Taro accuses Sun Pharmaceutical of failing to disclose FDA violations

By Lisa Kerner

Charlotte, N.C., Sept. 29 - Taro Pharmaceutical Industries Ltd. announced on Tuesday that it filed a lawsuit against Sun Pharmaceutical Industries Ltd. and some of its affiliates in the U.S. District Court for the Southern District of New York.

The lawsuit alleges that Sun failed to disclose to Taro shareholders that the Food and Drug Administration seized products worth $20 million from Sun subsidiary Caraco Laboratories, Inc.

Caraco's manufacturing operations were closed as a result, according to a Taro news release.

The FDA's action followed Caraco's failure to comply with regulatory requirements governing the manufacture of drugs, said Taro.

Taro also accuses Sun of misappropriating confidential information about Taro gathered as part of the proposed merger transaction.

According to Taro, Sun's tender offer for Taro that began in June 2008 violates the Williams Act in part because of Caraco's FDA violations.

Taro said it is seeking to enjoin use of Sun's improper tender offer materials as well as damages and injunctive relief.

Ongoing litigation

The latest suit is in addition to ongoing litigation in Israel and New York state courts.

While the Hart-Scott-Rodino waiting period has expired in Sun's tender offer for Taro, the closing of the offer has been temporarily prohibited by the Supreme Court of Israel until it issues a decision on Taro's appeal.

Previously, the Tel-Aviv District Court ruled in favor of Sun that a special tender offer was not required.

Sun's offer will expire on the fifth business day following the announcement by Sun of a ruling by the Supreme Court.

In May 2007, Taro agreed to be acquired by Sun for $7.75 per share and then terminated the merger agreement in May 2008. Sun offered to increase the price to $10.25 per share, which Taro rejected.

Sun exercised some options to acquire shares of Taro from the company's controlling shareholders on June 25, 2008 and began the tender offer on June 30, 2008.

According to Sun, as of 5 p.m. ET on Sept. 11, 32,202 ordinary shares of Taro had been tendered and not withdrawn.

Taro is a pharmaceutical company with offices in Israel and Hawthorne, N.Y.

Mumbai, India-based Sun makes specialty pharmaceuticals and active pharmaceutical ingredients.

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