Trading Update

Taihua plc

("Taihua" or the "Company")

TRADING UPDATE

Taihua is a China-based pharmaceutical company specialising in the manufacture of Traditional Chinese Medicines and certain Active Pharmaceutical Ingredients (Paclitaxel and Homoharringtonine). In addition, the Company owns plantations which produce the raw materials for a number of its products.

Taihua would like to update its shareholders on its progress in 2011 before the release of its financial results for the 12 months ended 31 December 2011

Forsythia

The maiden harvest from the first plantation was completed successfully in 2011 and the entire crop (of 986 Tonnes) was sold before the end of the year at a price of RMB 30.5per kg which was in line with the market price. Overheads were as previously forecasted with the exception of an additional provision of RMB 1.29m against possible bad debts in accordance with our bad debt provisioning policy. The Board, however, have no information to suggest that any debts outstanding in relation to Forsythia sales will not be repaid.

On 9 January 2012, Taihua entered into an agreement to lease a further similar plantation which could double the total potential harvest. The current price for Forsythia in the wholesale markets remains stable at the same level as our 2011 sales.

Traditional Chinese Medicines

Total sales of Traditional Chinese Medicines in 2011 were RMB 12.5m (2010: RMB 4.2m) of which RMB 8.3m (2010: nil) were from the Company's new product, Bian Tong Pian. Sales of our other TCMs were RMB 4.2m in 2011 (2010 RMB 4.2m)

The sales target for 2011 for Bian Tong Pian was RMB 10.395m including sales tax, RMB 8.884m excluding sales tax.

Active Pharmaceutical Ingredients (APIs)

The Company's sales in 2011 for its APIs were as follows:

Paclitaxel RMB 11.2m (2010 RMB 11.5m)

Homoharringtonine RMB 9.1m (2010 RMB 12.3m)

We believe that Homoharringtonine sales were particularly affected by Chinese customers' difficulties in reapplying for the Chinese certificate of Good Manufacturing Practice (GMP) which they are required to hold before they can utilise the product for consumer use.

We continue to believe that the market for generic APIs remains competitive with significant pressure on price.

Outlook

We are pleased that our move into TCM raw materials has proved to be successful and we look forward to expanding this area of our business. Taihua's cash position remains robust despite having made a significant capital investment into forsythia and this cash is available should other opportunities be identified.

TCM manufacture is a core strength of Taihua and we believe our success with Bian Tong Pian demonstrates that this model of supply to the market can be successful. This is something we are keen to build upon in the future.

API sales are increasingly competitive. However, our Yew tree plantation is now ready for harvest and this should reduce our cost of manufacture significantly, in addition the by-products from the process may be used to generate an additional stream of income which would result in a further reduction in our net cost of production. Taihua continues to push for expansion into the greater added value aspects of drug delivery such as injectables. However, we are ultimately only able to proceed at the speed of government approvals and authorisations.

The directors of Taihua remain optimistic about the future opportunities for the Company.

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