In the news release, Caraco Pharmaceutical Laboratories, Ltd.
Reports Results for the Second Quarter and First Six Months of
Fiscal Year 2010, issued 27-Oct-2009 by Caraco Pharmaceutical
Laboratories, Ltd. over PR Newswire, we are advised by the company
that the Statements of Income table included certain figures that
have since been corrected. Please disregard the table in the
original press release and reference the updated Statements of
Income table referenced in the complete, corrected release below:
Caraco Pharmaceutical Laboratories, Ltd. Reports Results for the
Second Quarter and First Six Months of Fiscal Year 2010 DETROIT,
Oct. 27 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical
Laboratories, Ltd. (NYSE Amex: CPD) generated net sales of $78.4
million and $126.4 million for the second quarter and first six
months of Fiscal 2010, respectively, compared to $122.2 million and
$230.5 million, respectively, during the corresponding periods of
Fiscal 2009. Sales of distributed products were significantly lower
for the second quarter and first six months of Fiscal 2010, in
comparison to the corresponding periods of Fiscal 2009 primarily as
a result of significantly higher sales of Paragraph IV products
during both periods of Fiscal 2009. Sales of distributed products
were also lower due to price erosion for the products sold. The
Company continues to remain competitive on products sold and
marketed during the first six months of Fiscal 2010. However,
during the second quarter and first six months, sales of
Caraco-owned products (those products for which Caraco owns the
ANDAs) were adversely affected by the actions of the FDA as
discussed below and the cessation of manufacturing and in part due
to the negative impact of voluntary recalls. Caraco earned a net
pre-tax income of $10.6 million during the second quarter and
incurred a net pre-tax loss of $3.9 million during the first six
months of Fiscal 2010, as compared to earning net pre-tax income of
$12.3 million and $26.9 million, respectively, during the
corresponding periods of Fiscal 2009. Net pre-tax income in both
periods of the current fiscal year was lower as the Company has
created a reserve in the amount of $7.5 million and $15.9 million,
respectively, during the second quarter and first six months of
Fiscal 2010 relating to the inventory seized by the FDA. Pre-tax
income was positively affected by non-recurring income of $20.0
million as part of an asset purchase agreement arising out of a
settlement agreement entered into by the Company during the current
period that is not expected to recur in future periods. The Company
voluntarily entered into a Consent Decree with the FDA on September
29, 2009. As stipulated in the Consent Decree, the Company will
attempt to have some of the seized inventory released. As
previously disclosed, the estimated value of this inventory of drug
products manufactured in Caraco's Michigan facilities including
ingredients and in-process materials was $24.0 million, as of
September 30, 2009. Products sold and distributed by Caraco that
are manufactured by third parties and outside of these facilities
are not impacted and the Company continues distribution and
marketing of these products. 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
such inventory would be difficult to recondition. Accordingly, a
reserve in the amount of $15.9 million has been created as of
September 30, 2009 for this remaining inventory. As a result of the
FDA action, Caraco has voluntarily ceased manufacturing operations
and instituted, in two phases, indefinite layoffs of approximately
430 employees. The Consent Decree provides a series of measures
that, when satisfied, will permit the Company to resume
manufacturing and distribution of those products that are
manufactured in its Michigan facilities. The Company has engaged a
consulting firm which is comprised of cGMP experts, in accordance
with the Consent Decree, and has submitted a work plan to the FDA
for remedial actions leading to resumption of its manufacturing
operations. Caraco incurred a gross loss of $4.1 million and $7.7
million, respectively, during the second quarter and first six
months of Fiscal 2010, as compared to gross profit of $22.0 million
and $45.6 million, respectively, during the corresponding periods
of Fiscal 2009. The gross loss in the second quarter and first six
months of Fiscal 2010 were, in large part, due to a reserve of $7.5
million and $15.9 million provided on the inventory seized by the
FDA during the respective periods. The gross profit has also
decreased due to negligible sales in second quarter of Caraco-owned
products and lower sales of both distributed as well as
Caraco-owned products in the first six months of Fiscal 2010.
Selling, general and administrative ("SG&A") expenses during
the second quarter and first six months of Fiscal 2010 were $6.8
million and $10.5 million, respectively, as compared to $4.2
million and $8.1 million, respectively, during the corresponding
periods of Fiscal 2009, representing increases of 60% and 30%,
respectively. SG&A expenses, as a percentage of net sales
increased to 8% for the first six months of Fiscal 2010, as
compared to 3% 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. Also
during the second quarter of Fiscal 2010, the Company recorded
additional expenses related to a) severance paid to its former CEO,
b) legal and professional consultation fees related to FDA issues
and c) payments made to its customers in lieu of contractual
unfulfilled product supply obligations. Total R&D expenses for
the second quarter and first six months of Fiscal 2010 were $(1.5)
million and $5.6 million, respectively, as compared to $5.6 million
and $11.1 million, respectively, during the corresponding periods
of Fiscal 2009. The R&D expenses during the second quarter of
Fiscal 2010 were lower compared to those during the corresponding
period of Fiscal 2009 as Caraco was reimbursed a certain amount
relating to certain product litigation costs as part of a
settlement agreement, as previously disclosed. Also, the R&D
costs were lower due to non-incurrence of any major expenses in the
second quarter relating to bio-equivalency studies and material
costs for development. Caraco has filed two Abbreviated New Drug
Applications ("ANDAs") relating to two products with the FDA during
the first six months of Fiscal 2010. Caraco has not received FDA
approval for any ANDAs during the first six months of Fiscal 2010
and does not expect to receive any approvals for products out of
the Detroit facility until the Company resolves the FDA's concerns.
The total number of ANDAs pending approval by the FDA as of
September 30, 2009 was 31 (including four tentative approvals)
relating to 27 products. The FDA's action and the Company's
voluntary actions have had, and are expected to continue to have, a
material adverse effect on operations and operating results. At
September 30, 2009, the Company had $73 million in cash and $10
million in short-term investments, including the proceeds from a
loan of $17.2 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, among other things, of the
uncertainty of future costs of FDA compliance and associated costs,
there can be no assurance. Caraco believes that it will emerge a
stronger company on a long-term basis. In the last two years the
Company has added considerable amount of infrastructure in its
quality control laboratories. The Company's current focus remains
on manufacturing and quality assurance. In the near term, Caraco
will utilize part of its R&D team to help with technical
validations and compliance initiatives. The Company's R&D
expense will decline as a result. The Company anticipates gaining
back its momentum on filings of new ANDAs internally once the
compliance initiatives and technical needs are satisfied. Any third
party development in process will continue. 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 first 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 INCOME Six Months ended Quarter ended September 30,
September 30, 2009 2008 2009 2008 ---- ---- ---- ---- (UNAUDITED)
(UNAUDITED) (UNAUDITED) (UNAUDITED) Net sales $126,445,911
$230,465,165 $78,375,895 $122,188,425 Cost of goods sold
118,243,578 184,879,891 75,010,528 100,186,562 -----------
----------- ---------- ----------- Gross profit before reserve for
inventory seized by FDA 8,202,333 45,585,274 3,365,367 22,001,863
Reserve for inventory seized by FDA 15,950,188 - 7,503,654 -
---------- --- --------- --- Gross (loss) profit (7,747,855)
45,585,274 (4,138,287) 22,001,863 Selling, general and
administrative expenses 10,452,575 8,055,246 6,793,364 4,237,244
Research and development costs - other 5,592,951 11,065,940
(1,492,184) 5,581,711 --------- ---------- ----------- ---------
Operating (loss) income prior to non-recurring income (23,793,381)
26,464,088 (9,439,467) 12,182,908 Non-recurring income 20,000,000 -
20,000,000 - ---------- --- ---------- --- Operating (loss) income
(3,793,381) 26,464,088 10,560,533 12,182,908 ---------- ----------
---------- ---------- Other (expense) income Interest expense
(258,085) - (127,135) - Interest income 264,660 420,259 160,204
142,486 Loss on sale of equipment (114,272) - - - Other income
46,309 - 11 - ------ --- -- --- Other (expense) income - net
(61,388) 420,259 33,080 142,486 ------- ------- ------ -------
(Loss) income before income taxes (3,854,769) 26,884,347 10,593,613
12,325,394 Income tax (benefit) expense (1,100,256) 9,020,309
3,925,076 3,901,421 Net (loss) income $(2,754,513) $17,864,038
$6,668,537 $8,423,973 =========== =========== ===========
========== Net (loss) income per common share Basic (0.07) 0.54
0.17 0.25 Diluted (0.07) 0.44 0.16 0.21 Weighted number of shares
Basic 38,138,937 33,035,602 38,723,585 33,389,920 Diluted
38,138,937 40,565,004 40,468,406 40,593,328 DATASOURCE: Caraco
Pharmaceutical Laboratories, Ltd. CONTACT: Jitendra Doshi,
+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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