DETROIT, May 23 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical Laboratories, Ltd. (NYSE Amex: CPD) recorded net sales of $233.7 million during Fiscal 2010 compared to $337.2 million during Fiscal 2009. During Fiscal 2010, the sales of Caraco-owned products (those products for which Caraco owns the ANDAs) were $22.3 million, as compared to $111.8 million during Fiscal 2009, while the sales of distributed products during Fiscal 2010 were $211.4 million, as compared to $225.4 million during Fiscal 2009. Net sales decreased during Fiscal 2010, in comparison to Fiscal 2009, primarily as a result of the adverse effect on sales of Caraco-owned products due to the actions of the FDA and the cessation of manufacturing, and in part due to the negative impact of voluntary recalls. Caraco incurred a net pre-tax loss of $13.2 million during Fiscal 2010, as compared to earning net pre-tax income of $29.5 million during Fiscal 2009. Net pre-tax income in the 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, and also due to the write-off of inventory, in the amount of $15.9 million, relating to inventory seized by the FDA, partially offset by non-recurring income earned during 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 non-recurring income is not expected to recur in future periods. The Company provided an income tax benefit of $4.5 million for Fiscal 2010, as compared to an income tax expense of $8.9 million during Fiscal 2009. Caraco incurred a net loss of $8.7 million during Fiscal 2010, as compared to net income of $20.5 million during Fiscal 2009. The Company generated cash from operations of $5.7 million during Fiscal 2010, as compared to $18.7 million during Fiscal 2009.
As previously disclosed, on June 25, 2009, at the request of the FDA, U.S. Marshals seized drug products in the Company's Michigan facilities that the FDA stated in its complaint were adulterated. Caraco-owned or licensed products distributed by Caraco that are manufactured outside of these facilities are not impacted. As a result of the FDA action, Caraco voluntarily ceased manufacturing operations and instituted an indefinite reduction in its workforce of approximately 430 employees.
On September 29, 2009, Caraco voluntarily entered into a Consent Decree with the FDA regarding the Company's drug manufacturing operations. Under terms of the Consent Decree, the cessation of manufacturing operations will continue until Caraco receives written notification from independent experts and the FDA that it is in compliance with cGMP and can resume operations. The Company submitted a remediation work plan to the FDA and this work plan has been approved by the FDA. Remediation activities are ongoing under the supervision of cGMP experts. The Company has subsequently recalled some of the laid-off employees in conjunction with its efforts to restart its manufacturing activities.
Further details on the results of operations are provided below.
The Company incurred a gross loss of $0.4 million in Fiscal 2010, as compared to earning a gross profit of $67.8 million during Fiscal 2009. The gross loss incurred during Fiscal 2010 was, in large part, due to a write-off in the amount of $15.9 million related to the inventory seized by the FDA, as well as lower sales of both distributed as well as Caraco-owned products.
Selling, general and administrative expenses during the relevant periods were $22.8 million and $16.4 million, representing an increase of 39%. SG&A expenses, as a percentage of net sales, increased to 10% in Fiscal 2010 as compared to 5% for Fiscal 2009. The higher SG&A percentage is partly due to the lower sales in the current year versus the previous year. Also, the SG&A expenses were higher during Fiscal 2010 as the Company recorded additional expenses primarily related to legal and professional consultation fees pertaining to FDA issues.
Total R&D expenses incurred during Fiscal 2010 were $10.1 million, as compared to $22.5 million during Fiscal 2009. The R&D expenses during Fiscal 2010 were lower compared to those during Fiscal 2009 as the Company was reimbursed a certain amount relating to certain product litigation costs 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 ANDAs relating to two products with the FDA during Fiscal 2010 as compared to 10 products filed in 2009. This brings the Company's total number of ANDAs pending approval by the FDA to 31 (including four tentative approvals) relating to 27 products. Caraco also submitted 12 other various filings with the FDA including those related to new sources on Active Pharmaceutical Ingredients (API) and alternative manufacturing sites.
The FDA actions and the Company's voluntary cessation of production at the Michigan facilities will adversely affect overall profitability in the near term. The Company initiated a reduction in various expenses in an effort to bring its expenses in line with its current levels of sales and other activities. The sales of distributed products and certain Caraco-owned products made by third parties will continue to contribute to ongoing cash flows. The Company has filed supplements to ANDAs for FDA approval, for the transfer of certain Caraco-owned products and intends to make further such filings in the next six months to regain revenues from these products. As of March 31, 2010, Caraco has $55 million in cash and another $10 million in short-term investments, including the proceeds from a loan in the amount of $15.3 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 resulting in lower sales, the uncertainty of future costs of FDA compliance and associated costs, there can be no assurance.
This press release should be read in conjunction with Caraco's annual report on Form 10-K which will provide more detailed information on the results 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 Year Ended Year Ended March 31, 2010 March 31, 2009 -------------- -------------- Net sales $233,673,688 $337,177,482 Cost of goods sold 234,072,916 269,382,927 ----------- ----------- Gross (loss) profit (399,228) 67,794,555 Selling, general and administrative expenses 22,768,338 16,417,971 Research and development costs 10,121,009 22,527,504 Non-recurring income (20,000,000) - ----------- --- Operating (loss) income (13,288,575) 28,849,080 ----------- ---------- Other income (expense) Interest income 947,046 631,151 Interest expense (867,074) (28,294) Loss on sale of equipment (84,174) - Other income 119,003 - ------- --- Other income - net 114,801 602,857 ------- ------- (Loss) income before income taxes (13,173,774) 29,451,937 Income tax (benefit) expense (4,514,142) 8,915,358 ---------- --------- Net (loss) income $(8,659,632) $20,536,579 =========== =========== Net (loss) income per share Basic $(0.22) $0.60 ====== ===== Diluted $(0.22) $0.51 ====== ===== Weighted number of shares Basic 38,613,262 34,227,335 Diluted 38,613,262 40,575,721
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/
