Taro Provides Results for September 30, 2016

HAWTHORNE, N.Y.–(BUSINESS WIRE)– Taro Pharmaceutical Industries Ltd. (NYSE:TARO) (“Taro” or the
“Company”) today provided unaudited financial results for the three and
six months ended September 30, 2016.

Quarter ended September 30, 2016 Highlights – compared to September
30, 2015

• Net sales of $228.8 million, increased $16.7 million or 7.9%, driven
  by increased volumes in the U.S. generic business. The 2015 net sales
  were negatively impacted by a $19.6 million net charge taken to meet
  contractual obligations associated with price adjustments. On a
  pro-forma basis, adjusting 2015 net sales for the price protection
  provision, net sales would have decreased 1.2%.
• Gross profit of $177.3 million, increased $8.5 million, or 5.1%
• Research and development (R&D) expenses decreased $3.9 million to
  $14.8 million with all of our activities, including clinical studies,
  proceeding according to plan as the R&D spend is not evenly
  distributed across quarters.
• Selling, marketing, general and administrative expenses (SG&A)
  decreased $3.2 million to $20.9 million, principally the result of
  reduced Keveyis marketing spend.
• Operating income increased $16.6 million to $141.6 million, or 61.9%
  of net sales compared to 58.9%
• Foreign Exchange (FX) income decreased $21.5 million from $34.9
  million to $13.4 million.
• Tax expense of $35.6 million increased $5.1 million.
• Net income attributable to Taro was $123.7 million compared to $133.3
  million, a $9.7 million decrease, as the increase in operating income
  was offset by the decrease in FX income and an increase in tax
  expense, resulting in diluted earnings per share of $3.00 compared to
  $3.11.

Six Months ended September 30, 2016 Highlights – compared to
September 30, 2015

• Net sales of $462.6 million, increased $35.2 million, or 8.2%, with an
  increase in volumes, principally due to an increase in our U.S.
  generic volumes. On a pro-forma basis, adjusted for the 2015 price
  protection provision, the net sales increase would have been 2.4%.
• Gross profit increased $19.5 million to $360.1 million, and as a
  percentage of net sales, was 77.8% compared to 79.7%.
• R&D expenses of $32.8 million remained in line with prior year
  expenses.
• SG&A decreased $3.8 million to $43.1 million, principally as the
  result of reduced Keveyis spend.
• Operating income increased $24.8 million to $284.2 million, or 61.4%
  of net sales compared to 60.7%
• FX income decreased $23.2 million from $30.7 million to $7.5 million.
• Tax expense of $66.0 million increased $5.5 million.
• Net income attributable to Taro was $233.6 million compared to $237.0
  million, a $3.4 million decrease, as the increase in operating income
  was offset by the decrease in FX income and increase in tax expense,
  resulting in diluted earnings per share of $5.59 compared to $5.54.

Mr. Kal Sundaram, Taro’s CEO stated, “We are pleased with our sales and
operating performance in the face of increasing competitive intensity
and pricing pressure. Our new product sales have met, and in some cases,
exceeded our expectations, helping to off-set the decline in sales
arising from the price erosion of existing products. We continue to
focus on building our R&D pipeline to deliver sustained long-term
performance.”

Cash Flow and Balance Sheet Highlights

• Cash flow provided by operations for the six months ended September
  30, 2016, was $192.7 million compared to $129.3 million for the six
  months ended September 30, 2015.
• As of September 30, 2016, cash, including short-term bank deposits and
  marketable securities, decreased $319.2 million to $909.5 million from
  March 31, 2016, mainly due to the $240.6 million impact from the
  Company’s share repurchases, and a $251.3 million increase in
  long-term bank deposits.

FDA Approvals and Filings

The Company recently received approval from the U.S. Food and Drug
Administration (“FDA”) for the Abbreviated New Drug Application (“ANDA”)
Naftifine Hydrochloride Cream USP, 1%. The Company has a total of thirty
six ANDAs awaiting FDA approval.

Share Repurchase Program

On August 19, 2016, the Company announced the completion of its $250
million share repurchase of ordinary shares. The Company bought back
1,801,099 of its ordinary shares in open market transactions, in
accordance with a 10b5-1 program, at an average price of $138.80 per
share, as represented in the following table.

New Hire Announcement

On October 3, Taro announced the appointment of Mariano Balaguer as Vice
President, CFO and Chief Accounting Officer. Mr. Balaguer has nearly 20
years of senior management experience in finance with global companies
such as Novartis Consumer Health, Nestle and most recently, the Global
Strategic Portfolio Division of Henry Schein.

On July 6, the Company announced that its’ CEO, Mr. Kal Sundaram, plans
to step down as CEO by the end of the current calendar year. The Taro
Board, with Mr. Sundaram’s assistance, is conducting a search for his
replacement.

Earnings Call (8:30 am EST, November
9, 2016)

As previously announced, the Company will host an earnings call at 8:30
am EST on Wednesday, November 9, 2016, where senior management will
discuss the Company’s performance and answer questions from
participants. This call will be accessible through an audio dial-in and
a web-cast. Audio conference participants can dial-in on the numbers
below:

• Participant Toll-Free Dial-In Number: +1 (844) 421-0601 ID: 10641252
• Participant International Dial-In Number: +1 (716) 247-5800 ID:
  10641252
• Web-cast: More details are provided on our website, www.taro.com

To participate in the audio call, please dial the numbers provided above
five to ten minutes ahead of the scheduled start time. The operator will
provide instructions on asking questions before the call. The transcript
of the event will be available on the Company’s website at www.taro.com.
An audio playback will be available for twelve (12) days following the
call.

The Company cautions that the foregoing financial information is
presented on an unaudited basis and is subject to change.

About Taro

Taro Pharmaceutical Industries Ltd. is a multinational, science-based
pharmaceutical company, dedicated to meeting the needs of its customers
through the discovery, development, manufacturing and marketing of the
highest quality healthcare products. For further information on Taro
Pharmaceutical Industries Ltd., please visit the Company’s website at www.taro.com.

SAFE HARBOR STATEMENT

The unaudited consolidated financial statements have been prepared on
the same basis as the annual consolidated financial statements and, in
the opinion of management, reflect all adjustments necessary to present
fairly the financial condition and results of operations of the Company.
The unaudited consolidated financial statements should be read in
conjunction with the Company’s audited consolidated financial statements
included in the Company’s Annual Report on Form 20-F, as filed with the
SEC.

Certain statements in this release are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of
1995. These statements include, but are not limited to,
statements that do not describe historical facts or that refer or relate
to events or circumstances the Company “estimates,” “believes,” or
“expects” to happen or similar language, and statements with respect to
the Company’s financial performance, availability of financial
information, and estimates of financial results and information for
fiscal year 2017. Although the Company believes the expectations
reflected in such forward-looking statements to be based on reasonable
assumptions, it can give no assurances that its expectations will be
attained. Factors that could cause actual results to differ
include general domestic and international economic conditions, industry
and market conditions, changes in the Company’s financial position,
litigation brought by any party in any court in Israel, the United
States, or any country in which Taro operates, regulatory and
legislative actions in the countries in which Taro operates, and other
risks detailed from time to time in the Company’s SEC reports, including
its Annual Reports on Form 20-F. Forward-looking statements are
applicable only as of the date on which they are made. The
Company undertakes no obligations to update, change or revise any
forward-looking statement, whether as a result of new information,
additional or subsequent developments or otherwise.

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