For the second quarter is sucession, Taro Pharmaceutical Industries (Nasdaq:TARO) has left investors open-mouthed with disappointment. Today, the generic drug maker reported a loss of $8.9 million, or $0.31 per share, compared with a profit of $14 million, $0.50 per share, in the corresponding quarter last year. Analysts had expected a profit of $0.44 per share.
Taro's second quarter sales were $49.1 million, compared with $74.8 million in the second quarter of 2003. Gross profit for the quarter was $23.5 million, compared with $50.0 million for the second quarter of 2003.
The company said that a substantial majority of the decrease in sales in the second quarter of 2004 was attributable to reduced purchases by several of its largest wholesaler customers. It added that further factors that impacted sales during the quarter were competitive pricing pressure on its generic products and the mix of products sold.
Taro believes that the decrease in sales to wholesalers primarily reflects a decision by wholesalers to reduce inventories, including inventories of its products.
It will be recalled that Taro's report for the first quarter was greeted as a huge disappointment after many quarters in which the company had succeeded in breaking sales and profits records and beating analysts' forecasts. Along with Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA) and the generic drugs sector in general, Taro has suffered from considerable weakness recently.
The consensus among the analysts covering the company is that Taro will report earnings per share of $0.57 for the third quarter on revenue of $95.75 million, and earnings per share of $2.13 on revenue of $378.6 million for 2004 as a whole.
Taro, it should be noted, is burning cash. At the end of the second quarter, it had cash and cash equivalents amounting to $94.16 million, compared with $159.12 million at the end of 2003.
Taro chairman Barrie Levitt said about the results, "While we are, of course, disappointed with our results for the second quarter, we believe that the decrease in sales is largely attributable to the timing of purchases by wholesale customers, who appear to be reducing their inventories.
"Overall prescriptions for our products have increased during the second quarter compared with last year, according to industry sources. Therefore, we believe that once the wholesalers adjust their current inventories, their purchasing patterns will normalize in future quarters.
"Taro will continue to invest in research and development activities, the company's primary growth strategy, as well as in other initiatives that are designed to build shareholder value in the long term. We are confident in the quality of our submissions to the FDA; however, the timing of new product approvals is impossible to predict with certainty. In light of the results of the first six months, we are implementing a comprehensive review of all of our costs in order to reduce our expense profile. This action will not only help our profitability in the short term, but will make Taro a stronger organization."
Taro shares closed at $30.08 yesterday, giving the company a market cap of $881 million.
Published by Globes [online] - www.globes.co.il - on July 29, 2004