Taro Pharmaceutical Industries .(TARO) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q2 2021, net sales were $143 million, a decrease of $18 million year-over-year, but increased by 21% sequentially from Q1 [23] - Gross profit was $82 million, down $20 million, with a gross margin of 57% compared to 63% in the prior year, but improved from 55% in Q1 [24] - EBITDA was $47 million with an EBITDA margin of 33%, down from 42% in the prior year but up from 30% in Q1 [25] - Net income attributable to Taro was $45 million, down from $56 million, resulting in diluted earnings per share of $1.18 compared to $1.46 in the prior year [27] - For the first half of the fiscal year, net sales were $261 million, a decrease of $62 million, with a net loss of $390 million compared to a profit of $122 million in the prior year [30] Business Line Data and Key Metrics Changes - The company launched Deferiprone, expanding its capabilities into specialty products, and received several approvals in Canada [18] - Taro's products ranked number 1 and 2 by market share in over 70% of its portfolio in the U.S. generic market [17] Market Data and Key Metrics Changes - The pandemic has led to reduced volumes in the U.S. market, affecting both generics and OTC products due to decreased foot traffic in pharmacies [15] - There has been a sequential increase in overall volumes in Q2 compared to Q1, although volumes have not fully normalized [16] Company Strategy and Development Direction - The company is focused on organic growth, strategic partnerships, and acquisitions to strengthen its portfolio [19] - Taro is committed to maintaining a disciplined evaluation of opportunities to ensure they meet business and financial criteria [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing challenges posed by the COVID-19 pandemic and its impact on business operations and market dynamics [9] - The company remains optimistic about the recovery of clinic operations and patient visits, although uncertainty persists [43] Other Important Information - Taro has returned over $1.2 billion to shareholders through share repurchases, tender offers, and special dividends [11] - The company has resolved all cases related to the DOJ investigation into the U.S. generic pharmaceutical industry [35] Q&A Session Summary Question: Does Taro intend to continue avoiding the branded space in the U.S.? - Management indicated they are exploring opportunities to participate in the branded space but have not committed to any specific actions [40] Question: What is the current status of clinics and patient visits? - Management noted a positive trend in clinic openings and patient visits, but uncertainty remains due to ongoing pandemic conditions [42][43] Question: Can you provide details on the recent acquisition of Aquinox? - The acquisition involves a development-stage company with products in early stages, specifically in the cancer therapy area [45][46] Question: What is the focus of R&D spending and pipeline development? - Management emphasized ongoing efforts to identify products with good market potential, without disclosing specific areas of focus [49] Question: How is Taro maintaining market share in a competitive dermatology space? - The company has maintained market share by ensuring good product supply and serving customers effectively despite overall market demand decline [52] Question: Can you disaggregate price versus volume trends in the portfolio? - Management indicated that price declines are expected to continue, with no major trend reversals observed [53]