UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE
SECURITIES EXCHANGE ACT OF 1934
For the month of March, 2007
Commission File Number 000-22286
Taro Pharmaceutical Industries Ltd.
(Translation of registrant's name into English)
Italy House, Euro Park, Yakum 60972, Israel
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F. Form 20-F |X| Form 40-F |_|
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): _____
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes |_| No |X|
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-_____.
Taro Files 2005 Form 20-F Following Completion of 2005 Audit
Company Seeking To Address Liquidity Needs; In Discussions and
Negotiations Regarding Strategic Alternatives; All Alternatives
Contemplate Repayment of Outstanding Loans and Bonds in Full
HAWTHORNE, N.Y.--(BUSINESS WIRE)--March 20, 2007--Taro Pharmaceutical
Industries Ltd. ("Taro," the "Company," Pink Sheets: TAROF) today reported that
the audit of its 2005 results has been completed, and the Company has filed its
annual report for the year ended December 31, 2005 on Form 20-F (the "2005 Form
20-F") with the U.S. Securities and Exchange Commission ("SEC"). The audited
results for 2005 and restated results for 2004 are lower than previously
provided unaudited estimates, as described below. In addition, Taro announced
that, with the assistance of its financial advisor, The Blackstone Group, the
Company is in discussions and negotiations with several interested parties
regarding a number of strategic alternatives that would provide for Taro to
continue as a growing business, all of which contemplate the repayment of all
outstanding loans and bonds in full. These strategic alternatives include an
equity investment, an infusion of working capital, or the purchase of the
outstanding shares of the Company.
2005 Form 20-F
As previously reported, the Company was delayed in completing its 2005
audit. The delay resulted from a number of factors, including the need to
restate 2004 and 2003 results due to adjustments in accounts receivable reserves
following the receipt of information contained in formal customer inventory
reports ("852 Reports"), which were acquired by the Company for the first time
in spring 2006 and utilized in the 2005 audit. The audit was also delayed due to
the time required for an investigation conducted by independent counsel
regarding the restatement, as well as the departure, subsequent to the
investigation, of the Company's Chief Financial Officer and another senior
member of Taro's financial staff. In view of the Company's financial situation
and liquidity needs discussed below, the 2005 Form 20-F contains an explanatory
paragraph in the independent auditors' report regarding Taro's ability to
continue to operate as a going concern.
In the Company's audited financial statements, Taro reported 2005 net sales
of $297.7 million, compared with restated net sales of $261.1 million for 2004.
The Company reported 2005 net income of $5.7 million, or $0.19 per diluted
share, compared with a restated net loss of $31.5 million, or $1.08 per share in
2004. Net income for 2005 and restated results for 2004 were lower than
previously provided preliminary unaudited estimates for those years due to the
availability of additional information based on an internal review of
transactions for full-year 2006. The Company had previously estimated 2005 sales
in a range of approximately $295 million to $305 million, and net income in a
range of approximately $14.0 million to $16.0 million. When it originally
provided the estimates, the Company noted that the estimates were subject to
change pending completion of the 2005 audit.
The Company's 2005 Form 20-F, which is posted on the Company's website,
www.taro.com, contains further detail concerning the 2005 results, the
restatements of 2004 and 2003, and recent developments, including the Company's
current financial situation.
Addressing Liquidity Needs and Negotiations Concerning Strategic
Alternatives
As previously reported, the Company is seeking to address its debt position
and liquidity needs. The reporting of the 2005 results in the 2005 Form 20-F
should bring the Company into compliance with reporting covenants under its
existing loan agreements through the end of 2005. The Company has obtained
waivers for financial covenants at the end of 2005 and remains current on
payments to all of its lenders. However, based on expected 2006 results
described below, the Company will not be in compliance with its debt covenants
for 2006. Certain lenders may therefore have the right to elect to accelerate
their indebtedness, and other lenders may be able to accelerate repayment under
cross default clauses. The Company continues to engage in discussions with its
lenders, who have been supportive of the Company in the context of the pursuit
of the strategic alternatives discussed below. Taro believes it also continues
to maintain good relationships with both its customers and suppliers.
With the assistance of its financial advisor, The Blackstone Group, the
Company is in discussions and negotiations with several interested parties
regarding a number of strategic alternatives that would provide for Taro to
continue as a growing business, all of which contemplate the repayment of all
outstanding loans and bonds in full as part of the completion of any
transaction. These strategic alternatives include an equity investment, an
infusion of working capital, or the purchase of the outstanding shares of the
Company. The Company has requested that final proposals be submitted by March
30, 2007, with a definitive agreement expected to be completed during April
2007. However, the Company reserves the right to accelerate this process. While
there can be no assurance that the Company will be successful in these various
efforts, in view of its covenant compliance issues, upcoming debt repayment
obligations and liquidity needs, the Company believes that the completion of one
of the strategic transactions described above is necessary for its ongoing
viability and is in the interests of its shareholders and other stakeholders.
The Company will provide an update upon completion of the process described
above.
In addition, as part of Taro's efforts to improve its liquidity, the Company
is in the process of identifying and selling non-utilized and non-core assets.
In 2007, the Company entered into agreements to sell land adjacent to its
facility in Ireland and a warehouse building in Canada. The Company intends to
use the net proceeds of approximately $8.4 million from the closing of these
sales to pay down debt and for working capital.
Profitability Initiatives and 2006 Performance
As previously announced, in 2006 the Company retained AlixPartners LLP,
appointed an Interim Chief Administrative and Restructuring Officer from that
firm and undertook a number of steps to improve its long-term profitability.
These corrective steps included the realignment of inventories held by certain
key customers. This initiative was undertaken based on information in the 852
Reports described above, which indicated those inventories were greater than the
Company previously estimated. In addition, the Company reduced full-time
employees by approximately 15% in the twelve-month period ended December 31,
2006, realigned its sales and marketing programs in order to enhance the
sell-through of Taro products, eliminated unprofitable products, and increased
control over expenditures throughout the Company.
For the year ended December 31, 2006, Taro expects to report a substantial
loss which will reflect the impact of the initiatives described above. The 2006
results will also reflect competitive pricing pressures, a smaller than
anticipated contribution from new products, and increased professional fees,
including one-time expenses associated with completing the 2005 audit and the
Company's restatement of 2004 and 2003 results.
Outlook for 2007
While the corrective steps described above had a significant negative impact
on 2006 results, the Company believes that they are having a positive effect on
2007 performance. Demand for the Company's products has remained strong. During
2006, according to industry sources, prescriptions for the Company's products
increased by 7% over 2005. Taro has developed a business plan designed to enable
the Company to operate profitably in 2007. The plan balances sales, marketing
and production programs with customer needs. While it is still too early to
gauge the success of this plan, the Company's sales performance to-date is ahead
of plan, indicating that certain key customers have accelerated their reorders
as their inventories continue to decline.
In 2007, Taro has also embarked on a program to increase sales to select
international markets. The Company recently entered into an agreement with
Winthrop Laboratories UK to market Taro's Etodolac XL Tablets in the UK, and is
in negotiations with a number of other pharmaceutical companies for the
marketing of other Taro products in Europe. Taro is also negotiating various
collaborative marketing and manufacturing arrangements with major pharmaceutical
companies.
Appointment of Interim Chief Financial Officer
Ron Kolker has been appointed to the position of Group Vice
President, Corporate Controller and Interim Chief Financial Officer of
both the Company and Taro Pharmaceuticals U.S.A., Inc. ("Taro USA").
Mr. Kolker joined Taro in 1994 and was previously Vice President of
Finance for Taro USA. Mr. Kolker is a Certified Public Accountant and
holds an MBA in Finance and Accounting.
Research and Development
As of March 9, 2007, Taro had one NDA and 26 ANDAs, including one
Abbreviated New Animal Drug Application and nine tentative approvals, under
review by the FDA. In addition, there are multiple products for which either
developmental or internal regulatory work is in process.
As part of its business plan, the Company is implementing research
initiatives that include the re-allocation of resources to niche products with
limited anticipated competition and within Taro's core competencies in both
semi-solid and solid dosage forms. In addition, the Company is pursuing joint
ventures and licensing arrangements that may allow Taro to realize the value of
selected research projects and share development costs.
Proprietary Technologies
T2000
Taro is continuing to develop T2000, the Company's non-sedating barbiturate
compound. The Company recently announced that a paper titled, "Treatment of
essential tremor with the barbiturate T2000" has been posted to the website of
Movement Disorders, the journal of the Movement Disorders Society, prior to its
appearance in the print version of that publication. Details of a current study
of T2000 are available at the www.clinicaltrials.gov website maintained by the
U.S. National Institutes of Health. The U.S. Patent and Trademark Office has
issued a patent to Taro for the use of the Company's proprietary, non-sedating
barbiturate compounds in the treatment of essential tremor and Parkinson's
disease. The patent will expire in June 2025.
There can be no assurance as to the outcome of any current or future study
of these compounds, or that the FDA or any foreign equivalent will approve any
product based on these compounds, or that any approved product will be
commercially successful.
Ovide(R) (malathion)
The Company is currently completing a Phase III clinical trial of its novel,
stabilized gel formulation of malathion. Taro currently markets Ovide(R)
(malathion) Lotion, 0.5%. The Company expects that the new formulation of
Ovide(R) will be a safe and effective treatment for head lice with shorter
application time and greater ease of use, thus improving patient compliance. A
patent application has been filed for this new formulation. There can be no
assurance of the successful completion of the study or of the eventual approval
or successful commercialization of the novel Ovide(R) product.
Taro 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.
For further information on Taro Pharmaceutical Industries Ltd.,
please visit the Company's website at www.taro.com.
SAFE HARBOR STATEMENT
Certain statements in this release are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements include, but are not limited to, statements that do not describe
historical facts and statements that refer or relate to events or circumstances
the Company "believes," "expects," "plans," "anticipates" or "designs" to
happen, or similar language, and statements with respect to preliminary
information regarding 2006 performance, the Company's prospects for 2007,
measures to address liquidity needs, the Company's continuation as a growing
business, discussions with interested parties regarding strategic alternatives,
an equity infusion, an infusion of working capital, the purchase of the
outstanding shares of the Company, the repayment of all outstanding loans and
bonds in full, the request from interested parties for final proposals by March
30, 2007, the completion of a definitive agreement during April 2007,
initiatives designed to return Taro to operating profitably, and statements
regarding the sale of non-core assets and the use of proceeds therefrom, the
positive effect on 2007 results from initiatives to lower customer inventories,
the actions of the Company's lenders, its compliance with bank covenants and
debt repayment obligations, improvement of the Company's financial position,
discussions with its lenders to address the Company's debt position,
relationships with its customers and suppliers, programs to increase sales to
select international markets, the success of research initiatives, joint
ventures and licensing arrangements, and successful completion of studies and
commercialization of T2000 and Ovide(R) Gel. Although Taro Pharmaceutical
Industries Ltd. believes the expectations reflected in such forward-looking
statements to be based on reasonable assumptions, it can give no assurances that
its expectations will be attained. Factors that could cause actual results to
differ include the audit of the Company's financial statements for the
year-ended December 31, 2006, the Company's performance in 2007, failure to
reach an agreement regarding the strategic alternatives under consideration,
actions of the Company's lenders and creditors, failure to complete the sale of
non-core assets, general domestic and international economic conditions,
industry and market conditions, slower than anticipated penetration of new
markets, changes in the Company's financial position, 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 Annual Reports on Form
20-F. Forward-looking statements speak only as of the date on which they are
made. Other than an update upon completion of the Company's process regarding
strategic alternatives, 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.
CONTACT: Taro Pharmaceutical Industries Ltd.
Daniel Saks, 914-345-9000 ext. 6208
Vice President, Corporate Affairs
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 22, 2007
TARO PHARMACEUTICAL INDUSTRIES LTD.
By: /s/ Tal Levitt
--------------
Name: Tal Levitt
Title: Secretary