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Investor Presentation

Investor Presentation. Merrill Lynch Healthcare Day June 22, 2010.

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Investor Presentation

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  1. Investor Presentation Merrill Lynch Healthcare Day June 22, 2010

  2. Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Any statements set forth in this presentation that are not historical facts may be forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors include, but are not limited to, the Company’s ability to market existing and new products, ability to access capital for expansion, and changes from anticipated levels of sales, future national or regional economic and competitive conditions, changes in relationships with customers, dependence on our flagship product’s profits and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. 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. This presentation was developed by the Company, is intended solely for informational purposes and is not to be construed as an offer to sell or the solicitation of an offer to buy the Company’s stock. This presentation is based upon information available to the public, as well as other information from sources which management believes to be reliable, but is not guaranteed by CHBT as being accurate nor does it purport to be complete. Opinions expressed herein are those of management as of the date of publication and are subject to change without notice. Safe Harbor Statement

  3. Investment Highlights The leading producer of probiotics in China • Strong R&D with sustainable, competitive advantages • Over 9 years probiotics product history & proven record of profitability • Rising demand for China’s probiotic products driven by increasing consumption of dairy products and rapid growth in the animal feed market • Established large-scale production capacity and quality control to penetrate bulk additives market • Strong revenue and profit growth with high margins • Revenue growth 39% CAGR FY06-FY10 • FY10 revenue $81M and adjusted net income $28M • Guidance for 50% top line growth in FY2011 • Proven high gross margin • Consistent positive free cash-flow in recent 3 years

  4. What are Probiotics? Historical Context Pasteur announced certain bacteria are necessary for human health Metchnikoff received 1908 Nobel Prize for work linking the immune system and intestinal bacteria “Good” bacteria helps not only to stimulate digestive health, but may stimulate a healthy immune system. - Gary Huffnagle, Ph.D., University of Michigan Health System. Benefits of Probiotics Improves health of G.I. tract Stimulates immune system Helps break down nutrients properly Reduces creation of toxins Reduces symptoms of lactose intolerance Decreases prevalence of allergies in susceptible individuals Reduces some risks associated with certain cancers Nutritional Products Food Additives Dairy Products Shining Probiotics Pharma-ceuticals Animal Feed Additives “Live microorganisms which when administered in adequate amounts confer a health benefit on the host … can play an important role in immunological, digestive and respiratory functions and could have a significant effect in alleviating infectious disease in children.”– WHO. * Sample: Bifido Bacteria, one kind of probiotic Source: www.usprobiotics.org

  5. Global Probiotics Market • New markets are posting faster growth Probiotic supplement sales in North America and Eastern Europe are currently reporting a growth rate of 25% • Significant increase in mainstream research on probiotics in recent years • Digestive health is ‘mainstream’ In 2008, nearly 59.9 million Americans complained of heartburn, and this figure is expected to rise to almost 73 million by 2013, amounting to nearly a quarter of the population • Global animal feed additives mkt is expected to reach US$15.4 B by 2010 Probiotics have been demonstrated to have an equivalent efficacy to synthetic antimicrobial growth promoters (AGP), which were banned completely in Europe since January 2006 History of Global Research Publications on Probiotics Source: Marketsandmarkets, nutraingredients-usa.com DataMonitor, FoodNavigator.com, ap-foodtechnology.com Pubmed.org, and Mgmt estimate

  6. Chinese Market Chinese affluence drives demand for health food Demand for health food in China expected to reach $9.7 Billion by 2010 (Source: Pacific Bridge Medical) Demand for Bulk Additive Probiotics increasing significantly Chinese Bureau of Statistics forecasts tenfold increase in domestic dairy consumption between 2007-2015, more demand for yogurt and baby formula product Estimated $58 Billion animal feed market in China Favorable Government Policies on both food safety and antibiotics safety Requires Good Manufacturing Practice (GMP) and a step-by-step Hazard Analysis Critical Control Point (HACCP) quality control system Over-prescription of antibiotics in China Gov’t is encouraging probiotics supplements to combat antibiotics abuse China has limited probiotics production capacity Current demand relies on imports from European manufacturers 3 dairy majors - Mengniu (HKSE: 2319), Yili (SHSE: 600887) and Bright (SHSE: 600597), are actively and increasingly introducing probiotics in their value-add dairy products

  7. Segment Analysis Chinese Probiotic Usage and Growth (Metric Tons) Source: Domestic Probiotics Market Analysis and Forecast Report by Beijing Leadership Management Consulting Co. Limited

  8. China-Biotics Overview • Founded in 1999 and headquartered in Shanghai, with about 500 employees • The largest domestic probiotics supplier in China • Shining is one of the most recognized brands in Shanghai • Launched commercial production in the new 150 ton manufacturing facility in Feb. 2010 to target bulk market in both diary industry and animal feed industry • Proprietary technology powered by over 30 R&D staff with advanced academic degrees • Retail outlets in 13 cities • Over 30 signed bulk additive customers Strong Organic Revenue Growth CAGR=39% (Millions USD)

  9. Strong R&D Capability Probiotics R&D Center • Research Areas: Advanced bacteria culturing and protection, genetically engineered drugs, drug delivery solutions • Over 30 members with Masters degrees or Ph.D.s • Close R&D partnerships with China’s top research programs in dairy science and technology at the Northeast Agricultural University • Dr. Kai Ma, Director of R&D - Ph.D. in Microbiology from the Institute of Microbiology of the Chinese Academy of Sciences and a member of the “863” and “973” national strategic projects for developing technology Intellectual Property • 4 approved patents and 8 pending • The largest domestic Enterprise Bacteria Center with over 500 types of bacteria strains • China-Biotics currently carries all of the 21 probiotics strains in the list recently approved by the Ministry of Health. These probiotics strains are widely used in the Company's bulk additive products.

  10. Sample Products Functions Calms digestive system, enhances G.I. health and protects / strengthens liver function Shining Essence Reduces high blood pressure, high blood sugar levels and hyperlipidemia Shining Signal Enhances the body’s immune system Shining Golden Shield Facilitates brain cell development and increases alertness Shining Energy Products in Retail Business Total 41 products with 11 active products in market

  11. Continue to develop and introduce new products to the marketplace Leverage existing directly operated outlets in major cities Strengthen and broaden distribution network by partnering with large wholesaler Expand capacity of retail product production capacity 30% in 2H 2010 Continue to improve brand name and recognition Retail Expansion Strategy

  12. Products in Bulk Business Additives for Dairy Product Essential to yogurt-based drinks CAGR of 31% for yogurt segment growth from ’05 to ’10 in China (estimated by McKinsey Research) Commonly added to infant formula milk powder Improves digestion Animal feeds $58 Billion per year animal feed market in China* Large global market *Management estimate Other Products Pharmaceuticals Nutritional products Other food additives

  13. Focus on dairy and animal feed industries, with extension to nutritional and pharmaceutical products Provide customized solutions and comprehensive support, i.e. co-develop new yogurt formulas Leverage our proprietary fermentation technology to offer large volume, high-quality bulk powder Extend business to international markets Phase II capacity expansion: to increase total annual capacity to 300 MT in Qingpu in 2011 Bulk Additive Strategy

  14. Expanded Customer Base (Bulk Additives)

  15. New Industry-Leading Facility • The largest probiotics production plant in China • GMP certified highly automated production line with maximum 60 workers even at full capacity utilization • Proprietary fermentation technology • Phase I = 150 MT annual production capacity • Commenced commercial productionin Feb. 2010 • Plan to ramp up to100MT run rate by March 2011 • Phase II = 150 MT annual capacity • Coming online in 2011 • Large scalability to lower production cost per unit and achieve high gross margin MT = metric tons

  16. Strong Financials Strong Organic Revenue Growth Proven Earning Growth CAGR=39% CAGR=35% *Adjustment to exclude gain/loss related to the change in fair value of convertible notes

  17. IncomeStatement & Cashflow ($ in Million) FY2010 FY2009 FY2008 FY2007 FY2006 Net sales 42.3 30.6 21.9 81.4 54.2 70% 70% Gross profit % 71% 71% 70% Operating income 35.2 20.2 18.3 14.9 12.2 14.2* 10.9 Adj. Net income 27.8* 16.9* 8.35 Operating Cash-Flow 19.4 10.0 7.0 28.2 23.1 * gain or lossrelated to the change in fair value of convertible notes is not included For Fiscal Years Ended March 31

  18. Balance Sheet March 31 ($ in thousands) 2010 2009 2008 2007 Cash and cash equivalents 155,579 70,824 64,310 26,992 181,953 Current assets 87,370 79,979 41,897 Total assets 232,935 120,804 93,792 44,580 2.7 2.0 Current ratio 3.0 2.4 32,336 Current liabilities 76,756* 26,896 20,670 49,396 Total liabilities 76,756* 55,408 20,670 Stockholder’s equity 23,910 44,395 156,179 65,396 *Reclassification of convertible note, embedded derivatives, and interest payable from non-current liabilities to current liabilities

  19. Mr. Jinan Song, Founder, Chairman and CEO Founder and CEO since 1999 Bachelor’s degree in Polymers; Masters degree in politics and economics Mr. Travis Cai,Chief Financial Officer Over 10 years of financial management experience in financial institutions and US-listed companies MS from Stern School of Business at New York University and BS from Tsinghua University Ms. Eva Yan, Chief Administration Officer Management team member since 1999 with participation in formulating corporate development plans Implementing internal control procedures and business negotiations Master’s degree in Economic Law from Capital University of Economics and Business Dr. Tom Gu, Vice President Former director of the United States Federation for Culture Collections Standing member of the Expert Committee of the Shanghai Zhangjiang Bio-Pharmaceutical Base Ph.D. in molecular medicine from University of Arizona and BS in biochemistry from Jilin University Key Management

  20. Investment Highlights The leading producer of probiotics in China • Strong R&D with sustainable, competitive advantages • Over 9 years probiotics product history & proven record of profitability • Rising demand for China’s probiotic products driven by increasing consumption of dairy products and rapid growth in the animal feed market • Established large-scale production capacity and quality control to penetrate bulk additives market • Strong revenue and profit growth with high margins • Revenue growth 39% CAGR FY06-FY10 • FY10 revenue $81M and adjusted net income $28M • Guidance for 50% top line growth in FY2011 • Proven high gross margin • Consistent positive free cash-flow in recent 3 years 20

  21. China-Biotics Inc. Travis Cai, Chief Financial Officer traviscai@chn-biotics.com Grayling Kevin Theiss (646) 284-9409 kevin.theiss@grayling.com Thank You June 2010

  22. Appendix: Reconciliation of Non-GAAP Financial Data

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