The Detroit, US-based Caraco Pharmaceuticals, a subsidiary of Rs 600 crore Sun Pharmaceuticals, has planned to raise $5-10 million as debt with banks and financial institutions in the US to finance its R&D programme.
The development follows the decision by Sun Pharma not to go in for fresh capital infusion in the cash-strapped US company. Sun had earlier expressed hope that the line of credit available from Bank of Nova Scotia for $5 million would be enough to meet the requirement for Caraco in 2001.
Caraco had run into losses for couple of quarters and sought support. In response, Sun had began negotiation with banks and FIs for fresh borrowings. The recent development can be seen as the outcome of the renewed effort of Sun Pharma, which holds 47 per cent equity in Caraco.
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Caraco's recent success with FDA approval for manufacturing and marketing of three drugs also appear to have improved its position with creditors in US. The confidence to tap the debt market has stemmed for the fact that the three drugs, flurbiprofen, clonazepam and carbamazepine, have opened up nearly $175 million market in US for Caraco.
Sun Pharma had already helped the company to get $5 million commercial loans from ICICI Bank and the $10 million from Bank of Nova Scotia. Sun stood as the security guarantor for the credit line to support R&D activities of the US-based company, which has made substantial investment for getting US FDA (Food and Drug Agency) approval for its ANDA (abbreviated new drug application).
In the half year ending June 31, Caraco registered 38 per cent growth in sales to $1,867,330, from $1,355,432 for the first half of 2000. Gross profit improved to $27,972 from a minus $22,950 the year before. The net loss was $3,606,784 comparable to the net loss of $3,508,725 for the year-earlier half.
Caraco management is hopeful that it would receive at least two more FDA approvals in as many quarters from the six applications now pending. It also expects to introduce one new drug in each of the coming three-quarters. Moreover, the R&D initiative may yield two additional drug applications ready for submission to the FDA by year end.
Sun, which sees Caraco as an entry platform into the US generic market, is bullish on the company. A Sun spokesperson said the company hoped Caraco would break even by 2002 with a turnover of $17 million and sales from about 10 Approved ANDAs in the product list. However, for the year ending December 2001, it was likely to show a loss of $3 million, the spokesperson added.
Sun bought 45 per cent stake in Caraco in 1997. It develops, manufactures and distributes generic and private-label prescription drugs to the US's largest wholesalers and distributors, drugstore chains and healthcare system.