DETROIT, Jan. 29 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical Laboratories, Ltd. posted record net sales for the third quarter and the first nine months of fiscal 2008, ended December 31, 2007, of $81.9 million and $158.6 million, respectively, as compared to $31.3 million and $84.3 million for the corresponding periods of fiscal 2007. This represents an increase of 162% and 88% over the third quarter and first nine months of fiscal 2007, respectively. The increase is primarily due to the launch of Oxcarbazepine Tablets (oxcarbazepine), which is a generic version of Trileptal(R), partially offset by price erosion and product sales mix. Oxcarbazepine is a product approved under an Abbreviated New Drug Application (ANDA) of Sun Pharmaceutical Industries Limited ("Sun Pharma"). Net income grew to $10.8 million and $23.9 million in the third quarter and the first nine months of fiscal 2008, respectively, as compared to net income of $10.1 million and $17.4 million during the corresponding periods of fiscal 2007.
Daniel H. Movens, Caraco's Chief Executive Officer, said, "Our record results in the third quarter and first nine months of fiscal 2008 continue to validate our development and marketing agreements and our ability to monetize these areas as part of our overall business plan. Our strategy remains to grow the business appropriately by utilizing all of our diverse paths of development. Overall, we are pleased with the direction of the Company, which is highlighted by 12 FDA product approvals we received in addition to five tentative approvals, year-to-date in fiscal 2008."
Mr. Movens added, "Oxcarbazepine, which was launched during the quarter under our marketing agreement with Sun Pharma, was the most significant driver to our sales. The sales of oxcarbazepine were significantly higher than our budgeted projections due to less competition than anticipated when we entered the market. We do not believe the oxcarbazepine sales are sustainable at current levels due to additional competitors having entered the market or about to enter the market, and pricing will most likely erode as a result. Excluding oxcarbazepine sales, overall sales continued to grow due to the introduction of newer products of both Caraco and of Sun Pharma combined with the sales of existing products to new and existing customers."
Third Quarter and First Nine Months Fiscal 2008 Results
Net sales for the third quarter and the first nine months of fiscal 2008 were $81.9 million and $158.6 million, respectively, as compared to $31.3 million and $84.3 million for the corresponding periods of fiscal 2007, reflecting an increase of 162% and 88%, respectively. The increase is primarily due to the launch of oxcarbazepine.
Gross profit during the third quarter and the first nine months of fiscal 2008 was $23.3 million and $57.2 million, respectively, as compared to gross profit of $15.1 million and $42.4 million during the corresponding periods of fiscal 2007, reflecting an increase of 54% and 35%, respectively. The increase in gross profit was due to higher sales, primarily of distributed products, partially offset by the change in sales mix and price erosion on certain products.
The gross profit margin for the third quarter and the first nine months of fiscal 2008 decreased to 28% and 36% as compared to 48% and 50% during the corresponding periods of fiscal 2007. The decrease was primarily due to increased sales of distributed products, mainly oxcarbazepine and the associated weight of those sales versus the weight of manufactured products on the overall margin. Net sales for distributed products were $49.6 million and $63.0 million for the third quarter and the first nine months of fiscal 2008, respectively, as compared to $1.0 million for both third quarter and the first nine months of fiscal 2007. The gross profit margin on distributed products sold was 15% and 16% for the respective periods of fiscal 2008, as compared to 24% for the corresponding periods of fiscal 2007. Net sales for manufactured products were $32.3 million and $95.6 million for the third quarter and the first nine months of fiscal 2008, respectively, as compared to $30.3 million and $83.3 million during the corresponding periods of fiscal 2007. The gross profit margin for manufactured products was 49% for both of the respective periods of fiscal 2008, as compared to 50% for both of the respective periods of fiscal 2007.
Selling, general and administrative (SG&A) expenses during the third quarter and the first nine months of fiscal 2008 were $3.7 million and $10.2 million, respectively, as compared to $2.6 million and $7.1 million during the corresponding periods of fiscal 2007, representing an increase of 42% and 44% in respective periods. The increase was mainly due to higher marketing and administrative efforts relative to the increase in sales. SG&A expenses, as a percentage of net sales improved to 6% for the first nine months of fiscal 2008, as compared to 8% for the corresponding period of fiscal 2007. Excluding sales of oxcarbazepine, the expenses for the first nine months of fiscal 2008 as a percentage of net sales were 8%, which is consistent with the corresponding period of fiscal 2007.
Total research and development (R&D) expenses for the third quarter and the first nine months of fiscal 2008 were $10.0 million and $23.8 million, respectively, as compared to $2.7 million and $18.5 million during the corresponding periods of fiscal 2007. Actual cash R&D expenses were $4.1 million and $12.5 million during the third quarter and the first nine months of fiscal 2008, respectively, as compared to $2.7 million and $6.8 million during the corresponding periods of fiscal 2007. We incurred non-cash R&D expenses (technology transfer cost) of $5.9 million and $11.3 million for one product transfer and two product transfers during the third quarter and the first nine months of fiscal 2008, respectively, as compared to no expense during the third quarter of fiscal 2007 and $11.8 million for three product transfers during the first nine months of fiscal 2007 The non-cash R&D expenses consist of technology transfer costs associated with Sun Pharma Global, Inc. earning preferred shares for each product transferred that has passed its bio-equivalency study, as per the terms of the technology transfer agreement between Caraco and Sun. All 25 products haves passed their bio- equivalency studies. The final product was transferred to Caraco during the third quarter which concludes the obligations between the parties under this agreement. The cash R&D expenses during the third quarter and the first nine months of fiscal 2008 were higher compared to those during the corresponding periods of fiscal 2007 due to increased R&D activity including milestone payments for outside development, increased patent related expenses and increases in other expenses in an effort to file more products with the FDA.
A net income tax benefit of $0.7 million was recorded during the third quarter of fiscal 2008 and a net income tax provision of $0.7 million was recorded during the first nine months of fiscal 2008. There was no such provision or benefit recorded for the corresponding periods of fiscal 2007.
Net pre-tax income of $10.1 million and $24.6 million was earned during the third quarter and the first nine months of fiscal 2008, respectively, as compared to a net pre-tax income of $10.1 million and $17.4 million during the corresponding periods of fiscal 2007. Net income of $10.8 million and $23.9 million was earned in the third quarter and the first nine months of fiscal 2008, respectively, as compared to net income of $10.1 million and $17.4 million during the corresponding periods of fiscal 2007.
Mr. Movens stated, "We generated cash from operations of $24.3 million during the first nine months of fiscal 2008 as compared to $19.7 million during the corresponding period of fiscal 2007. Accounts receivable increased by $29.3 million to $55.4 as of December 31, 2007, as compared to $26.1 million at the end of fiscal 2007 due to higher net sales."
"At December 31, 2007, we had working capital of $94.1 million, as compared to working capital of $76.2 million at March 31, 2007. At December 31, 2007, we had stockholders' equity of $131.2 million, as compared to stockholders' equity of $95.2 million at March 31, 2007. Additionally, we have available the $10.0 million line of credit obtained through JP Morgan Chase Bank, N.A. which would allow us flexibility in expansion efforts to increase our capacity over the next few years. The Company currently remains free of debt."
Mr. Movens added, "We continue to believe the competitive environment we find ourselves in is conducive to our success. Due to our size and management structure, we believe that we are able to move swiftly and effectively. We are disciplined and have the aptitude to execute our plan. We believe we remain substantially compliant with cGMP. We continue to invest in improved systems, training and personnel in quality assurance, quality control and manufacturing to improve our overall performance in quality."
"We continue to expand and upgrade our facilities, attract and hire talented individuals and expand our customer base. During the third quarter of fiscal 2008, we entered into a long-term lease to move distribution and storage of finished goods to a new facility which offers additional efficiency and scale. We also started our expansion project adjacent to our manufacturing facility which we anticipate to be completed by the end of calendar year 2008," stated Mr. Movens.
Mr. Movens said, "We continue to improve our near-term capacity constraints, while strategically looking at our capacity based on our vision of our long-term plan. We continue to build our inventories in order to be prepared for future sales opportunities on both Caraco and Sun products. Our internal efforts, combined with Sun Pharma, in developing new products have also picked up momentum. Collectively, this should permit us to grow at the level of our revised sales growth guidance. Additionally, during the third quarter of fiscal 2008, we gained FDA approval on two products, three tentative approvals and two product approvals since then for Caraco ANDAs. Year-to-date fiscal 2008 we gained FDA approval on 12 Caraco ANDAs covering 12 products and five tentative approvals. During fiscal 2008 we also began marketing five Sun Pharma products that were approved and launched during the period."
Mr. Movens added, "We intend to aggressively move forward with the development of new products. We believe that Sun Pharma is a partner with a proven track record and one that already has provided us with quality products. In addition to the Sun Pharma products agreement, we have implemented additional development strategies with various third parties both domestically and abroad that will 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 during fiscal 2008, we continue to fortify our own R&D team by adding formulators and increasing the number of products we have in development internally. We filed 19 ANDAs in fiscal 2007 covering 11 products. In the first nine months of fiscal 2008, we filed five ANDAs covering five products. Currently, we have 26 ANDAs pending approval at the FDA (including five tentative approvals) relating to 19 products."
"Through the first nine months of fiscal 2008, we have surpassed our previous sales growth guidance of 30% for fiscal 2008, compared to the full year fiscal 2007. This is primarily due to strong sales of oxcarbazepine, which we began marketing on behalf of Sun Pharma during the third quarter of fiscal 2008. The significant sales of oxcarbazepine are attributed to Sun Pharma sharing 180-day marketing exclusivity on its oxcarbazepine ANDA with a Paragraph IV certification. We believe that sales of oxcarbazepine will decrease from the third quarter fiscal 2008 level in the fourth quarter of fiscal 2008. In addition, when the exclusivity period expires on or about April 10, 2008, we believe sales will continue to erode due to additional competitors entering the market. Although we do not believe the sales of this product to be sustainable at current levels past fiscal 2008, we have revised our guidance to reflect these strong sales. We now expect sales for our fiscal year ending March 31, 2008, to grow 75% over the corresponding period of fiscal 2007," Mr. Movens concluded.
This press release should be read in conjunction with our Form 10-Q which has more detailed information on the third quarter and nine month results of fiscal 2008.
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 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 cheaper 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.
CONTACT: Daniel Movens, +1-313-871-8400, or Aaron Miles, +1-313-556-4150,
both of Caraco Pharmaceutical
Web site: http://www.caraco.com/
