DETROIT, Jan. 28 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical
Laboratories, Ltd. (NYSE Amex: CPD) generated net sales of $52.0
million and $178.4 million for the third quarter and first nine
months of Fiscal 2010, respectively, compared to $55.7 million and
$286.2 million, respectively, during the corresponding periods of
Fiscal 2009. Net sales decreased during the third quarter and first
nine months of Fiscal 2010, in comparison to the corresponding
periods of Fiscal 2009, primarily as a result of the adverse effect
on sales of Caraco-owned products (those products for which Caraco
owns the ANDAs) due to the actions of the FDA and the cessation of
manufacturing, and in part due to the negative impact of our
voluntary recalls. Sales of distributed products were lower during
the first nine months of Fiscal 2010 over the corresponding period
of Fiscal 2009 due to higher sales of Paragraph IV products during
the first nine months of Fiscal 2009, particularly sales of certain
Paragraph IV products which were launched by the Company during the
fourth quarter of Fiscal 2008 under the distribution and sale
agreement with Sun Pharma. These product sales may or may not be
sustainable, as previously disclosed. The sales of distributed
products were also lower due to price erosion on the products sold,
partially offset by new product launches. The Company incurred a
net pre-tax loss of $4.9 million during the third quarter and $8.8
million during the first nine months of Fiscal 2010, as compared to
earning net pre-tax income of $6.5 million and $33.4 million,
respectively, during the corresponding periods of Fiscal 2009. Net
pre-tax income in the third quarter of Fiscal 2010 was lower
primarily due to the cessation of manufacturing at the Company's
Michigan facilities resulting in the loss of revenues from such
products. The net pre-tax loss for the first nine months of the
current fiscal year was due to a reserve created, in the amount of
$15.9 million, relating to inventory seized by the FDA, and also
due to the cessation of manufacturing at the Company's Michigan
facilities, partially offset by non-recurring income earned during
the second quarter of Fiscal 2010 in the amount of $20.0 million as
part of an asset purchase agreement arising out of a settlement
agreement entered into by the Company. Such income is not expected
to recur in future periods. Caraco incurred a net loss of $3.0
million and $5.8 million during the third quarter and first nine
months of Fiscal 2010, as compared to net income of $5.1 million
and $22.9 million, respectively, during the corresponding periods
of Fiscal 2009. Caraco generated cash from operations in the amount
of $15.5 million during the first nine months of Fiscal 2010, as
compared to generating cash from operations in the amount of $0.2
million during the corresponding period of Fiscal 2009. As
previously disclosed, on June 25, 2009, U.S. Marshals, at the
request of the FDA, arrived and seized drug products manufactured
in our Michigan facilities. The seizure also included ingredients
and in-process materials held at these same facilities. The
estimated value of such seized inventory as of December 31, 2009
was $24.0 million. Products sold and distributed by Caraco that are
manufactured by third parties and outside of these facilities are
not impacted and distribution and marketing of these products
continues. The Company has also transferred certain Caraco-owned
products to additional alternate manufacturing sites that would
allow the Company to regain revenues from those products while
Caraco completes the necessary remedial actions that would lead to
resumption of its manufacturing operations. As previously
disclosed, the Company voluntarily entered into a Consent Decree of
Condemnation, Forfeiture and Permanent Injunction ("Consent
Decree") with the FDA on September 29, 2009. As stipulated in the
Consent Decree, the Company will attempt to have the seized
inventory released. The Company believes that, except for the raw
materials which were opened solely for the purpose of sampling, the
estimated value of which is $8.1 million, all other seized
inventory would be difficult to recondition. Accordingly, a reserve
in the amount of $15.9 million has been created as of December 31,
2009 for this remaining inventory. In accordance with the Consent
Decree, the Company has also provided third party certification to
the FDA and requested the release of raw materials which were
opened solely for the purpose of sampling. The Consent Decree
provides a series of measures that, when satisfied, will permit the
Company to resume manufacturing and distributing those products
which are manufactured in its Michigan facilities. In accordance
with the Consent Decree, the Company has engaged a consulting firm
which is comprised of current good manufacturing practice ("cGMP")
experts and has submitted a work plan to the FDA in October 2009
for remedial actions leading to resumption of its manufacturing
operations. Some additional details and clarifications to the work
plan were submitted to the FDA for its approval on January 14,
2010. As a result of the FDA action, Caraco voluntarily ceased
manufacturing operations and instituted, in two phases, indefinite
layoffs of approximately 430 of our employees. The Company has
subsequently started recalling some of these employees in
conjunction with its efforts to restart its manufacturing
activities. Further details on the results of operations are
provided below. Caraco earned gross profit of $3.1 million in the
third quarter of Fiscal 2010 and incurred a gross loss of $4.7
million during the first nine months of Fiscal 2010, as compared to
earning gross profit of $15.9 million and $61.5 million,
respectively, during the corresponding periods of Fiscal 2009. The
gross loss in the first nine months of Fiscal 2010 was, in large
part, due to a reserve of $15.9 million provided on the inventory
seized by the FDA, as well as lower sales of both distributed and
Caraco-owned products. The decrease in gross profit in the third
quarter of Fiscal 2010, as compared to the corresponding period of
Fiscal 2009 was primarily due to the negligible sales of
Caraco-owned products. Selling, general and administrative
("SG&A") expenses during the third quarter and first nine
months of Fiscal 2010 were $5.4 million and $15.9 million,
respectively, as compared to $3.7 million and $11.8 million,
respectively, during the corresponding periods of Fiscal 2009,
representing increases of 45% and 34%, respectively. SG&A
expenses, as a percentage of net sales, increased to 9% for the
first nine months of Fiscal 2010, as compared to 4% for the
corresponding period of Fiscal 2009. The higher percentage of
SG&A is partly due to the lower sales in the current period
versus the corresponding period last year. Total R&D expenses
incurred for the third quarter and first nine months of Fiscal 2010
were $2.8 million and $8.3 million respectively, as compared to
$5.8 million and $16.9 million, respectively, during the
corresponding periods of Fiscal 2009. The R&D expenses during
the first nine months of Fiscal 2010 were lower compared to those
during the corresponding period of Fiscal 2009 as we were
reimbursed a certain amount relating to certain product litigation
costs during the second quarter of Fiscal 2010, as part of a
settlement agreement, as previously disclosed. Although R&D
expenses have decreased in the current period due to the focus of
the Company on remediating FDA concerns, they are likely to
increase once the company refocuses on new product filings and
approvals with the FDA. Caraco filed two Abbreviated New Drug
Applications ("ANDAs") relating to two products with the FDA during
the first nine months of Fiscal 2010. The Company has not received
FDA approval for any ANDAs during the first nine months of Fiscal
2010 and does not expect to receive any approvals for products out
of its Michigan facilities until resolution of the FDA's concerns.
The total number of ANDAs pending approval by the FDA as of
December 31, 2009 was 31 (including four tentative approvals)
relating to 27 products. As previously disclosed, the FDA has
initiated certain actions and, as a consequence, production at the
Company's Michigan facilities has voluntarily been ceased. This
will adversely affect the overall profitability of the Company in
the near term. The Company has initiated a reduction in various
expenses in an effort to bring its expenses in line with its
current levels of sales. Such reduction is expected to continue
until FDA concerns are resolved and the Company resumes its
manufacturing activities, of which there is no assurance. As of
December 31, 2009, we have $67 million in cash and another $10
million in short-term investments, including the proceeds from a
loan in the amount of $16.2 million, currently classified as a
short term liability. The Company believes that its cash flow from
operations and cash balances will continue to support its ongoing
business requirements, however, because of, among other things,
decreased customer confidence, the uncertainty of future costs of
FDA compliance and associated costs, there can be no assurance.
Caraco intends to continue to work with the FDA to effectively and
expeditiously resolve remaining concerns, although there can be no
assurance that the Company will succeed in reaching such a
resolution or the terms thereof. This press release should be read
in conjunction with our quarterly report on Form 10-Q which will
provide more detailed information on the results of the third
quarter of Fiscal 2010. Detroit-based Caraco Pharmaceutical
Laboratories, Ltd., develops, manufactures, markets and distributes
generic pharmaceuticals to the nation's largest wholesalers,
distributors, drugstore chains and managed care providers. Safe
Harbor: This news release contains forward-looking statements made
pursuant to the safe-harbor provisions of the Private Securities
Litigation Reform Act of 1995. Without limitation, the words
"believe" or "expect" and similar expressions are intended to
identify forward-looking statements. Such statements are based on
management's current expectations and are subject to risks and
uncertainties that could cause actual results to differ materially
from those described in the forward-looking statements. These risks
and uncertainties are contained in the Corporation's filings with
the Securities and Exchange Commission, including Part I, Item 1A
of our most recent Form 10-K, and include but are not limited to:
information of a preliminary nature that may be subject to
adjustment, potentially not obtaining or delay in obtaining FDA
approval for new products, governmental restrictions on the sale of
certain products, development by competitors of new or superior
products or less expensive products or new technology for the
production of products, the entry into the market of new
competitors, market and customer acceptance and demand for new
pharmaceutical products, availability of raw materials, timing and
success of product development and launches, dependence on few
products generating majority of sales, product liability claims for
which the Company may be inadequately insured, material litigation
from product recalls, the purported class action lawsuits alleging
federal securities laws violations, delays in returning the
Company's products to market, including loss of market share,
increased reserves against the FDA-seized inventory, and other
risks identified in this report and from time to time in our
periodic reports and registration statements. These forward-looking
statements represent our judgment as of the date of this report. We
disclaim, however, any intent or obligation to update our
forward-looking statements. CARACO PHARMACEUTICAL LABORATORIES,
LTD. (A subsidiary of Sun Pharmaceutical Industries Limited)
STATEMENTS OF OPERATIONS Nine Months ended December 31, Quarter
ended December 31, 2009 2008 2009 2008 ---- ---- ---- ----
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Net sales
$178,435,869 $286,185,477 $51,989,958 $55,720,312 Cost of goods
sold 167,148,654 224,698,828 48,905,076 39,818,936 -----------
----------- ---------- ---------- Gross profit before reserve for
inventory seized by FDA 11,287,215 61,486,649 3,084,882 15,901,376
Reserve for inventory seized by FDA 15,950,188 - - - ---------- ---
--- --- Gross (loss) profit (4,662,973) 61,486,649 3,084,882
15,901,376 Selling, general and administrative expenses 15,855,217
11,790,777 5,402,641 3,735,532 Research and development costs
8,346,916 16,886,738 2,753,965 5,820,799 --------- ----------
--------- --------- Operating (loss) income prior to non- recurring
income (28,865,106) 32,809,134 (5,071,724) 6,345,045 Non-recurring
income 20,000,000 - - - ---------- --- --- --- Operating (loss)
income (8,865,106) 32,809,134 (5,071,724) 6,345,045 ----------
---------- ---------- --------- Other income (expense) Interest
expense (402,174) - (144,089) - Interest income 464,835 570,847
200,175 150,589 Loss on sale of equipment (114,272) - - - Other
income 120,698 - 74,390 - ------- --- ------ --- Other income - net
69,087 570,847 130,476 150,589 ------ ------- ------- -------
(Loss) income before income taxes (8,796,019) 33,379,981
(4,941,248) 6,495,634 Income taxes (benefit) expense (3,008,190)
10,431,391 (1,907,934) 1,411,082 Net (loss) income $(5,787,829)
$22,948,590 $(3,033,314) $5,084,552 =========== ===========
=========== ========== Net (loss) income per common share Basic
(0.15) 0.68 (0.08) 0.15 Diluted (0.15) 0.57 (0.08) 0.13 Weighted
number of shares Basic 38,457,176 33,609,119 39,090,194 34,749,920
Diluted 38,457,176 40,577,201 39,090,194 40,608,355 DATASOURCE:
Caraco Pharmaceutical Laboratories, Ltd. CONTACT: Jitendra Doshi,
+1-313-871-8400, Thomas Versosky, +1-313-556-4150, both of Caraco
Pharmaceutical Web Site: http://www.caraco.com/
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