Taro Pharmaceuticals, a multinational generic manufacturer with established subsidiaries, manufacturing and products across Israel, Canada and the US, reported in March it expected a "substantial loss" for the year ended December 31, 2006, following pricing pressures and decreased cash flow.
Financially, the company had been in the doldrums following an independent scrutiny over its 2003/2004 books after they were required to be restated in view of errors in estimating the chargebacks from wholesalers and the actual inventory in the drug distribution chain.
The company faced further embarrassment after being de-listed from the NASDAQ at the end of 2006.
Taro had been in the process of shifting some of its product research and development to India in 2005/2006 in a bid to enhance its position in the US market, and had considered increasing its active pharmaceutical ingredients (APIs) sales as one option to lift the business.
But Sun Pharma was the saviour, seeing a gem in Taro and investing $454m (€337m) in the company, and refinancing $224m in net debt.
The two companies also announced they had entered into a separate definitive agreement for Sun Pharma to immediately provide $45m of interim equity financing to Taro by acquiring $7.5m of the company's ordinary shares.
The move provides Sun Pharma with additional manufacturing facilities in Canada and Israel, which adds to the 16 plants the speciality and generic pharmaceutical company already owns.
The deal also means Taro's equity is now valued at $230m or $7.75 per share, which is 27 per cent higher than its May 18, 2007 closing price of $6.10.
While the all-cash deal is still subject to shareholder approval and requisite regulatory clearances, the agreement has been described by a Sun Pharma spokesman as "beneficial" for both companies, with increased capabilities for Sun Pharma, and fund infusion and managerial focus for Taro.
"Taro has good products and manufacturing in two continents, a strong team, and we believe these synergies are complementary with the skill sets at Sun Pharma.
We look forward to filing complex products and unlocking value to grow the business," the spokesman told in-PharmaTechnologist.com.
In addition to the plants in Israel and Canada, Taro will also be providing more than 100 additional new drug applications (ANDAs) to complement the 111 ANDAs in the pipeline at Sun Pharma, as well as 170 more scientists to add to the 500 plus at the Indian firm.
Taro is also involved in drug discovery with its lead molecule T-2000, a non-sedating barbiturate for tremors, in Phase II studies in Canada.
Sun Pharma chairman and managing director Dilip Shanghvi said in a statement: "This is a good opportunity for Sun and Taro to work together to create increasing value and add a complementary multinational organisation to Sun's business.
We intend to build on Taro's expertise in dermatology and paediatrics along with speciality and generic pharmaceuticals, and over-the-counter products."
The acquisition of Taro follows Sun Pharma's August 2005 purchase of a new 170-acre facility in Hungary, which was to launch the company's ambitions in Europe and around the world, and the September 2005 purchase of a Bryan, Ohio facility in the US from Valeant Pharmaceuticals.
Both acquisitions together cost less than $10m. Also in 2005, Sun Pharma acquired the entire business of fellow Indian pharmaceutical company MJ Pharmaceuticals and took over control of its formulations unit at Haloi in India's western state of Gujarat.