Last week investment bank Bear Stearns (NYSE:BSC) came to the defense of Taro Pharmaceutical Industries (Nasdaq:TARO). Bear Stearns said that the recent drops in the share price were not due to any changes in the company's business foundations or because of a change in the company's forecasts.

Bear Stearns noted that the current price of Taro shares constitutes a good opportunity for entering positions. The bank recommended Taro as a high-quality generic drugs firm, run by experienced management.

Since mid-December, Taro shares have lost 18.5%, and the analyst team headed by Joseph Riccardo estimates that Taro will report strong results for the fourth quarter of 2001. Revenue is expected to rise to $42 million, and earnings per share are expected to increase to 31 cents.

The analysts expect that 2002 will be strong, with revenue of $193 million, 31% higher than in 2001, and EPS of $1.5, 56% above 2001.

The investment bank reiterated its Buy rating, setting a price target of $50, 40% above the Taro share price on January 13, and $1 higher than the share¿s peak price.

The analysts estimate that Taro will end 2002 with $155 million cash, compared with $146 million at the end of the third quarter of 2001 (consisting of $19 million in cash the company had at its disposal before the third quarter, and $127 million netted in its secondary offering).

Taro's market cap is about $1.1 billion.

The analysts noted that Taro is awaiting the approval of the U.S. Food and Drug Administration for four new products worth a total of $150 million, and that these approvals are expected to come through in the first half of 2002. The sales of two of these new products are expected to come to $100 million based on original-product sales.

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Taro is currently awaiting FDA approval for a total of 11 products, whose market is in the range of $400 million to $500 million. In 2002, the company is expected to receive approvals for four to six of those products.

The analysts expect that sales of Lotrisone products will remain similar to sales in 2001.

Taro's Lotrisone market segment last week came to 57.2%, and it controlled 81.1% of new Lotrisone prescriptions.

The original Lotrisone, made by Schering-Plough, is used for treating dermatological conditions. Taro's generic product is called Clotrimazole/Betamethasone.

The analysts believe that Taro's forecasts incorporate the entry of another competitor into this market.

According to the sales model used by Bear Stearns, Taro's Lotrisone-product sales in 2002 are expected to come to $29 million, unchanged from 2001. But the analysts add that the company may yet surprise for the better on this item.

Taro on January 8 announced that its British subsidiary Taro Pharmaceuticals UK has received approval from the United Kingdom Medicines Control Agency for Warfarin in 0.5 milligram, 1 milligram, 3 milligram and 5 milligram tablets. Taro's drug is the bioequivalent of Goldshield's Marevan (warfarin sodium) tablets.

The drug is used for treating blood clotting, post-heart surgery complications, and cardio-vascular problems.

The analysts estimate that 2002 Warfarin sales will come to $20 million.