Taro Pharmaceutical Industries Ltd. (Pink Sheets: TAROF) has sued India's Sun Pharmaceutical Industries Ltd. (BSE: 524715) and some of its affiliates with the US District Court for the Southern District of New York. Taro alleges that Sun Pharmaceuticals failed to disclose to Taro shareholders that the US Food and Drug Administration (FDA) had effectively closed down Sun's US subsidiary Caraco Pharmaceutical Laboratories Inc.
Taro and Sun Pharmaceuticals are currently locked in a legal battle in the Tel Aviv District Court over Taro's unilateral cancellation of the takeover contract by Sun.
Taro alleges that its shareholders were not notified that the FDA had seized $20 million in products, effectively closing down manufacturing operations of Caraco, and the fact that the FDA action apparently grew out of a long pattern of failure to comply with regulatory requirements governing the manufacture of drugs at Caraco under Sun's controlling hand. Taro claims, "These events and other serious lapses of operational diligence and corporate governance would have on Taro, its operations, business and its shareholders if Sun were to gain control of Taro."
Taro also alleges that Sun misappropriated confidential information about Taro gathered as part of the proposed merger transaction. It alleges that Sun illegally used such confidential information to disrupt and harm Taro's customer relationships and undermine Taro's revenues.
Sun Pharmaceuticals said in response, "The legal action commenced yesterday by the Taro board of directors against Sun Pharmaceuticals represents yet another unfortunate attempt by the Taro directors to divert Taro's limited resources to assisting the Levitt family in their ongoing refusal to comply with their written agreements… Taro's legal action seeks only to distract the company's shareholders from the following simple facts: as Taro has already acknowledged, Sun's investment in Taro saved the company from near-certain bankruptcy."
Published by Globes [online], Israel business news - www.globes-online.com - on October 1, 2009
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