Q2 2021 Taro Pharmaceutical Industries Ltd Earnings Call
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Ladies and gentlemen, this is the operator todays conference is scheduled to begin momentarily until that time your life will again be play some musical thank you for your patience.
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Second quarter earnings conference call at this time, all participants are in English only know les.
Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone.
As a reminder, this conference call is being recorded I would now like to turn the call over to your host today Mr., William Coote Assistant Vice President and Treasurer. Please go ahead Sir.
Thank you good morning, everyone and welcome to our second quarter 2000 2021 earnings.
Earnings Conference call, we hope everyone is healthy and safe. During these trying times safety is our top priority we are conducting a virtual call.
Joining me today are Mr. Dilip Shanghvi chairman of the board of directors Mr. everyday Valdosta.
<unk> CEO and Ms. Daphne one.
He was CFO. We hope you have received a copy of the earnings press release, which can be found on our website at <unk> Dot com.
We anticipate that many of you may have questions concerning not only this quarter's and year to date financial.
For me, but also our markets operations strategies and other matters.
While we will try to respond to most of your queries, we will not be able to share product specific and commercially sensitive information including pipeline details.
As a reminder, this call is being recorded and a replay and call transcript will be made available on our website.
Before we proceed I must remind you that today's discussion may include certain forward looking statements and then meeting of the private Securities Litigation Reform Act of 1995, although.
The company 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 and should be viewed in conjunction with <unk> with the risks that our business faces as detailed from time to time in the Companys FCC reports.
I would now turn the call over to Mr. Dilip Shanghvi.
Thank you Bill.
Welcome to all of you and thank you for joining us today.
Oh rules or gone after the announcement of second quarter and six months 2000 granted couldn't give us financial results.
Hi, cool that all the fuel remain cheap C and D.
Oh the reserves.
Section of this challenging times, we have to see.
Oh, there or what have you but.
Well Weve been Ben continues to infect the blue dogs.
Toggle remains focused on delivering quality products.
And communities that depend on that.
While continuing to dig the Mississippi precautions to ship dock season, and they'll be awful lot employees.
Oh, the pandemic Whitney one.
War the long in fact from <unk> 19.
Would be.
Not going really well.
Todd It was business, but more importantly on people said Oh.
Around the world.
[laughter] is difficult to measure and then disappeared.
And as we have said for some time.
We believe the U.S. genetic market, we continue to be calm thing to do for the foreseeable future.
On the positive side.
September box, we've been telling you what city of Sun's majority ownership of thought.
During this time.
The company has grown significantly.
And enjoyed many successes.
Including more than 70 filings with the <unk> Dee Ann.
Well, what 65 approved whats.
In addition.
You got it done it.
Additional shareholder values in excess of 1.2 billion.
It's a combination of share repurchases.
Bad debt off worse.
And especially in the region.
On behalf of the entire board of directors.
Hi, one good thing logs that auto employees for their continuing baby kitchen and commitment to serving our customers and patients. During this on the incident that thanks.
I, even know handover the call to date.
Thank him at the foundry.
Welcome everyone and thank you for joining us today I Hope you and your families out any court has.
Obama just to participants on the call important in it that are on a bunch of last minute technical difficulty.
I'm not aware that beyond the mic and its impact continues to a backbone.
And our key geography, we have witnessed a second or even a card to be able to infection.
Even as we speak infections don't show a definite kind of decline.
On the external front this fundamental bald don't step Linux too low.
What we have seen an opening in quarter two.
I've been there a dozen families spend more time at home incident up in mental review.
It falls into pharmacies are significant the decline.
Clinical trials have been dealing with no now you had a comedy.
On the in doesn't front, we have invested domecq factories, and also says as much covered pool as possible.
You don't have stepped up to this challenge even as we continue to operate in a hybrid part of my Fox News from home and also.
Factories and these teams have all but it did put every single day. So this time.
Living Testament of the commencement of the entitle.
You can do safety measure we put in place.
I'm good educational part in place to follow D.
We have been able to maintain a safe and healthy work environment and avoid any out there so call. It nine can deliver to our.
My last is this quarter have improved over the previous quarter.
These are still below previous year, principally as a result of the view to you what volume that reflects the impact and that took over 90.
We are holding steady and not market share.
In the fourth quarter. The major change we saw was a reduced volume being bought by the patients and pharmacies. Both of genetic then it would be cheaper, which you believe is a deliberate loved down lift door tropic or theater operations, leaving their homes.
The six month, but also impacted by the customer stocking be expedient in fourq or all but he just yet.
Which from a volume standpoint was unusually high due to the initial response to be fine with me.
Important to you saw any reason not to limit on volumes can be friendship or combined is done and while one quarter does not make a trend is encouraging.
However, more in terms of not contribute to normalize.
As we sit down with that hasn't been done make your was getting the rest of the yet they said this instead of ordering them.
However, we have some accomplishment got embedded by something.
As I previously indicated our products continue to it I'm somebody one or number two by market share in almost 70% of our portfolio into your work and that if market.
Yes, I mean based on what our volumes in the sequential quarter over quarter up about it.
We launched a deficit he brought on a product with orphan indication that expands our capabilities to include specialty pharma.
We have received a number of upper work in Canada.
And our investment in R&D continue to help us add to our portfolio we.
We have successfully launched a number of product in recent months and since the beginning of the year. We haven't received seven approvals from the FDA.
Currently we have 18, India everything you look at the proven with five than to people.
We continue to look at opportunities. It's done first and then a portfolio I guess organic growth and strategic partnerships or is that to get that position.
Let me emphasize we will continue to be disciplined and not evaluation in order to ensure that any opportunity you need both car business has been a financial.
With that I will now hand on before we would definitely will discuss the financial.
Thank you with that.
Hi, everyone and welcome to the second quarter Karl Earnings Conference call.
Let me discuss some of the key financial highlights we.
We try in comparison with the comparable prior year period.
First second quarter highlights then followed by the six month comparison.
My second quarter ended September Thirtyth 2020.
Our net sales were 143 million a decrease.
18 million.
Our around the sequential quarter over quarter comparison, our net sales increased 21% over first quarter.
Our gross profit was 82 million decrease 20 million.
And as a percentage of net sales was 57% compared to 63% in the prior year quarter, but improved from sequentially, 55% in Q1.
Our R&D expense was 17 million increase about 1 million as we remain committed to our R&D investment.
R&D expenses are not even the just distributed across quarters in our case and primarily vary due to the timing of R&D activities, including clinical studies and certain other expenses.
Our SGN <unk> expenses were 24 million and Dallas in line pretty much with the prior year quarter.
As a result of the above.
EBITDA was 47 million.
You bet margin of 33% compared to 42% in the prior year quarter.
When compared to first quarter.
Excluding the impact of the first quarter settlement and loss contingency charges.
Even I increased from 30% pro forma in first quarter to 33%.
Based on the above operating income of 41 million decreased 22 million.
And as a percentage of net sales was 29% compared to 39% in the prior year quarter.
On a sequential quarter over quarter comparison, however, excluding the impact of the Q1 settlements and loss contingency charges.
Operating income increased 11 million.
And as a percentage of net sales.
Increased from 25%.
Interest and other financial income decreased 3 million to 6 million as a result of the low global interest rate environment.
Income tax expense of 4 million decreased 13 million, resulting in an effective tax rate.
7% compared to 22% in the same period last year.
Net income attributable to Taro was 45 million as compared to 56 million.
As the decrease in operating income and interest revenue were partially offset by the decrease in tax expense without in.
Earnings per share of <unk> dollar 18, compared to $1.46 for the second quarter last year.
Now, let me turn to discuss the six month performance in comparison to last year.
Net sales were 261 million decreased 62 million.
As already indicated the customer stocking we experienced in fourth quarter of fiscal.
Let's go your 1920 came at the expense of the fiscal year 2021.
First quarter.
In the second quarter as previously stated we realized a 21% Oh Bakken net sales over first quarter.
Gross profit was 147 million decreased 57 million and as a percentage of net sales was 56% compared to 63%.
R&D expenses of 30 million slightly increase.
DNA of 46 million increased 3 million, principally due to higher legal and professional fees.
As well as higher freight rates.
And some cold weather related costs.
Excluding the impact from the first quarter settlement and loss contingency charges.
EBITDA was 82 million would the EBITDA margin of 32%.
Operating loss of 408 million compare.
Compared to operating income of 131 million in the prior year.
Our excluding the settlement loss contingency charges.
Operating income pro forma was 71 million and as it presented net sales was 27% compared to 41%.
Interest and other financial income was 13 million.
Increased <unk> million from the same time cry here.
Primary was the result of the low global interest rate environment.
FX income Oh 1 million.
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7 million loss compared to the same period last year.
Our income tax expense for the first half decreased 24 million to 12 million, excluding the impact from the settlement and loss contingency charges.
Back the tax rate was 14% compared to 23%.
Net loss income attributable to Taro was 390 million of law.
Compared to the 122 million of income in the current period.
Resulting in diluted loss per share a $10 and banking then compared to $3.17 of EPS of the prior year same period.
Excluding the impact from settlement and loss contingency charges.
Our net income for the first half of fiscal year was 74 million, resulting in diluted earnings per share Oklahoma.
Alan 94.
Now turning to our cash flow and balance sheet I'll pass on balance sheet remain strong.
Cash and cash equivalents, including short term and long term marketable security.
Decreased 50 million to 1.5 billion from March 31st 2020.
That cash reduction was primarily due to the partial payment to the deal Jay settlement.
There was a payment plan in place and we're paying according to the plan.
Our investment policy, our marketable securities remains very conservative.
And our marketable securities are of high quality with little to no exposure to distract industries those securities and continue to outperform the benchmark.
Cash flow from operations for the six months ended September Thirtyth 2020 was negative 40 million.
Harvard excluding the impact from the settlement and loss contingency.
Cash flow provided by operations pro forma it was $55 million compared to 123 million for the six months ended September Thirtyth 2019.
I will now hand, the floor back to die.
Thanks, Doug.
As we announced in July.
That'll Pharmaceuticals, you listed it has it has all the oil gets us involving the company in connection with there might be a investigations by the department of Justice and good subdivision and Civil Division into the you went generic pharmaceutical industry.
At the same time the company agreed with the Civil Division of DRG to settle all claims and that the limited federal program losses associated with anti competitive conduct relative to be generic drugs that were subject of the DPG and were purchased are subsidized by these programs.
The company is in the process of finalizing the agreements with the deal just seven but the mosquitoes done including the settlement amount and it really is just a second.
Concerning that amending stayed until the investigation and multi district litigation. We've continued to work for that concept to defend these claims.
Furthermore, we remain committed to strong corporate governance, and fostering an ongoing culture of compliance.
Finally, I want to say thank you for the 15 under federal employees for their contributions throughout this pandemic demonstrating their commitment and dedication every day to keep our products go into customers and ultimately to patients will depend on admitted.
With this I.
I would like to open the floor for your questions. Thanks.
Thank you.
At this time I would like to remind everyone. If you would like to ask a question. Please press star and the number one on your telephone keypad again that is star one.
We'll pause for a moment to come how the China thereafter.
Your first question comes from the line of Ram Selvaraju with H.C.
ER and whether or not you intend to continue to avoid the branded space right.
[noise] Hello could you repeat the question please.
Hello I'm.
Gary I wouldn't tend to continue to avoid the brand.
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I.
I think what you've said in the Boston that we continue to look for opportunities.
Which are sort of.
Help us a.
Participate in the branded space for audio valuation continues.
Haven't yet necessarily committed ourselves to doing.
Doing anything I think our work is on on on that front.
Thank you that's my only question thank.
Thank you.
Again, if you would like to ask a question. Please press Star then the number one on your telephone keypad again that is star one.
And we do have a question from the line of duress backroom with bank of America.
Be coated papers, so so the Phoenix home person told me personally.
We have seen in the quarter.
And if you have I'm going to Miss you. Your numbers are all well station with its particularly in the dumb sorry.
So the British report on behalf of part of the question can you repeat.
So my question was one you said that there was some recovery you saw in quarter, two and don't so your mix have started to open up and I will be normal. So second within 30 days that you mentioned in southern geographies Buddies, you did Oh, a trend because you beekeeping Baird.
Did get you more opening up and it's a patient information, but it's solid and greedy.
I think we see that depended positive, but as I also said that or would that be number.
Yeah.
We do have a question from the line of Cheyenne sure vaccine with Goldman Sachs.
Alright.
Hi, Good morning, Thank you for taking my question.
First question is on the R&B, just looking at slightly alone Muslim women spending about 60 to 70 million every year.
Just trying to see in terms of the pipeline, what we have kind of built two words and given the kind of.
Price that also you get seems a dermatologist space out of their neurotherapy areas that you would like to highlight where incremental R&B is going towards which is kind of diversify this the.
Hi, dependence on the mythology topical project.
Sure some qualitative after Saddam.
So I think some reconfirm it to look for.
There you have capabilities products, which we believe have a good potential in the marketplace.
So that's a return on worrying FERC.
And that's what we used to develop our portfolio at.
At the moment I wouldn't want to sort of give any meeting indicated if there were no breach or that area that we're looking at but that I would say as an active work best container cooking.
Okay.
Thank you David My second question is on the.
Of the comments in the press release it on the computer Covid intensity.
The mythology space as well as a weakness in the underlying demand.
But otherwise he said has maintained market shift so how.
Is how are we enabling.
Maintaining a market share.
If you could answer highlights some of the.
To complicate back to what you need that you've seen in the offices.
I think as I mentioned in my.
You know that.
Ensuring that we continue to have a book products supplies.
And reconnecting with part of our customers in the best possible way.
I think that is waters helter.
Keep our market share that it that it has been in fact in some cases, probably increase it as well.
But you run wild with you the overall market demand falling we're compressing.
Good supply chain I think we have been able to keep our shares.
Court.
The last question.
I know the volumes have been declining December if you could help us disaggregate the.
Price with this any volume plan that you could disaggregate for us and.
We have seen signs of the orders face actually seeing a lot of stability in terms of price erosion. This year have you seen something similar on your portfolio Smith.
I think.
Similar to what they've said in the past and no different.
The price at Ocean that accompanies the that typically dependent on the product portfolio that the company has.
And.
And that is an Arctic billion.
The price declines that the letter that we've seen in the past and probably even in the in the six months.
I think it gives us a sense that the price declines Echo state.
We haven't seen any major trend reversed.
Thank you and all the rest of it.
Thank you.
And again, if you'd like to ask a question. Please press star and the number one on your telephone keypad again that is star wash and will pass around moments you can have the Q&A roster.
At this time, they're currently no questions and Q Mister Coot are there any closing remarks before we end the call.
No. Thank you operate.
Ladies and gentlemen, thank you for participating this concludes today's second quarter earnings call you may now disconnect.
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