US generics market slide reaches Taro

drugs, medicine  picture: thinkstock

The share has lost 41% of its value since reaching a peak in early 2015.

The fall of generic drug prices in the US is also affecting the results of Israeli company Taro Pharmaceutical Industries Ltd. (NYSE: TARO). Taro is controlled by Indian company Sun Pharmaceutical Industries, whose chairman is Israel Makov. Following the publication of its second-quarter results, Taro's share plunged 7.3% yesterday, bringing the company's market cap down to $4.1 billion. The share has lost 27% of its value this year, and is now 41% below the peak it reached in early 2015. Over the past five years, however, Taro has given investors a return of over 150%, a result that other companies in the sector, including Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), Perrigo Company (NYSE:PRGO; TASE:PRGO), and Mylan N.V. (Nasdaq: MYL; TASE: MYL), could only dream about.

Taro finished the first quarter of its fiscal year (ending on June 30) with a decline in all important financial parameters. Revenue totaled $161 million in the second quarter, 31% less than in the the corresponding quarter in 2016 and 18% less than in the preceding quarter. As a percentage of sales, gross profit fell from 78.2% to 72.2%. Operating profit shrank 45.6% to $77.6 million and net profit was down 50.4% to $54.5 million. The company attributed the fall in its revenue to growing competition and the challenging price environment. At the end of the quarter, Taro had $1.4 billion in cash, after spending $8.5 million buying back its own shares at an average share price of $106, compared with a current price of $101.

"Our results reflect the difficult generic pricing environment, particularly in the US, driven by more intense competition among manufacturers, new entrant to the market, buy consortium pressures, and a higher ANDA approval rate from the FDA. We expect this product-specific pricing pressure to continue into the future," said acting Taro CEO Abhai Gandhi, adding, "We believe that our long-term strategy is well-balanced, with a leadership position in many of our key molecules, our pipeline, our commitment to providing quality products, and strong manufacturing and customer service capability.

In response to the report, Credit Suisse economists retained their "Neutral" recommendation for the Taro share, with a $100 target price, just under the market price.

Published by Globes [online], Israel Business News - - on August 10, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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drugs, medicine  picture: thinkstock
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