DETROIT, May 14 /PRNewswire-FirstCall/ -- Caraco Pharmaceutical Laboratories, Ltd. posted record net sales for the fourth quarter and fiscal year 2007, ended March 31, 2007, of $32.7 million and $117.0 million, respectively, as compared to $24.7 million and $82.8 million for the corresponding periods of fiscal year 2006. This represents an increase of 32% over the fourth quarter of fiscal 2006 and 41% over the fiscal year 2006. Net income grew to $9.5 million and $26.9 million in the fourth quarter and fiscal year 2007, respectively as compared to net losses of $6.5 million and $10.4 million during the corresponding periods of fiscal year 2006. The $26.9 million in annual net income for fiscal year 2007 was a record for the Company.
Daniel H. Movens, Caraco's Chief Executive Officer, said, "Our record results for the fourth quarter and fiscal year 2007 demonstrate management's disciplined focus on the execution of our business strategy. Contributing to the record results was improved production and increased sales of key products including Sun Pharmaceuticals Industries Ltd. ("Sun") products under our marketing agreement and lower non-cash research and development expenses. We continue to experience significant growth highlighted by record sales and profit in fiscal year 2007. The Company has continued to meet the demands of a competitive US generic pharmaceutical market, and going forward we will look to sustain this growth by continuing to effectively market our products and leverage opportunities from our new and existing product pipeline."
Fourth Quarter and Fiscal Year 2007 Results
During the fourth quarter and fiscal year 2007, net sales rose to a record $32.7 million and $117.0 million, respectively, from $24.7 million and $82.8 million for the corresponding periods of fiscal year 2006. Gross profit during the relevant periods improved to $15.4 million and $57.8 million, as compared to $12.7 million and $40.9 million for the corresponding periods of fiscal year 2006, reflecting an increase of 21% and 41%, respectively. The increases in gross profits were primarily due to higher sales and an improved balance in the mix of customers or the class of trade and product selection being sold, partially offset by price erosion and weight of distribution margins as compared to manufactured margins.
Selling, general and administrative (SG&A) expenses for the fourth quarter and fiscal year 2007 were $2.8 million and $9.9 million, respectively, compared to $2.5 million and $8.2 million for the corresponding periods of fiscal year 2006, representing an increase of 12% and 21% in the respective periods. The SG&A expenses, as a percentage of net sales, have declined to 8% for the fiscal year 2007, as compared to 10% for the corresponding period of fiscal year 2006. The increase in SG&A for fiscal year 2007 over fiscal year 2006 was primarily due to an increase in costs for additions to staff and management and associated compensation, and higher SG&A expenses associated with higher sales volumes.
Total research and development (R&D) expenses for the fourth quarter and fiscal year 2007 were $3.8 million and $22.4 million, respectively, as compared to $16.9 million and $43.5 million during the corresponding periods of fiscal year 2006. Actual cash R&D expenses were $3.8 million and $10.6 million, respectively, during the fourth quarter and fiscal year 2007, compared to $2.9 million and $8.4 million during the corresponding periods of fiscal year 2006. We incurred non-cash R&D expenses of $11.8 million for three product transfers during fiscal year 2007, as compared to $35.1 million for nine product transfers during the corresponding period of fiscal year 2006. There were no product transfers in the fourth quarter of fiscal year 2007 as compared to three products transferred in the corresponding period of fiscal year 2006 at a non-cash cost of $14.0 million. The cash R&D expenses during the fiscal year 2007 were higher compared to those during the fiscal year 2006 due to increased internal R&D activity and initial milestone payments paid to three parties for initiating technology transfer of four products. We filed eight ANDAs or six products with the FDA during the fourth quarter of fiscal year 2007 and 19 ANDAs or 11 products with the FDA during fiscal year 2007 (three products filed had multiple ANDAs). This brings our total number of ANDAs pending approval by the FDA to 29 (including one tentative approval) or 21 products. We also submitted three other filings to the FDA for new strengths on existing ANDAs and for new sources on the Active Pharmaceutical Ingredients (API).
Mr. Movens stated, "We generated cash from operations of $27.9 million during fiscal year 2007, as compared to $8.9 million during the corresponding period of fiscal year 2006. During the second quarter of fiscal year 2007, we acquired a packaging facility, which has now been fully integrated. We continue to believe that this acquisition will improve overall costs in packaging, bottling and increase our production. Also, during fiscal year 2007, we acquired six acres of land directly adjacent to our existing manufacturing facility. We are currently contemplating the construction of a 125,000 sq. ft. facility on this site versus potential expansion elsewhere."
"Our working capital continues to improve. At March 31, 2007 we had working capital of $76.2 million as compared to working capital of $41.4 million at the end of March 31, 2006. The working capital was significantly higher due to higher cash balances, higher receivables and inventories, along with a reduction in current liabilities at the end of March 2007, compared to that at the end of March 2006. At March 31, 2007, we had stockholders' equity of $95.2 million as compared to $56.4 million at March 31, 2006. Additionally, we have a $10.0 million line of credit through JP Morgan Chase Bank, N.A., which allows us flexibility in our expansion efforts to increase our capacity over the next few years."
Mr. Movens added, "Although the development of new products will increase our cash R&D expense and possibly impact EPS, we believe it is a necessary investment in the future growth of the company. We expect that we will continue to have the cash and other means available to meet increased working capital requirements, fund strategic Paragraph IV Certification litigation and finance further capital investments. With only two products remaining to pass biostudies under the Sun technology transfer agreement, on a long-term basis our non-cash R&D expense will decrease as our cash R&D expense increases. We have recently begun marketing and distributing selected Sun products that are approved by the FDA through our marketing agreement with Sun. This agreement provides for an alternate stream of products that complement our internal R&D, outsourced development and our current technology agreement with Sun, thus, providing four diverse paths of development, an increased product pipeline and potential revenue. These various paths help to mitigate the risk of each other, potentially allowing for an ongoing stream of approvals from the FDA."
"We remain pro-active in regard to the strategic growth of our business along with maintaining a tactical balance in our day-to-day operation. We continue to expand and upgrade our facilities and hire talented employees. These initiatives have allowed us to better cope with a significantly increased workload through improved timeliness, higher quality, and increased FDA cGMP compliance. Both our internal efforts and Sun's development of new products have picked up momentum. These efforts should facilitate growth at the level of our guidance. Based on current trends and future realizations, we believe we will achieve a 30% growth in sales for fiscal year 2008, compared to fiscal year 2007," stated Mr. Movens.
Mr. Movens added, "During fiscal year 2007, the Company entered into three definitive agreements with separate partners to develop four additional Caraco ANDAs. These relationships should also provide additional opportunities for the future development of products. We anticipate additional development agreements will be entered into in order to eliminate any future gaps in our calendar of FDA approvals. We expect these agreements to run parallel to our own internal product development. In order to improve the amount of filings during the fiscal year 2008, we continue to fortify our internal research and development team by adding formulators and staff."
"Our overall margin will most likely be determined by the weighted mix of our distribution margin verses our manufactured margin. We will report these margins collectively and separately as we have as part of our quarterly and annual filings with the Securities and Exchange Commission. As we noted in previous quarters, although gross profit margins may come down over time due to price erosion, we are confident that the combination of sales growth, expanding our product portfolio and the successful execution of our business plan will offset any long-term impact. However, should the pricing pressures become more severe than anticipated; the result may be lower growth rates and gross margins. Management will continue to work diligently to counter the downward pricing pressures by increasing sales volume, expansion of our customer base, improved productivity, and better cost absorption of operational overheads," Mr. Movens concluded.
This press release should be read in conjunction with our Form 10-K which has more detailed information on the fourth quarter and full year results of fiscal 2007.
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 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.
CARACO PHARMACEUTICAL LABORATORIES, LTD. UNAUDITED STATEMENTS OF OPERATIONS Year ended March 31, Quarter ended March 31, 2007 2006 2007 2006 Net sales $117,027,016 $82,788,918 $32,738,713 $24,701,008 Cost of goods sold 59,242,858 41,872,834 17,327,837 12,010,977 Gross profit 57,784,158 40,916,084 15,410,876 12,690,031 Selling, general and administrative expenses 9,880,674 8,182,718 2,774,778 2,481,487 Research and development costs - affiliate 11,761,280 35,055,360 - 14,008,000 Research and development costs - other 10,590,643 8,437,338 3,812,439 2,924,784 Operating income (loss) 25,551,561 (10,759,332) 8,823,659 (6,724,240) Other income Interest income 1,081,208 233,385 464,886 125,255 Interest expense (28,194) (3,740) - (3,740) Loss on sale of equipment (5,106) - (5,106) - Other income 258,652 106,375 218,756 63,740 Other income 1,306,560 336,020 678,536 185,255 Net income (loss) $26,858,121($10,423,312) $9,502,195 ($6,538,985) Net income (loss) per common share Basic 1.02 (0.39) 0.36 (0.25) Diluted 0.72 (0.39) 0.25 (0.25) Weighted number of Shares Basic 26,447,312 26,392,054 26,447,312 26,392,054 Diluted 37,254,780 26,392,054 37,692,295 26,392,054
Caraco Pharmaceutical Laboratories, Ltd.CONTACT: Daniel Movens or Mukul Rathi, +1-313-871-8400, or Aaron Miles,+1-313-556-4150, all of Caraco Pharmaceutical
Web site: http://www.caraco.com//
