Caraco Pharmaceutical Laboratories, Ltd. Reports Results for the Second Quarter and...

Caraco Pharmaceutical Laboratories, Ltd. Reports Results for the Second
Quarter and First Six Months of Fiscal 2009

DETROIT, Oct. 23 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical
Laboratories, Ltd. (Amex: CPD) posted net sales for the second quarter and
first six months of Fiscal 2009 of $122.2 million and $230.5 million,
respectively, as compared to $41.4 million and $76.8 million, respectively,
for the corresponding periods of Fiscal 2008. This represents increases of
195% and 200% over the respective periods of Fiscal 2008. Pre-tax income grew
to $12.3 million for the second quarter and $26.9 million for the first six
months of Fiscal 2009 as compared to pre-tax income of $4.9 million and $14.5
million, respectively, during the corresponding periods of Fiscal 2008, while
net income increased by 82% to $8.4 million in the second quarter of Fiscal
2009, as compared to $4.6 million in the second quarter of Fiscal 2008 and
increased to $17.9 million for the first six months of Fiscal 2009, compared
to $13.1 million for the corresponding period of Fiscal 2008, an increase of
36%.
Daniel H. Movens, Caraco's Chief Executive Officer, said, "Our sales
results for the second quarter are primarily due to sales of distributed
products by the Company under the distribution and sale agreement with Sun
Pharma, and to a lesser extent, sales of other products launched in Fiscal
2008 under the marketing agreements with Sun Pharma as well as growth in sales
of our own manufactured products."
Mr. Movens added, "Though distributed products launched in the fourth
quarter Fiscal 2008 remained a significant driver of our sales, second quarter
Fiscal 2009 had solid growth on our overall product line over the
corresponding period of Fiscal 2008. We continue to make inroads towards
improved market share of both new and existing products while we work to
maintain our current market share on what is now becoming a broader basket of
products in our portfolio."
"Our strategy remains to grow the business effectively by maximizing our
sales on our approved products born out of our various paths of development.
Towards the end of Fiscal 2008, the weight of distributed product sales
significantly increased. This trend has continued through the first six months
of Fiscal 2009 and will most likely continue on a short-term basis. Overall,
we are pleased with the direction of the Company and our continued focus on
executing Caraco's business plan is a major factor in the Company's success."
Second Quarter and First Six Months Fiscal 2009 Results
During the second quarter and first six months of Fiscal 2009, net sales
were $122.2 million and $230.5 million, respectively, as compared to $41.4
million and $76.8 million, respectively, for the corresponding periods of
Fiscal 2008. Gross profit during the second quarter and first six months of
Fiscal 2009 improved to $22.0 million and $45.6 million, respectively, as
compared to $18.0 million and $33.9 million, respectively, for the
corresponding periods of Fiscal 2008, reflecting increases of 22% and 35%,
respectively. The increases in gross profit were due to higher sales,
primarily of distributed products, including Paragraph IV products, under
agreements with Sun Pharma.
The gross profit margin as a percentage of net sales for the second
quarter and first six months of Fiscal 2009 decreased to 18% and 20%,
respectively, as compared to 44% during both of the corresponding periods of
Fiscal 2008. The decreases were primarily due to the weight of increased sales
of distributed products versus the sales of manufactured products, which had
an impact on the overall margin percentage. Net sales for distributed products
during the second quarter and first six months of Fiscal 2009 were $89.9
million and $166.2 million, respectively, as compared to $6.4 million and
$13.4 million, respectively, for the corresponding periods of Fiscal 2008. The
gross profit margin for distributed products for the second quarter and first
six months of Fiscal 2009 was 7% and 8%, respectively, as compared to 17% and
20%, respectively, for the corresponding periods of Fiscal 2008. The decreases
were 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. Net sales for manufactured products were $32.2 million
and $64.3 million, respectively, during the second quarter and first six
months of Fiscal 2009 as compared to $34.9 million and $63.3 million,
respectively, for the corresponding periods of Fiscal 2008. The gross profit
margin for manufactured products was 48% and 49%, respectively, for the second
quarter and first six months of Fiscal 2009, in line with the second quarter
and first six months of Fiscal 2008.
Mr. Movens stated, "Manufactured product margins have remained fairly
stable period to period. This rate may or may not remain at current levels in
future periods. To date we have had constant downward pricing pressure. 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 second
quarter and first six months of Fiscal 2009 were $4.2 million and $8.1
million, respectively, as compared to $3.0 million and $6.4 million,
respectively, during the corresponding periods of Fiscal 2008. The increases
were mainly related to higher marketing and administrative efforts relative to
the increase in sales.
Total R&D expenses for the second quarter and first six months of Fiscal
2009 were $5.6 million and $11.1 million, respectively, as compared to $10.5
million and $13.8 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 second quarter or first six months of Fiscal 2009,
as compared to $5.4 million incurred for both of the corresponding periods of
Fiscal 2008. The final product was transferred to Caraco by Sun Pharma Global
Inc. during the third quarter of Fiscal 2008, which concluded the obligations
between the parties under a technology transfer agreement between Caraco and
Sun Global. Cash R&D will continue to increase in an effort to develop and
file additional products. We filed four Abbreviated New Drug Applications
("ANDAs") relating to three products with the FDA during the second quarter of
Fiscal 2009. This brings our total number of ANDAs pending approval by the FDA
to 23 (including four tentative approvals) relating to 19 products and one NDA
pending approval.
Mr. Movens said, "As we have previously disclosed, we have implemented
development strategies with various third parties both domestic and abroad, in
addition to the Sun Pharma products agreements that are intended to complement
both the Caraco and Sun Pharma development pipeline. We also 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 remain key future contributors to our business
in addition to our own internal product development. We continue to fortify
our internal development by adding formulators to our research and development
team and increasing the number of products we have in development."
Mr. Movens stated, "The expansion of our facilities should be completed
prior to the end of Fiscal 2009. The manufacturing facility that we are
building, along with our new distribution facility which we recently leased,
should provide the capacity we need to supply our customers effectively. Our
training and succession planning is being enhanced to support our growth and
predict future operational efficiencies and improved outcome in quality. We
continue to work in collaboration with the State of Michigan and the City of
Detroit in conjunction with local universities and technical schools in order
to provide the proper talented employees. This should allow us to perform well
in what is a highly regulated business. This should also create and solidify
the pool of personnel required at all levels of the Company to support our
growth and provide careers for the local economy. We anticipate improved
productivity as our staff continues to increase their experience in their
respective positions."
"Our internal efforts, combined with Sun Pharma, in developing new
products continue to pick up momentum and should permit us to grow at the
level of our guidance. The current level of growth is at a high level which
may not be sustainable. Based on our current distribution and sale and
marketing agreements with Sun Pharma and our internal portfolio of products
and future approved products, we believe we will achieve 25% growth in sales
for Fiscal 2009, compared to Fiscal 2008," added Mr. Movens.
Mr. Movens stated, "The Company intends to aggressively move forward with
the development of new products. We believe that R&D remains to be a
significant driver of future growth. While the development of new products
will continue to impact our cash R&D expense and EPS, we believe that we will
continue to have the cash and other means available to meet increased working
capital requirements, fund anticipated Paragraph IV certification litigation
legal expenses, and finance further capital investments. Product development
is a critical element in meeting future expectations."
"We are pleased with our overall results and the direction of the company.
We look towards building on our manufacturing sales where possible while
measuring the balance required to optimize our gross profit on both
distributed and manufactured products. We have many projects in place that
should result in improved efficiencies and productivity both from a systems
and operational perspective. We will continue to work at lowering costs while
maintaining quality throughput in production. As we work through reviewing
various target acquisition opportunities that come available to us we may
determine that we need additional cash to complete a particular acquisition.
Though this could result in future borrowings, we currently remain debt free,"
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 second quarter and
first six 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 (UNAUDITED)

Six months ended Quarter ended
September 30, September 30,

2008 2007 2008 2007

Net sales $230,465,165 $76,754,883 $122,188,425 $41,354,567
Cost of goods
sold 184,879,891 42,871,307 100,186,562 23,338,768

Gross profit 45,585,274 33,883,576 22,001,863 18,015,799

Selling, general
and
administrative
expenses 8,055,246 6,436,725 4,237,244 3,034,058
Research and
development costs
- affiliate - 5,440,000 - 5,440,000
Research and
development costs
- other 11,065,940 8,389,210 5,581,711 5,103,723

Operating income 26,464,088 13,617,641 12,182,908 4,438,018

Other income
Interest income 420,259 886,455 142,486 419,162
Other income 420,259 886,455 142,486 419,162

Net income before
income taxes 26,884,347 14,504,096 12,325,394 4,857,180
Income taxes 9,020,309 1,367,966 3,901,421 236,265

Net income $17,864,038 $13,136,130 $8,423,973 $4,620,915

Net income per common
share
Basic $0.54 $0.46 $0.25 $0.16
Diluted $0.44 $0.34 $0.21 $0.12

Weighted number of
shares
Basic 33,035,602 28,739,315 33,389,920 28,739,315
Diluted 40,565,004 38,483,864 40,593,328 38,640,844

SOURCE Caraco Pharmaceutical Laboratories, Ltd.

Daniel Movens, +1-313-871-8400, or Thomas Versosky, +1-313-556-4150, both of
Caraco Pharmaceutical Laboratories, Ltd.