Taro Pharmaceutical Industries presents preliminary first half 2009 financials

Taro Pharmaceutical Industries Ltd. (“Taro,” the “Company,” Pink Sheets: TAROF) today provided information on its financial performance for the first half of 2009.

For the six months ended June 30, 2009, Taro estimates net sales of $181.7 million compared to $166.2 million in the same period of the previous year, a 9% increase. Gross profit for the first half of 2009 was $104.4 million, or 57% of net sales, compared to a gross profit of $91.5 million, or 55% of net sales for the same period in 2008, an increase of 14%. Operating income for the six months ended June 30, 2009 was $34.7 million, compared to $29.2 million for the same period in 2008, an increase of 19%. Net income was $23.6 million, or $0.58 per diluted share, compared to $20.6 million, or $0.51 per diluted share for first half 2008, an increase of 15%.

For the second quarter ended June 30, 2009, Taro estimates net sales of $96.8 million compared to $88.1 million, a 10% increase compared to the second quarter of 2008. Gross profit for the second quarter was $57.9 million, or 60% of net sales, compared to $50.6 million, or 57% of net sales for the second quarter of 2008, an increase of 14%. Operating income for the second quarter of 2009 was $20.6 million compared to $17.7 million, an increase of 16% over the prior year. Net income was $12.5 million, or $0.31 per diluted share, compared to $13.0 million, or $0.32 per diluted share for the second quarter of 2008, a decrease of 4%. The decrease in net income is the result of increased financial expenses in the amount of $3.7 million, principally related to the weakening of the U.S. dollar against the Canadian dollar.

The Company noted that its first half 2009 earnings were impacted by $4.2 million of expenses related to operating the Company’s Irish facility. In addition, first half 2009 expenses included approximately $13.0 million in professional, consulting and other fees related to the Company’s continuing efforts to complete the 2004-2006 audits, and litigation related to its former merger partner, Sun Pharmaceutical Industries Ltd.

The Company also said that it continues to strengthen its balance sheet with net debt (total debt offset by the value of hedging instruments, less cash and cash equivalents) steadily declining from $103.7 million in December 2008 to $90.9 million in June 2009. As of June 30, 2009, Taro had $79.1 million in cash, cash equivalents and restricted cash, after making scheduled debt payments of $17.6 million in 2009. During the first half of 2009, cash provided by operations was $13.5 million. Amortization and depreciation expenses were $9.7 million during the period.

Trade accounts receivable at June 30, 2009 were $82.6 million, which represents 83 days sales outstanding. The increase in accounts receivable reflects the recent launch of carbamazepine extended release tablets as well as the launch of other new products. Inventories were $65.5 million at June 30, 2009, compared to $75.3 million at June 30, 2008, the result of improved inventory management.

The Company cautioned that the financial information presented herein does not constitute complete financial information, has not been reviewed by its independent auditors and is subject to possible change. However, subject to the foregoing caveats, the Company believes that the information above represents the best information currently available to Taro management.

Two Extraordinary General Meetings of Shareholders

The Company announced today that it has scheduled two Extraordinary General Meetings of Shareholders. The first is scheduled to convene on September 13, 2009, at 8:00 a.m. (Israel time), at the offices of the Company in Haifa, Israel. The purpose of the meeting is to elect, consistent with the requirements of Israeli law, two independent external directors to represent the public, as well as to ratify and approve indemnification for non-executive directors.

Taro’s Board of Directors has carefully considered the background and qualifications of the two external director candidates, Irith Hausner, Esq. and Yaron Saporta, CPA (Israel), and found them to be highly qualified professionals who can meaningfully contribute to the Company. Ms. Hausner is an experienced attorney and businesswoman. Mr. Saporta, a prominent and experienced accountant and internal auditor, works with both private and public companies in Israel.

The full text of the Company’s letter to shareholders, along with the notice of the meeting scheduled to be held on September 13, 2009, and the corresponding proxy statement can be accessed at the Company’s website at www.taro.com or at www.sec.gov. Shareholders are urged to read both documents carefully.

A second meeting is scheduled to convene on September 14, 2009, at 8:00 a.m. (Israel time), at the offices of the Company in Haifa, Israel, to update shareholders on the status of the Company’s financial statements for 2006-2008. This meeting is being held following receipt of a request by Franklin Templeton Investments.

www.taro.com