatives. SFAS No. 155 is effective for all financial instruments acquired, issued, or subject to a remeasurement event occurring after the beginning of an entity’s fiscal year that begins after September 15, 2006. The Company has evaluated the effect of SFAS No. 155 and determined that it does not have a material impact from the adoption to its consolidated financial position, liquidity, or results from operations.

In July 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes—an Interpretation of SFAS 109 “Accounting for Income Taxes”. FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on a tax return. Under FIN 48, the financial statements will reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts, but without considering time values. FIN 48 also revises disclosure requirements and introduces a prescriptive, annual, tabular roll-forward of the unrecognized tax benefits. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company is currently evaluating the effect FIN 48 will have on its consolidated financial position, liquidity, or results of operations.

In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (SAB 108). Due to diversity in practice among registrants, SAB 108 expresses SEC staff views regarding the process by which misstatements in financial statements are evaluated for purposes of determining whether financial statement restatement is necessary. SAB 108 is effective for fiscal years ending after November 15, 2006, and early application is encouraged. Adopting SAB 108 did not have a material impact on our results from operations or financial position.

Also in September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective the first quarter of our 2008 fiscal year with early adoption permitted. We do not believe SFAS 157 will have a material impact on our results from operations or financial statements.

F-24

Contingencies. The guidance in EITF 00-19-2 amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to include scope exceptions for registration payment arrangements. EITF 00-19-2 also requires additional disclosure regarding the nature of any registration payment arrangements, alternative settlement methods, the maximum potential amount of consideration and the current carrying amount of the liability, if any. This EITF is effective immediately for registration payment arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issue of this EITF. For registration payment arrangements and financial instruments subject to those arrangements that were entered into prior to the issuance of this EITF, this is effective for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years. The implementing EITF 00-19-2 will have not impact on our financial statements.

In February 2007, the FASB issued Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB No. 115.” This statement permits entities to choose to measure many financial instruments and certain other items at faire value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company expects to adopt this statement effective January 1, 2007 and we have not yet determined the impact, if any, that the implementation of SFAS No. 159 will have on our financial statements.

15. Quarterly Financial Information (Unaudited):

Selected unaudited quarterly results for the year ended December 31, 2006 and 2005 were as follows:


				Dec. 31,			Sept. 30,			June 30,			Mar. 31
	Total			2006			2006			2006			2006
Year Ended December 31, 2006
Revenues		24,258,269			7,237,802			6,898,886			5,398,797			4,722,784
Gross Margin		558,154			(4,853	)		215,285			177,043			170,679
Operating loss		(6,931,565	)		(2,146,613	)		(1,604,416	)		(1,642,946	)		(1,537,590	)
Net loss		(6,796,084	)		(2,092,437	)		(1,554,466	)		(1,611,485	)		(1,537,696	)
Basic and diluted (loss) per share	$	(0.30	)	$	(0.09	)	$	(0.07	)	$	(0.07	)	$	(0.07	)


				Dec. 31,			Sept. 30,			June 30,			Mar. 31
	Total			2005			2005			2005			2005
Year Ended December 31, 2005
Revenues		4,179,168			4,055,329			23,086			44,018			56,735
Gross Margin		(800,743	)		(140,149	)		(62,788	)		(545,773	)		(52,033	)
Operating loss		(5,613,435	)		(1,840,709	)		(1,174,043	)		(1,667,078	)		(931,605	)
Net loss		(5,723,758	)		(2,042,386	)		(1,121,130	)		(1,652,637	)		(907,605	)
Basic and diluted (loss) per share	$	(0.31	)	$	(0.10	)	$	(0.06	)	$	(0.09	)	$	(0.06	)

F-25

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


March 26, 2007	BEIJING MED-PHARM CORPORATION
	By:	/s/ FRED M. POWELL
		Fred M. Powell
		Chief Financial Officer (Principal financial and accounting officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.


By:	/s/ DAVID GAO	By:	/s/ MARTYN D. GREENACRE
David Gao		Martyn D. Greenacre
Chief Executive Officer, Director and Principal Executive		Director
Officer		March 26, 2007
March 26, 2007

By:	/s/ MICHEL Y. DE BEAUMONT	By:	/s/ JACK M. FERRARO
Michel Y. de Beaumont		Jack M. Ferraro
Director		Director
March 26, 2007		March 26, 2007

By:	/s/ FRANK J. HOLLENDONER	By:	/s/ JOHN W. STAKES, M.D.

Frank J. Hollendoner		John W. Stakes, M.D.
Director		Director
March 26, 2007		March 26, 2007

By:	/s/ FRED M. POWELL	By:	/s/ ALBERT YEUNG

Fred M. Powell		Albert Yeung
Chief Financial Officer (Principal Financial Officer)		Director
March 26, 2007		March 26, 2007

EXHIBIT INDEX


Exhibit
Number		Description
3.1		Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

3.2		Bylaws (Incorporated by reference to Exhibit 3.2 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.1		Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.2		Form of Warrant issued on April 26, 2004 (Incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.3		Form of Subscription Agreement, dated October 14, 2005, as amended, by and between Beijing Med-Pharm Corporation and the signatories thereto (Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

4.4		Form of Subscription Agreement, dated December 20, 2006, by and between Beijing Med-Pharm Corporation and the signatories thereto (Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2006)

4.5		Form of Warrant, dated December 20, 2006, by and between Beijing Med-Pharm Corporation and the signatories thereto (Incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2006)

10.1		Employment Agreement, dated October 14, 2005, between Beijing Med-Pharm Corporation and David Gao (Incorporated by reference to Exhibit 10.1 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.2		Consulting Agreement, dated July 1, 2004, between Beijing Med-Pharm Corporation and Ning Ning Chang (Incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.3		2004 Stock Incentive Plan (Incorporated by reference to Exhibit 10.3 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.4		Share Transfer and Debt Restructuring Agreement, dated December 15, 2004, between Beijing Wanwei Pharmaceutical Group and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.4 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)
10.5		Share Transfer Agreement, dated December 15, 2004, between Beijing Med-Pharm Corporation and Wen Xin (Incorporated by reference to Exhibit 10.5 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)


Exhibit
Number		Description
10.6		Entrusted Loan Contract, dated December 27, 2004, between Beijing Med-Pharm Calculating Co. Ltd., China International Trust and Investment Industrial Bank and Beijing Wanwei Pharmaceutical Co. Ltd. (Incorporated by reference to Exhibit 10.6 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.7		Summary of Fred M. Powell Severance Terms (Incorporated by reference to Exhibit 10.7 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.8		Letter Agreement, dated June 6, 2002, by and among Biomet Merck, Merck China, Xiamen International Economic and Trade Company, and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.8 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.9		Distributorship Agreement, dated August 29, 2005, by and among Cytokine PharmaSciences, Inc., Controlled Therapeutics (Scotland) Limited and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.10		Agreement, dated July 19, 2005, by and between Beijing Med-Pharm Corporation and MCM Klosterfrau GmbH, as amended on September 20, 2005 (Incorporated by reference to Exhibit 10.2 of the Registrant’s Quarterly report on form 10-Q for the quarter ended September 30, 2005, filed with the SEC on November 14, 2005

10.11		Office Lease Agreement, dated October 13, 2005, by and between Beijing Shengshang Asset Management Co. Ltd. and Beijing Med-Pharm Market Calculating Co. Ltd. (Incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (Registration No. 333-121957) filed with the SEC on January 11, 2005, as amended)

10.12		Exclusive Patent and Know How License Agreement, dated October 26, 2005, by and among Psimedica Ltd., Psioncology Pte. Ltd. and Beijing Med-Pharm Corporation (Incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2005, filed with the SEC on November 14, 2005)**

10.13		Letter Agreement, dated as of January 20, 2006, amending the terms of the Exclusive Patent and Know How License Agreement among Psimedica Ltd., Psioncology Pte. Ltd. and Beijing Med-Pharm Corporation dated October 26, 2005 (Incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on form 8-K, filed with the SEC on January 26, 2006

10.14		Shareholders’ Agreement, dated as of January 18, 2007, among Beijing Med-Pharm Corporation, Alliance Unichem Group Limited and Alliance BMP Limited (Incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 30, 2007)

21.1*		Subsidiaries of the Registrant

23.1*		Consent of Grant Thornton, Hong Kong

31.1*		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a)

31.2*		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002/SEC Rule 13a-14(a)


Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2006 and 2005		F-3
Consolidated Statements of Operations For the Years Ended December 31, 2006, 2005 and 2004		F-4
Consolidated Statement of Stockholders’ Equity For the Years Ended December 31, 2006, 2005 and 2004		F-5
Consolidated Statements of Cash Flows For the Years Ended December 31, 2006, 2005 and 2004		F-6
Notes to the Consolidated Financial Statements		F-8 through F-25
Schedule II: Valuation and Qualifying Accounts For the Years Ended December 31, 2006, 2005 and 2004		F-26


	Page
Cautionary Note Regarding Forward-Looking Statements		1

PART I

Item 1. Business		3
Item 1A. Risk Factors		16
Item 1B. Unresolved Staff Comments		26
Item 2. Properties		26
Item 3. Legal Proceedings		26
Item 4. Submission of Matters to a Vote of Security Holders		26

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters		27
Item 6. Selected Financial Data		29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		39
Item 8. Financial Statements and Supplementary Data		39
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		39
Item 9A. Controls and Procedures		39
Item 9B. Other Information		39

PART III

Item 10. Directors, Executive Officers and Corporate Governance		40
Item 11. Director and Executive Compensation		40
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		40
Item 13. Certain Relationships and Related Transactions, and Director Independence		41
Item 14. Principal Accountant Fees and Services		41

PART IV

Item 15. Exhibits and Financial Statement Schedules		42

SIGNATURES

EXHIBIT INDEX
Subsidiaries of the Registrant
Consent of Grant Thornton, Hong Kong
Certification of Principal Executive Officer Pursuant to Section 302
Certivicatio of Pricipal Financial Officer Pursuant to Section 302
Certification Pursuant to Section 1350
Certification Pursuant to Section 1350


*		Filed herewith

**		Certain information in this exhibit has been omitted and has been filed separately with the Securities and Exchange Commission pursuant to a confidential treatment request under 17 C.F.R. Section 200.80(b)(4), 200.83 and 230.406.


		Jurisdiction of
Name		Incorporation
Beijing Medpharm Co. Ltd.		Beijing, China
Beijing Wanwei Pharmaceutical Co., Ltd.		Beijing, China
Beijing Med-Pharm Hong Kong Company Ltd.		Hong Kong, China


Date: March 26, 2007		/s/ DAVID GAO David Gao
		Chief Executive Officer


Date: March 26, 2007		/s/ FRED M. POWELL Fred M. Powell
		Chief Financial Officer

	(1)		The Company’s annual report on Form 10-K for the fiscal year ended December 31, 2006 (the “Form 10-K”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

	(2)		The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.