Quarter reflects One-Time Charge for
Global Resolution with DOJ
Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro”) today
provided unaudited financial results for the quarter ended June 30,
2020.
Quarter ended June 30, 2020 Highlights - compared to Quarter
ended June 30, 2019
- Net sales of $117.6 million, decreased $43.7 million.
- Gross profit of $64.9 million decreased $36.8 million, and as a
percentage of net sales was 55.2% compared to 63.1%.
- Research and development expenses of $12.9 million decreased
slightly from the prior year.
- Selling, marketing, general and administrative expenses of
$22.2 million, which includes the impact of COVID-19 related
expenses and higher legal expenses, increased $2.5 million.
- Settlements and loss contingencies of $478.9 million reflect
the one-time settlement charge of $418.9 million related to the
global resolution of the Department of Justice investigations into
the U.S. generic pharmaceutical industry. An additional provision
of $60.0 million has been taken for the related ongoing
multi-jurisdiction civil antitrust matters; however, there can be
no assurance as to the ultimate outcome.
- Operating (loss) income was $(449.2) million. Excluding the
settlement and loss contingencies charges, operating income was
$29.8 million, a decrease of $38.8 million, and as a percentage of
net sales was 25.3% as compared to 42.5%.
- Interest and other financial income decreased $2.3 million to
$7.3 million, reflecting the lower global interest rate
environment.
- Foreign Exchange income of $0.2 million compared to $7.9
million in the comparable quarter ─ an unfavorable impact of $7.7
million.
- Tax expense of $8.9 million compared to a tax expense of $20.4
million ─ a favorable impact of $11.5 million. Excluding the impact
from the settlement and loss contingencies charges, the effective
tax rate for the quarter was 23.4% as compared to 23.6%.
- Net (loss) income attributable to Taro was $(434.9) million.
Excluding the settlement and loss contingencies charges, net income
was $29.0 million compared to $66.2 million. Diluted (loss) per
share for the quarter was $(11.37). Excluding the settlement and
loss contingencies charges, diluted earnings per share was $0.76
compared to $1.72.
Cash Flow and Balance Sheet Highlights
- Cash flow provided by operations was $64.1 million compared to
$82.6 million for the three months ended June 30, 2019.
- As of June 30, 2020, cash, including short-term and long-term
marketable securities, increased $64.4 million to $1.63 billion
from March 31, 2020.
Mr. Uday Baldota, Taro’s CEO stated, “Regarding our results —
they reflect the challenging times that we are facing, not only due
to the continuing uncertainty of the duration and impact of the
COVID─19 pandemic, but also in the overall U.S. generic industry —
which we believe will continue in the foreseeable future. We are
happy to have reached a resolution with the DOJ, so that we can
move forward and sharpen our focus on growing our business.”
FDA Approvals and
Filings
Taro recently received approvals from the U.S. Food and Drug
Administration (“FDA”) for three Abbreviated New Drug Applications
(“ANDAs”): Betamethasone Dipropionate Spray, 0.05%, Doxepin
Hydrochloride Capsules USP, and Butalbital, Acetaminophen and
Caffeine Capsules USP. Taro currently has a total of nineteen ANDAs
awaiting FDA approval, including five tentative approvals.
Taro Achieves Global Resolution of DOJ
Antitrust Investigations
On July 23, 2020, Taro Pharmaceuticals U.S.A., Inc. (“Company”),
globally resolved all matters related to the Company in connection
with the multi-year investigations by the Department of Justice,
Antitrust Division and Civil Division (“DOJ”) into the U.S. generic
pharmaceutical industry. Under a Deferred Prosecution Agreement
reached with DOJ Antitrust, the DOJ will file an Information for
conduct that took place between 2013 and 2015. If the Company
adheres to the terms of the agreement, including the payment of
$205.7 million, the DOJ will dismiss the Information at the end of
a three-year period. The Company has also reached a framework
understanding with DOJ Civil, subject to final agreement and agency
authorization, in which the Company has agreed to pay $213.3
million to resolve all claims related to federal healthcare
programs. Accordingly, a charge of $418.9 million is taken in the
current quarter and shown as Settlements and loss
contingencies.
Form 20-F Filings with the
SEC
On June 19, 2020, Taro filed its Annual Report on Form 20-F with
the U.S. Securities and Exchange Commission (“SEC”) for the fiscal
year ended March 31, 2020.
Taro cautions that the foregoing financial information is
presented on an unaudited basis and is subject to change.
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 2021. 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.
TARO PHARMACEUTICAL INDUSTRIES
LTD.
SUMMARY CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
(U.S. dollars in thousands,
except share data)
Quarter Ended June 30,
2020
2019
Sales, net
$
117,634
$
161,296
Cost of sales
52,688
59,572
Gross profit
64,946
101,724
Operating Expenses: Research and development
12,932
13,443
Selling, marketing, general and administrative
22,248
19,718
Settlements and loss contingencies
478,924
—
Operating (loss) income *
(449,158
)
68,563
Financial income, net: Interest and other financial income
(7,310
)
(9,624
)
Foreign exchange income
(197
)
(7,905
)
Other gain, net
549
594
(Loss) income before income taxes
(441,102
)
86,686
Tax expense
8,854
20,445
Net (loss) income
(449,956
)
66,241
Net (loss) income attributable to non-controlling interest
(15,038
)
58
Net (loss) income attributable to Taro *
$
(434,918
)
$
66,183
Net (loss) income per ordinary share attributable to
Taro: Basic and Diluted *
$
(11.37
)
$
1.72
Weighted-average number of shares used to compute net
(loss) income per share: Basic and Diluted
38,258,337
38,539,056
May not foot due to rounding.
* Excluding the settlement and loss contingencies charges of
$478.9 million, for the quarter ended June 30, 2020, Operating
income was $29.8 million, Net income attributable to Taro was $29.0
million, and Basic and diluted earnings per share was $0.76.
TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY
CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands)
June 30,
March 31,
2020
2020
ASSETS
(unaudited)
(audited)
CURRENT ASSETS: Cash and cash equivalents
$
532,044
$
513,354
Marketable securities
590,286
595,383
Accounts receivable and other: Trade, net
189,301
235,221
Other receivables and prepaid expenses
45,082
35,567
Inventories
166,223
153,073
TOTAL CURRENT ASSETS
1,522,936
1,532,598
Marketable securities
510,397
459,639
Property, plant and equipment, net
209,228
209,961
Deferred income taxes
105,389
106,693
Other assets
31,743
32,361
TOTAL ASSETS
$
2,379,693
$
2,341,252
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT
LIABILITIES: Trade payables
$
36,302
$
28,858
Other current liabilities
560,185
193,873
TOTAL CURRENT LIABILITIES
596,487
222,731
Deferred taxes and other long-term liabilities
109,068
8,762
TOTAL LIABILITIES
705,555
231,493
Taro shareholders' equity
1,683,279
2,103,864
Non-controlling interest
(9,141
)
5,895
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
2,379,693
$
2,341,252
TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. dollars
in thousands)
Three Months Ended June 30,
2020
2019
Cash flows from operating activities: Net (loss)
income
$
(449,956
)
$
66,241
Adjustments required to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
5,571
5,071
Change in derivative instruments, net
(923
)
(2,421
)
Effect of change in exchange rate on inter-company balances,
marketable securities and bank deposits
(1,728
)
(5,624
)
Deferred income taxes, net
(2,367
)
2,930
Decrease in trade receivables, net
45,921
24,431
Increase in inventories, net
(13,150
)
(205
)
(Increase) decrease in other receivables, income tax receivable,
prepaid expenses and other
(3,462
)
15,671
Increase (decrease) in trade, income tax, accrued expenses, and
other payables
483,957
(22,965
)
Loss (income) from marketable securities, net
247
(525
)
Net cash provided by operating activities
64,110
82,604
Cash flows from investing activities: Purchase of
plant, property & equipment, net
(5,133
)
(7,969
)
Investment in other intangible assets
(63
)
(30
)
Investment in marketable securities, net
(40,825
)
(9,070
)
Net cash used in investing activities
(46,021
)
(17,069
)
Cash flows from financing activities: Net cash
used in financing activities
—
—
Effect of exchange rate changes on cash and cash
equivalents
601
—
Increase in cash and cash equivalents
18,690
65,535
Cash and cash equivalents at beginning of period
513,354
567,451
Cash and cash equivalents at end of period
$
532,044
$
632,986
Cash Paid during the year for: Income taxes
$
7,119
$
10,432
Cash Received during the year for: Income taxes
$
—
$
7,128
Non-cash investing transactions: Purchase of property, plant
and equipment included in accounts payable
$
1,304
$
2,317
Non-cash financing transactions: (Sale) purchase of
marketable securities
$
(745
)
$
2,436
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200729005920/en/
Daphne Huang VP, CFO
(914) 345-9001 Daphne.Huang@taro.com
William J. Coote AVP,
Business Finance, Treasurer and Investor Relations (914) 345-9001
William.Coote@taro.com
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