Don't Touch Taro Until Management is Gone

| About: Taro Pharmaceutical (TARO)

Taro Pharmaceutical Industries Ltd. (TAROF.PK) is still run by the same management that has run it since the company was founded by the parents of its present chairman. From the first day I began working on Wall Street, I’ve heard bitter complaints against the company’s management. I am amazed that Taro shareholders don’t see the growth advantage they’d have if they’d emulate Savient Pharmaceuticals Inc. (Nasdaq: SVNT).

After long thought, I want to put the facts on the table. If it weren’t for Merrill Lynch, no one would have heard of Taro, and no one would care about it. For years, Taro’s share hovered unchanged at $6-7, until Merrill Lynch came and saw “visions of Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA) in Taro”. Merrill Lynch began coverage of the company with a “Strong buy” recommendation, and the share rose to $34 at the end of 2004. True, those were good times for the company’s business, but in view of the subsequent serious developments, I wonder if those were really good times, or if there were “creative times”.

Taro is now repeatedly deferring the publication of its financial reports, and it’s busy reviewing reports for several years back. The company now claims that it’s stuck on data for 2004 and 2005. In my opinion, all that’s really happening is that the smart alecks at Merrill Lynch turned up and made waves, which are now abating, and that the share has now reverted to its natural and correct value. It could very well be that in view of rumors that Franklin Templeton Investments (also known as Franklin Resources) (NYSE: BEN), a very serious investor, intends to apply pressure on Taro’s directors, and maybe even impose some changes, Taro might now be worth looking at. Look, but don’t be in a hurry to buy.

In my opinion, it’s only a matter of time, and a short time at that, until the Levitt family and its offspring will be on the way out, and if that is the case, I’m on my way in. I complained several times before about the management, their methods of reporting, and who is doing what at the company. Anyone who monitors this company doesn’t have to be a genius to know the source of the problem. My bottom line is this: until the Levitts are gone, it’s not worthwhile to touch Taro’s shares.

Published originally by Globes [online], Israel business news - © Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

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