Will the ‘Sun’ rise on Caraco Pharmaceuticals?

US-based Caraco Pharmaceuticals Laboratories is likely to have its path paved to profitability with a little help from the Mumbai-based Sun Pharmaceuticals, which has a 45 per cent stake in it. This help comes in the form of arranging additional funding and development of new products.

Sun Pharma, had during the year 2000 assisted Caraco in obtaining loans from ICICI Bank and the Bank of Nova Scotia to the tune of $5 million each. Out of these loans, Caraco utilised ICCI Bank's $5 million and $3.85 million from Bank of Nova Scotia during the year.

The loans were primarily used to fund the operations, research and development of new products and finance the FDA compliance activities.

Besides, Caraco's plan for the year 2001 includes a continued focus on USFDA compliance, research and development support from Sun Pharma, focus on research and development for three ANDAs for submission to the FDA by this year-end and improved capacity utilisation
and sales.

According to the annual management discussion, Caraco has historically experienced limited sales, operating losses and cash flow difficulties. The non-receipt of FDA certification for its plant also hindered better sales. In order to overcome this handicap and heed to the warning letter received from FDA, Caraco decided to focus all its energies on FDA compliance during last year.

The compliance efforts include retaining a reputed consulting group to advise, train and audit the operations for compliance, recruiting three highly educated and experienced individuals to head quality control.

Forming assurance and regulatory departments, investing funds in upgrading the plant and machinery to improve production capacities and a thorough review of procedures and systems for increasing reliability of operations and compliance are some of the other notable efforts. The last emphasis on FDA compliance is to continue till compliance culture is well embedded in the organisation.

According to Caraco's management, the company has submitted nine ANDAs to FDA and has three more products in advanced stages of development. Altogether, Caraco has 21 products under development, including the products mentioned above. It is to be stated that FDA will
approve no ANDAs and technology unless the corporation comes into compliance with cGMP.

Caraco's net sales for the year's 2000 and 1999 were $2,377,546 and $2,895,022, respectively. This decrease can be mainly attributed to absence of contract manufacturing activity, the discontinuance of one of its products containing Phenyl Propanalomine, temporary suspension of production of four other products, and the increased resources of the company shifting from production to FDA compliance.

Net losses for the years 2000 and 1999 were $7,622,708 and $9,739,984, respectively. They were principally related to inadequacy of sales volume to absorb fixed operating costs, research and development costs, and costs incurred by Caraco relating to compliance matters and lower production.