887708--6/10/2008--CARACO_PHARMACEUTICAL_LABORATORIES

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{product, liability, claim}

{customer, product, revenue}

{property, intellectual, protect}

{regulation, government, change}

{personnel, key, retain}

{control, financial, internal}

{tax, income, asset}

{product, market, service}

Risks Related to Our Industry If brand pharmaceutical companies are successful in limiting the use of generics through litigation, legislature and regulatory efforts, our sales of generic products may suffer. FDA approval is required before any generic drug products can be marketed. The process of obtaining FDA approval to manufacture and market new and generic pharmaceutical products is rigorous, time-consuming, costly and largely unpredictable. The ANDA approval process may result in the FDA granting final ANDA approvals to more competitors than anticipated for a given product at the time a patent claim for a corresponding brand product or other market exclusivity expires resulting in lower than anticipated margins and sales. Extensive industry regulation has had, and will continue to have, a significant impact on our business, especially our product development, manufacturing and distribution capabilities. Risks Related to Our Company If we are unable to successfully develop or commercialize new products, our operating results will suffer. Our gross profit may fluctuate from period to period depending upon our product sales mix including new launches, our product pricing, customer class of trade, and our costs for active ingredients. An unaffiliated third party may make a claim for royalties which could have a material adverse effect on our results of operations. Our policies regarding returns and chargebacks by wholesalers may reduce our revenues in future fiscal periods. We are and may become involved in various legal proceedings including, but not limited to, patent infringement and products liability involving substantial amounts of money or for other relief. The loss of our key personnel could cause our business to suffer. Sales of our products may continue to be adversely affected by the continuing consolidation of the distribution network and the concentration of customers. Even if we are able to obtain regulatory approvals for our new pharmaceutical products, the success of those products is dependent upon market acceptance. Levels of market acceptance for our new products could be impacted by several factors, including: From time to time a relatively small group of products could represent a significant portion of our sales and if the products sales of these product decline unexpectedly it could have a negative material effect on our business and could cause the market value of our common stock to decline. Our competitors may be able to develop products and processes competitive with or superior to our own for many reasons, including that they may have: Our reporting and payment obligations under Medicaid and other governmental programs are complex and may change periodically based upon new guidelines provided by those agencies. We depend primarily on Sun Pharma to assist us in our research and development. We depend on Sun Pharma for the active pharmaceutical ingredients that we use to manufacture our products, We have various marketing agreements with Sun Pharma and its affiliates that may not be renewed. DEA quotas may be restricted, limiting our ability to have enough product to manufacture and market these products each year, A significant portion of our net sales are from sales to a limited number of customers. Should we lose a particular contract with a customer or the customer is acquired by a non-customer, our sales and operational results could face a significant decline. We manufacture our product line predominately from one FDA approved facility. There is a possibility that our production could be negatively impacted by a business disruption or closure of this facility. We must maintain adequate internal controls and be able to demonstrate, and provide, on an annual basis an assertion as to the effectiveness of such controls. Failure to maintain adequate internal controls or to implement new or improved internal controls could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

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887708--6/10/2008--CARACO_PHARMACEUTICAL_LABORATORIES_LTD