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Report Date : |
01.06.2013 |
IDENTIFICATION DETAILS
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Name : |
TARO PHARMACEUTICAL INDUSTRIES LTD. |
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Formerly Known As : |
TARO VIT CHEMICAL INDUSTRIES LTD. |
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Registered Office : |
P.O. Box 10347,
Haifa (2611202) Italy House, Euro Park Yakum Business Park Yakum 6097200 |
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Country : |
Israel |
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Financials (as on) : |
31.03.2013 |
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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. |
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No. of Employees : |
Over 700 |
RATING & COMMENTS
|
MIRA’s Rating : |
Ba |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
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, 2013
|
Country Name |
Previous Rating (31.12.2012) |
Current Rating (31.03.2013) |
|
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 |
ISRAEL - ECONOMIC OVERVIEW
Israel has a technologically advanced market economy. Its
major imports include crude oil, grains, raw materials, and military equipment.
Cut diamonds, high-technology equipment, and pharmaceuticals are among the
leading exports. Israel usually posts sizable trade deficits, which are covered
by tourism and other service exports, as well as significant foreign investment
inflows. The global financial crisis of 2008-09 spurred a brief recession in
Israel, but the country entered the crisis with solid fundamentals - following
years of prudent fiscal policy and a resilient banking sector. The economy has
recovered better than most advanced, comparably sized economies. In 2010,
Israel formally acceded to the OECD. Israel's economy also has weathered the
Arab Spring because strong trade ties outside the Middle East have insulated
the economy from spillover effects. Natural gasfields discovered off Israel's
coast during the past two years have brightened Israel's energy security
outlook. The Leviathan field was one of the world's largest offshore natural
gas finds this past decade, and production from the Tama field is expected to
meet all of Israel's natural gas demand beginning mid-2013. In mid-2011, public
protests arose around income inequality and rising housing and commodity
prices. The government formed committees to address some of the grievances but
has maintained that it will not engage in deficit spending to satisfy populist
demands.
Source
: CIA
TARO
PHARMACEUTICAL INDUSTRIES LTD.
Telephone 972
9 971 18 00
Fax 972
9 955 74 43
P.O. Box 10347, HAIFA (2611202)
Italy House, Euro Park
Yakum Business Park
YAKUM 6097200 -ISRAEL
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.
Authorized share capital NIS 20,000.00, divided into -
200,000,000 ordinary
shares of NIS 0.0001 each,
of which 44,800,007 shares amounting to NIS 4,480.0007 were issued.
1. SUN PHARMACEUTICAL INDUSTRIES LTD., 66.3% (in
capital, 77.5% in voting), via ALKALOIDA CHEMICAL CO., of India, a publicly
traded company on the Bombay Stock Exchange, controlled by Dilip
Shanghvi,
2. Shares
are also traded on the New York Stock Exchange (NYSE:TARO).
As of March 22, 2012, subject's shares are traded on the NYSE. Prior to
the move to the NYSE, shares were quoted on the Pink Sheets Electronic
Quotation Service (“Pink Sheets”) under the 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).
SUN attempted to gain full ownership in subject through a purchasing
offer for the shares held by the public, however in February 2013 these the
attempt was terminated – see more CHARACTER.
1. Subramanian Kalyanasundaram, Chairman,
2. Jim Kedrowski, Interim CEO,
3. Sudhir Valia,
4. Aalok Shanghvi,
5. Mrs. Ilana Avidov-Mor,
6. Dan Biran,
7. Prof. Dov Pekelman.
Developers, manufacturers, exporters and markets of pharmaceuticals,
generic and branded pharmaceuticals, both prescription and OTC.
Subject produces some 190 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, Yakum, 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 1,273 employees serving TARO Group, of which over 700 in Israel.
Consolidated B/S shows (fiscal year ends March 31st):
US$
(thousands)
31.03.2013 31.03.2012
ASSETS
Current assets
Cash and cash equivalents 237,284 238,266
Short term bank deposits & marketable securities 323,216 96,055
Accounts receivable- Trade 119,810 111,130
Other receivables, prepaid expenses & others 119,835 98,572
Inventories 109,626 109,638
909,771 653,661
Long-term
receivables and other assets 23,227 19,972
Property, plant and equipment, net 145,265 150,750
Other assets 28,373 32,041
1,106,636 856,424
======== =======
LIABILITIES
Current
liabilities 192,531 198,899
Long-term debt, net of current maturities 23,144 34,567
Equity 890,961 622,958
1,106,636 856,424
======== =======
Current market value US$ 2.58 billion.
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.
During 2003, subject completed a US$ 110 million capital raise by issuing
bonds to the institutional market and local banks.
In June 2011 SUN announced it is going to invest some US$ 100 million in
expanding and upgrading its facilities worldwide, including in subject.
There are several charges for a total amount of NIS 48,400,000, registered
on the company's assets.
Subject announced it changed its fiscal year end from December 31st
to March 31st to align TARO's fiscal reporting and annual budgeting
periods with that of its major shareholder, SUN.
Consolidated Statement of Income:
US$
(thousands)
Fiscal
year ended 31.03
2013 2012
Sales, net 670,954 543,082
Gross profit 494,826 365,585
Operating income 328,580 237,570
Income before income
taxes 335,863 241,718
Income from continuing
operations 268,064 205,744
Net income 266,206 204,274
======= =======
Subject's main 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
TARO PHARMACEUTICALS INDIA PVT LTD., India.
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: CitiBank N.A., Main Branch (No. 001), Tel Aviv.
In the legal aspect,
after resolving the power struggle issue in September 2010 (as described
below), there is nothing detrimental on subject. TARO also settled class action
motions that were filed due to the said affairs.
Subject is the 3rd largest pharmaceutical company in Israel
(after TEVA and PERRIGO ISRAEL). TARO is a veteran company, 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 current market value of
around US$ 17.1 billion (INR 855.71 billion).
Following the
deal, a major dispute erupted between the parties, accompanied by lawsuits and
counter-lawsuits, and fierce power struggle, which also effected subject
operations.
In May 2008 subject’s
Board voted to terminate Merger Agreement,
claiming mainly that the deal reflected a well much lower subject’s real value.
SUN persisted its efforts to complete the deal as planned (realize its option
to acquire Levitt and Moros
shares). In Summer 2008 the District
Court ruled that the merger is valid. An appeal filed to the Supreme Court,
ruling in favor of SUN, and SUN gained
control in subject (paid further
US$ 37 million to Levitt and Moros for their 12% in capital share and 33% of
voting shares. In November 2010 SUN paid TEMPLETON US$ 82 million for further 12%.
Since October 2011
SUN has been trying to purchase the remaining of TARO's shares held by the
public, including investment funds as minority shareholders, in view of merging
it into SUN (thus deleting subject's shares from trade). Its purchase offer
from late 2011 was rejected, which forced SUN to improve its offer. In August
2012 SUN made another higher offer (for some 33% of the shares), now needed to
be approved. Yet, 2 investments funds, minority shareholders, resist, claiming
(including a lawsuit filed) that subject's recent 2nd quarter
financial results were manipulated, therefore SUN's offer is unfair.
On the 08.02.2013 subject and SUN announced that they have mutually agreed
to terminate their merger agreement, announced in August 2012. The termination
is due to objection of the minority shareholders, and the fact that following
subject's recent financial results its value increased, turning SUN's offer
irrelevant (24% under market share value).
In 2002 subject
acquired all assets of American pharmaceutical company, THAMES PHARMACAL INC.,
for a sum of US$ 6.4 million.
In 2003 TARO
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 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.
Annual sales
volume in the local pharmaceuticals market is estimated at NIS 4 billion,
divided into NIS 1.8 billion to the institutional sector (HMO's, hospitals,
etc.) and NIS 1.2 billion to the private sector (including pharma retail
chains).
In 2009 sales of
drugs for human consumption (including from import) reached US$ 1,409 million
(US$ 1,416 million in 2008), of which estimated over US$ 1,100 million were
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%.
In 2011 import of
medicines reached US$ 497 million (were US$ 555 million in 2010).
Exports of
pharmaceuticals in 2012 reached US$ 6,847 million, representing close to 6%
decrease from 2011 (after 10% and 41.5% increase in 2011 and 2010 from the
previous years, respectively).
Sales for export
are to over 120 countries. Products included drugs, raw materials for medicine
production, veterinary medication.
There are some 13
generic pharmaceutics production companies in Israel and the industry employs
9,000 employees.
Good for trade engagements.
Note: Since the beginning of February 2013
Israel Post has started using a new area code method of 7 digits (the old
method of 5 digits is no longer valid).
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.56.49 |
|
|
1 |
Rs.86.01 |
|
Euro |
1 |
Rs.73.68 |
INFORMATION DETAILS
|
Report
Prepared by : |
PRL |
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest capability
for timely payment of interest and principal sums |
Unlimited |
|
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 |
|
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 |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
|
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 |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
-- |
NB |
New Business |
-- |
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.