Detroit-based Caraco Pharmaceutical Laboratories Ltd. (NYSE Amex: CPD) announced late Thursday that United States Marshals seized drug products manufactured in its Michigan plants, as well as ingredients stored there.
The company said the marshals arrived at the request of the U.S. Food and Drug Admniistration.
The FDA's most recent inspection of Caraco's Detroit facility, completed in May 2009, found unresolved violations of industry "good manufacturing processes" requirements as previously disclosed in the company's last filing with the U.S. Securities and Exchange Commission on Form 10-K filed June 15.
The company said it believes that corrective actions have been made and continual improvements are in process.
The FDA has only seized products manufactured in its Michigan facilities. Products distributed by Caraco that are manufactured outside of these facilities are not impacted.
The company said Thursday that "while we have not fully determined the impact of this action by the FDA on our financial condition, we believe that it may have a material adverse effect on our near term operations" and that it anticipates "working with the FDA to resolve these concerns as effectively and expeditiously as possible."
Friday morning, Caraco issued an update, saying that the seized inventory was worth $15 million to $20 million.
The company said the products subject to seizure do not impact products on hand manufactured by third parties under their own label or manufactured for Caraco under the Caraco label. It also does not impact products recently sold into the market manufactured by Caraco.
Based on the estimated sales of distributed products and Caraco products manufactured by third parties, we believe that the profit generated from those products will cover our estimated ongoing expenses. And the company said its cash balance as of June 25 is approximately $64 million which includes a loan of $18 million. Accordingly, the company said it expects that its financial position will give it time to resolve its pending FDA issues.
Caraco develops, manufactures, markets and distributes generic and private-label pharmaceuticals to the nation's largest wholesalers, distributors, drugstore chains and managed care providers.
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