Caraco Pharmaceutical Laboratories, Ltd. Reports Results for the Second Quarter and First Six Months of Fiscal Year 2010

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 (7,843,193) 26,464,088 (1,935,813) 12,182,908

Non-recurring
income 20,000,000 - 20,000,000 -
---------- --- ---------- ---

Operating (loss)
income 12,156,807 26,464,088 18,064,187 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 12,095,419 26,884,347 18,097,267 12,325,394
Income tax
(benefit)
expense (1,100,256) 9,020,309 3,925,076 3,901,421

Net (loss) income $13,195,675 $17,864,038 $14,172,191 $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

SOURCE Caraco Pharmaceutical Laboratories, Ltd.

Jitendra Doshi, +1-313-871-8400, or Thomas Versosky, +1-313-556-4150, both of
Caraco Pharmaceutical