Stock update: Sun Pharmaceuticals

Stock update: Sun Pharmaceuticals

Sun Pharmaceuticals won a temporary relief from the Tel Aviv District Court on a shareholders’ meeting of the Israeli company that was set to limit liabilities of the directors of Taro in the event of mergers and corporate restructuring.

The district court issued a temporary injunction to block Taro’s shareholders from considering resolutions regarding indemnification until 21 days from the date on which Taro provides the documents demanded by Sun.

Sun Pharma had filed a case against Taro in May challenging the validity of the indemnification. It had also asked Taro for minutes of the board meetings and financial reports, which the Israeli company did not provide.

Taro shareholders were to ratify, confirm and approve the exemption and indemnification undertakings to limit the liability of its directors in mergers and corporate restructuring.

At current levels, the stock is trading at 19.4x its FY2010E and 16.3x its FY2011E Earnings. We recommend a NEUTRAL view on the stock.