DETROIT, Jan. 29 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical
Laboratories, Ltd. (NYSE Alternext US: CPD) posted net sales for
the third quarter ended December 31, 2008 and first nine months of
Fiscal 2009 of $55.7 million and $286.2 million, respectively, as
compared to $81.9 million and $158.6 million, respectively, for the
third quarter and first nine months of Fiscal 2008, reflecting a
decrease of 32% in the third quarter of Fiscal 2009 and an increase
of 80% in the first nine months of Fiscal 2009, as compared to the
corresponding periods of Fiscal 2008. The Company earned a net
pre-tax income of $6.5 million and $33.4 million, respectively,
during the third quarter and first nine months of Fiscal 2009, as
compared to a net pre-tax income of $10.1 million and $24.6 million
during the corresponding periods of Fiscal 2008. Caraco earned net
income of $5.1 million and $22.9 million, respectively, for the
third quarter and first nine months of Fiscal 2009, compared to net
income of $10.8 million and $23.9 million, respectively, for the
corresponding periods of Fiscal 2008. Daniel H. Movens, Caraco's
Chief Executive Officer, said, "The sales decline in third quarter
Fiscal 2009 was primarily due to sales of one product
(oxcarbazepine), launched under our marketing agreement with Sun
Pharmaceutical Industries Limited during the third quarter of
Fiscal 2008. The sales in third quarter Fiscal 2008 were
significantly higher than current sales during the third quarter of
Fiscal 2009 since this product enjoyed 180 days shared exclusivity
in Fiscal 2008, which allowed its higher sales. Subsequent to the
end of the exclusivity period, which occurred during the first
quarter of Fiscal 2009, the net realizations for this product have
decreased significantly as several other competitors have entered
the market for this generic product. The increase in the first nine
months of Fiscal 2009 of 80% is primarily due to sales of
pantoprazole partially offset by the reduction in oxcarbazepine
sales." Third Quarter and First Nine Months Fiscal 2009 Results Net
sales for the third quarter ended December 31, 2008 and first nine
months of Fiscal 2009 were $55.7 million and $286.2 million,
respectively, as compared to $81.9 million and $158.6 million,
respectively, for the third quarter and first nine months of Fiscal
2008, reflecting a decrease of 32% in the third quarter of Fiscal
2009 and an increase of 80% in the first nine months of Fiscal
2009, as compared to the corresponding periods of Fiscal 2008. The
decrease in net sales for the third quarter of Fiscal 2009, as
compared to the corresponding period of Fiscal 2008 is primarily
due to lower sales of distributed products by the Company under the
marketing agreement with Sun Pharma, and to a lesser extent, sales
of manufactured products. Also as previously disclosed, the sales
of Para IV products being marketed under the distribution and sales
agreement may not be sustainable. A significant decrease on the
sale of a Para IV product (pantoprazole) contributed to the lower
sales in third quarter Fiscal 2009 as compared to first two
quarters of Fiscal 2009. Mr. Movens added, "Though the first nine
months of Fiscal 2009 reflects growth of 80% over the corresponding
period of Fiscal 2008, we believe that full-year Fiscal 2009 sales
will be in line with level achieved during Fiscal 2008. This is
based primarily on the reduction in sales on pantoprazole, and to a
lesser extent our manufactured product sales. We have not taken any
specific position on projected pantoprazole sales at this time.
This product was launched at risk as part of our distribution and
sale agreement with Sun Pharma. This product remains under
litigation. We will continue to assess our level of risk that we
are comfortable with and once we cross that threshold, we will have
to weigh our options." The gross profit margin as a percentage of
net sales for the third quarter and first nine months of Fiscal
2009 was 29% and 21%, respectively, as compared to 28% and 36%,
respectively, during the corresponding periods of Fiscal 2008. The
decrease in the nine month period margin was primarily due to the
weight of increased sales of distributed products versus the sales
of manufactured products, which had an impact on the overall
margins. The gross profit margin on distributed products was 10%
and 9%, respectively, for the third quarter and first nine months
of Fiscal 2009, as compared to 15% and 16%, respectively, for the
corresponding periods of Fiscal 2008. The decrease was primarily
due to the weight of increased sales of Para IV products, which
earn lower margins as a percentage of sales versus the sale of
other distributed products. The gross profit margin for
manufactured products was 45% and 48%, respectively, for the third
quarter and first nine months of Fiscal 2009, as compared to 49%
for both of the corresponding periods of Fiscal 2008. Manufactured
product margins have remained fairly stable during the Fiscal 2009
nine-month period. For the third quarter of Fiscal 2009, the
overall gross profit margin for manufactured products was lower due
to price erosion on certain products that faced new competition, as
well as the change in customer mix. These rates may, or may not,
remain at current levels in future periods. Mr. Movens stated, "We
are hopeful that manufactured margins remain in line with Fiscal
2008 as we continue to manage, among other things, various factors
such as changes in product sales mix, the balance of product sold
to the various classes of trade, price erosion, new competitors
entering the market and protecting and growing our market share. We
can not determine the mix of distributed product sales versus
manufactured product sales in any given period as it depends on our
ability to gain market share on each product and is relative to
when the FDA approves any given product in either category of
product and the revenue potential of that product once it has been
approved." Selling, general and administrative ("SG&A")
expenses during the third quarter and first nine months of Fiscal
2009 were $3.7 million and $11.8 million, respectively, as compared
to $3.7 million and $10.2 million, respectively, during the
corresponding periods of Fiscal 2008, representing no change in the
third quarter of Fiscal 2009 as compared to corresponding period of
Fiscal 2008 and an increase of 16% in the first nine months of
Fiscal 2009 versus the same period of Fiscal 2008. The increase in
the nine-month period was mainly related to higher marketing and
administrative efforts relative to the increase in sales. Total
R&D expenses for the third quarter and first nine months of
Fiscal 2009 were $5.8 million and $16.9 million, respectively, as
compared to $10.0 million and $23.8 million, respectively, during
the corresponding periods of Fiscal 2008. The Company did not incur
any non-cash R&D expenses (technology transfer costs) during
the third quarter or first nine months of Fiscal 2009, as compared
to $5.9 million and $11.3 million, respectively, for the
corresponding periods of Fiscal 2008. The cash R&D expenses
during the first nine months of Fiscal 2009 were higher compared to
those during the corresponding period of Fiscal 2008 due to
increased R&D activity, including increased patent related
expenses and increases in other expenses in an effort to file more
products with the FDA. The Company filed six Abbreviated New Drug
Applications ("ANDAs"), relating to five products, with the FDA
during the first nine months of Fiscal 2009. Caraco has received
FDA approval for eight ANDAs, relating to three products during the
first nine months of Fiscal 2009. This brings the Company's total
number of ANDAs pending approval by the FDA to 25 (including four
tentative approvals), relating to 21 products. We need to continue
to improve our output on research and development by filing more
ANDAs with the FDA so as to increase our own manufactured products
portfolio. It is our intention to do so both internally and by
utilizing third party developers. Mr. Movens said, "The Company
intends to aggressively move forward with the development of new
products. We believe we will file additional products with the FDA
before the end of Fiscal 2009. In addition to the Sun Pharma
products agreement, we have implemented additional development
strategies with various third parties, both domestically and
abroad, that are intended to complement the Sun Pharma development
pipeline. We anticipate additional development agreements will be
entered into in order to eliminate any future gaps in our calendar
of approvals that we anticipate from the FDA. We expect these
agreements to run parallel to our own internal product development.
In order to improve the amount of filings, we continue to fortify
our own research and development team by adding formulators and
increasing the number of products we have in development
internally. We continue to be on track in our development
expectations and subsequent filings." We generated cash from
operations in the amount of $0.2 million during the first nine
months of Fiscal 2009, as compared to generating cash from
operations of $24.3 million during the corresponding period of
Fiscal 2008. The decrease in cash flows from operations was
primarily due to a decrease in accounts payable balances offset, in
part, by decreases in accounts receivable and inventory balances.
At December 31, 2008, we had working capital of $104.4 million,
compared to working capital of $104.5 million at March 31, 2008.
Although the Company generated negative cash flows from operations
in the first quarter of Fiscal 2009 in the amount of $27.4 million,
the cash provided from operations during the second and third
quarters of Fiscal 2009 were $19.2 million and $8.2 million,
respectively. The Company's cash and cash equivalents balance was
$34.0 million at December 31, 2008. Additionally, the Company has
available a $10.0 million line of credit obtained through JP Morgan
Chase Bank, N.A. Currently the credit line has no outstanding
balances. The Company believes that its cash flows from operations
will continue to support its business requirements. Further, during
the first nine months of Fiscal 2009, the Company expended $21.7
million in purchases of property, plant and equipment, primarily to
self-fund the expansion of its primary facility located in Detroit,
Michigan. As of December 31, 2008, the expansion of this facility
is nearing completion, and the Company believes that cash
disbursements for capital expansions will decline significantly.
Mr. Movens stated, "The expansion of our facilities should provide
us the capacity we need to supply our customers effectively. We are
currently working on streamlining our procedures by adding improved
systems and processes which should provide a quality output. Our
training and succession planning is being enhanced both internally
and by utilizing third parties, to support our growth and predict
future operational efficiencies, and improved outcome in quality.
We continue to work with local governments, universities and
technical schools in order to provide the proper talented employees
required to perform in a highly regulated business. We anticipate
improved productivity and quality as our newer staff continues to
increase their experience in their respective positions." "With our
planned expansion during Fiscal 2009, it remains important to have
the proper management team in place to support the anticipated
improvements and growth. Our production capacity and output needs
to be increased in order to maximize sales throughout the remainder
of Fiscal 2009 and beyond. Though we may decide to incur debt for
target acquisitions or other business propositions, we currently
remain free of any debt," Mr. Movens added. On October 31, 2008,
the Company received a warning letter from the Detroit District of
the FDA. In this letter, the Agency reiterated some of the concerns
detailed in the previous Form 483 issued as a result of our
inspection that concluded in June 2008. These concerns included
inadequate and untimely investigations by our quality control unit
of certain incidents contrary to the Company's standard operating
procedures. The FDA also commented on our corrective action plans.
The FDA added that failure to promptly correct the deficiencies may
result in legal action without further notice, including, without
limitation, seizure and injunction. It also noted that other
federal agencies may take this warning letter into account when
considering the award of contracts. Additionally, the FDA may
withhold approval of requests for export certificates, or approval
of pending new drug applications. We promptly responded to the
warning letter on November 24, 2008 for the deficiencies noted and
provided our corrective actions. The Detroit District acknowledged
our response on December 22, 2008. It noted that our corrective
actions will be evaluated during the FDA's next scheduled
inspection of our Detroit facility. It is unlikely that we will
receive any approvals for products out of our Detroit facility
until after our next inspection. At this time, no further meetings
were deemed necessary by the FDA. We have changed our leadership in
both manufacturing and quality control in order to better align
these areas with our corporate goals. "We believe we are
substantially compliant with cGMP. We have corrective actions in
place and continue to work to improve our quality system. It is our
intention to be a model of compliance at all times. We remain
confident in our action plan. We continue to invest in improved
systems, equipment, training and personnel in quality and
manufacturing to improve our overall performance in quality and
production. In the last two years we have added a considerable
amount of infrastructure in our quality control laboratories. Our
current focus is on manufacturing and quality assurance. The
Company's sales of current products continue in the normal course
of business. We continue to add products to our portfolio through
Sun Pharma and its affiliates that we will launch into the US," Mr.
Movens concluded. This press release should be read in conjunction
with our Form 10-Q, which provides more detailed information on the
results of the third quarter and first nine months of Fiscal 2009.
Detroit-based Caraco Pharmaceutical Laboratories, Ltd., develops,
manufactures, markets and distributes generic and private-label
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. 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 Item 1A to the Corporation's annual
report on 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, 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. Financial Statements to Follow CARACO
PHARMACEUTICAL LABORATORIES, LTD. (A subsidiary of Sun
Pharmaceutical Industries Limited) STATEMENTS OF INCOME Nine months
ended Quarter ended December 31, December 31, 2008 2007 2008 2007
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) Net sales
$286,185,477 $158,614,840 $55,720,312 $81,859,956 Cost of goods
sold 224,698,828 101,445,849 39,818,936 58,574,542 Gross profit
61,486,649 57,168,991 15,901,376 23,285,414 Selling, general and
administrative expenses 11,790,777 10,159,869 3,735,532 3,723,144
Research and development costs - affiliate - 11,320,640 - 5,880,640
Research and development costs - other 16,886,738 12,476,952
5,820,799 4,087,742 Operating income 32,809,134 23,211,530
6,345,045 9,593,888 Other income (expense) Interest income 570,847
1,420,730 150,589 534,275 Loss on disposal of assets - (4,420) -
(4,420) Other income 570,847 1,416,310 150,589 529,855 Net income
before income taxes 33,379,981 24,627,840 6,495,634 10,123,743
Income tax expense / (benefit) 10,431,391 718,627 1,411,082
(649,339) Net income $22,948,590 $23,909,213 $5,084,552 $10,773,082
Net income per common share Basic 0.68 0.82 0.15 0.37 Diluted 0.57
0.63 0.13 0.28 Weighted number of Shares Basic 33,609,119
29,197,836 34,749,920 29,197,836 Diluted 40,577,201 38,035,421
40,608,355 38,169,114 DATASOURCE: Caraco Pharmaceutical
Laboratories, Ltd. CONTACT: Daniel Movens, +1-313-871-8400, or
Thomas Versosky, +1-313-556-4150, both of Caraco Pharmaceutical Web
site: http://www.caraco.com/
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