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MIRA INFORM REPORT
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Report No. : |
500557 |
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Report Date : |
03.04.2018 |
IDENTIFICATION DETAILS
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Name : |
TARO PHARMACEUTICAL INDUSTRIES LTD. |
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Formerly Known As : |
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TARO VIT INDUSTRIES LTD. ·
TARO VIT CHEMICAL INDUSTRIES LTD. |
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Registered Office : |
P.O. Box 10347, (2611201), 14 Hakitor Street, Haifa Bay Industrial
Zone, Haifa 2624761 |
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Country : |
Israel |
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Financials (as on) : |
31.12.2017 |
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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 : |
1,413 [Taro Group - 2017] |
RATING & COMMENTS
(Mira Inform has adopted New Rating mechanism w.e.f. 23rd
January 2017)
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MIRA’s Rating : |
A |
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Credit Rating |
Explanation |
Rating Comments |
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A |
Acceptable Risk |
Business dealings permissible with moderate
risk of default |
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Status : |
Satisfactory |
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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
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Country Name |
Previous Rating (30.09.2017) |
Current Rating (31.12.2017) |
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Israel |
B1 |
B1 |
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Risk Category |
ECGC
Classification |
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Insignificant |
A1 |
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Low Risk |
A2 |
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Moderately Low Risk |
B1 |
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Moderate Risk |
B2 |
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Moderately High Risk |
C1 |
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High Risk |
C2 |
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Very High Risk |
D |
ISRAEL - ECONOMIC OVERVIEW
Israel has a technologically advanced free market economy. Cut diamonds,
high-technology equipment, and pharmaceuticals are among its leading exports.
Its major imports include crude oil, grains, raw materials, and military
equipment. Israel usually posts sizable trade deficits, which are offset by
tourism and other service exports, as well as significant foreign investment
inflows.
Between 2004 and 2013, growth averaged nearly 5% per year, led by exports.
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. Israel's economy also
weathered the 2011 Arab Spring because strong trade ties outside the Middle
East insulated the economy from spillover effects.
Slowing domestic and international demand and decreased investment
resulting from Israel’s uncertain security situation reduced GDP growth to an
average of roughly 2.8% per year during the period 2014-17. Natural gas fields
discovered off Israel's coast since 2009 have brightened Israel's energy
security outlook. The Tamar and Leviathan fields were some of the world's
largest offshore natural gas finds in the last decade. Political and regulatory
issues have delayed the development of the massive Leviathan field, but
production from Tamar provided a 0.8% boost to Israel's GDP in 2013 and a 0.3%
boost in 2014. One of the most carbon intense OECD countries, Israel generates
about 57% of its power from coal and only 2.6% from renewable sources.
Income inequality and high housing and commodity prices continue to be a
concern for many Israelis. Israel's income inequality and poverty rates are
among the highest of OECD countries, and there is a broad perception among the
public that a small number of "tycoons" have a cartel-like grip over
the major parts of the economy. Government officials have called for reforms to
boost the housing supply and to increase competition in the banking sector to
address these public grievances. Despite calls for reforms, the restricted
housing supply continues to impact the well-being of younger Israelis seeking
to purchase homes. Tariffs and non-tariff barriers, coupled with guaranteed
prices and customs tariffs for farmers kept food prices high in 2016. Private
consumption is expected to drive growth through 2018 with consumers benefitting
from low inflation and a strong currency.
In the long term, Israel faces structural issues, including low labor
participation rates for its fastest growing social segments - the ultraorthodox
and Arab-Israeli communities. Also, Israel's progressive, globally competitive,
knowledge-based technology sector employs only about 8% of the workforce, with
the rest mostly employed in manufacturing and services - sectors which face
downward wage pressures from global competition. Expenditures on educational
institutions remain low compared to most other OECD countries with similar GDP
per capita.
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Source
: CIA |
Company
name & address
TARO PHARMACEUTICAL INDUSTRIES LTD.
Telephone 972 4 847 57 00
Fax 972 4 872 71 65
Email: info@taro.co.il
P.O. Box 10347, (2611201)
14 Hakitor Street
Haifa Bay Industrial Zone
Haifa 2624761 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 above inactive company, i.e. to the present name.
In 1961 subject
completed its initial public offering.
As from 1982,
shares are publicly traded (see more below).
On the 18.09.2002,
TARO PHARMACEUTICAL PROPERTIES LTD. was merged into subject. On the 03.07.2012
TARO RESEARCH INSTITUTE LTD. was merged into subject.
SHARE
CAPITAL
Authorized share capital
NIS 20,000.00, divided into -
200,000,000 ordinary shares of NIS 0.0001
each (45,116,262 shares issued),
2,600 founders’ shares NIS 0.00001 each
(issued),
of which shares
amounting to NIS 4,511.6522 were issued.
(Note: The currency
in share capital was originally in Old Israeli Shekel whose nominal
value was 1 thousandth of the current New Israeli Shekel (NIS),
converted in 1986).
SHAREHOLDERS
1.
SUN PHARMACEUTICAL INDUSTRIES LTD., 81.9% (in
capital, 72.8% of ordinary shares and all founder shares issued), via ALKALOIDA
CHEMICAL CO., of India, SUN being a publicly traded company on the Bombay Stock
Exchange, controlled (54.4%) by Dilip Shanghvi,
2. Shares are also traded on
the New York Stock Exchange (NYSE:TARO).
As from 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 attempts were terminated – see
more CHARACTER.
DIRECTORS
1. Dilip Shanghvi, Chairman,
2. Uday Baldota, General
Manager,
3. Sudhir Valia,
4. James Kedrowski,
5. Abhay Gandhi,
6. Ms. Linda Benshoshan,
7. Prof. Dov Pekelman,
8. Elli Streit.
According to our,
Itamar Krasenti serves as Haifa Site Manager.
BUSINESS
Developers,
manufacturers, exporters and markets of pharmaceuticals, generic and branded
pharmaceuticals, both prescription and OTC.
Producing over 200
pharmaceutical products, including topical preparations (creams, ointments,
gels, and solutions), oral medications (tablets, capsules, powders, liquids)
and sterile products (ophthalmic drops, powders).
97% of 2017 sales
were for export (98% in 2016), mostly to the USA (89% in 2017, 91% in 2016).
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, CARASSO,
etc.
Operating from
owned premises (headquarters, plant, labs and warehouses), on an area of 84,400
sq. meters in 14 Hakitor Street, Haifa Bay Industrial Zone, Haifa. Also
operating from manufacturing facilities in Canada (owned, 14,700 sq. meters +
8,300 sq. meters leased) offices and marketing premises in the USA (owned, on a
total area of 40,700 sq. meters) and manufacturing facility, R&D and
warehouses in Ireland (owned, on an area of 11,500 sq. meters).
Website: www.taro.co.il
Having 1,413
employees serving TARO Group as of March 2017, of which 706 employees in Israel
(had 1,407 employees serving TARO Group as of March 2016, of which 709
employees in Israel).
Note: current number
of employees expected to be updated with the publication of Subject’s 2018 F-20
statements by the end of June/beginning of July 2018.
MEANS
Subject is an
Approved Enterprise and as such entitled to tax benefits and State incentives.
In 2001, 2002 and 2004, the Israeli Investment Centre (IIC) approved US$ 20.3 million,
US$ 13.5 million and US$ 22 million investment plans, respectively, for the
expansion of subject’s plant in Haifa.
In August 2016
subject reported it completed its self-share purchase in volume of US$ 250
million (began in March 2016).
Consolidated B/S
shows (fiscal year ends March 31st):
US$ (thousands)
31.12.2017
31.03.2017
ASSETS
Current assets
Cash and cash equivalents 569,193 600,399
Short term bank deposits
& marketable securities 822,585 786,361
Accounts receivable- Trade 197,799 203,924
Other receivables,
Prepaid expenses &
others 168,160 267,295
Inventories 149,186 141,045
1,906,923 1,999,024
Long-term bank deposits 214,226 70,685
Property, plant and equipment, net 190,468 180,085
Other assets 110,272 39,959
2,421,889 2,289,753
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LIABILITIES
Current liabilities 213,573 209,837
Non-current liabilities 4,842 6,110
Equity 2,203,474 2,073,806
2,421,889 2,289,753
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Current market
value US$ 3.96 billion.
There are no
charges registered on the company's assets.
REVENUES
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
2017 2016 2015
Sales, net 879,387 950,751 862,944
Gross profit 671,251 778,966 676,585
Operating income 514,951 614,468 527,631
Income before income taxes 560,798 636,820 581,680
Income from continuing operations 457,018 541,507 485,621
Net income 456,356 540,932 484,257
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First 9 months of
2018 sales (ending 31.12.2017) were US$ 486,697,000 (29% decrease compared to
parallel period in 2017), making a gross profit of US$ 344,579,000, an
operating profit of US$ 228,188,000 and a net profit of
US$ 124,863,000.
OTHER
COMPANIES
Subject's main
subsidiaries (all 100% owned):
TARO
PHARMACEUTICALS USA INC., U.S.A.
TARO
PHARMACEUTICALS INC., Canada
TARO PHARMACEUTICAL
NORTH AMERICA INC (TNA), Cayman Islands
TARO
PHARMACEUTICAL EUROPE B.V., the Netherlands
TARO INTERNATIONAL
LTD.
SUN PHARMACEUTICAL
INDUSTRIES LTD. established 1983, an Indian multinational pharmaceutical company
headquartered in Mumbai, manufacturers and marketers pharmaceutical
formulations and active pharmaceutical ingredients (APIs) primarily in India
and the United States. Having some 53,000 employees. Publicly traded on the
Mumbai Stock Exchange, current market value INR 1.198 trillion.
BANKERS
According to our
records (since so far we could not speak to subject's officials, we are unable
to verify a/m bank details):
Bank Hapoalim
Ltd., Hayetzira Branch (No.459), Netanya, account No. 90909.
Bank Leumi
Le’Israel Ltd., Principal Branch Tel Aviv (No. 800), Tel Aviv, account
406200/44.
Israel Discount
Bank Ltd., Main Branch (No. 10), 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. 1), Tel Aviv.
CHARACTER
AND REPUTATION
In the legal
aspect, after resolving the power struggle issue in September 2010 (as described
below), there is nothing unfavorable learnt. TARO also settled class action
motions that were filed due to the said affairs.
Despite our
efforts, we were unable to speak with subject's officials, being told there is
no one at office (it is a holiday period in Israel –Passover, and many
businesses are on consolidated vacations).
Subject is the 3rd
largest pharmaceutical company in Israel (after TEVA and PERRIGO ISRAEL). TARO
is a veteran company, enjoying good reputation.
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 INR 1.5 trillion.
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 scandal (regarding inventory calculations), which
also led to senior management shocks and resignations.
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 the merger
agreement (option for 3 years).
Following a/m
deal, a major legal dispute and fierce power struggle erupted between the
parties.
In the 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 was 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),
however the purchase offers were rejected.
In February 2013
subject and SUN announced that they have mutually agreed to terminate their
merger agreement, announced in August 2012. The termination was due to
objection of the minority shareholders, and the fact that following subject's
financial results its value increased, turning SUN's offer irrelevant.
In December 2013
subject re-purchased some 4.6% of its shares in a reverse tender (a Dutch
tender), for US$ 191 million.
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 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 April 2014 it
was reported that SUN acquired (via share swop) RANBAXY according to a value of
US$ 4 billion, making SUN the 5th largest generic pharmaceutical in the world.
Over 90% of sales
by the local Pharmaceutical Industry are for export.
Sales for exports
of pharmaceuticals (mainly human uses, also veterinary use) in 2017 reached US$
7,538 million, compared to export of US$ 6,905.8 million in 2016, US$ 6,809.4
million in 2015, US$ 6,485.3 million in 2014, and US$ 6,317.7 million in 2013.
Import of
pharmaceutical products to Israel in 2016 reached US$ 2,006.5 million, compared
to US$ 1,916 million in 2015 and US$ 1,899 million in 2014. Import in the first
11 months of 2017 reached US$ 1,966.6 million, 7% higher than in the parallel
period in 2016.
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%.
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).
Import of
medicines to Israel in 2016 summed up to US$ 750.6 million, compared to US$
744.4 in 2015 and US$ 815.4 million in 2014. Import in the first 11 months of
2017 was similar to the parallel period in 2016.
There are some 13
generic pharmaceutics production companies in Israel and the industry employs
9,000 employees.
SUMMARY
Notwithstanding
the lack of updated data from subject's officials, considered good for trade
engagements.
FOREIGN EXCHANGE RATES
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Currency |
Unit
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Indian Rupees |
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US Dollar |
1 |
INR 65.04 |
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|
1 |
INR 92.28 |
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Euro |
1 |
INR 80.62 |
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ILS |
1 |
INR 18.43 |
Note :
Above are approximate rates obtained from sources believed to be correct
INFORMATION DETAILS
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Analysis Done by
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VAR |
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Report Prepared
by : |
TPT |
RATING EXPLANATIONS
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Credit Rating |
Explanation |
Rating Comments |
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A++ |
Minimum Risk |
Business dealings permissible with minimum
risk of default |
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A+ |
Low Risk |
Business dealings permissible with low
risk of default |
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A |
Acceptable Risk |
Business dealings permissible with
moderate risk of default |
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B |
Medium Risk |
Business dealings permissible on a regular
monitoring basis |
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C |
Medium High Risk |
Business dealings permissible preferably
on secured basis |
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D |
High Risk |
Business dealing not recommended or on
secured terms only |
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NB |
New Business |
No recommendation can be done due to
business in infancy stage |
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NT |
No Trace |
No recommendation can be done as the
business is not traceable |
NB is stated where there is insufficient information to facilitate rating. However, it is not to be considered as unfavourable.
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 are as follows:
·
Financial
condition covering various ratios
·
Company
background and operations size
·
Promoters
/ Management background
·
Payment
record
·
Litigation
against the subject
·
Industry
scenario / competitor analysis
·
Supplier
/ Customer / Banker review (wherever available)
This report is issued at
your request without any risk and responsibility on the part of MIRA INFORM
PRIVATE LIMITED (MIPL) or its officials.