UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of November, 2005
Commission File Number 000-22286
Taro Pharmaceutical Industries Ltd.
(Translation of registrant's name into English)
14 Hakitor Street, Haifa Bay 26110, Israel
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F. Form 20-F |X| Form 40-F |_|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes |_| No |X|
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-_____.
Taro Reports Third Quarter and Nine Month 2005 Results
HAWTHORNE, N.Y.--(BUSINESS WIRE)--Nov. 17, 2005--Taro Pharmaceutical
Industries Ltd. ("Taro," the "Company," Nasdaq: TARO) today reported results for
the Company's third quarter and the nine-month period ended September 30, 2005.
Third Quarter 2005 Results
Taro's third quarter sales were $72.5 million, compared with $73.3 million
in the third quarter of 2004. Sales in the third quarter of 2004 included the
contribution from proprietary over-the-counter ("OTC") product lines, which were
divested earlier this year. Gross profit for the quarter was $37.7 million,
compared with $42.5 million in the third quarter of 2004.
Selling, general and administrative expenses ("SG&A") were $22.3 million,
compared with $29.6 million in the year-ago quarter. The decrease in SG&A
reflects a reduction of marketing expenses following the above mentioned
divestiture of the Company's proprietary OTC product lines and the Company's
continuing focus on expense control. R&D expenses were $11.7 million, compared
with $10.5 million for the third quarter of 2004.
Operating income was $3.7 million, compared with $2.4 million for the
year-ago quarter. Net income for the quarter was $2.1 million, or $0.07 per
diluted share, compared with net income of $4.0 million, or $0.14 per diluted
share, for the third quarter of 2004.
Accounting Treatment Revised for ElixSure(R) and Kerasal(R) Divestiture
In March 2005, the Company reported that it had entered into multi-year
agreements to divest its over-the-counter ElixSure(R) and Kerasal(R) products in
North America. Pursuant to the terms of the agreements, including the sale of
inventories, the Company received $10 million in cash in the first quarter.
Among other matters, the agreements provide for additional payments to be made
to Taro in each of the next three years.
The Company accounted for the initial $10 million payment by recording the
sale of inventories of approximately $4.9 million in the first quarter, and
deferring the remaining $5.1 million, as well as all other revenues to be
recognized over the ensuing three-year contract period. The Company has
reconsidered the timing of revenue recognition for a portion of the $4.9 million
in sales in the first quarter and accordingly revised the accounting treatment
to allocate that portion over the three-year contract period. This change did
not have any effect on the Company's cash position. The change will reduce
revenue and net income in the first quarter of 2005 by $4.8 million and $1.2
million respectively, and allocate the amount of the reduction in revenue and
net income over the three-year contract period. In the second quarter, revenue
was increased by $0.4 million and net income by $0.1 million. The results of the
third quarter and the nine months reflect these changes.
Nine Month Results
Sales were $225.3 million for the nine-month period ended September 30,
2005, compared with $206.5 million for the same period in 2004. The Company's
gross profit in the nine-month period was $123.0 million, compared with $122.4
million for the same period in 2004.
SG&A expenses for the nine-month period were $72.1 million, compared with
$94.4 million for the year-ago period. R&D expenses were $33.3 million for the
first nine months of this year, compared with $32.7 million in the year-ago
period.
Operating income for the nine-month period was $17.7 million, compared with
an operating loss of $4.7 million for the year-ago period. Net income for the
nine-month period was $12.6 million, or $0.42 per diluted share, compared with
net income of $6.3 million, or $0.21 per diluted share, for the first nine
months of 2004.
Discussion of Third Quarter Results
The results for the third quarter of 2005 were affected by various factors,
including price erosion, an increase in production costs resulting from the
strengthening of the Canadian dollar against the U.S. dollar, and the mix of
products sold.
In the third quarter of 2005, according to industry sources, total
prescriptions for Taro products increased approximately 8% compared with the
third quarter of 2004 and approximately 3% from the second quarter of 2005.
Sales were reduced from $79.0 million in the second quarter of 2005 to
$72.5 million in the third quarter, while prescriptions for the Company's
products increased. "The increase in prescriptions and the decrease in sales
suggest a reduction in customer inventories," said Bill Seiden, Senior
Vice-President of Sales and Marketing.
Financial Position
At September 30, 2005, Taro's total assets were $710.2 million, an increase
of $13.4 million compared with $696.8 million at December 31, 2004.
Total liabilities were $325.4 million at September 30, 2005, a decrease of
$2.6 million compared with $328.0 million at the end of 2004.
Shareholders' equity at September 30, 2005 was $384.1 million, an increase
of $16.0 million compared with $368.1 million at the end of 2004.
"Our results reflect the competitive nature of the generic drug industry
and our continuing investment in the development of proprietary and generic
drugs," said Barrie Levitt, M.D., Chairman of the Board. "We believe that Taro
has a robust pipeline which includes the critical products necessary to sustain
the long-term growth of our generic business. In addition, two of our major
proprietary research initiatives are approaching definitive clinical studies."
Proprietary Research Update
Novel Formulation of Ovide(R)
On October 26, 2005, the Company announced that it will initiate a
multi-center Phase III study in the United States to evaluate a novel
formulation of Ovide(R), a prescription product for control of head lice
(Pediculus humanus capitis) in pediatric and adult subjects.
Taro Pharmaceuticals U.S.A., Inc. currently markets Ovide(R) (malathion)
Lotion, 0.5%. The Company expects that the new formulation of Ovide(R) will
maintain the efficacy of Ovide(R) Lotion with shorter application time and
greater ease of use, thus improving patient compliance. Approximately six to
twelve million cases of head lice are reported annually in the United States,
according to the American Academy of Pediatrics. Taro has filed a patent
application in the U.S. Patent and Trademark Office with claims that cover this
new, proprietary formulation.
There can be no assurance as to the successful outcome of any studies of
the novel formulation of Ovide(R), or of its eventual approval by any regulatory
authorities or successful commercialization if approved.
T2000 Studies
T2000 is the first compound in a group of long-acting, non-sedating
barbiturates under development at Taro. As reported earlier, the Canadian Health
Products and Food Branch Inspectorate has approved a multi-center, randomized,
double-blind, placebo-controlled Phase III study of T2000 in patients with
essential tremor. Essential tremor is a common form of involuntary shaking not
related to Parkinson's disease. It is estimated that essential tremor affects
more than five million people in the U.S. To date, T2000 has been administered
to 165 people in Phase I and II studies to evaluate the compound's safety and
efficacy.
There can be no assurance of the ultimate demonstration of safety and
efficacy, or successful completion of Phase III testing, or of the approval by
any regulatory authority of T2000 for any indication, or of its commercial
success if and when approved.
FDA Approvals
During the third quarter, the Company reported that five final approvals
were received from the U.S. Food and Drug Administration ("FDA") for Abbreviated
New Drug Applications ("ANDAs") for topical generic pharmaceutical products.
Three are prescription corticosteroids used in treating inflammatory skin
conditions: Hydrocortisone Butyrate Cream USP, 0.1%, bioequivalent to Ferndale
Laboratories' Locoid(R) cream; Halobetasol Propionate Cream, 0.05%,
bioequivalent to Bristol-Myers Squibbs' Ultravate(R) cream; and Alclometasone
Dipropionate Cream USP, 0.05%, bioequivalent to GlaxoSmithKline's Aclovate(R)
cream. Two are prescription products used in treating infections of the skin:
Ciclopirox Topical Suspension USP, 0.77%, an antifungal product, which is
bioequivalent to Medicis Pharmaceutical Corp.'s Loprox(R) Topical Suspension;
and, Mupirocin Ointment USP, 2%, an antibiotic used to treat impetigo. This
product is bioequivalent to GlaxoSmithKline's Bactroban(R) Ointment.
In addition, during the quarter, Taro received tentative approval from the
FDA of its ANDA for Gabapentin Capsules 100 mg, 300 mg, and 400 mg. Tentative
approvals do not grant marketing rights. On October 4, 2005, Taro received FDA
approval of its New Drug Application for Loratadine Oral Suspension, 5mg / 5mL.
This spill-resistant OTC product, used for the temporary relief of symptoms due
to upper respiratory allergies, utilizes the proprietary NonSpil(R) liquid drug
delivery system developed by Taro researchers.
FDA Filings
Currently, Taro has 25 ANDA filings at the FDA, including four tentative
approvals. These filings address U.S. markets with annual sales of more than $1
billion. In addition, Taro and its affiliates have regulatory filings in Canada,
Israel and other countries.
Conference Call
The Company will conduct a conference call to discuss third quarter and
nine-month results on Thursday, November 17, 2005 at 11:00 a.m. Eastern Time
(8:00 a.m. Pacific Time). The call will be available live via the Internet by
accessing www.taro.com. An online replay will be available through November 25,
2005 on www.taro.com. A telephone replay will also be available through November
25, 2005 by dialing 1-888-286-8010 (domestic U.S.) or +617-801-6888
(international) and providing the passcode 69447933.
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 more information on the Company, please visit
www.taro.com.
SAFE HARBOR STATEMENT
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, statements that include the words "hope," "will," "believe,"
"suggest," "anticipate," "expect," "plan," "intend," or "design" to happen or
exist, or similar language; and statements concerning the Company's sales and
profitability, the impact of strategic initiatives, customer inventory levels,
cost reductions, studies of Ovide(R) and T2000, recently approved products, the
market environment, and the market size of the Company's pipeline. Although the
Company believes that such statements are based on reasonable assumptions and
reliable sources, it has no assurance thereof. Factors that could cause actual
results to differ include general economic conditions, industry and market
conditions, changes in buying patterns by any of the Company's customers, the
ability of third parties to execute their agreements with Taro successfully,
regulatory actions and legislative actions in the countries in which Taro
operates, future demand and market size for products under development,
marketplace acceptance of new or existing products, either generic or
proprietary, and other risks detailed from time to time in the Company's SEC
reports, including its Annual Reports on Form 20-F. On an ongoing basis, the
Company reviews (and, if appropriate, revises) its estimates, including those
related to reserves for customer charge-backs, bad debts, income taxes and
contingencies. The Company bases its estimates on currently available
information, historical experience and various other assumptions that it
believes to be reasonable under circumstances prevailing from time to time. The
results of these assumptions are the basis for determining the carrying values
of assets and liabilities that are not readily apparent from other sources.
Since the factors underlying these assumptions are subject to change over time,
the estimates on which they are based are subject to change accordingly.
Forward-looking statements speak 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 BALANCE SHEETS
(US dollars in thousands)
September 30, June 30, December 31,
2005 2005* 2004
------------- ------------ ------------
Assets
Current Assets:
Cash and Cash Equivalents $76,740 $78,665 $98,630
Restricted Short-Term Bank
Deposits 6,738 6,750 6,598
Accounts Receivable - Trade 139,838 138,965 124,674
Accounts Receivable - Other
and Prepaid Expenses 20,436 20,086 16,621
Inventories 79,011 79,003 86,591
- ------------------------------ ------------- ------------ ------------
Total Current Assets 322,763 323,469 333,114
Long Term Investments 19,558 18,512 19,984
Property, Plant and Equipment,
net 266,080 260,383 241,966
Deferred Taxes and Other
Assets 101,829 103,435 101,783
- ------------------------------ ------------- ------------ ------------
TOTAL ASSETS $710,230 $705,799 $696,847
============================== ============= ============ ============
Liabilities and Shareholders'
Equity
Current Liabilities:
Short-Term Bank Credits $63,126 $67,282 $64,961
Current Maturities of Long-
Term Liabilities 20,009 19,325 16,944
Accounts Payable and Accrued
Expenses 44,154 51,669 49,624
- ------------------------------ ------------- ------------ ------------
Total Current Liabilities 127,289 138,276 131,529
Long -Term Liabilities 187,250 179,495 187,346
Deferred Taxes and Other
Liabilities 10,879 10,726 9,158
- ------------------------------ ------------- ------------ ------------
Total Liabilities 325,418 328,497 328,033
Minority Interest 668 664 694
Shareholders' Equity 384,144 376,638 368,120
- ------------------------------ ------------- ------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $710,230 $705,799 $696,847
============================== ============= ============ ============
* Revised to reflect change in accounting treatment of ElixSure(R) and
Kerasal(R) transaction.
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED STATEMENTS OF INCOME
(US dollars in thousands, except per share data)
Quarter Ended Nine Months Ended
September 30, September 30,
2005 2004 2005* 2004
----------- ----------- ----------- -----------
SALES $72,541 $73,282 $225,297 $206,462
Cost of Sales 34,809 30,743 102,266 84,070
----------- ----------- ----------- -----------
Gross Profit 37,732 42,539 123,031 122,392
Operating Expenses:
Selling, General and
Administrative 22,319 29,628 72,058 94,351
Research and
Development 11,664 10,502 33,263 32,731
----------- ----------- ----------- -----------
Operating Income
(Loss) 3,749 2,409 17,710 (4,690)
Financial and other
Expenses - Net 2,080 1,658 5,710 5,645
----------- ----------- ----------- -----------
Income (Loss) Before
Income Taxes 1,669 751 12,000 (10,335)
Taxes on Income (477) (3,041) (538) (15,651)
Minority Share in
Profits (Loss) of
Subsidiary 4 (237) (27) (973)
----------- ----------- ----------- -----------
NET INCOME $2,142 $4,029 $12,565 $6,289
=========== =========== =========== ===========
Earnings per Ordinary
Share $0.07 $0.14 $0.43 $0.22
Diluted Earnings per
Ordinary Share $0.07 $0.14 $0.42 $0.21
Weighted Average
Number of Shares-
BASIC EPS 29,277,846 29,069,163 29,235,477 29,027,753
DILUTED EPS 29,597,293 29,485,542 29,619,815 29,670,162
* Revised to reflect change in accounting treatment of ElixSure(R) and
Kerasal(R) transaction.
CONTACT: Taro Pharmaceutical Industries Ltd.
Daniel Saks, 914-345-9000 ext. 6208
or
Kevin Connelly, 914-345-9000 ext. 6338
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 28, 2005
TARO PHARMACEUTICAL INDUSTRIES LTD.
By: /s/ Kevin Connelly
------------------
Name: Kevin Connelly
Title: Senior Vice President and
Chief Financial Officer