TARO Taro Pharmaceutical Industries Ltd

Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter and year ended March 31, 2022.

Quarter ended March 31, 2022 Highlights ─ compared to March 31, 2021   The quarter ended March 31, 2022, includes one month’s results from the February 28th acquisition of Alchemee.

• Net sales of $143.3 million decreased $5.1 million.
• Gross profit of $77.3 million (54.0% of net sales) compared to $76.9 million (51.9% of net sales).
• Research and development (R&D) expenses of $14.9 million decreased $1.7 million.
• Selling, marketing, general and administrative expenses (SG&A) of $41.2 million increased $18.9 million.
• Operating income of $21.3 million (14.9% of net sales) compared to an operating loss of $(41.9) million. Excluding the settlement and loss contingencies charges, operating income in the prior year quarter was $38.1 million, (25.7% of net sales).
• Interest and other financial income of $0.7 million decreased $2.5 million, reflecting the lower global interest rate environment.
• Foreign Exchange (FX) income of $2.5 million compared to $0.8 million ─ a favorable impact of $1.7 million.
• Tax benefit of $2.4 million compared to tax benefit of $8.9 million in the prior year quarter. Excluding the impact from the settlement and loss contingencies charges, tax expense and the effective tax rate in the prior year quarter was $7.8 million and 18.5%, respectively.
• Net income attributable to Taro was $27.4 million compared to net loss of $(29.8) million, resulting in diluted earnings per share of $0.73 compared to diluted (loss) per share of $(0.78). Excluding the impact from the settlement and loss contingencies charges, net income in the prior year quarter was $31.0 million, resulting in diluted earnings per share of $0.81.

Year ended March 31, 2022 Highlights ─ compared to March 31, 2021   The year ended March 31, 2022, includes one month’s results from the February 28th acquisition of Alchemee.

• Net sales of $561.3 million increased $12.4 million.
• Gross profit of $293.1 million (52.2% of net sales compared to 54.0%) decreased $3.5 million.
• R&D expenses of $54.5 million decreased $5.6 million.
• SG&A of $113.7 million increased $22.3 million.
• Settlements and loss contingencies of $61.4 million consist of the additional legal contingency of $60.0 million (taken in the first quarter) related to ongoing multi-jurisdiction civil antitrust matters and $1.4 million related to the global resolution with the Department of Justice (“DOJ”) in connection with its investigations into the U.S. generic pharmaceutical industry. In the prior year, settlements and loss contingencies of $558.9 million consisted of $418.9 million related to the global resolution with the DOJ in connection with its investigations into the U.S. generic pharmaceutical industry and a $140.0 million provision related to ongoing multi-jurisdiction civil antitrust matters; however, there can be no assurance as to the ultimate outcome.
• Operating income of $63.5 million compared to an operating loss of $(413.8) million. Excluding the settlement and loss contingencies charges in both periods, operating income was $124.9 million, a decrease of $20.2 million, and as a percentage of net sales was 22.3% compared to 26.4%.
• Interest and other financial income decreased $12.0 million to $8.2 million.
• FX income of $2.0 million compared to FX expense of $0.4 million ─ a favorable impact of $2.4 million.
• Tax expense of $19.6 million increased $9.9 million. Excluding the impact from the settlement and loss contingencies charges in both periods, the effective tax rate was 9.3% compared to 15.7%.
• Net income attributable to Taro was $58.3 million compared to net loss of $(386.7) million, resulting in diluted earnings per share of $1.55 compared to diluted (loss) per share of $(10.12). Excluding the impact from the settlement and loss contingencies charges in both years, net income was $126.4 million as compared to $141.4 million in the prior year: resulting in diluted earnings per share of $3.36 and $3.70, respectively.

Cash Flow and Balance Sheet Highlights

• Cash flow used in operations for the year ended March 31, 2022, was $158.7 million. Excluding the impact from the settlement and loss contingencies charges, cash flow provided by operations was $165.6 million compared to $130.3 million for the year ended March 31, 2021.
• As of March 31, 2022, cash and cash equivalents and marketable securities (both short and long-term) decreased $324.9 million to $1.26 billion from March 31, 2021; reflecting the impact from payments to the DOJ of $317.6 million ─ as a result of the global resolution with the DOJ in connection with its investigations into the U.S. generic pharmaceutical industry, the Alchemee acquisition, net of cash of $91.9 million and share repurchases of $24.9 million.

Mr. Uday Baldota, Taro’s CEO, stated, “The challenging market dynamics, including pricing, supply chain and competitive pressures persist ─ particularly in the U.S. market. However, our strong balance sheet and strategy will enable us to continue to pursue future business development opportunities, such as our recent acquisition of Alchemee and continued R&D investment.”

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.

Taro Acquisition of Alchemee

On February 28, 2022, Taro completed its acquisition of Alchemee, formerly The Proactiv Company (TPC), from Galderma for $91.9 million, net of cash; the acquisition includes Alchemee’s worldwide business and assets, including the Proactiv® brand. Proactiv® is a line of topical skin care products with a core acne indication: the products include cleansers and moisturizers as well as acne creams.

The Company cautions that the foregoing 2022 financial information (including Alchemee) is unaudited 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 2022. 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 (U.S. dollars in thousands, except share data)   Quarter Ended Year Ended March 31, March 31,

 

2022 (1)

 

 

2021

 

 

2022 (1)

 

 

2021

 

(unaudited)

(unaudited)

(unaudited)

(audited)

  Sales, net

$

143,264

 

$

148,348

 

$

561,347

 

$

548,970

 

Cost of sales

 

65,919

 

 

71,414

 

 

268,212

 

 

252,314

 

Impairment

 

—

 

 

—

 

 

13

 

 

—

 

Gross profit

 

77,345

 

 

76,934

 

 

293,122

 

 

296,656

 

  Operating Expenses: Research and development

 

14,892

 

 

16,587

 

 

54,540

 

 

60,152

 

Selling, marketing, general and administrative

 

41,175

 

 

22,234

 

 

113,676

 

 

91,355

 

Settlements and loss contingencies

 

—

 

 

80,000

 

 

61,446

 

 

558,924

 

Operating income (loss) *

 

21,278

 

 

(41,887

)

 

63,460

 

 

(413,775

)

  Financial income, net: Interest and other financial income

 

(685

)

 

(3,185

)

 

(8,187

)

 

(20,174

)

Foreign exchange (income) expense

 

(2,541

)

 

(842

)

 

(1,986

)

 

365

 

Other gain, net

 

512

 

 

100

 

 

4,226

 

 

2,892

 

Income (loss) before income taxes

 

25,016

 

 

(37,760

)

 

77,859

 

 

(391,073

)

Tax (benefit) expense

 

(2,388

)

 

(8,878

)

 

19,592

 

 

9,667

 

Net income (loss)

 

27,404

 

 

(28,882

)

 

58,267

 

 

(400,740

)

Net income (loss) attributable to non-controlling interest

 

—

 

 

904

 

 

—

 

 

(14,087

)

Net income (loss) attributable to Taro *

$

27,404

 

$

(29,786

)

$

58,267

 

$

(386,653

)

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

$

0.73

 

$

(0.78

)

$

1.55

 

$

(10.12

)

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

 

37,584,891

 

 

38,065,388

 

 

37,641,087

 

 

38,209,726

 

  May not foot due to rounding.  

(1) Includes one month’s results from the February 28th acquisition of Alchemee.

 

* Excluding the settlement and loss contingencies charges of $61.4 million and $558.9 million for the year ended March 31, 2022 and 2021, Operating income was $124.9 million and $145.1 million, Net income attributable to Taro was $126.4 million and $141.4 million, and basic and diluted earnings per share was $3.36 and $3.70, respectively.

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

March 31,

 

March 31,

2022

 

 

2021

 

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

$

251,134

$

605,177

 

Short-term and current maturities of long-term bank deposits

 

47,586

 

—

 

Marketable securities

 

522,028

 

418,480

 

Accounts receivable and other: Trade, net

 

246,973

 

213,539

 

Other receivables and prepaid expenses

 

59,726

 

53,347

 

Inventories

 

210,439

 

180,292

 

TOTAL CURRENT ASSETS

 

1,337,886

 

1,470,835

 

Marketable securities

 

435,189

 

557,209

 

Property, plant and equipment, net

 

199,692

 

205,508

 

Deferred income taxes

 

124,882

 

142,007

 

Other assets

 

78,712

 

31,314

 

TOTAL ASSETS

$

2,176,361

$

2,406,873

 

  LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables

$

68,232

$

61,166

 

Other current liabilities

 

363,887

 

615,135

 

TOTAL CURRENT LIABILITIES

 

432,119

 

676,301

 

Deferred taxes and other long-term liabilities

 

32,799

 

35,115

 

TOTAL LIABILITIES

 

464,918

 

711,416

 

  Taro shareholders' equity

 

1,711,443

 

1,703,649

 

Non-controlling interest

 

—

 

(8,192

)

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

2,176,361

$

2,406,873

 

 

Note: March 31, 2022, includes the February 28th acquisition of Alchemee.

  TARO PHARMACEUTICAL INDUSTRIES LTD. SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS (U.S. dollars in thousands)   Year Ended March 31,

 

2022

 

 

2021

 

(unaudited)

(audited)

Cash flows from operating activities: Net income (loss)

$

58,266

 

$

(400,740

)

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

 

25,915

 

 

23,680

 

Impairment of long-lived assets

 

13

 

 

—

 

Realized loss on sale of long-lived assets

 

689

 

 

92

 

Change in derivative instruments, net

 

(631

)

 

(236

)

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

 

(449

)

 

(4,588

)

Deferred income taxes, net

 

23,200

 

 

(38,413

)

(Increase) decrease in trade receivables, net

 

(6,229

)

 

21,683

 

Increase in inventories, net

 

(2,082

)

 

(27,219

)

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

 

(5,451

)

 

(16,325

)

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

 

(265,278

)

 

482,520

 

Expense from amortization of marketable securities bonds, net

 

13,339

 

 

5,316

 

Net cash (used in) provided by operating activities

 

(158,698

)

 

45,770

 

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

 

(11,796

)

 

(16,983

)

Acquisition, net of cash acquired

 

(91,872

)

 

—

 

Investment in other intangible assets

 

(243

)

 

(161

)

Investment in short-term bank deposits, net

 

(47,586

)

 

—

 

(Investment in) proceeds from marketable securities, net

 

(19,084

)

 

84,885

 

Net cash (used in) provided by investing activities

 

(170,581

)

 

67,741

 

  Cash flows from financing activities: Purchase of treasury stock

 

(24,934

)

 

(24,196

)

Net cash used in financing activities

 

(24,934

)

 

(24,196

)

  Effect of exchange rate changes on cash and cash equivalents

 

170

 

 

2,508

 

(Decrease) increase in cash and cash equivalents

 

(354,043

)

 

91,823

 

Cash and cash equivalents at beginning of period

 

605,177

 

 

513,354

 

Cash and cash equivalents at end of period

$

251,134

 

$

605,177

 

  Cash Paid during the year for: Income taxes

$

7,753

 

$

29,377

 

Cash Received during the year for: Income taxes

$

2,351

 

$

4,093

 

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

$

1,468

 

$

2,997

 

Non-cash financing transactions: Purchase of intangible assets

$

—

 

$

15

 

Purchase of treasury stock

$

—

 

$

782

 

Purchase of marketable securities, net

$

3,890

 

$

9,417

 

 

Note: March 31, 2022, includes the February 28th acquisition of Alchemee.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220526005688/en/

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