MIRA INFORM REPORT
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Report Date : |
18.06.2011 |
IDENTIFICATION DETAILS
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Name : |
TARO PHARMACEUTICAL INDUSTRIES LTD. |
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Formerly Known As : |
TARO VIT INDUSTRIES LTD |
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Registered Office : |
P.O. Box 10347, Haifa (26110), Italy House,
Euro Park, Yakum Business Park Yakum 60972 |
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Country : |
Israel |
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Financials (as on) : |
31.03.2011 |
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Date of Incorporation : |
03.06.1959 |
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Legal Form : |
Public Limited Company |
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Line of Business : |
Developers, Manufacturers, Exporters and Markets of pharmaceuticals
(generic and branded pharmaceuticals, both prescription and OTC) |
RATING & COMMENTS
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MIRA’s Rating : |
Ba |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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Status : |
Good |
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Payment
Behaviour : |
No Complaints |
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Litigation : |
Clear |
NOTES :
Any query related to this report can be made
on e-mail : infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – March 31st, 2011
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Country Name |
Previous Rating (31.12.2010) |
Current Rating (31.03.2011) |
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Israel |
a2 |
a2 |
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Risk Category |
ECGC
Classification |
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Insignificant |
A1 |
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Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
Company name & address
TARO PHARMACEUTICAL INDUSTRIES LTD.
Telephone 972
9 971 18 00
Fax 972
9 955 74 43
P.O. Box 10347, HAIFA (26110)
Italy House, Euro Park
Yakum Business Park
YAKUM 60972 -ISRAEL
HISTORY & LEGAL FORMATION
A public limited company, incorporated as per file No. 52-002290-6 on the
03.06.1959, under the name of TARO VIT CHEMICAL INDUSTRIES LTD., which changed its
name to TARO VIT INDUSTRIES LTD. on the 27.06.1984.
In December 1993 merged with TARO PHARMACEUTICAL INDUSTRIES LTD.
(established 1950, acquired 1961), which became non-active.
On 27.02.1994 name was changed to that of the non active company, i.e. the
present name.
In 1961 completed its initial public offering.
As of 1982, shares are publicly traded (see more below).
On the 18.09.2002, TARO PHARMACEUTICAL PROPERTIES LTD. was merged into
subject.
SHARE CAPITAL
Authorized share capital NIS 20,000.026, divided into -
2,600 founders' shares
(issued), of NIS 0.00001 each,
200,000,000 ordinary
shares (43,340,632 issued), of NIS 0.0001 each,
of which shares amounting to NIS 4,334.0892 were issued.
SHAREHOLDERS
1. SUN PHARMACEUTICAL INDUSTRIES LTD., around 66%,
via ALKALOIDA CHEMICAL CO., of India, a publicly traded company on the Bombay
Stock Exchange,
2. Shares
are also traded on the "Pink Sheets" List of the OTHER OTC Stock
Exchange, U.S.A (symbol TAROF).
In September 2010 came to an end a 3-years battle over the control in
subject, after the Court ruled in favor of SUN. The affair started in May 2007,
when Indian international pharmaceuticals corporation, SUN PHARMACEUTICAL INDUSTRIES, acquired (via
Hungarian subsidiary ALKALOIDA CHEMICAL COMPANY EXCLUSIVE GROUP LTD.) the
control in subject in consideration of US$ 454 million (partly cash, partly for
covering TARO's debts), from the Levitt and Moros families (controlled by Dr.
Barrie Levitt and Dr. Daniel Moros) - see more below.
DIRECTORS
1. Dilip Shanghvi, Chairman,
2. Jim Kedrowski, Interim CEO,
3. Dr. Ilan Leviteh,
4. Aalok Shanghvi,
5. Mrs. Ilana Avidov-Mor,
6. Dan Biran,
7. Hasmukh Shah,
8. Sudhir
Valia.
Presently, subject does not have a general manager.
BUSINESS
Developers, manufacturers, exporters and markets of pharmaceuticals
(generic and branded pharmaceuticals, both prescription and OTC).
Subject produces some 180 pharmaceutical products, including topical
preparations (creams, ointments, gels, and solutions), oral medications
(tablets, capsules, powders, liquids) and sterile products (ophthalmic drops,
powders).
Some 95% of sales are for export, mostly to the USA.
Main wholesaler customers (in USA): McKesson, AmeriSource Bergen.
Among local suppliers: MICHAEL CHEMICALS, YES PHARMA, DEAL ENGINEERS,
HELION, BERLIN TECHNOLOGIES, KINETIC SYSTEMS ISRAEL, A. SHITZER, GADOT CHEMICALS, HUBERMAN & SONS,
N.S.L.T.
2002 HAIFA, BIOPHARMAX, ZIFRONI CHEMICAL
SUPPLIERS, BIO-LAB, etc.
Operating from rented premises (headquarters), on an area of 2,300 sq.
meters in Euro-Park, Italy House, Yakum Business Park and from an owned
premises (plant, labs and warehouses) on an area of 34,000 sq. meters in 14 Hakitor
Street, Industrial Zone, Haifa Bay, Haifa (subject's registered address).
Also operating from manufacturing facilities in Canada (owned, 33,000 sq.
meters) and R&D and marketing premises in the USA and Canada.
Having some 1,300 employees serving the TARO Group, of which around
MEANS
Consolidated B/S shows:
US$
(thousands)
31.12.2010 31.03.2011
ASSETS
Current assets
Cash and cash equivalents 54,144 78,872
Short term bank deposits & marketable securities 34,693 44,789
Accounts receivable-trade 73,406 81,815
Other receivables, prepaid expenses & others 49,685 53,225
Inventories 83,709 86,024
295,637 344,725
Long-term receivables and
other assets 30,663 30,974
Property, plant and equipment, net 163,596 161,671
Other assets 66,546 60,211
556,442 597,581
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LIABILITIES
Current
liabilities 129,786 134,444
Long-term debt, net of current maturities 42,143 42,575
Equity 384,513 420,562
556,442 597,581
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Current market value US$ 765.4 million.
In June 2003, subject completed a US$ 60 million capital raise by issuing
bonds to the institutional market and local banks. In November further US$ 50
million were raised in bonds issuance to Israeli institutional bodies.
In June 2011 SUN announced it is going to invest some US$ 100 million in
exoanding and upgrading its facilities worldwide, including subject's.
There
Subject is an Approved Enterprise and as such entitled to tax benefits
and State incentives. In December 2001, Israeli Investment Centre (IIC)
approved a US$ 20.3 million investment plan for the expansion of subject’s
plant in Haifa. In December 2002, IIC approved a further US$ 13.5 million plan
for the expansion of subject’s plant. In May 2004, IIC approved a further US$
22 million plan for the expansion of subject’s plant.
SALES
Consolidated Statement of Income
US$
(thousands)
Year
ended 31.12
2010 2009 2008
Sales, net 392,535 355,936 327,351
Gross profit 233,377 208,845 187,841
Operating income 86,465 71,835 54,215
Income before income
taxes 75,380 58,808 56,438
Net income 64,551 116,751 30,521
======= ======= =======
Consolidated sales for the first quarter of 2011 were US$ 107,727,000
(21% over 2010 1stQ), making a gross profit of US$ 63,110,000, an operating
income of US$ 33,392,000, and a net income of US$ 25,953,000.
OTHER COMPANIES
Subject's subsidiaries (all 100% owned):
TARO RESEARCH INSTITUTE LTD., operates as the Research and Development
company of the TARO PHARMACEUTICAL Group.
TARO PHARMACEUTICALS USA INC., U.S.A.
TARO PHARMACEUTICALS INC., Canada
TARO PHARMACEUTICAL UK LTD., U.K.
TARO PHARMACEUTICAL NORTH AMERICA INC (TNA), Cayman Islands
TARO PHARMACEUTICAL EUROPE B.V., the Netherlands
TARO PHARMACEUTICAL IRELAND LTD., Ireland
TARO
TARO PHARMACEUTICALS INDIA PVT LTD., India
TARO PHARMACEUTICAL LABORATORIES INC., U.S.A.
TARO HUNGARY KFT, Hungary.
BANKERS
· Bank Hapoalim Ltd., Hayetzira Branch (No.459), Netanya, account No. 90909.
· Bank Leumi Le’Israel Ltd., Central Branch (No. 800), Tel Aviv, account 406200/44.
· Israel Discount Bank Ltd., Main Branch (No. 010), Tel Aviv, account No. 196991.
A check with the Central Banks' data base
did not reveal negative information on subject’s bank accounts.
Also working with: CityBank N.A., Main Branch (No. 001), Tel Aviv.
CHARACTER AND REPUTATION
Subject is the 3rd largest pharmaceutical companies in Israel
(after TEVA and PERRIGO ISRAEL). TARO is a veteran company and has been
enjoying good reputation.
After years of
continuous growth, subject suffered a major set back in Spring 2004, after
severe irregularities in its financial reports were revealed concerning
inventories evaluation, leading to a long turmoil, which also harmed subject in
several aspects, including financial.
During 2006 subject encountered financial difficulties and liquidity
distress (subject operated under the warning of a "going concern" for
a certain period), mainly connected to
the accounting turmoil (regarding inventory calculations), which also led to senior management shocks
and resignations.
As a result, TARO
Group went through streamlining measures and re-organization process, including
dismissals and real estate properties realization.
In December 2006
TARO's shares were removed from the Nasdaq Global Select Market to the traded
on the "Pink Sheets" list (the Over-The-Counter Bulletin Board),
after failing to meet the SEC regulations (subject published its audited
financial statements for the three years ended December 31, 2006, which include
restated financial statements for 2004-5-6, only in April 2010).
In May 2007
subject entered into a merger agreement for its acquisition by SUN PHARMACEUTICAL INDUSTRIES for US$230
million in cash and in addition US$224 million from SUN to cover debts of
subject to their banks, institutional investors and bonds holders. The total enterprise
value of the transaction was US$454 million. In addition, SUN fueled an
immediate sum of US$41 million of interim equity financing to subject, which
solved immediate debt problem (payments to their bond's holders). In July 2007 SUN fueled further US$ 18 million into
subject, realizing part of the option given to them in th emerger agreement
(option for 3 years).
SUN in an
international company based in India, one of the largest pharmaceutical
companies in India. It is a public company whose shares are traded on the
Bombay Stock Exchange, with market value of US$ 10.7 billion.
Following the
deal, a major dispute erupted between the parties, accompanied by lawsuits and
counter-lawsuits, some continue to-date and fierce power struggle, which also effects
subject current operations (including millions of US$ costs for subject’s CPAs
and lawyers).
In May 2008
subject’s Board unanimously voted to terminate
Merger Agreement from May 2007 with SUN, claiming mainly that the deal does not
reflect subject’s real value, but a well much lower value. SUN persisted its
efforts to complete the deal as planned and realize its option to acquire Levitt and Moros shares, leading to a continuous process of bids from each
party, which were unsuccessful. In Summer 2008 the District Court ruled that
the merger is valid. TARO, then backed by TEMPLETON, resisted. The District
Court rejected subject’s request and TARO appealed to the Supreme Court (in the
middle the matter went to an arbitrator but returned to the Supreme Court in
March 2009 after arbitration efforts failed).
A major turn in the power struggle over subject occurred in December
2009, as the TEMPLETON Fund (an institutional
minority shareholder in subject) who backed the Levitt and Moros families, shifted its support to SUN. The legal
struggle finally ended with the Supreme Court ruling in favor of SUN, and Levitt and Moros had to transfer their shares
to SUN based on the original agreement (much lower company value than the
current value at that date). SUN paid US$ 37 million for their 12% in capital
share (and 33% of voting shares without return), thus reaching control in
subject. In November 2010 SUN paid TEMPLETON
US$ 82 million for further 12% (reaching 65.2% in subject).
In May 2002, it
was reported that subject acquired all assets of American pharmaceutical
company, THAMES PHARMACAL INC., for a sum of US$ 6.4 million.
In January 2003,
subsidiary TNA, signed an agreement with MEDICIS PHARMACEUTICAL CORP., to
purchase from MEDICIS 4 branded prescription product lines for sale in the USA
for an aggregate price of US$ 23.8 million.
In February 2007
subject received positive results from the clinical trials assessing the
effectiveness of T2000 in treating essential tremor. It will be subject's first
proprietary ethical drug, a significant breakthrough.
In September 2007 subject signed a 5-years agreement
with BREATH-ID, developers of a breath-testing system, which
enables to diagnose and manage a wide range of diseases of the digestive
system. Accordingly subject will manufacture the substance used in
BREATH-ID device for their applications.
In February 2009 it was reported that subject received
a warning from the U.S. FDA concerning a test conducted in its manufacturing
facility in Canada in July 2008, relating to the company’s quality control
procedures. In April 2011 FDA, after re-conducting a test in the plant,
announced TARO meets the requirements.
During 2010
subject closed down its manufacturing facility in Ireland, which has been
inflicting losses, and decided to sell the facility.
In May 2010
subject signed an agreement with GLENMARK GENERICS INC of the USA to distribute
GLENMARK's branded product.
In the legal
aspect, after resolving the power struggle issue in September 2010, there is nothing
detrimental on subject. Subject also settled class action motions that were
filed due to the said affairs.
Exports of
pharmaceuticals in 2010 rose by 41.5% from 2009, reaching US$ 6,614 million.
This comes after in 2009 exports fell by 6.7% from 2008, due to the global
economic crisis.
Sales for export
are to over 120 countries. Products included drugs, raw materials for medicine
production, veterinary medication.
The Israeli market
for pharmaceuticals was estimated at US$ 1,600 million in 2008, of which US$
1,124 million for human consumption (including from import).
The
non-prescription drugs market in Israel is valued at some 15% of the local
whole drugs market, with annual growth rate of circa 15%.
There are some 13
generic pharmaceutics production companies in Israel and the industry employs
9,000 employees.
SUMMARY
Good for trade engagements.
Maximum unsecured credit recommended up to several US$ millions.
FOREIGN EXCHANGE RATES
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Currency |
Unit
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Indian Rupees |
|
US Dollar |
1 |
Rs.44.93 |
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UK Pound |
1 |
Rs.72.43 |
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Euro |
1 |
Rs.63.62 |
RATING EXPLANATIONS
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
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11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
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<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
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NB |
New Business |
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This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this report.
The assessed factors and their relative weights (as indicated through %) are as
follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)
This report is issued at your request without any risk
and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its
officials.