Taro Provides Results for December 31, 2020
Taro Pharmaceutical Industries Ltd. (NYSE: TARO) reported unaudited financial results for Q3 and nine months ending December 31, 2020. Q3 net sales fell to $140.1 million, a $7.5 million decline year-over-year. Gross profit dropped to $73.2 million (52.2% of sales), impacted by price erosion and COVID-19. Net income plummeted to $32.9 million, down $34.8 million from the prior year. For nine months, net sales of $400.6 million represented a $69.2 million decrease, with a significant operating loss of $(371.9) million due to a $478.9 million one-time settlement charge. Despite challenges, the company continues its R&D investment.
- FDA approved Clindamycin Phosphate Gel USP, 1%, adding to product offerings.
- Maintained leading market share in several products.
- Share repurchase program in effect, demonstrating commitment to shareholder value.
- Q3 net sales decreased by $7.5 million from the previous year.
- Gross profit fell to $73.2 million, down $20.9 million primarily due to price erosion and COVID-19 impact.
- Net income dropped dramatically to $32.9 million, a decrease of $34.8 million.
- Operational loss of $(371.9) million for nine months due to a significant one-time settlement charge of $478.9 million.
Taro Pharmaceutical Industries Ltd. (NYSE: TARO) (“Taro” or the “Company”) today provided unaudited financial results for the quarter and nine months ended December 31, 2020.
Quarter ended December 31, 2020 Highlights ─ compared to December 31, 2019
-
Net sales of
$140.1 million decreased$7.5 million . -
Gross profit of
$73.2 million (52.2% of net sales compared to63.7% ) decreased$20.9 million , primarily due to continued price erosion, unfavorable impact from COVID, change in product mix, and certain one-time charges. -
Research and development (R&D) expenses of
$14.1 million decreased$0.9 million . -
Selling, marketing, general and administrative expenses (SG&A) of
$22.8 million increased$1.9 million . -
Operating income of
$36.3 million (25.9% of net sales compared to39.4% ) decreased$21.9 million . -
Interest and other financial income of
$4.0 million decreased$4.5 million , reflecting the low global interest rate environment. -
Foreign Exchange (FX) expense of
$2.0 million compared to FX income of$3.3 million ─ an unfavorable impact of$5.3 million . -
Tax expense of
$6.1 million increased$3.2 million ; with the effective tax rate of15.6% compared to4.1% . The prior year quarter reflects the impact from a non-recurring item. -
Net income attributable to Taro was
$32.9 million compared to$67.7 million , a$34.8 million decrease ─ resulting in diluted earnings per share of$0.86 compared to$1.76 .
Nine Months ended December 31, 2020 Highlights ─ compared to December 31, 2019
-
Net sales of
$400.6 million decreased$69.2 million . -
Gross profit of
$219.7 million (54.8% of net sales compared to63.3% ) decreased$77.7 million , primarily due to the aforementioned factors. -
R&D expenses of
$43.6 million were in line with the previous year. -
SG&A of
$69.1 million increased$4.8 million . -
Settlements and loss contingencies of
$478.9 million reflect the one-time settlement charge (taken in the first quarter) which consists of$418.9 million related to the global resolution of the Department of Justice (“DOJ”) investigations into the U.S. generic pharmaceutical industry and an additional provision of$60.0 million related to ongoing multi-jurisdiction civil antitrust matters; however, there can be no assurance as to the ultimate outcome. -
Operating (loss) of
$(371.9) million compared to operating income of$189.3 million . Excluding the settlement and loss contingencies charges, operating income was$107.0 million , a decrease of$82.3 million , and as a percentage of net sales was26.7% compared to40.3% . -
Interest and other financial income decreased
$10.0 million to$17.0 million . -
FX expense of
$1.2 million compared to FX income of$11.1 million ─ an unfavorable impact of$12.4 million . -
Tax expense of
$18.5 million decreased$21.0 million . Excluding the impact from the settlement and loss contingencies charges, the effective tax rate was14.8% compared to17.2% . -
Net (loss) attributable to Taro was
$(356.9) million compared to net income of$190.0 million , resulting in diluted (loss) earnings per share of$(9.33) compared to$4.93 . Excluding the impact from the settlement and loss contingencies charges, net income was$107.1 million , resulting in diluted earnings per share of$2.80 .
Cash Flow and Balance Sheet Highlights
-
Cash flow (used in) operations for the nine months ended December 31, 2020, was
$(5.3) million . Excluding the impact from the settlement and loss contingencies charges, cash flow provided by operations was$97.5 million compared to$222.0 million for the nine months ended December 31, 2019. -
As of December 31, 2020, cash and cash equivalents and marketable securities (both short and long-term) of
$1.55 billion decreased$18.2 million from March 31, 2020.
Mr. Uday Baldota, Taro’s CEO, stated, “While many of our products maintain their leading market share, our lower sales are principally the result of reduced U.S. volumes; a reflection of the impact related to COVID-19. Continuing our investment in R&D to build our pipeline is critical to our business growth. We continue to concentrate on creating shareholder value as demonstrated by our R&D investment, the share repurchase program, as well as continuing to explore investments in strategic opportunities.”
FDA Approvals and Filings
The Company recently received an approval from the U.S. Food and Drug Administration (“FDA”) for one Abbreviated New Drug Application (“ANDA”): Clindamycin Phosphate Gel USP,
Share Repurchase Program - Returning Capital to Shareholders
On November 4, 2019, the Company announced that its Board of Directors approved a share repurchase of ordinary shares up to
During the quarter, the Company repurchased 53,328 shares at an average price of
The Company 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.
**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, |
||||||||||||||
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
| Sales, net | $ |
140,145 |
|
$ |
147,683 |
|
$ |
400,622 |
|
$ |
469,829 |
|
|||
| Cost of sales |
|
66,957 |
|
|
53,557 |
|
|
180,900 |
|
|
172,375 |
|
|||
| Gross profit |
|
73,188 |
|
|
94,126 |
|
|
219,722 |
|
|
297,454 |
|
|||
| Operating Expenses: | |||||||||||||||
| Research and development |
|
14,081 |
|
|
14,996 |
|
|
43,565 |
|
|
43,978 |
|
|||
| Selling, marketing, general and administrative |
|
22,798 |
|
|
20,932 |
|
|
69,121 |
|
|
64,302 |
|
|||
| Settlements and loss contingencies |
|
— |
|
|
— |
|
|
478,924 |
|
|
(150 |
) |
|||
| Operating income (loss) |
|
36,309 |
|
|
58,198 |
|
|
(371,888 |
) |
|
189,324 |
|
|||
| Financial (income) expense, net: | |||||||||||||||
| Interest and other financial income |
|
(4,001 |
) |
|
(8,531 |
) |
|
(16,989 |
) |
|
(27,012 |
) |
|||
| Foreign exchange expense (income) |
|
2,036 |
|
|
(3,287 |
) |
|
1,207 |
|
|
(11,147 |
) |
|||
| Other gain, net |
|
863 |
|
|
534 |
|
|
2,792 |
|
|
2,211 |
|
|||
| Income (loss) before income taxes |
|
39,137 |
|
|
70,550 |
|
|
(353,313 |
) |
|
229,694 |
|
|||
| Tax expense |
|
6,101 |
|
|
2,874 |
|
|
18,545 |
|
|
39,565 |
|
|||
| Net income (loss) |
|
33,036 |
|
|
67,676 |
|
|
(371,858 |
) |
|
190,129 |
|
|||
| Net income (loss) attributable to non-controlling interest |
|
117 |
|
|
(6 |
) |
|
(14,991 |
) |
|
84 |
|
|||
| Net income (loss) attributable to Taro | $ |
32,919 |
|
$ |
67,682 |
|
$ |
(356,867 |
) |
$ |
190,045 |
|
|||
| Net income (loss) per ordinary share attributable to Taro: | |||||||||||||||
| Basic and Diluted | $ |
0.86 |
|
$ |
1.76 |
|
$ |
(9.33 |
) |
$ |
4.93 |
|
|||
| Weighted-average number of shares used to compute net income per share: | |||||||||||||||
| Basic and Diluted |
|
38,254,231 |
|
|
38,502,440 |
|
|
38,256,963 |
|
|
38,526,806 |
|
|||
| May not foot due to rounding. | |||||||||||||||
| TARO PHARMACEUTICAL INDUSTRIES LTD. | ||||||
| SUMMARY CONSOLIDATED BALANCE SHEETS | ||||||
| (U.S. dollars in thousands) | ||||||
| December 31, | March 31, | |||||
|
2020 |
|
2020 |
|||
| ASSETS | (unaudited) | (audited) | ||||
| CURRENT ASSETS: | ||||||
| Cash and cash equivalents | $ |
552,918 |
|
$ |
513,354 |
|
| Marketable securities |
|
521,041 |
|
|
595,383 |
|
| Accounts receivable and other: | ||||||
| Trade, net |
|
228,825 |
|
|
235,221 |
|
| Other receivables and prepaid expenses |
|
49,963 |
|
|
35,567 |
|
| Inventories |
|
169,527 |
|
|
153,073 |
|
| TOTAL CURRENT ASSETS |
|
1,522,274 |
|
|
1,532,598 |
|
| Marketable securities |
|
476,248 |
|
|
459,639 |
|
| Property, plant and equipment, net |
|
206,296 |
|
|
209,961 |
|
| Deferred income taxes |
|
134,799 |
|
|
106,693 |
|
| Other assets |
|
32,207 |
|
|
32,361 |
|
| TOTAL ASSETS | $ |
2,371,824 |
|
$ |
2,341,252 |
|
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Trade payables | $ |
45,409 |
|
$ |
28,858 |
|
| Other current liabilities |
|
538,668 |
|
|
193,873 |
|
| TOTAL CURRENT LIABILITIES |
|
584,077 |
|
|
222,731 |
|
| Deferred taxes and other long-term liabilities |
|
37,174 |
|
|
8,762 |
|
| TOTAL LIABILITIES |
|
621,251 |
|
|
231,493 |
|
| Taro shareholders' equity |
|
1,759,668 |
|
|
2,103,864 |
|
| Non-controlling interest |
|
(9,095 |
) |
|
5,895 |
|
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ |
2,371,824 |
|
$ |
2,341,252 |
|
| TARO PHARMACEUTICAL INDUSTRIES LTD. | |||||||
| SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
| (Unaudited) | |||||||
| (U.S. dollars in thousands) | |||||||
| Nine Months Ended December 31, | |||||||
|
2020 |
|
|
2019 |
|
||
| Cash flows from operating activities: | |||||||
| Net (loss) income | $ |
(371,858 |
) |
$ |
190,129 |
|
|
| Adjustments required to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization |
|
17,337 |
|
|
16,101 |
|
|
| Change in derivative instruments, net |
|
(390 |
) |
|
(3,395 |
) |
|
| Effect of change in exchange rate on marketable securities, bank deposits and inter-company balances |
|
(4,288 |
) |
|
(11,061 |
) |
|
| Deferred income taxes, net |
|
(31,877 |
) |
|
(2,076 |
) |
|
| Decrease in trade receivables, net |
|
6,395 |
|
|
10,618 |
|
|
| Increase in inventories, net |
|
(16,454 |
) |
|
(9,796 |
) |
|
| (Increase) decrease in other receivables, income tax receivables, prepaid expenses and other |
|
(11,962 |
) |
|
27,407 |
|
|
| Increase in trade, income tax, accrued expenses and other payables |
|
405,233 |
|
|
5,263 |
|
|
| Loss (income) from marketable securities, net |
|
2,579 |
|
|
(1,182 |
) |
|
| Net cash (used in) provided by operating activities |
|
(5,285 |
) |
|
222,008 |
|
|
| Cash flows from investing activities: | |||||||
| Purchase of plant, property & equipment, net |
|
(14,210 |
) |
|
(19,350 |
) |
|
| Investment in other intangible assets |
|
(117 |
) |
|
(1,016 |
) |
|
| Proceeds from (investment in) marketable securities, net |
|
60,122 |
|
|
(233,393 |
) |
|
| Net cash provided by (used in) investing activities |
|
45,795 |
|
|
(253,759 |
) |
|
| Cash flows from financing activities: | |||||||
| Purchase of treasury stock |
|
(3,243 |
) |
|
(26,827 |
) |
|
| Net cash used in financing activities |
|
(3,243 |
) |
|
(26,827 |
) |
|
| Effect of exchange rate changes on cash and cash equivalents |
|
2,297 |
|
|
488 |
|
|
| Increase (decrease) in cash and cash equivalents |
|
39,564 |
|
|
(58,090 |
) |
|
| Cash and cash equivalents at beginning of period |
|
513,354 |
|
|
567,451 |
|
|
| Cash and cash equivalents at end of period | $ |
552,918 |
|
$ |
509,361 |
|
|
| Cash Paid during the year for: | |||||||
| Income taxes | $ |
24,169 |
|
$ |
38,773 |
|
|
| Cash Received during the year for: | |||||||
| Income taxes | $ |
4,093 |
|
$ |
24,819 |
|
|
| Non-cash investing transactions: | |||||||
| Purchase of property, plant and equipment included in accounts payable | $ |
453 |
|
$ |
1,479 |
|
|
| Non-cash financing transactions: | |||||||
| Purchase of intangible assets | $ |
— |
|
$ |
750 |
|
|
| Purchase of treasury stock | $ |
559 |
|
$ |
— |
|
|
| Purchase (sale) of marketable securities | $ |
580 |
|
$ |
(145 |
) |
|
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FAQ
What were Taro's net sales for Q3 2020?
What impact did COVID-19 have on Taro's financial performance?
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What significant charge impacted Taro's financial results for nine months?
