Claris Lifesciences Limited is tapping the capital markets with an IPO to raise Rs 300 crs. The company has allotted 18.43 lakh shares to anchor investors at the top end of the price band of Rs 278-293 to four anchor investors. Today is the last day of the issue and after two days of subscription, the company has received zero subscription from QIB’s, a mere 9,174 shares from HNI’s and 8,20,204 shares from retail investors. The subscription is roughly 8% of the issue size of 102.38 lakh shares.

Claris is in the business of sterile injectables pharmaceutical with a presence in 76 countries worldwide. The company’s product offering comprises of 128 products across multiple markets and therapeutic areas. All the products are off-patent products, a significant majority of which are capable of being directly injected into the body and predominantly used in the treatment of critical illnesses.

Promoter

The company is promoted by Mr Arjun. S.Handa and M/s Sarjan Financial Private Limited. The promoter is the son of Mr Sushil Kumar Handa the erstwhile promoter and CMD (Chairman cum Managing Director) of Core Healthcare Limited. It was at that time India’s leading manufacturer and exporter of IV Fluids. The company turned sick and was referred to BIFR, and the assets were taken over by ARCIL in 2005. In 2007 the Sachana unit was demerged and sold to Nirma Limited and the Rajpur unit was sold in 2008.

It is interesting to note that the performance of Core Healthcare had peaked out in 1994 and thereafter it was a one way slide. Even while this was happening, Mr Sushil Handa promoted Sarjan Financial Private Limited in September 1996. The company was incorporated as Oracle Laboratories Limited in July 1994 and changed its name to Core Laboratories Limited in May 1996. The business was that of acting as the marketing and distribution agent for Core Healthcare Limited.

The company set up its first manufacturing unit in 2002. The company has expanded the same to four units now and the fifth plant is under construction.

Risks

Corporate Governance is a very weak point of the company and the same is mentioned in risk factors no 3 of the RHP which is reproduced below.

3. Core Healthcare Limited, a Company promoted by Mr. Sushil Kumar Handa, one of our erstwhile promoters and a relative of our individual Promoter (included in our Promoter Group), is listed on www.watchoutinvestors.com in relation to certain regulatory non-compliances, on account of which regulatory action and penalties have been initiated and imposed by SEBI for certain violations of securities laws, by the BSE and NSE for certain violations of the listing agreement, and by the CDSL and NSDL in relation to dematerialization requests.

Core Healthcare Limited (“CHL”), a company promoted by Mr. Sushil Kumar Handa, one of our erstwhile
promoters and a relative of our individual Promoter (included in our Promoter Group), is listed on the Ministry
of Corporate Affairs’ sponsored site www.watchoutinvestors.com for certain violations of securities and other
laws. The regulatory charges and actions listed against CHL include:

• A contravention of section 15C of the SEBI Act, 1992 on account of failure to redress investor grievances.
  In letters dated July 30, 2004 and September 2, 2004, SEBI informed CHL that 81 investor complaints were
  pending against it for a period of more than six months. SEBI passed an order dated November 28, 2004,
  for initiation of adjudication proceedings in relation to the company’s failure to address investor grievances.
  A show cause notice dated December 4, 2004, was sent to CHL in relation to the 81 investor complaints
  wherein the company was asked to show cause as to why an enquiry should not be commenced against it
  and why no penalty should be imposed. The company appeared for hearing on January 25, 2005 and
  February 10, 2005 in relation to the show cause notice. On an analysis of the complaints, the adjudicating
  officer of relevant jurisdiction found that a majority of complaints related to non-payment of interest on
  debentures and redemption amounts. Certain complaints were also pending in relation to non-issue of share
  certificates. Due to the lack of response by CHL in relation to investor complaints, a penalty of Rs. 100,000
  was imposed. Subsequently, on appeal by CHL, the Securities Appellate Tribunal reduced the penalty to
  Rs. 50,000 by an order dated December 14, 2005.
• Penalty imposed by SEBI for failure to appoint common share registrar for handling share registry work of
  demat and physical securities.
• Suspension of trading of its securities on BSE and NSE for non-compliance with the listing agreement(s).
• Notices from CDSL and NSDL in relation to pending dematerialisation requests.
• Public notice from BSE and NSE for various non-compliances such as non-submission of corporate
  governance report, failure to submit shareholding patterns.

This is an issue which could be forgiven but the next risk factor which concerns human health is even more serious. It concerns the USFDA and is mentioned in risk factor 6 and 7. Further the quality seems to be suspect and the same is mentioned in risk factor no 8, all reproduced below.

The USFDA issued a warning letter to us pursuant to an inspection carried out at our manufacturing
facilities at Ahmedabad. Such warnings and any future warnings to us and/or in relation to our products
has had and may have an adverse effect on our business, financial condition and results of operations,
as well as adversely affect our reputation and the demand for our products.

The USFDA carried out an inspection at our manufacturing facilities at Ahmedabad, in addition to earlier
inspections carried out at the premises of our wholly owned subsidiary, Claris Lifesciences Inc., subsequent to
which a warning letter dated November 1, 2010 (the “Warning Letter”) was issued to us mentioning the
following:

• The Company violated the Current Good Manufacturing Practice (“CGMP”) regulations for Finished
  Pharmaceuticals (Title 21 Code of Federal Regulations), which caused our drug products to be
  adulterated within the meaning of the Federal Food, Drug and Cosmetic Act (the “FFDC Act”).
• We failed to submit field alert reports to the USFDA in order to comply with the USFDA regulations
  as required under the FFDC Act.
• Based on a review of the labeling/misbranding of Sodium Bicarbonate Injection drug products
  manufactured by us and marketed through our subsidiary, Claris Lifesciences Inc., we had marketed,
  introduced or delivered for introduction an unapproved new drug product into inter-state commerce
  within the United States, which was in violation of the provisions of the FFDC Act and was subject to
  an import detention in the United States.
• Violations of the post-marketing adverse drug experience reportings; which are required under the
  Code of Federal Regulations as well as the FFDC Act.
• Despite various responses from us and Claris Lifesciences, Inc., to the USFDA in relation to the CGMP
  violations, the field alert reporting violations, the unapproved new drug violations and adverse drug experience reporting violations, the USFDA has stated in the Warning Letter that these responses lack
  sufficient corrective actions.

Additionally, the USFDA requested for information relating to the discontinuance of certain of our products
including, amongst others, Ciprofloxacin, Metronidazole, Ondansetron, Fluconazole and Levofloxacin, by way
of the Warning Letter. For the five month period ended May 31, 2010, the revenue from the sale of our
products, both international and domestic, from these products amounted to Rs. 451.43 million constituting
13.9% of our total consolidated revenue during that period.

The Warning Letter is available on the website of the USFDA at http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm233010.htm and is available for inspection at the Registered Office of our Company, as set out in the section titled “Material Contracts and Documents for
Inspection” on page 336 of this Red Herring Prospectus.

A non-compliance of the FFDC Act may result in the FDA issuing warning letters, filing injunctions, seizing
our products and pursuing civil and criminal prosecution for violations of the Act. Under applicable Unites
States law, individuals who violate the Act can be fined $100,000 per count ($250,000 if a death occurs) and
corporations can be fined USD 200,000 per count (U.S. $500,000 if a death occurs). Jail time can result if
convicted of the criminal charges, corporations can be excluded from participating in Federal Health Care
Programs and if serious enough violations occur, individuals and firms may be debarred (excluded from
working in the pharmaceutical industry). We cannot assure you that any penalty imposed by the USFDA will
not exceed the amounts quantified in this paragraph.

We cannot ensure that no legal proceedings will be brought against us in the future in connection with such
warnings, and any future warnings to us and/or in relation to our products. Further, such warnings, and any
future warnings to us and/or in relation to our products may have an adverse effect on our business, financial
condition and results of operations as well as adversely affect our reputation and the demand for our products.

6. The USFDA imposed an import alert on us and our products pursuant to receipt of a number of
complaints, in relation to certain of our products, by us and certain of our partners, which is subsisting.
Such import alert, and any future import alerts to us and/or in relation to our products, has had and may
have an adverse effect on our business, financial condition and results of operations as well as adversely
affect our reputation and the demand for our products.

We and certain of our partners received a number of complaints in relation to certain of our products, namely,
ciprofloxacin, metronidazole and ondansetron that were contaminated or suspected to be contaminated; pursuant
to which, the USFDA imposed an import alert on us and our products, which is subsisting. As a result, we are
unable to sell our products in the United States until the import alert is withdrawn. Our revenue from the sale of
our products in the United States during the five month period ended May 31, 2010 amounted to Rs. 95.08
million, which constituted 2.93% of our total consolidated revenue during this period. The import alert
notification is available on the website of the USFDA at
http://www.accessdata.fda.gov/cms_ia/importalert_189.html. The present import alert and/or any future import alerts to us and/or in relation to our products may have an
adverse effect on our business, financial condition and results of operations as well as adversely affect our
reputation and the demand for our products.

7. The registration of our Company and its products were suspended by the Drug and Food Control,
Ministry of Health, State of Kuwait. Such suspension and/or any future suspensions to us and/or in
relation to our products has had and may have an adverse effect on our business, financial condition and
results of operations as well as adversely affect our reputation and the demand for our products.

Pursuant to the recommendation by the USFDA and the Gulf Cooperation Council meeting no. 49, the
registration of the Company and its products were suspended by the Drug and Food Control, Ministry of Health,
State of Kuwait from June 8, 2010 till August 22, 2010, as a result of which the Company’s products were not
marketed in Kuwait during that period.

We cannot ensure that no legal proceedings will be brought against us in Kuwait in the future in connection with
the administration or use of these products, or the suspension of the registration of the Company or its products,
which may in turn result in an adverse effect on our business, financial condition and results of operations as
well as adversely affect our reputation and the demand for our products.

Conclusion: – This is not the only company for subscription and with so many concerns in a business concerning human health and that also direct injectables, I believe one should just skip the issue. It is not worth taking the risk what so ever.

SEBI Disclaimer: – I do not intend subscribing to the above issue.