TARO Taro Pharmaceutical Industries Ltd

Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter ended June 30, 2022.

Quarter ended June 30, 2022* Highlights ─ compared to June 30, 2021

• Net sales increased $9.6 million, or 6.5%, to $156.7 million.
• Gross profit of $81.6 million (52.1% of net sales) compared to $77.7 million (52.8% of net sales).
• Research and development (R&D) expenses of $11.5 million decreased $1.4 million.
• Selling, marketing, general and administrative expenses of $56.1 million increased $32.1 million.
• Operating income of $14.0 million (8.9% of net sales) compared to an operating loss of $(19.2) million. Excluding the settlement and loss contingencies charges in the prior year quarter, operating income was $40.8 million (27.7% of net sales).
• Interest and other financial income of $1.9 million decreased $1.1 million.
• Tax expense of $2.0 million compared to $2.7 million in the prior year quarter. Excluding the impact from the settlement and loss contingencies charges in the prior year quarter, the effective tax rate for the quarter was 12.3% as compared to 6.1% in the prior year quarter.
• Net income attributable to Taro was $14.1 million compared to net loss of $(18.8) million, resulting in earnings per share of $0.37 compared to (loss) per share of $(0.50). Excluding the impact from the settlement and loss contingencies charges in the prior year quarter, net income was $41.2 million, resulting in earnings per share of $1.09.

Cash Flow and Balance Sheet Highlights

• Cash flow used in operations for the quarter ended June 30, 2022, was $58.0 million. Excluding the impact from the settlement and loss contingencies charges, cash flow provided by operations was $9.6 million compared to $44.0 million for the quarter ended June 30, 2021.
• As of June 30, 2022, cash and cash equivalents and marketable securities (both short- and long-term) decreased $74.7 million to $1.18 billion from March 31, 2022; principally the result of a $67.6 million settlement payment to the Direct Purchaser Plaintiff (“DPP”) class in the In re: Generic Drug Pricing Antitrust Litigation, MDL No. 2724.

Mr. Uday Baldota, Taro’s CEO, stated, “While we maintain the leading market position of many of our products, we continue to face an overall market trend, particularly in the U.S, that is not dramatically changing, and depending on the product, price deflation continues to be a challenge. With input costs rising sharply, we will continue to allocate increasing amounts of capital including R&D efforts into growth and profitable businesses and new businesses opportunities”.

* The June 30, 2022 results include three month’s results from the February 28th acquisition of Alchemee.

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug Administration (“FDA”) for the Abbreviated New Drug Application (“ANDA”) Fluphenazine Tablets 1mg, 2.5mg, 5mg, 10mg. The Company currently has a total of eighteen ANDAs awaiting FDA approval, including four tentative approvals.

Generic Drug Pricing Antitrust Litigation MDL No. 2724

On November 4, 2021, a settlement was reached with the putative DPP, a putative class generally comprised of wholesalers and distributors that purchased generic drug products from manufacturers. On May 11, 2022, the Court granted preliminary approval of Taro’s settlement with the DPP class. As a result, on June 8, 2022, within the required time period, Taro made a $67.6 million settlement payment to the DPP class plaintiffs, subject to a reduction of up to $8.0 million depending on the volume of certain class members that may opt-out of the settlement.

The Company cautions that the foregoing 2022 financial information (including Alchemee) 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 2023. 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 June 30,

 

2022 (1)

 

2021

 

(unaudited) (unaudited) Sales, net

$

156,665

 

$

147,113

 

Cost of sales

 

75,059

 

 

69,415

 

Gross profit

 

81,606

 

 

77,698

 

  Operating Expenses: Research and development

 

11,508

 

 

12,952

 

Selling, marketing, general and administrative

 

56,122

 

 

23,976

 

Settlements and loss contingencies

 

—

 

 

60,000

 

Operating income (loss) *

 

13,976

 

 

(19,230

)

  Financial income, net:

Interest and other financial income

 

(1,926

)

 

(3,042

)

Foreign exchange expense

 

294

 

 

275

 

Other gain, net

 

445

 

 

384

 

Income (loss) before income taxes

 

16,053

 

 

(16,079

)

Tax expense

 

1,974

 

 

2,688

 

Net income (loss) attributable to Taro *

$

14,079

 

$

(18,767

)

  Net earnings ( loss) per ordinary share attributable to Taro: Basic and Diluted *

$

0.37

 

$

(0.50

)

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

 

37,584,891

 

 

37,794,430

 

  May not foot due to rounding. (1) Includes quarters’ results from Alchemee (acquired February 28, 2022). * Excluding the one-time provision of $60.0 million for settlements and loss contingencies, for the quarter ended June 30, 2021, Operating income was $40.8 million, Net income attributable to Taro was $41.2 million, and Basic and diluted earnings per share was $1.09.

Note: June 30, 2022, includes the Balance Sheet of Alchemee (acquired February 28, 2022).

TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED BALANCE SHEETS (U.S. dollars in thousands)  

June 30,

March 31,

2022

2022

ASSETS (unaudited) (audited) CURRENT ASSETS: Cash and cash equivalents

$

225,801

$

251,134

Short-term bank deposits

 

22,586

 

47,586

Restricted short-term bank deposits

 

—

 

—

Marketable securities

 

557,859

 

522,028

Accounts receivable and other:

Trade, net

 

265,858

 

246,972

Other receivables and prepaid expenses

 

59,330

 

59,727

Inventories

 

216,833

 

210,439

Long-term assets held for sale, net

 

—

 

—

TOTAL CURRENT ASSETS

 

1,348,267

 

1,337,886

Marketable securities

 

374,968

 

435,189

Property, plant and equipment, net

 

194,805

 

199,692

Deferred income taxes

 

123,573

 

124,882

Goodwill

 

12,718

 

11,820

Other assets

 

65,661

 

66,893

TOTAL ASSETS

$

2,119,992

$

2,176,362

  LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables

$

73,923

$

68,232

Other current liabilities

 

300,529

 

363,886

TOTAL CURRENT LIABILITIES

 

374,452

 

432,118

Deferred taxes and other long-term liabilities

 

31,826

 

32,799

TOTAL LIABILITIES

 

406,278

 

464,917

  Taro shareholders' equity

 

1,713,714

 

1,711,445

Non-controlling interest

 

—

 

—

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,119,992

$

2,176,362

 

 

Note: June 30, 2022, includes the Balance Sheet of Alchemee (acquired February 28, 2022).

TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands)   Quarter Ended June 30,

 

2022

 

 

2021

 

(unaudited) (unaudited) Cash flows from operating activities: Net income (loss)

$

14,079

 

$

(18,767

)

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

 

6,978

 

 

6,346

 

Realized gains on sale of long-lived assets

 

—

 

 

(4

)

Change in derivative instruments, net

 

(24

)

 

(166

)

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

 

747

 

 

(589

)

Deferred income taxes, net

 

2,415

 

 

11,244

 

Increase in trade receivables, net

 

(19,321

)

 

(3,295

)

Increase in inventories, net

 

(6,566

)

 

(2,568

)

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

 

(467

)

 

(2,598

)

(Decrease) increase in trade, income tax, accrued expenses and other payables

 

(59,819

)

 

52,211

 

Expense from amortization of marketable securities bonds, net

 

3,950

 

 

2,179

 

Net cash (used in) provided by operating activities

 

(58,028

)

 

43,993

 

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

 

(2,074

)

 

(3,855

)

Investment in other intangible assets

 

(34

)

 

(72

)

Investment in short-term bank deposits, net

 

25,000

 

 

—

 

Proceeds from long-term deposits and other assets

 

(73

)

 

—

 

(Investment in) proceeds from marketable securities, net

 

11,936

 

 

(12,500

)

Net cash (used in) provided by investing activities

 

34,755

 

 

(16,427

)

  Cash flows from financing activities: Purchase of treasury stock

 

—

 

 

(18,319

)

Net cash used in financing activities

 

—

 

 

(18,319

)

  Effect of exchange rate changes on cash and cash equivalents

 

(2,060

)

 

464

 

(Decrease) increase in cash and cash equivalents

 

(25,333

)

 

9,711

 

Cash and cash equivalents at beginning of period

 

251,134

 

 

605,177

 

Cash and cash equivalents at end of period

$

225,801

 

$

614,888

 

  Cash Paid during the year for: Income taxes

$

2,410

 

$

3,333

 

Cash Received during the year for: Income taxes

$

12,511

 

$

2,351

 

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

$

1,232

 

$

1,225

 

Non-cash financing transactions: Purchase of treasury stock

$

—

 

$

430

 

Purchase of marketable securities, net

$

2,050

 

$

3,179

 

 

Note: June 30, 2022, includes the Balance Sheet of Alchemee (acquired February 28, 2022).

View source version on businesswire.com: https://www.businesswire.com/news/home/20220727005946/en/

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