In its letter to Caraco Pharma CEO Narendra N Borkar, the FDA says that, "A January 18 through March 10, 2000, inspection of your firms's drug manufacturing operations found that your firm is operating in serious violation of the Federal Food, Drug and Cosmetics Act. During the inspection, our investigators documented numerous significant deviations from the Good Manufacturing Practice Regulations, which cause your drug products to be adulterated within the meaning of section 501 (a)(2)(B) of the Act".

The FDA's concerns largely cover areas like quality control, record-keeping systems, stability testing program etc, though there have been no product recalls as a result of the regulatory action. However, pending new drug applications, abbreviated new drug applications (ANDAs) or export approval requests may not be approved unless Caraco gets a clean chit from the FDA. Sun Pharma's official spokesperson said, "Caraco has implemented a plan to address the deficiencies, and is working closely with a reputed consultancy firm to see that the necessary corrections are implemented. We are confident of the measures taken and expect FDA re-inspection shortly."

Caraco Pharmaceutical Laboratories Inc said has filed responses with the FDA to address Good Manufacturing Practices (cGMP) deficiencies and/or deviations from cGMP at its plant. The company has also been in communication with the FDA and has met with the Director of the FDA's Detroit District. Meanwhile, Caraco has submitted five ANDAs to the US FDA and three more products are awaiting expiration of New Chemical Entity (NCE) exclusivity, after which submissions can be made. Sun Pharma also said that four more products at Caraco are in an advanced stage of development, though the details on this front could not be obtained.

Caraco, which is expected to break-even in 2002, with a projected turnover of roughly $ 17 million, is also likely to raise $5-10 million debt with banks and financial institutions in the US. Since 1996, Sun Pharma has invested $7.5 million towards equity in Caraco. For the year ended December 1999, Caraco registered a loss of $9.73 million on sales of $2.89 million.