China increases budget for rural healthcare spending

TSX-V: CHO
OTCQX: CHLBF

www.chinahealthlabs.com

TORONTO, Aug. 1, 2012 /CNW/ - China Health Labs & Diagnostics Ltd. ("China Health" or the "Company") (TSXV:CHO; OTCQX:CHLBF) is well positioned for growth as China's central government continues to increase its investment and annual budget for healthcare with an emphasis on moving towards universal healthcare and improving rural healthcare.

In 2010, a total of 1,998 billion yuan ($320 billion dollars) was spent on healthcare in China. In 2011, it is estimated that China spent 2,250 billion yuan ($360 billion dollars) on healthcare, being healthcare expenditure per capita of 1,643 yuan ($263 dollars).  While China has increased its healthcare spending, it still spends far less per capita than developed countries such as Canada and the USA which were estimated by The World Bank to have per capita total healthcare spending of $5,222 and $8,362, respectively, in 2010.

Although significant improvements is required for China's healthcare system to be comparable to developed countries such as Canada and USA, China is committed to improving its healthcare system significantly in the next few years. For an example, in April 2009, the Chinese government announced that it would earmark 850 billion yuan ($125 billion dollars) in additional healthcare spending between 2009 and 2012 to meet China's three-year health care reform program, which included: providing 90% of the population with some basic coverage by end of 2011; building 30,000 hospitals, renovating 5,000 town hospitals, 3,700 community health centers and 11,000 community clinics over the next ten years; and increasing access to prescription drugs by building a list of essential medications for which the government will increase subsidies for end users.

A recent statistical report from the Ministry of Health in China provided an update on the status of healthcare improvements made from 2009 to 2011, showing impressive progress including basic medical care insurance programs that cover over 95 percent of China's population and completion of an additional 1,688 hospitals and 5,552 community health centres. Between 2009 and 2011, 63 billion yuan ($10 billion dollars) was invested in the construction and improvement of 33,000 hospitals at grass-roots levels and 451 billion yuan ($72 billion dollars) was invested in medical care services.

"China's move towards a universal healthcare system and investments in improving rural healthcare has supported the growth of our rural hospitals and clinics business.  Our network of rural diagnostic lab total solutions ("BK Clinlabs") has increased from 86 BK Clinlabs in two provinces in 2009 to 977 BK Clinlabs in nine provinces, installed or under contract in 2012," said Wilson Yao, CEO of China Health. "Our growth is also driven by the track record we have established of providing a total diagnostic solution that delivers reliable and efficient test results that enable rural hospitals to diagnose and treat patients - based on our success to date we expect to increase our coverage in the nine provinces where we have installed BK Clinlabs and add new provinces."

China Health's BK Clinlab total diagnostic labs solution combines diagnostic laboratory equipment, a proprietary lab management system, training and ongoing maintenance and supply of reagents and consumables and has proven its effectiveness in improving overall healthcare to citizens in rural areas. With a potential of 90,000 rural hospitals and clinics in China, the Company is working diligently in expanding its network to new and current provinces in China.

About China Health Labs & Diagnostics Ltd.

China Health, operating in China as the Biochem Group, is a leading diagnostic lab solution provider for the public healthcare industry in China. The Company develops and sells Biochem Group branded and third-party medical diagnostic products and services to diagnostic facilities in China. Customers include large urban hospitals, rural hospitals, Chinese defense and rescue operations, the Beijing government and third-party distributors.

The Company intends to continue its growth by focusing its efforts on expanding its sales network in three areas where it provides proprietary solutions, has limited competition and which are supported by Chinese government policies and budgets: BK Clinlab total lab solutions for rural hospitals and clinics, POCT solutions for the Chinese defense and rescue operations, and food safety solutions for large cities in China.  In 2011, China Health increased its revenues by 35% to $45.6 million, and increased its installed base of BK Clinlabs from 210 at the start of 2011 to 977 rural hospitals installed and contracted to date.  In addition, the Company grew revenues from its overall total lab solutions business by 99% from 2010, which increased gross margins to 44% in 2011 as compared to 39% in 2010.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FORWARD LOOKING INFORMATION

This press release contains forward-looking statements and information that are based on the beliefs of management and reflect China Health's current expectations.  When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.  The forward-looking statements and information in this press release includes information relating to the expansion of the Company's installed base of BK Clinlabs in new and current provinces and the growth of the Company's business through its sales network in areas where it has proprietary products, limited competition and strong government support.  The forward-looking information is based on certain assumptions, which could change materially in the future, including the assumption that the Company will have the resources and ability to expand its installed base, and that the Company will be able to grow its sales network and business. Such statements and information reflect the current view of China Health with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information.  By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risk that the Company may not have the ability or resources to expand its installed base, and the Company may not be able to grow its business as expected through its sales network in any of the areas in which it has proprietary products, limited competition and strong government support.  China Health cautions that the foregoing list of material factors is not exhaustive.  When relying on China Health's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.  China Health has assumed a certain progression, which may not be realized.  It has also assumed that the material factors referred to above will not cause such forward-looking statements and information to differ materially from actual results or events.  However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE REPRESENTS THE EXPECTATIONS OF CHINA HEALTH AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE.  READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE.  WHILE CHINA HEALTH MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.

SOURCE: CHINA HEALTH LABS & DIAGNOSTICS

Judyanna Chen
Chief Financial Officer
China Health Labs & Diagnostics Ltd.
T: [phone]
Email: [email protected]

Babak Pedram
Investor Relations
TMX Equicom Group
T: [phone] ext. 264
Email: [email protected]