Third-Quarter 2011 Highlights and Recent Events

• Net sales increased 33.6% year-over-year to $12.4 million
• Gross profit increased 60.8% to $7.5 million from $4.6 million in the third quarter of fiscal year 2010
• Gross margin increased to 60.3% from 50.1% a year ago
• Net income rose 73.0% to $2.5 million or $0.07 per diluted share
• The Company was named "High Integrity Enterprise" by a prominent industry group at the 2nd Session of Heilongjiang Pharmaceutical Integrity Enterprise Selection Committee, which is made up of government and trade association including Heilongjiang Integrity Promotion Association, Heilongjiang Food and Drug Administration, the Heilongjiang Pharmaceutical Industry Association.

"We are pleased to report double digit revenue and net income growth in the third quarter of fiscal year 2011. Our strong growth in sales, profitability, and operating cash flow during the quarter was largely driven by increase in our average selling prices and four new products introduced in the fourth quarter of fiscal year 2010," said Mr. Shaoming Li, Chairman and Chief Executive Officer of China Botanic.  "Our Siberian Ginseng products exhibited strong year-over-year sales growth and accounted for 50% of our total revenue in the third quarter of fiscal year 2011 compared with 44% in the same period of last year.  This reflected our continued commitment to create awareness and promote our premier product, the Siberian Ginseng Series, and it will continue to remain our top priority in the future. In addition, our four new products, namely Qing Re Jie Du Oral Liquid, Compound Schizandra Tablets, Ginseng and Venison Extract, and Badger Oil have established a strong foothold in the market and contributed nearly 19% of the quarter's total sales revenue."

Third Quarter Fiscal Year 2011 Results

During the three months ended July 31, 2011, net sales increased 33.6% to $12.4 million, from $9.3 million during the same period in 2010.  The rise was mainly attributable to year-over-year increase in average selling prices of the Company's products and the growing market acceptance of the Company's new products introduced in the fourth quarter of 2010. Sales declined compared to the first and second quarters fiscal 2011 due to seasonality.  April to August is typically the company's slowest sales period.

Gross profit increased 60.8% to $7.5 million compared to $4.6 million in the third quarter of fiscal 2010. Gross margin increased to 60.3% as compared to 50.1% in the same period of 2010. The growth in gross profit was mainly driven by price increases across all of the Company's products, somewhat mitigated by modest increases in raw material prices. The Company's new high-margin products, Qing Re Jie Du Oral Liquid, Compound Schizandra Tablets, Ginseng and Venison Extract, and Badger Oil also contributed to the gross margin growth.

Operating expenses for the third quarter of fiscal 2011 were $4.5 million, as compared to $3.2 million in the same period last year. Sales and distribution expenses rose 21.4% to $1.6 million from $1.3 million a year ago. The spending increase reflected the Company's efforts to expand its distribution network, market share, and awareness of its premium quality products. General and administrative expenses increased 212.1% to $1.2 million, primarily due to rental expenses of our Ah City Natural and Pharmaceutical Plant, accounting and attorney expenses, and amortization expenses related to exclusive land use rights of YiChun Redstar Forestry and patents. Research and development expenses were $1.7 million, up 10.3% from $1.6 million in the year ago period, reflecting the Company's continued commitment to invest into new product development and other research efforts.

Operating income in the third quarter was $3.0 million, compared to $1.4 million in the third quarter of 2010. Operating margin increased year-over-year to 24.1% from 15.5%.

The Company incurred income tax expenses $0.5 million in the third quarter of fiscal 2011, compared to no taxes paid for the third quarter of 2010, due to the 15% tax rate imposed effective January 1, 2011. For the third quarter ended July 31, 2011, net income increased 73.0% to $2.5 million, or $0.07 per diluted share, from $1.5 million, or $0.04 per diluted share for the same period a year ago.

Nine Month Results

Total revenue for the nine month period ended July 31, 2011 was $53.9 million, an increase of 40.0% from $38.5 million for the first nine months of fiscal 2010. Gross profit in the first nine months of fiscal 2011 rose 59.4% to $32.4 million, representing a gross margin of 60.2% as compared to 52.8% in the first nine months of fiscal 2010. Operating income grew 86.0% year-over-year to $22.7 million. In the first nine months of fiscal 2011, net income was $20.5 million or $0.54 per diluted share, up from $12.2 million or $0.32 per diluted share in the first nine months of fiscal 2010.

Financial Condition

As of July 31, 2011, the Company had cash and cash equivalents of approximately $38.3 million and total current assets of approximately $58.9 million. As of July 31, 2011, China Botanic had working capital of approximately $45.8 million as compared to $47.1 million for the fiscal year ended October 31, 2010.  The Company had no long-term debt on its balance sheet as of July 31, 2011. Shareholders' equity stood at $93.4 million, compared with $69.8 million as of October 31, 2010. Net cash flow from operating activities for the nine months ended July 31, 2011 was $26.4 million compared to $22.9 million for the same period of 2010.

Business Outlook

"We will continue to focus on our botanical anti depression and nerve regulations products, and continue to invest in research and development of these products," said Mr. Li. "We remain confident that we will meet our fiscal year 2011 guidance for revenue in the range of $70.6 million and $71.7 million and net income of $25.5 million. We have completed the architectural design of our Ah City phase two project and are in the process of obtaining approval from relevant government authorities. and expect to begin construction following receipt of approval documents. The Ah City phase two project is expected to be completed in the end of 2012. In the longer term, we expect Ah City natural and pharmaceutical plant expansion and new products which are currently in our R&D pipeline will provide sizeable contribution to our future revenue and net income growth."

Conference Call

China Botanic will host a conference call at 9:00 a.m. Eastern Time on Thursday, September 15, 2011, to discuss financial results for the third quarter of fiscal year 2011, ended July 31, 2011. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 866-394-2209. International callers should dial +1 706-758-1481. The conference ID number for the call is 97912567.

If you are unable to participate in the call at this time, a replay will be available on Thursday, September 15, 2011 at 12:00 noon Eastern Time, through Thursday, September 29, 2011. To access the replay, dial 855-859-2056. International callers should dial +1 404-537-3406. The conference ID number for the replay is 97912567.

ABOUT CHINA BOTANIC PHARMACEUTICAL INC.

China Botanic Pharmaceutical Inc. is engaged in the research, development, manufacturing, and distribution of botanical products, bio-pharmaceutical products, and traditional Chinese medicines ("TCM"), in the People's Republic of China. All of the Company's products are produced at its three GMP-certified production facilities in Ah City, Dongfanghong and Qingyang. The Company distributes its botanical anti-depression and nerve-regulation products, biopharmaceutical products, and botanical antibiotic and OTC TCMs through its network of over 3,000 distributors and over 70 sales centers across 24 provinces in China. For more information, please visit www.renhuang.com.

Safe Harbor Statement

This press release contains certain statements that may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon management's beliefs, assumptions and expectations of the Company's future operations and financial performance, taking into account the information currently available to management. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known that may cause actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition expressed or implied in any forward-looking statements. These forward-looking statements are based on current plans and expectations and are subject to a number of uncertainties including, but not limited to, the Company's ability to manage expansion of its operations effectively, and other factors detailed in the Company's annual report on Form 10-K and other filings with the Securities and Exchange Commission.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented herein.