Market Overview

Taro Provides Results for Year Ended March 31, 2017


Taro Pharmaceutical Industries Ltd. (NYSE:TARO) ("Taro" or the
"Company") today provided unaudited financial results for the quarter
and fiscal year ended March 31, 2017.

Quarter ended March 31, 2017 Highlights - compared to March 31, 2016

  • Net sales of $196.4 million, decreased $68.7 million, or 25.9%, the
    result of continuing increased competition and the challenging pricing
    environment. Overall volumes increased 3%.
  • Gross profit of $143.8 million decreased $80.4 million, and as a
    percentage of net sales, was 73.2% compared to 84.6% for the same
    quarter last year.
  • Research and development expenses of $19.9 million, remained in line
    with the comparable quarter.
  • Selling, marketing, general and administrative expenses (SG&A) of
    $22.2 million slightly decreased.
  • Operating income of $101.7 million decreased $80.0 million and as a
    percentage of net sales was 51.8% as compared to 68.6% in the prior
    year quarter.
  • Foreign Exchange (FX) expense decreased $41.6 million to $5.8 million,
    principally due to the weakening of the U.S. dollar vs. Canadian
    dollar at a lower rate than in prior period.
  • Tax expense decreased $5.6 million to $17.3 million resulting in an
    effective tax rate of 17.3% compared to 16.6% for the same quarter
    last year.
  • Net Income attributable to Taro was $83.0 million compared to $115.0
    million, resulting in diluted earnings per share of $2.05 compared to
    $2.68 for the same period last year.

Year ended March 31, 2017 Highlights - compared to March 31, 2016

  • Net sales of $879.4 million, decreased $71.4 million, or 7.5%. Overall
    volumes increased 2% versus the prior year.
  • Gross profit of $671.3 million decreased $107.7 million and as a
    percentage of net sales, was 76.3% compared to 81.9%.
  • Research and development expenses of $70.6 million decreased slightly.
  • SG&A expenses decreased $6.7 million to $85.7 million, principally as
    a result of reduced Keveyis spend and certain other savings.
  • Operating income of $515.0 million decreased $99.5 million, and as a
    percentage of net sales was 58.6% vs. 64.6%.
  • FX income increased $13.1 million to $20.2 million, principally driven
    by the strengthening of the U.S. dollar vs. Canadian dollar at a
    slightly lower rate compared to the prior year. The FX impact is
    mainly balance sheet driven.
  • Other gain, net of $11.2 million increased $8.5 million, primarily
    driven by the sale of Keveyis in the fiscal 2017 third quarter.
  • Tax expense increased $8.5 million, mainly due to certain tax benefits
    reflected in the prior year, not realized in the current year,
    resulting in the effective tax rate increasing to 18.5% from 15.0%.
  • Net income attributable to Taro was $456.4 million compared to $540.9
    million, resulting in diluted earnings per share of $11.05 compared to
    $12.62 for last year.

Cash Flow and Balance Sheet Highlights - compared to March 31, 2016

  • Cash provided by operations for the period ended March 31, 2017 was
    $437.5 million, compared to $395.1 million.
  • As of March 31, 2017, cash, including short-term bank deposits and
    marketable securities of $1.4 billion, increased $158.1 million from
    March 31, 2016, despite the $294.9 million impact from the Company's
    share repurchases during this fiscal year.

Mr. Abhay Gandhi, Taro's Interim CEO said, "As is commonly known, and as
we have stated for quite some time, the entire generic sector, including
Taro, is facing a challenging period. We continue to see a difficult
generic pricing environment, particularly in the U.S., driven by
intensified competition among manufacturers, new entrants to the market,
buying consortium pressures, and higher ANDA approval rate from the
FDA." Mr. Gandhi continued, "Based on our well-balanced portfolio, the
continuing focus on R&D investment, our healthy pipeline, and the
Company's strong balance sheet, we believe we are well positioned in our
target markets."

FDA Approvals and Filings

The Company recently received approvals from the U.S. Food and Drug
Administration ("FDA") for four Abbreviated New Drug Applications
("ANDAs"): Brompheniramine Maleate, Pseudoephedrine Hydrochloride and
Dextromethorphan Hydrobromide Syrup 2 mg/5 mL, 30mg/5 mL, 10 mg/5 mL,
Metronidazole Gel USP, 1%, Tazarotene Cream, 0.1% and Felbamate Tablets,
400 mg and 600 mg. The Company currently has a total of thirty-five
ANDAs awaiting FDA approval, including 5 tentative approvals.

Share Repurchase Program - Returning Capital to

On November 23, 2016, the Company announced that its' Board of Directors
approved a new $250 million share repurchase of ordinary shares. This
authorization follows the successful completion of the previous $250
million share repurchase program on August 19, 2016; under which, the
Company bought back 1,801,099 of its ordinary shares, of which,
1,733,760 shares were purchased subsequent to April 1, 2016.

Under the November 2016 authorization, repurchases may be made from time
to time at the Company's discretion, based on ongoing assessments of the
capital needs of the business, the market price of its stock, and
general market conditions. No time period has been set for the
repurchase program, and any such program may be suspended or
discontinued at any time. The repurchase authorization enables the
Company to purchase its ordinary shares from time to time through open
market purchases, negotiated transactions or other means, including
10b5-1 trading plans in accordance with applicable securities laws or
other restrictions. During the fourth quarter, the Company repurchased
207,503 shares at an average price of $103.99. During the year, the
Company repurchased 2,252,725 shares between the two programs.

Purchase of Thallion Pharmaceuticals Inc.

On March 16, 2017, BELLUS Health Inc.("BELLUS") announced that it had
entered into a share purchase agreement with Taro for the sale of
BELLUS' wholly-owned subsidiary Thallion Pharmaceuticals Inc.
("Thallion"), including all the rights to the drug candidate Shigamab™.
Pursuant to the agreement, Taro is acquiring all issued and outstanding
shares of Thallion for a potential total consideration of CAD $2.7
million. In addition, BELLUS will receive a portion of certain
post-approval revenues related to the Shigamab™ program.

Development and Commercialization license to
sell and distribute Pliaglis

On April 25, 2017, Crescita Therapeutics Inc. ("Crescita"), announced it
had entered into a development and commercialization license agreement
with Taro, under which, Crescita has granted Taro an exclusive license
to the rights to sell and distribute Pliaglis® in the U.S. market and
for a second-generation enhanced version with patent pending.

Earnings Call (8:00 am EDT,
May 23, 2017)

As previously announced, the Company will host an earnings call at 8:00
am EDT on Tuesday, May 23, 2017, 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: 21985230
  • Participant International Dial-In Number: +1 (716) 247-5800 ID:
  • Web-cast: More details are provided on our website,

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
An audio playback will be available for twenty four (24) 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


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

Certain statements in this release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
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 2018.
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
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.
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**

(U.S. dollars in thousands, except share data)
Quarter Ended Year Ended
March 31, March 31,





(unaudited) (unaudited) (unaudited) (audited)
Sales, net $ 196,414 $ 265,073 $ 879,387 $ 950,751
Cost of sales 52,494 40,749 207,860 169,743
Impairment   92     95     276     2,042  
Gross profit 143,828 224,229 671,251 778,966
Operating Expenses:
Research and development 19,878 19,948 70,644 71,160
Selling, marketing, general and administrative 22,206 22,561 85,656 92,365
Settlements and loss contingencies               973  
Operating income 101,744 181,720 514,951 614,468
Financial (income) expense, net:
Interest and other financial income (3,654 ) (2,896 ) (14,468 ) (12,604 )
Foreign exchange expense (income) 5,830 47,478 (20,168 ) (7,068 )
Other gain, net   745     860     11,211     2,680  
Income before income taxes 100,313 137,999 560,798 636,820
Tax expense   17,313     22,950     103,780     95,313  
Income from continuing operations 83,000 115,049 457,018 541,507
Net loss from discontinued operations attributable to Taro   (38 )   (34 )   (352 )   (236 )
Net income 82,962 115,015 456,666 541,271
Net (loss) income attributable to non-controlling interest   (23 )   65     310     339  
Net income attributable to Taro $ 82,985   $ 114,950   $ 456,356   $ 540,932  

Net income per ordinary share from continuing
attributable to Taro:

Basic $ 2.05   $ 2.68   $ 11.06   $ 12.63  
Diluted $ 2.05   $ 2.68   $ 11.06   $ 12.63  

Net loss per ordinary share from discontinued
attributable to Taro:

Basic $ (0.00 ) * $ (0.00 ) * $ (0.01 ) $ (0.01 )
Diluted $ (0.00 ) * $ (0.00 ) * $ (0.01 ) $ (0.01 )
Net income per ordinary share attributable to Taro:
Basic $ 2.05   $ 2.68   $ 11.05   $ 12.62  
Diluted $ 2.05   $ 2.68   $ 11.05   $ 12.62  

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

Basic   40,566,815     42,828,338     41,300,797     42,832,241  
Diluted   40,566,815     42,828,338     41,300,797     42,832,241  
* Amount is less than $0.01
May not foot due to rounding.
(U.S. dollars in thousands)
March 31, March 31,
2017 2016
ASSETS (unaudited) (audited)
Cash and cash equivalents $ 600,399 $ 576,757
Short-term and current maturities of long-term bank deposits 782,813 648,297
Marketable securities 3,548 3,572
Accounts receivable and other:
Trade, net 203,924 238,611
Other receivables and prepaid expenses 266,280 270,724
Inventories 141,045 138,553
Long-term assets held for sale, net   1,015   1,081
TOTAL CURRENT ASSETS 1,999,024 1,877,595
Long-term bank deposits 70,685 115,173
Property, plant and equipment, net 180,085 159,459
Other assets   39,959   35,806
TOTAL ASSETS $ 2,289,753 $ 2,188,033
Trade payables and other current liabilities $ 209,837 $ 245,462
Deferred taxes and other long-term liabilities   6,110   5,427
TOTAL LIABILITIES 215,947 250,889
Taro shareholders' equity 2,067,494 1,931,142
Non-controlling interest   6,312   6,002
(U.S. dollars in thousands)
Year Ended March 31,
2017 2016
Cash flows from operating activities: (unaudited) (audited)
Net income $ 456,666 $ 541,271
Adjustments required to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,829 14,848
Impairment for long-lived assets 276 2,042
Realized (gain) loss on sale of marketable securities and long-lived
(8,389 ) 74
Change in derivative instruments, net 1,434 (6,137 )
Effect of change in exchange rate on inter-company balances and bank
(21,174 ) (7,778 )
Deferred income taxes, net 73,706 (11,976 )
Decrease (increase) in trade receivables, net 34,413 (16,386 )
Increase in inventories, net (3,770 ) (19,013 )
Increase in other receivables, income tax receivable, prepaid
expenses and other
(75,219 ) (42,858 )
Decrease in trade, income tax, accrued expenses, and other payables   (35,237 )   (58,959 )
Net cash provided by operating activities   437,535     395,128  
Cash flows from investing activities:
Purchase of plant, property & equipment, net (35,755 ) (18,972 )
Proceeds from (investment in) other intangible assets 8,440 (134 )
Proceeds from other assets 35,000
Proceeds from (investment in) short-term bank deposits 196,170 (220,102 )
Investment in long-term deposits and other assets (286,607 ) (80,587 )
Proceeds from restricted bank deposits 199
Investment in marketable securities, net   (26 )   (135 )
Net cash used in investing activities   (117,778 )   (284,731 )
Cash flows from financing activities:
Purchase of treasury stock (294,897 ) (9,450 )
Repayment of long-term debt       (5,888 )
Net cash used in financing activities   (294,897 )   (15,338 )
Effect of exchange rate changes on cash and cash equivalents   (1,218 )   57  
Increase in cash and cash equivalents 23,642 95,116
Cash and cash equivalents at beginning of period   576,757     481,641  
Cash and cash equivalents at end of period $ 600,399   $ 576,757  
Cash Paid during the year for:
Interest $   $ 85  
Income taxes $ 97,782   $ 192,964  
Non-cash investing transactions:
Purchase of property, plant and equipment included in accounts
$ 692   $ 1,744  

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