ex99c2ii.htm

Discussion Materials Regarding

January 14, 2011

Project GIBSON

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CERTAIN PORTIONS OF THESE DISCUSSION MATERIALS HAVE BEEN OMITTED BASED ON A REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE “SECˮ). THE NON-PUBLIC INFORMATION HAS BEEN OMITTED FROM THE DISCUSSION MATERIALS HAS BEEN SEPARATELY FILED WITH THE SEC. EACH REDACTED PORTION OF THE AGREEMENT IS INDICATED BY A “[ * ]ˮ AND IS SUBJECT TO THE REQUEST FOR CONFIDENTIAL TREATMENT SUBMITTED TO THE SEC. THE REDACTED INFORMATION IS CONFIDENTIAL INFORMATION OF CARACO PHARMACEUTICAL LABORATORIES, LTD.

Table of Contents

I. Income Statement Discussion

II. Discounted Cash Flow Analyses

III. Premiums Analysis

IV. Talking Points for Sun Negotiations

Appendix

Table of Contents

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Income Statement Discussion

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I/S - Dec. 22, 2010 Model

Income Statement Discussion

§ Shown is the Income Statement from Dec. 22, 2010, prior to the adjustments due to the Consulting audit
that demonstrated problems with manufacturing operations

§ Revenues, expenses and EBIT are shown by operating unit: Distribution, Contract Manufacturing and
GIBSON Manufacturing

§ Assumptions:

– Distribution agreement will terminate at fiscal year end 2012

– Revenue from GIBSON manufacturing will recommence 2012

§ Based on Management’s projections

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I/S - Jan. 5, 2011 Model

§ Shown is the Income Statement from January 5, 2011

§ Assumptions:

– Distribution agreement will terminate at fiscal year end 2012

– Revenue from GIBSON manufacturing will recommence two months later than December 22,
2010 model

– Includes additional changes by management to reflect new assumptions regarding contract
manufacturing and other items

§ Based on Management’s projections

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§ Shown is a comparison of the December 22, 2010 model and the January 5, 2011 model

§ Based on Management’s projections

I/S Comparison - Dec. 22, 2010 vs. Jan. 5, 2011

Comparison = Jan 5. 2011 Model - Dec. 22, 2010 Model.

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Income Statement Discussion

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I/S - Jan. 10, 2011 Model

§ Shown is the Income Statement from January 10, 2011

§ Assumptions:

– Distribution agreement will terminate at fiscal year end 2012

– Revenue from GIBSON manufacturing will recommence two quarters later than original plan
(December 22, 2010)

– Includes additional changes by management to reflect new assumptions regarding contract
manufacturing and other items

§ Based on Management’s projections

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Income Statement Discussion

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§ Shown is a comparison of the January 5, 2011 and the January 10, 2011 model

§ Based on Management’s projections

I/S Comparison - Jan. 5, 2011 vs. Jan. 10, 2011

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Income Statement Discussion

Comparison = Jan 10. 2011 Model - Jan. 5, 2011 Model.

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I/S - Repaglinide

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Income Statement Discussion

§ Shown is the Income Statement impact of Repaglinide on the January 10, 2011 model

§ Based on Management’s projections

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Manufacturing Shut Down Analysis

§ Assumed that GIBSON’s manufacturing operations are discontinued

§ GIBSON manufacturing expense assumptions:

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Income Statement Discussion

Expense	2012P (‘000s)	Expense % Remaining
Salaries and Wages Detail
Manufacturing	$3,281	0%
Packaging	559	25%
Facilities	682	75%
QC & QA	3,778	50%
Regulatory affairs	511	100%
R&D Analytical Dev	581	100%
R&D Form. Dev	510	100%
Commercial	503	25%
Sales & Marketing	2,404	75%
Wixom Shipping	713	25%
M.I.S.	386	75%
General Admin. & Finance	1,290	75%
Human Resources	541	75%
Salary adjustments	941	25%
Bonus payments	353	25%
Total	17,035

Note: The above percentages apply to both the Shut Down March 31, 2011 Scenario and the Shut Down March 31, 2012 Scenario.

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Manufacturing Shut Down Analysis (ctd.)

Expense	2012P (‘000s)	Expense % Remaining
Education and Training	26	50%
Dues and Subscriptions	312	50%
Freight	71	0%
Legal and Professional (2)	5,199	NA (2)
Travel Related	116	75%
R/E Taxes	604	100%
Rent	66	100%
Director Fees	100	50%
Facility Maintenance and Security	566	50%
Service Agreement	725	50%
Advertising	0.0	50%
Miscellaneous	431	50%
Depreciation and Amortization	4,767	100%
Total Operating Expense	34,911

Note: The above percentages apply to both the Shut Down March 31, 2011 Scenario and the Shut Down March 31, 2012 Scenario.

Note: Operating expenses do not contain “Tax Expense - State & Local “and “Technology Transfer” expense.

!1) See discussion of salary and wages on prior page.

(2) Assumes legal and professional expenses remain; however Lachman expenses are removed - Lachman expenses were projected to be $3.75 million in 2012 and $3.0 million in 2013.

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Income Statement Discussion

Expense	2012P (‘000s)	Expense % Remaining
Material Charges	$4	0%
Salaries & Wages (1)	17,035	NA (1)
Contract Labor	98	50%
Insurance Costs	322	50%
Operational Supplies	531	50%
Chemicals and Solvents	246	0%
Tooling-Stores and Spares	50	50%
R&D Materials	189	100%
Repairs and Maintenance	608	50%
Utilities	1,145	50%
Outside Testing and Analytics	332	75%
Biostudies	1,250	100%
Office Supplies	118	50%

§ Assumed that GIBSON’s manufacturing operations are discontinued

§ GIBSON manufacturing expense assumptions:

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I/S - Shut Down Mar. 31, 2011

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Income Statement Discussion

§ Shown is the Income Statement from January 10, 2011 with the assumption that GIBSON’s
manufacturing operation are discontinued March 31, 2011

§ Contract Manufacturing Assumptions:

– Existing products continue as well as products to be “relaunched”

– Expenses after 2012 are kept constant except for incremental material costs from “relaunched” products

§ GIBSON Manufactured Products Assumptions:

– Future revenue from manufactured products is zero

– Adjusted expenses are kept constant at 2012 levels

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I/S - Shut Down Mar. 31, 2012

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Income Statement Discussion

(1)

§ Shown is the Income Statement from January 10, 2011 with the assumption that GIBSON’s manufacturing
operation are discontinued March 31, 2012

§ Contract Manufacturing Assumption:

– Revenue and expenses as projected by management

§ GIBSON Manufactured Products Assumptions:

– Revenue and material costs delayed two years due to site transfer from GIBSON to a contract manufacturer

– Adjusted expenses are kept constant at 2013 levels with the exception of material costs mentioned above

(1) Represents product revenue and cost associated with products to be site transferred from GIBSON to a contract manufacturer.

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Discounted Cash Flow Analyses

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Key Assumptions Underlying DCF Analysis

Discounted Cash Flow Analyses

§ At the instruction of the Independent Committee (the “Committee”), we have performed
discounted cash flow analyses on different potential operating scenarios:

– Scenario 1: Management’s current forecast from January 10, 2011, which reflects the resumption of
GIBSON’s manufacturing activities in fiscal year 2012 in addition to ongoing contract manufactured
business

– Scenario 2: Repaglinide’s stand-alone valuation given Management’s current forecast from January
10, 2011

– Scenario 3: Management’s current forecast above (Scenario 1); however, adjusted assuming
manufacturing operations are discontinued as of March 31, 2011

– Scenario 4: Management’s current forecast above (Scenario 1); however, adjusted assuming
manufacturing operations are discontinued as of March 31, 2012

§ For scenarios involving the termination of manufacturing activities, we have relied on the advice
of the Committee regarding certain assumptions (e.g., shutdown costs, liquidation proceeds,
etc.) to enable this analysis and express no opinion with respect to the estimates and judgments
on which those assumptions are based

§ Further, we acknowledge to the Committee that adjustments to these assumptions may have a
material effect on the outcome of the discounted cash flow analysis

§ Finally, we are not expressing any opinion as to the relative merits of any alternative operating
scenario that might exist for GIBSON or the effect of any other transaction in which GIBSON
might engage

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Scenario 1 - January 10, 2011 Model

Parameters

GIBSON Stand-Alone (Price Per Share)

EBITDA Exit Multiple Range

Discounted Cash Flow Analyses

Discount
Rate

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§ Based on GIBSON’s balance sheet and cash
flow projections for 2011-2016 from the
Company’s January 10, 2011 model

§ EBITDA exit multiples ranging from 8.0x to
10.0x

§ Discount rates ranging from 11.0% to 15.0%

§ Assumes tax rate of 40%

§ Present value as of January 31, 2011

§ Net working capital per Management balance
sheet projections

§ Reflects GIBSON’s common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1

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Scenario 2 - Repaglinide Stand-Alone

Parameters

Repaglinide Stand-Alone (Price Per Share)

Discounted Cash Flow Analyses

§ EBITDA exit multiples ranging from 8.0x to
10.0x

§ Discount rates ranging from 11.0% to 15.0%

§ Assumes tax rate of 40%

§ Present value as of January 31, 2011

§ Reflects GIBSON’s common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1

§ Assumes zero capital expenditures and zero
change in net working capital

EBITDA Exit Multiple Range

Discount
Rate

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Scenario 3 - Cease Manufacturing March 31, 2011

Parameters

GIBSON Stand-Alone (Price Per Share)

Discounted Cash Flow Analyses

Revenue Exit Multiple Range

Discount
Rate

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§ Based on GIBSON’s balance sheet and cash
flow projections for 2011-2016 from the
Company’s January 10, 2011 model

§ Given negative EBITDA in the exit year,
revenue exit multiples ranging from 1.00x to
2.00x

§ Discount rates ranging from 11.0% to 15.0%

§ Assumes tax rate of 40%

§ Present value as of January 31, 2011

§ Net working capital per Management balance
sheet projections

§ Reflects GIBSON’s common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1

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Scenario 4 - Cease Manufacturing March 31, 2012

Parameters

GIBSON Stand-Alone (Price Per Share)

Discounted Cash Flow Analyses

EBITDA Exit Multiple Range

Discount
Rate

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For discussion purposes only

§ Based on GIBSON’s balance sheet and cash
flow projections for 2011-2016 from the
Company’s January 10, 2011 model

§ EBITDA exit multiples ranging from 8.0x to
10.0x

§ Discount rates ranging from 11.0% to 15.0%

§ Assumes tax rate of 40%

§ Present value as of January 31, 2011

§ Net working capital per Management balance
sheet projections

§ Reflects GIBSON’s common shares
outstanding per 10Q as of 9/30/10; includes
Series B shares which convert 1:1

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Discount Cash Flow Analyses Summary

	Scenario 1 Final Model (Jan. 10, 2011)	Scenario 2 Repaglinide Stand-Alone	Scenario 3 Cease Manufacturing March 31, 2011	Scenario 4 Cease Manufacturing March 31, 2012

Low	$4.33	[ * ]	$2.05	$4.22
Midpoint	$4.91	[ * ]	$2.28	$4.71
High	$5.59	[ * ]	$2.55	$5.28


Low	$173.9	[ * ]	$82.2	$169.6
Midpoint	$197.3	[ * ]	$91.5	$189.3
High	$224.4	[ * ]	$102.4	$212.2

Discounted Cash Flow Analyses

Implied Aggregate Equity Value

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($ in millions, except per

share amounts)

Implied Per Share Equity Value

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Premiums Analysis

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Premiums in Public Acquisitions

§ William Blair analyzed 27 domestic public transactions announced since January 1, 2000 with
transaction values greater than $10 million in which 15% to 35% of the target’s equity was acquired
with the acquiror owning between 65% to 85% of the target prior to the transaction.(1) Upon
completion of the transaction the acquiror owned 100% of the target.

§ William Blair compared the price of each transaction to the closing price of the target stock one day,
one week, one month, 90 days, 180 days, and 360 days prior to the announcement of the
transaction

Source: FactSet Research Systems. Data as of December 28, 2010.

(1) Includes the March 2009 Genentech / Roche transaction at the instruction of the Committee.

(2) As of December 3, 2010.

Premiums Analysis

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(2)

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Talking Points for Sun Negotiations

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Preliminary Talking Points for Sun Negotiation

§ The announced premium on December 6, 2010 of 5% represents a below median premium for the
transaction. This is the case for both:

– Public company acquisitions generally

– Public company acquisitions where the buyer owned greater than 50.1%, but less than 99.9% prior to
acquiring the remaining shares

– Public company acquisitions where the buyer owned greater than 65.0%, but less than 85% prior to
acquiring the remaining shares

§ At a proposed offer price per share of $4.75, it is not clear that the value of the shares has been
maximized

– The Independent Committee may want to consider an alternative to the current business plan, whereby
all manufacturing activities at the plant cease as soon as possible

– The Independent Committee may consider other possible alternatives including finding alternative

buyers for the minority shares

– The minority shareholders may not sell, leaving Sun as owner of less than the 90% threshold to

complete a squeeze out merger

– Exploration of all of these alternatives take time and will delay a possible transaction with Sun

Talking Points for Sun Negotiations

In an attempt to maximize the potential value obtained in a possible transaction with Sun, we believe
the following points represent some of the key themes that should be developed during future
negotiations:

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Preliminary Talking Points for Sun Negotiation (ctd.)

§ The announced share price has been deemed unsatisfactory by the market

– Immediately following the announcement, the stock price increased to a high of $5.29 on December 13th
due to the expectation that a higher price would be achieved

– There have been numerous shareholder lawsuits filed against the Company on the basis that $4.75 per
share is inadequate

– The Company has received correspondence from existing shareholders (including large institutional
investors) stating their opposition to the deal given the proposed price per share

§ To ensure an expeditious transaction is achieved, it is imperative that the Company achieve a
higher share price than $4.75 that will enable broad support from the minority shareholders. If not,
the deal will encounter several challenges:

– Enhanced legal costs

– Delayed closing

– Deterioration of the value of the Company (i.e., lost employees, strained customer relationships,
distraction from consent decree remediation work, etc.)

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Talking Points for Sun Negotiations

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Appendix

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Scenario 1 - January 10, 2011 Model Detail

Appendix

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Scenario 2 - Repaglinide Stand-Alone Detail

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Appendix

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Scenario 3 - Cease Manufacturing March 31, 2011 Detail

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Appendix

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Scenario 4 - Cease Manufacturing March 31, 2012 Detail

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Appendix

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