CPD: Rehiring in full force

A recent article on Caraco about its rehiring and plan to restart production.

Fifty to 100 employees who were laid off last June by Caraco Pharmaceutical Laboratories Ltd. have been rehired to help the Detroit-based generic drug maker work on a remediation plan intended to get the plant back into production this year, Caraco officials told Crain’s last week.

The number of employees that CPD is rehiring is a clear sign that management believes it is very close to restarting production.

“We are hopeful we can reopen this year,” he said [Andrew Bos, Caraco’s in-house counsel].

CPD has never publicly stated when they would restart production but recently the company has been making comments, like this one, about restarting before the end of this year.

I feel extremely bullish about CPD and their plan to restart production. I believe the shares at current prices are extremely cheap, with a huge upside in a short period (less than 6 months).

To access the article, click here and then follow the second link (“Caraco rehiring as it works to reopen Detroit plant”)

2 responses to “CPD: Rehiring in full force”

  1. Hi Pakiya,
    Great blog. I also hold CPD and share your thesis. I would like to get your thoughts on Caraco exposure to Sun loss of Protonix. At issue is both lost sales and potential damages. It seems hard to get solid information on exactly what % Protonix made up of Caraco distributed products. I guess lost sales are not such an issue b/c as I understand patent is up in January and lots of other players will prob. be entering the generic space anyway. But Caraco could be on the hook for damages. In their 10-K regarding this lawsuit they say “In the event of a Jury award of damages against Sun Pharma for patent infringement, Caraco’s obligation to Sun Pharma is capped at its fixed margin percentage, in accordance with the terms of the Distribution and Sale Agreement with Sun Pharma.” Question then is what % of distribution sales was protonix?

    • It is too early to know what is going to happen with Protonix. I haven’t reviewed CPD’s 10-K yet. Based on what you said, CPD has 7-9% margins on distributed products for Sun Pharma. I believe it is 7% for Para IV products, which is what Protonix would be, and 9% for non Para IVs generics. Sun has always been extremely conservative in the drugs it distributes on the ‘at risk’ basis. So I would think Sun did their due diligence with the Protonix before entering the market. I could be wrong. In any case, if CPD is limited on its liability to the margins it received then the damages will be limited. Also this is a one-time issue, so in the long run the company should not be hurt.

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