Second-quarter fiscal 2010 results announced by Caraco Pharmaceutical Laboratories

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.