Taro Reports Third Quarter and Nine Month 2004 Results; 3rd Quarter Results Reflect Return to Profitability and Improved Sales vs. 2nd Quarter 2004.HAWTHORNE, N.Y. -- 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, 2004. Third Quarter 2004 Results Taro's third quarter sales were $73.3 million, compared with $83.1 million in the third quarter of 2003. Gross profit for the quarter was $42.5 million, compared with $56.6 million in the third quarter of 2003. Selling, general and administrative ("SGA SGA abbr. small for gestational age Small-for-gestational-age (SGA) A term used to describe newborns who are below the 10th percentile in height or weight for their estimated gestational age. ") expenses were $29.6 million, compared with $25.7 million in the year-ago quarter. R&D expenses were $10.5 million, compared with $11.2 million for the third quarter of 2003. Net income for the quarter was $4.0 million, or $0.14 per diluted share, compared with net income of $15.7 million, or $0.53 per diluted share, for the third quarter of 2003. "The increase in sales in the third quarter compared with the second quarter was a major factor in Taro's return to profitability," said Barrie Levitt, M.D., Chairman of the Company. "While revenues in the third quarter were lower than a year ago, the sequential increase in quarterly revenues reflected improvements in sales to all classes of trade in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Although sales to U.S. wholesalers remained below year-ago levels, they improved compared with the second quarter." According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. industry sources, overall prescriptions for Taro products in the United States increased in the third quarter compared with the same period last year. Nine Month Results Sales were $206.5 million for the nine-month period ended September 30, 2004, compared with $226.8 million for the same period in 2003. The Company's gross profit in the nine-month period was $122.4 million, compared with $150.9 million for the same period in 2003. SGA expenses for the nine-month period were $94.4 million, compared with $65.6 million for the year-ago period. R&D expenses were $32.7 million for the first nine months of this year, compared with $29.5 million in the year-ago period. Net income for the nine-month period was $6.3 million, or $0.21 per diluted share, compared with net income of $44.5 million, or $1.50 per diluted share, for the first nine months of 2003. Financial Position At September 30, 2004, Taro's total assets were $659.8 million, an increase of $43.3 million compared with $616.5 million at December 31, 2003. Included in Other Assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. and Deferred Taxes are the Company's in-licensing agreements and product acquisitions. Total liabilities were $301.7 million, an increase of $34.3 million compared with $267.4 million at the end of 2003. Shareholder's equity was $357.3 million at September 30, 2004, an increase of $9.9 million compared with $347.4 million at the end of 2003. "We believe that several initiatives undertaken in the third quarter of this year will continue to have a positive impact on Taro's performance in future quarters. These initiatives include a focus on decreasing inventories; a reduction in purchasing and production; rationalization of manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. , and the deferral deferral - Waiting for quiet on the Ethernet. of non-core initiatives," said Dr. Levitt. "In addition, we are lowering Taro's expense profile, which has included a reduction in Taro's workforce of approximately 150 people, or ten percent." Proprietary Research T2000 is the first compound in a group of long-acting, non-sedating barbiturates Barbiturates Definition Barbiturates are medicines that act on the central nervous system and cause drowsiness and can control seizures. Purpose under development at Taro. Following its review of Phase I and Phase II studies on T2000, the Canadian Health Products and Food Branch The Health Products and Food Branch (HPFB) of Health Canada manages the health-related risks and benefits of health products and food by minimizing risk factors while maximizing the safety provided by the regulatory system. Inspectorate has approved a multi-center, randomized ran·dom·ize tr.v. ran·dom·ized, ran·dom·iz·ing, ran·dom·iz·es To make random in arrangement, especially in order to control the variables in an experiment. , double-blind, placebo-controlled Phase III Noun 1. phase III - a large clinical trial of a treatment or drug that in phase I and phase II has been shown to be efficacious with tolerable side effects; after successful conclusion of these clinical trials it will receive formal approval from the FDA study of T2000 in patients with essential tremor Essential tremor An uncontrollable (involuntary) shaking of the hands, head, and face. Also called familial tremor because it is sometimes inherited, it can begin in the teens or in middle age. The exact cause is not known. . The Company is continuing its preparations for definitive studies in Canada on the safety and efficacy of T2000. There can be no assurance that T2000, or any members of its class, will be successful in any current or future clinical trials, or will be commercialized for any indication. ANDA ANDA abbr. abbreviated new drug application Approvals During the third quarter, approvals were received from the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. for four Abbreviated New Drug Applications abbreviated new drug application Pharmacology An application made in the US by a pharmaceutical company requesting authority to market a 'new' drug for which both its therapeutic indications and formulation were previously approved by the FDA in another similar ("ANDAs") for generic pharmaceutical products. Two of the approvals are for topical products used in dermatology dermatology (dûrmətŏl`əjē), branch of medicine concerned with diagnosis and treatment of diseases and disorders of the skin. : clotrimazole clotrimazole /clo·trim·a·zole/ (klo-trim´ah-zol) an imidazole derivative used as a broad-spectrum antifungal agent. clo·trim·a·zole n. and betamethasone betamethasone /be·ta·meth·a·sone/ (ba?tah-meth´ah-son) a synthetic glucocorticoid, the most active of the antiinflammatory steroids; used topically as the benzoate, dipropionate, or valerate salts as an antiinflammatory, topically or dipropionate lotion (bioequivalent bi·o·e·quiv·a·lent n. A value indicating the rate at which a substance enters the bloodstream and becomes available to the body. to Schering-Plough's Lotrisone(R) lotion) and alclometasone dipropionate ointment ointment /oint·ment/ (oint´ment) a semisolid preparation for external application to the skin or mucous membranes, usually containing a medicinal substance. oint·ment n. (bioequivalent to GlaxoSmithKline's Aclovate(R) ointment). Taro Pharmaceuticals U.S.A., Inc. ("Taro USA") now provides the U.S. market with a generic equivalent of Lotrisone(R) in both cream and lotion forms. The other approvals are for oral dosage form A dosage form is the physical form of a dose of medication, such as a capsule or injection. The route of administration is dependent on the dosage form of a given drug. products: fluconazole fluconazole /flu·con·a·zole/ (floo-kon´ah-zol) a triazoleantifungal used in the systemic treatment of candidiasis and cryptococcal meningitis. flu·con·a·zole n. tablets in 50, 100, 150 and 200 mg strengths (bioequivalent to Pfizer's Diflucan(R) tablets), and loratadine syrup, 5 mg/5 mL (bioequivalent to Schering-Plough's Claritin(R) syrup). To date in the fourth quarter, approvals were received for two additional ANDAs. An ANDA approval was received for augmented betamethasone dipropionate ointment, which is bioequivalent to Schering-Plough's Diprolene(R) ointment. Taro also received approval of its ANDA for ciprofloxacin ciprofloxacin /cip·ro·flox·a·cin/ (sip?ro-flok´sah-sin) a synthetic antibacterial effective against many gram-positive and gram-negative bacteria; used as the hydrochloride salt. cip·ro·flox·a·cin n. tablets in 250, 500 and 750 mg strengths, bioequivalent to Bayer's Cipro(R) tablets in the same strengths, and a tentative ANDA approval for the 100 mg strength. As previously announced, Taro USA has entered into an agreement with Medicis Pharmaceutical Medicis Pharmaceutical is a pharmaceutical company headquartered in Scottsdale, Arizona. One of their divisions is Ucyclyd Pharma. External links
pertaining to dermatology; of or affecting the skin. products for the U.S. and Canada with a purchase option. Two of the products, Lustra Lustra® Hydroquinone Dermatology A topical agent used to manage UV-induced skin discoloration and hyperpigmentation due to trauma, pregnancy, OCs, HRT. See Tanning. (R) and Lustra-AF(R), used for the treatment of dyschromia or discoloration dis·col·or·a·tion n. 1. a. The act of discoloring. b. The condition of being discolored. 2. A discolored spot, smudge, or area; a stain. Noun 1. of the skin, are currently being marketed to dermatologists across the United States by Taro's professional medical representatives. FDA Filings Currently, Taro has 25 filings at the FDA. These consist of 24 ANDAs, plus one New Drug Application related to the Company's NonSpil(TM) liquid drug delivery system. The ANDAs 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, October 28, 2004 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 4, 2004 on www.taro.com. A telephone replay will also be available through November 4, 2004 by dialing 1-888-286-8010 (domestic U.S.) or +617-801-6888 (international) and entering the passcode 28430887 when prompted. 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. SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. STATEMENT Certain statements in this release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements include, but are not limited to, statements that do not describe historical facts, and statements that include the words "hope," "will," "believe," "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 and cost reductions on future performance, studies of T2000, 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, 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 2003 Annual Report 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 Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. 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. Financial Tables Follow:
TARO PHARMACEUTICAL INDUSTRIES LTD.
SUMMARY CONSOLIDATED BALANCE SHEETS
(US dollars in thousands)
September June December
30, 30, 31,
2004 2004 2003
--------- --------- ---------
Assets
Current Assets:
Cash and Cash Equivalents $91,185 $94,161 $159,121
Restricted Short-Term Bank Deposits 6,581 6,870 2,518
Accounts Receivable - Trade 101,979 118,677 120,522
Accounts Receivable - Other and Prepaid
Expenses 14,149 15,756 17,046
Inventories 98,283 101,665 84,486
--------- --------- ---------
Total Current Assets 312,177 337,129 383,693
Long Term Investments 16,740 16,991 2,888
Property, Plant and Equipment, net 230,322 220,018 182,306
Other Assets and Deferred Taxes 100,520 60,970 47,636
---------
TOTAL ASSETS $659,759 $635,108 $616,523
=========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-Term Bank Credits $44,781 $33,254 $19,124
Current Maturities of Long-Term
Liabilities 17,664 11,420 24,420
Accounts Payable and Accrued Expenses 44,206 50,964 60,194
---------
Total Current Liabilities 106,651 95,638 103,738
Long -Term Liabilities 187,978 181,807 156,937
Deferred Taxes and Other Liabilities 7,060 6,838 6,737
---------
Total Liabilities 301,689 284,283 267,412
Minority Interest 739 975 1,711
Shareholders' Equity 357,331 349,850 347,400
---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $659,759 $635,108 $616,523
=========
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,
2004 2003 2004 2003
--------------------------------------------
SALES $73,282 $83,115 $206,462 $226,836
Cost of Sales 30,743 26,559 84,070 75,893
Gross Profit 42,539 56,556 122,392 150,943
Operating Expenses:
Selling, General and
Administrative 29,628 25,677 94,351 65,621
Research and Development 10,502 11,221 32,731 29,538
Operating Income (Loss) 2,409 19,658 (4,690) 55,784
Financial and other
Expenses - Net 1,658 585 5,645 1,168
Income (Loss) Before
Income Taxes 751 19,073 (10,335) 54,616
Taxes on Income (3,041) 3,253 (15,651) 9,745
Minority Share in Profits
(Loss) of Subsidiary (237) 84 (973) 328
NET INCOME $4,029 $15,736 $6,289 $44,543
Earnings per Ordinary
Share $0.14 $0.54 $0.22 $1.54
Diluted Earnings per
Ordinary Share $0.14 $0.53 $0.21 $1.50
Weighted Average Number of
Shares-
BASIC EPS 29,069,163 28,902,137 29,027,753 28,851,955
DILUTED EPS 29,485,542 29,728,763 29,670,162 29,626,273
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