1. Taro Provides Results for September 30, 2015

Taro Provides Results for September 30, 2015

Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three and six months ended September 30, 2015.

By: | Published: November 4, 2015 2:58 PM

Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the “Company”) today provided unaudited financial results for the three and six months ended September 30, 2015.

 

Quarter ended September 30, 2015 Highlights – compared to September 30, 2014

 

Net sales of $212.1 million, decreased $38.8 million, or 15.5%. This net sales decline is principally due to the impact of net charges taken to meet contractual obligations associated with price adjustments and the changing U.S. market dynamics on certain products. On a pro-forma basis, adjusted for the price protection provision, net sales would have decreased 7.7%
Gross profit of $168.8 million decreased $29.3 million; however, as a percentage of net sales, was 79.6% compared to 79.0%. Excluding the impact of the price adjustment and the impact of the $2.0 million impairment charge, the gross profit decrease would have been $8.0 million, or 4.1%
Research and development expenses increased $4.9 million to $18.7 million
Selling, marketing, general and administrative expenses increased $2.4 million to $24.0 million
Operating income decreased $35.3 million to $125.0 million
Net Income was favorably impacted by a $28.7 million increase in foreign exchange (FX) income to $34.9 million, principally the result of the strength of the U.S. vs. Canadian dollar
Net income attributable to Taro was $133.3 million compared to $143.4 million, resulting in diluted earnings per share of $3.11 compared to $3.35

Six Months ended September 30, 2015 Highlights – compared to September 30, 2014

 

Net sales of $427.3 million, increased $46.3 million, or 12.1%, despite an 8% volume decline as a result of changing U.S. market dynamics on certain products. On a pro-forma basis, adjusted for the previously mentioned price protection provision, the net sales increase would have been 18.5%
Gross profit increased $57.1 million to $340.6 million and as a percentage of net sales, was 79.7% compared to 74.4%. Excluding the impact of the aforementioned price adjustment, and the impact of the $2.0 million impairment charge, the gross profit increase would have been $81.4 million, or 28.7%
Research and development expenses increased 15.4% to $33.3 million
Selling, marketing, general and administrative expenses increased $2.9 million to $46.9 million
Operating income increased $44.6 million to $259.4 million
FX income increased $29.8 million to $30.7 million
Net income attributable to Taro was $237.0 million compared to $189.5 million, a $47.5 million increase, resulting in diluted earnings per share of $5.54 compared to $4.42

Mr. Kal Sundaram, Taro’s CEO stated, “We continue to experience pressure on our business from strong competition and the industry and customer consolidations as evidenced by the decrease in our net sales. However, our margins remain strong as the result of the cost efficiencies and benefits realized as we actively manage and remain disciplined with our spending.” Mr. Sundaram, continued, “The recent approval and launch of Keveyis, the first medicine approved by the FDA for the treatment of primary hyperkalemic and hypokalemic periodic paralysis, demonstrates our continuing commitment to R&D.”

 

Cash Flow and Balance Sheet Highlights

 

Cash provided by operations for the period ended September 30, 2015 was $129.3 million, as compared to $96.2 million at September 30, 2014
Cash, including marketable securities of $1.1 billion, increased $142.1 million from March 31, 2015

FDA Approvals and Filings

 

The Company currently has a thirty-four ANDAs awaiting FDA approval.

 

The Company recently received approval from the U.S. Food and Drug Administration (“FDA”) for a New Drug Application (“NDA”) Keveyis™ (dichlorphenamide) 50 mg Tablets, the first medicine approved by the FDA for the treatment of primary hyperkalemic and hypokalemic periodic paralysis and related variants. Periodic paralysis, which is a group of rare hereditary disorders that cause episodes of muscle weakness or paralysis, is estimated to affect approximately 5,000 people in the United States.

 

Taro Purchases Shares of Zalicus Pharmaceuticals Ltd.

 

On October 1, 2015, Taro entered into a Share Purchase Agreement with EPIRUS Biopharmaceuticals, Inc. (“EPIRUS”) for all of the shares of Zalicus Pharmaceuticals Ltd., and its product candidate Z944 and certain related assets, a novel, oral, T-type calcium channel modulator in development for the treatment of pain. As a result of the sale, Taro paid CAD $5.0 million in cash and a non-interest bearing, limited recourse promissory note in the amount of CAD $5.0 million with a maturity date of July 1, 2017. If Taro elects to repay the Promissory Note in cash and continue development of the Z944 Assets, EPIRUS will also be entitled to additional payments.

 

Earnings Call (8:00 am EST, November 4, 2015)

 

As previously announced, the Company will host an earnings call at 8:00 am EST on Wednesday, November 4, 2015, where senior management will discuss the Company’s performance and answer questions from participants. This call will be accessible through an audio dial-in and a web-cast. Audio conference participants can dial-in on the numbers below:

 

Participant Toll-Free Dial-In Number: +1 (844) 421-0601 ID: 63935727
Participant International Dial-In Number: +1 (716) 247-5800 ID: 63935727
Web-cast: More details are provided on our website, www.taro.com

To participate in the audio call, please dial the numbers provided above five to ten minutes ahead of the scheduled start time. The operator will provide instructions on asking questions before the call. The transcript of the event will be available on the Company’s website at www.taro.com. An audio playback will be available for twelve (12) days following the call.

 

About Taro

 

Taro Pharmaceutical Industries Ltd. is a multinational, science-based pharmaceutical company, dedicated to meeting the needs of its customers through the discovery, development, manufacturing and marketing of the highest quality healthcare products. For further information on Taro Pharmaceutical Industries Ltd., please visit the Company’s website at www.taro.com.

 

SAFE HARBOR STATEMENT

 

The unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments necessary to present fairly the financial condition and results of operations of the Company.The unaudited consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 20-F, as filed with the SEC.

 

Certain statements in this release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.These statements include, but are not limited to, statements that do not describe historical facts or that refer or relate to events or circumstances the Company “estimates,” “believes,” or “expects” to happen or similar language, and statements with respect to the Company’s financial performance, availability of financial information, and estimates of financial results and information for fiscal year 2016.Although the Company believes the expectations reflected in such forward-looking statements to be based on reasonable assumptions, it can give no assurances that its expectations will be attained.Factors that could cause actual results to differ include risks related to commercializing Keveyis, general domestic and international economic conditions, industry and market conditions, changes in the Company’s financial position, litigation brought by any party in any court in Israel, the United States, or any country in which Taro operates, regulatory and legislative actions in the countries in which Taro operates, and other risks detailed from time to time in the Company’s SEC reports, including its Annual Reports on Form 20-F.Forward-looking statements are applicable only as of the date on which they are made.The Company undertakes no obligations to update, change or revise any forward-looking statement, whether as a result of new information, additional or subsequent developments or otherwise.

 

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(U.S. dollars in thousands, except share data)

 

Quarter Ended

Six Months Ended

September 30,

September 30,

 

2015

 

2014

 

2015

 

2014

 

Sales, net

$
212,058

$
250,834

$
427,336

$
381,064
Cost of sales

41,354

52,745

84,828

97,608
Impairment

1,947

1,947


Gross profit

168,757

198,089

340,561

283,456
 

Operating Expenses:

Research and development

18,728

13,828

33,268

28,816
Selling, marketing, general and administrative

24,046

21,684

46,938

44,070
Settlements and loss contingencies

1,000

2,300

1,000

(4,200
)

Operating income

124,983

160,277

259,355

214,770
 

Financial Expenses, net:

Interest and other financial income

(3,401
)

(2,054
)

(6,670
)

(3,622
)

Foreign exchange income

(34,858
)

(6,131
)

(30,658
)

(889
)

Other income, net

758

1,575

1,110

1,981
Income before income taxes

164,000

170,037

297,793

221,262
Tax expense

30,443

26,110

60,532

31,013
Income from continuing operations

133,557

143,927

237,261

190,249
Net loss from discontinued operations

(70
)

(223
)

(101
)

(347
)

Net income

133,487

143,704

237,160

189,902
Net income attributable to non-controlling interest

139

319

176

419
Net income attributable to Taro

$
133,348

$
143,385

$
236,984

$
189,483
 

Net income per ordinary share from continuing operations attributable to Taro:

Basic

$
3.11

$
3.35

$
5.54

$
4.43
Diluted

$
3.11

$
3.35

$
5.54

$
4.43
 

Net loss per ordinary share from discontinued operations attributable to Taro:

Basic

$
(0.00
)
*
$
(0.00
)
*
$
(0.00
)
*
$
(0.01
)

Diluted

$
(0.00
)
*
$
(0.00
)
*
$
(0.00
)
*
$
(0.01
)

 

Net income per ordinary share attributable to Taro:

Basic

$
3.11

$
3.35

$
5.54

$
4.42
Diluted

$
3.11

$
3.35

$
5.54

$
4.42
 

Weighted-average number of shares used to compute net income per share:

 

Basic

42,833,533

42,833,299

42,833,533

42,832,976
Diluted

42,833,533

42,833,493

42,833,533

42,833,411
 

* Amount is less than $0.01

May not foot due to rounding.

 

 

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

September 30,

March 31,

2015

2015

ASSETS

(unaudited)

(audited)

CURRENT ASSETS:

Cash and cash equivalents

$
487,695

$
481,641

Short-term bank deposits

571,147

434,899

Restricted short-term bank deposits

199

Marketable securities

3,482

3,458

Accounts receivable and other:

Trade, net

247,278

222,427

Other receivables and prepaid expenses

271,900

250,911

Inventories

125,856

120,272

Long-term assets held for sale, net

1,066

TOTAL CURRENT ASSETS

1,708,424

1,513,807

Long-term receivables and other assets

21,296

46,330

Property, plant and equipment, net

151,053

153,045

Other assets

20,718

24,563

TOTAL ASSETS

$
1,901,491

$
1,737,745

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Current maturities of long-term debt

$
940

$
912

Trade payables and other current liabilities

275,030

309,093

TOTAL CURRENT LIABILITIES

275,970

310,005

Long-term debt, net of current maturities

4,499

4,976

Deferred taxes and other long-term liabilities

5,150

5,381

TOTAL LIABILITIES

285,619

320,362

 

Taro shareholders’ equity

1,610,032

1,411,720

Non-controlling interest

5,840

5,663

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$
1,901,491

$
1,737,745

 

 

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS

(U.S. dollars in thousands)

 

Six Months Ended September 30,

2015

2014

(unaudited)

(unaudited)

Operating Activities:

Net income

$
237,160

$
189,902
Adjustments required to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

7,783

7,986
Loss (gain) on sale of long-lived assets and marketable securities, net

68

(118
)

Impairment for long-lived assets

1,947


Increase in long-term debt due to currency fluctuations

(523
)

Increase in trade receivables, net

(25,414
)

(40,092
)

Change in derivative instruments, net

(5,673
)

2,057
Increase in other receivables, prepaid expenses and other assets

(20,951
)

(31,641
)

Increase in inventories, net

(7,472
)

(8,613
)

Effect of change in exchange rate on bank and inter-company balances

(29,579
)

(1,524
)

Decrease in trade and other payables and liabilities

(28,545
)

(21,278
)

Net cash provided by operating activities

129,324

96,156
 

Investing Activities:

Purchase of plant, property & equipment

(6,730
)

(10,520
)

(Investment in) proceeds from other intangible assets

(123
)

57
Investment in other assets

(31,050
)

Investment in long-term security deposits and other assets

(5,000
)


Investment in short-term bank deposits

(108,551
)

(3,479
)

Proceeds from restricted bank deposits

199

13
(Investment in) proceeds from the sale of marketable securities

(66
)

41
Net cash used in investing activities

(120,271
)

(44,938
)

 

Financing Activities:

Proceeds from issuance of shares, net

26
Repayment of long-term debt

(449
)

(422
)

Net cash used in financing activities

(449
)

(396
)

 

Effect of exchange rate changes

(2,550
)

(2,174
)

Net decrease in cash

6,054

48,648
Cash at beginning of period

481,641

209,967
Cash at end of period

$
487,695

$
258,615
 

 

 

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