TARO Taro Pharmaceutical Industries Ltd

Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter and nine months ended December 31, 2023.

Quarter ended December 31, 2023 Highlights ─ compared to December 31, 2022

• Net sales of $157.1 million increased $17.9 million or 12.9% principally due to new launches and gross-to-net (“GTN”) adjustments. Excluding the impact of GTN adjustments, sales growth was high single digits.
• Gross profit of $79.9 million (50.8% of net sales) compared to $64.0 million (46.0% of net sales).
• Research and development (R&D) expenses of $13.6 million increased $0.7 million.
• Selling, marketing, general and administrative expenses (SG&A) of $50.4 million included certain one-time charges of $0.9 million related to recruiting expenses for the relocation of our Alchemee operations from California to New York and legal costs related to the Special Committee that was established by the Board to consider the proposal submitted by Sun Pharmaceutical Industries Ltd. on May 26, 2023. Excluding these charges, SG&A declined marginally.
• Operating income was $15.9 million; excluding the impact from the certain one-time charges, operating income was $16.8 million compared to operating income of $1.3 million in the previous year quarter.
• Interest and other financial income of $15.5 million increased $8.9 million.
• Tax expense of $13.1 million compared to a tax expense of $1.9 million in the prior year quarter.
• Net income was $20.2 million compared to net income of $7.3 million in the previous quarter, resulting in earnings per share of $0.54 compared to earnings per share of $0.19.

Nine Months ended December 31, 2023 Highlights ─ compared to December 31, 2022

• Net sales of $464.2 million increased $37.9 million or 8.9%, due to one-time GTN adjustments. Excluding, these adjustments, the sales growth was mid-single-digits.
• Gross profit of $217.6 million (46.9% of net sales as compared to 45.2%) increased $25.0 million.
• R&D expenses of $44.1 million increased $8.1 million, principally the result of increased clinical studies.
• SG&A of $160.8 million included certain one-time charges of $13.2 million related to the aforementioned certain one-time charges. Excluding these charges, SG&A was $147.6 million, slightly below the prior year.
• Operating income was $12.7 million; excluding the impact from the GTN adjustments and the certain one-time charges, operating income was slightly increased as compared to the prior year.
• Interest and other financial income of $40.4 million increased $27.5 million from $12.8 million in the prior year.
• Net income was $38.8 million compared to $18.5 million, resulting in earnings per share of $1.03 compared to earnings per share of $0.49.

Cash Flow and Balance Sheet Highlights

• Net cash provided by operations for the nine months ended December 31, 2023 was $86.2 million compared to net cash used in operations of $24.9 million for the nine months ended December 31, 2022. Excluding the impact from settlement payments and settlement and loss contingencies charges impacting the prior year, cash flow provided by operations was $97.7 million compared to $50.4 million for the nine months ended December 31, 2022.
• As of December 31, 2023, cash and cash equivalents, short-term bank deposits and marketable securities (both short- and long-term) increased $51.0 million to $1.306 billion from March 31, 2023.

Taro Announces Merger Agreement with Sun Pharma On January 17, 2024, Taro and Sun Pharmaceutical Industries Limited (Reuters: SUN.BO, Bloomberg: SUNP IN, NSE: SUNPHARMA, BSE: 524715) (together with its subsidiaries and/or associates referred as “Sun Pharma”) announced that they have entered into a definitive merger agreement in which Sun Pharma, Taro’s controlling shareholder, has agreed to acquire all of the outstanding ordinary shares of Taro (other than the shares already held by Sun Pharma or its affiliates) for $43.00 per share in cash without interest. The merger is subject to various closing conditions. These include, among other conditions, the approval of the merger by the affirmative vote of shareholders representing at least 75% of the voting power of the Company's shares present and voting in person or by proxy at a meeting of the Company’s shareholders, including at least a majority of the voting power of such shares held by holders other than Sun Pharma and its affiliates or any other holders having a personal interest (under the Israeli Companies Law) in the merger and voting thereon.

The $43.00 per share purchase price represents a 48% premium over the closing price of $28.97 per share on May 25, 2023, the last trading day before Sun Pharma first submitted its non-binding proposal to Taro, and a 58% premium to the volume-weighted average price of the shares during the 60 days prior to and including May 25, 2023.

The Company cautions that the foregoing 2023 financial information is unaudited and is subject to change.

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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 2024. 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 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.

**Financial Tables Follow**

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

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

 

Quarter Ended

 

Nine Months Ended

December 31,

 

December 31,

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Sales, net

$

157,145

 

$

139,202

 

$

464,241

 

$

426,365

 

Cost of sales

 

77,241

 

 

75,155

 

 

246,651

 

 

233,750

 

Impairment

 

23

 

 

—

 

 

23

 

 

—

 

Gross profit

 

79,881

 

 

64,047

 

 

217,567

 

 

192,615

 

  Operating Expenses: Research and development

 

13,588

 

 

12,907

 

 

44,058

 

 

35,937

 

Selling, marketing, general and administrative

 

50,410

 

 

49,861

 

 

160,808

 

 

148,238

 

Operating income *

 

15,883

 

 

1,279

 

 

12,701

 

 

8,440

 

  Financial (income)/expense, net: Interest and other financial income

 

(15,496

)

 

(6,592

)

 

(40,358

)

 

(12,814

)

Foreign exchange (income)/expense

 

(138

)

 

(738

)

 

(597

)

 

2,344

 

Other gain, net

 

1,827

 

 

563

 

 

2,783

 

 

1,403

 

Income before income taxes

 

33,344

 

 

9,172

 

 

56,440

 

 

20,313

 

Tax expense

 

13,136

 

 

1,907

 

 

17,651

 

 

1,781

 

Net income *

$

20,208

 

$

7,265

 

$

38,789

 

$

18,532

 

  Net income/(loss) per ordinary share: Basic and Diluted *

$

0.54

 

$

0.19

 

$

1.03

 

$

0.49

 

  Weighted-average number of shares used to compute net income/(loss) per share: Basic and Diluted

 

37,584,891

 

 

37,584,891

 

 

37,584,891

 

 

37,584,891

 

* For the quarter ended December 31, 2023, excluding the impact from the certain one-time charges of $0.9 million (see page one of release for a description), operating income was $16.8 million compared to operating income of $1.3 million. Excluding the impact of the certain one-time charges, net income was $21.0 million, resulting in earnings per share of $0.56.

* For the nine months ended December 31, 2023, excluding the impact from the certain one-time charges of $13.2 million (see page one of release for a description), operating income was $25.9 million compared to $8.4 million. Excluding the impact of the certain one-time charges, net income was $50.2 million, resulting in earnings per share of $1.34.

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands)

 

December 31,

 

March 31,

2023

 

2023

ASSETS

(unaudited)

 

(audited)

CURRENT ASSETS: Cash and cash equivalents

$

382,409

$

154,495

Short-term bank deposits

 

56,480

 

119,980

Marketable securities

 

463,327

 

575,814

Accounts receivable and other: Trade, net

 

191,232

 

202,260

Other receivables and prepaid expenses

 

39,140

 

57,210

Inventories

 

214,816

 

226,669

TOTAL CURRENT ASSETS

 

1,347,404

 

1,336,428

Marketable securities

 

403,544

 

404,896

Property, plant and equipment, net

 

218,385

 

190,139

Deferred income taxes

 

97,300

 

103,672

Goodwill

 

17,231

 

17,231

Other assets

 

79,315

 

83,147

TOTAL ASSETS

$

2,163,179

$

2,135,513

  LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables

$

51,183

$

68,485

Other current liabilities

 

322,876

 

317,064

TOTAL CURRENT LIABILITIES

 

374,059

 

385,549

Deferred taxes and other long-term liabilities

 

10,027

 

19,106

TOTAL LIABILITIES

 

384,086

 

404,655

  Taro shareholders' equity

 

1,779,093

 

1,730,858

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,163,179

$

2,135,513

 

TARO PHARMACEUTICAL INDUSTRIES LTD.

SUMMARY CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

(U.S. dollars in thousands)

 

 

Nine Months Ended

December 31,

 

 

 

2023

 

 

 

2022

 

Cash flows from operating activities: Net income

$

38,789

 

$

18,533

 

Adjustments required to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization

 

22,872

 

 

21,320

 

Impairment of long-lived assets

 

23

 

 

—

 

Realized loss on sale of long-lived assets

 

—

 

 

2

 

Change in derivative instruments, net

 

—

 

 

(24

)

Decrease in goodwill and intangible assets

 

242

 

 

—

 

Effect of change in exchange rate on marketable securities and bank deposits

 

(539

)

 

1,590

 

Deferred income taxes, net

 

5,189

 

 

4,612

 

Decrease (increase) in trade receivables, net

 

10,781

 

 

(5,168

)

Decrease (increase) in inventories, net

 

11,769

 

 

(12,361

)

Decrease in other receivables, income tax receivables, prepaid expenses and other

 

18,367

 

 

7,287

 

Decrease in trade, income tax, accrued expenses and other payables

 

(14,972

)

 

(67,938

)

(Income)/expense from amortization of marketable securities bonds, net

 

(6,303

)

 

7,247

 

Net cash provided by (used in) operating activities

 

86,218

 

 

(24,900

)

  Cash flows from investing activities: Purchase of plant, property & equipment, net

 

(48,229

)

 

(11,186

)

Investment in other intangible assets

 

(99

)

 

(122

)

Proceeds (Investment) in short-term bank deposits, net

 

63,500

 

 

(121,982

)

Proceeds from marketable securities, net

 

126,367

 

 

3,060

 

Investment in other investments

 

—

 

 

(2,000

)

Net cash used in (provided by) investing activities

 

141,539

 

 

(132,230

)

  Cash flows from financing activities: Net cash used in financing activities

 

—

 

 

—

 

  Effect of exchange rate changes on cash and cash equivalents

 

157

 

 

(2,031

)

Increase (decrease) in cash and cash equivalents

 

227,914

 

 

(159,161

)

Cash and cash equivalents at beginning of period

 

154,495

 

 

251,134

 

Cash and cash equivalents at end of period

$

382,409

 

$

91,973

 

  Cash Paid during the year for: Income taxes

$

10,600

 

$

3,415

 

Cash Received during the year for: Income taxes

$

12,931

 

$

14,156

 

Non-cash investing transactions: Purchase of property, plant and equipment included in accounts payable

$

1,360

 

$

1,260

 

Non-cash financing transactions: Purchase of marketable securities, net

$

1,305

 

$

2,710

 

Sale of marketable securities

$

270

 

$

—

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240125784015/en/

William J. Coote VP, CFO (914) 345-9001 William.Coote@taro.com