Thank you. Good morning everyone and welcome to our second quarter 2016 - ’17 earnings conference call.

Joining me today on the call are Mr. Dilip Shanghvi, Chairman of Taro’s Board of Directors; Mr.

Kal Sundaram, CEO; and Mr. Mariano Balaguer, Taro’s new CFO.

We hope you received a copy of the earnings press release, which can be found on our website at taro.com. We anticipate that many of you may have questions concerning not only this quarter’s and year-to-date financial performance, but also our markets, operations, strategies and other matters.

We will try to respond to most of your queries. We will not be able to share product specific and commercially sensitive information, including pipeline details.

We ask that you limit yourself to one question, and if you have any more questions please rejoin the queue. As a reminder, this call is being recorded and a replay will be available on our website for the next 12 days.

A call transcript will also be placed and remain on our website. Before we proceed, I must remind you that today’s discussion may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurances that its expectations will be attained and should be reviewed in conjunction with the risks that our business faces, as detailed from time to time in the company’s SEC reporting. I will now turn the call over to Mr.

Dilip Shanghvi.

Thank you, Will. Welcome all of you and thank you for joining us today for Taro’s earnings call after the announcement of Taro’s second quarter fiscal ’16 - ’17 financial results.

We’ve been trying to respond to most of your queries; however, we will not be able to share product specific and commercial sensitive information, including pipeline details. We have just completed the six-year anniversary of Sun ownership in Taro.

When Sun acquired Taro in September 2010, we recognized that there were two key challenges that needed to be addressed in order to profitably move Taro forward: low sales growth and R&D productivity. The R&D investment was below its theoretical requirement.

Over the past six years, Taro’s commitment to delivering quality products through R&D investment has doubled with a healthy pipeline of 36 ANDS awaiting FDA approval. Building a strong pipeline will continue to be our focus.

As you are aware, we announced in July that Kal will be returning to India to assume an executive position in Sun Pharma’s global headquarters. Before I turn over to Kal, I would like to thank him for his commitment, dedication, and for his contribution to Taro, its management, employees, and most importantly shareholders.

He has led the company on a steady and consistent growth path through a very challenging year for both the company and the industry. Thank you, Kal.

Thank you, Mr. Shanghvi.

Welcome to everyone and thank you for joining us today. We are pleased with our overall operating performance.

Net sales, gross profit and operating income have all increased for both the quarter as well as year-to-date compared to 2015 comparable periods. We recorded a 7% uptick in volumes in the quarter, which is within [indiscernible] compared to the previous period.

While our R&D spend is down slightly over last year, this is mostly due to the timing of the spend. We take a very long-term view of our R&D activities, including plant clinical activities.

All of them are on track. In fact, we spent practically as much as the first half of this year as we did in the entire year of 2010 prior to Sun buying Taro.

Our [indiscernible] are in good standing [indiscernible] major regulatory agencies. Our customer service is outstanding, in my view some of the best in the industry.

Taro recently received [indiscernible] Excellence Award from [indiscernible] Health and we also achieved RDC 2016 Manufacturers Award. Finally, we successfully completed our $250 million of share purchase program in August, repurchasing 1.8 million shares.

As a reminder, in 2013 the company repurchased 2 million shares. With excess cash of over $1 billion, we continue to evaluate business development opportunities with appropriate targets; however, we remain disciplined in our approach in the way we deploy the cash, ensuring that our financial and operational targets are met.

We continue to face broader industry challenges in the generic landscape given the competitive intensity [indiscernible] customer consolidation. Nevertheless, we remain cautiously optimistic about our medium to long-term growth.

On our new product sales, we have met and in some cases have exceeded our own expectations for first half of this year. This is helping us to offset some of the sales decline [indiscernible] of our existing products.

We will remain focused on strengthening our R&D pipeline and other initiatives that will continue to keep us well positioned in the market. In summary, I believe our long term [indiscernible] is well balanced with a leadership position in many of the key molecules, a good pipeline, solid pipeline, and effective new product launches and strong manufacturing and customer service capabilities.

Before I had over the floor to Mariano Balaguer, our new CFO who has just joined, I’ll give his background. Mariano has 20 years of experience in senior management roles with global companies such as Novartis Consumer Health, Nestle, and most recently Global Strategic Portfolio division at Henry Schein.

In his previous roles, Mariano was responsible for the finance functions of the business, working to expand investment and profitability of the growth, as well as [indiscernible] the capacity of the finance teams. His experience covered all aspects of financial reporting, planning, expense control, tax, treasury, M&A, and other financial matters.

His extensive financial background and international exposure will help us strengthen our management team and contribute to continuing growth and expansion of our business. With this, I welcome Mariano.

Thank you, Kal. Hello everyone and welcome.

I’m very happy and excited to be at Taro, and I look forward to making a meaningful contribution to the company and its growth. My goal is to provide strong financial leadership to the company, keeping in mind that creating shareholder value and providing good quality products to the market is paramount to what we do.

The comparisons that I will discuss are with the comparable prior year period: first, the Q2 highlights followed by the full year comparisons. Q2 net sales were $229 million, an increase of $17 million or 8% driven by an increase in volumes mainly from the U.S.

business generics. In 2015, net sales were negatively impacted by $19.6 million net charge taken to meet contractor obligations associated with price adjustments.

On a pro forma basis, adjusted for the price protection provision, net sales would have decreased 1.2%. Gross profit of $177 million increased $9 million or 5% versus same quarter last year.

R&D decreased $4 million to $15 million, and as Kal said, with all our activities including clinical studies proceeding according to plan. As you know, R&D spending is not evenly distributed across quarters.

Selling, marketing, general and administrative expenses decreased $3 million principally from the result of reduced [indiscernible], and we continue to actively manage and remain disciplined with our spending and [indiscernible] initiatives wherever possible. Operating income increased $17 million to $142 million and increased to 62% as a percentage of net sales from 59% in the same quarter last year.

As a result of the above, Q2 EBITDA grew 13% or $16 million quarter over quarter to $145 million. EBITDA margins improved to 63% compared to 61% for Q2 last year.

Net income was unfavorably impacted by a $22 million fluctuation in foreign exchange income from $35 million in 2015 to $13 million in 2016. This was principally due to the result of the strength of U.S.

versus Canadian dollar, an increase in U.S. dollar cash, and intercompany balance.

The FX is mainly balance sheet driven by U.S. dollar-denominated bank accounts and intercompany AR balances on our Canadian subsidiary books.

Tax expense increased $5 million to $36 million, resulting in an effective tax rate of 22% compared to 19% prior period. This increase is the result of geographical mix of where our profits are realized.

Net income attributable to Taro was $124 million compared to $133 million as the increase in operating income was offset by the decrease in FX income and increasing tax expenses, resulting in earnings per share for the quarter of $3 versus $3.11 in Q2 last year. Let me now briefly discuss the full-year performance and comparison to last year.

Net sales of $463 million increased $35 million or 8% with an increase in volumes principally due to our U.S. generic business.

On a pro forma basis adjusted for 2015 price protection provisions, the net sales increase would have been 2%. Cost of goods sold increased $17 million or 21%, the result of higher volume as well as product mix.

Gross profit increased $20 million to $360 million, and as a percentage of net sales was 78% compared to 80% for the same period last year. R&D expenses of $33 million remain in line with prior year expenses, and SG&A expenses decreased $4 million to $43 million, mainly from the result of a reduced [indiscernible] reduction.

Operating income increased $25 million to $284 million or 10%versus prior year, where EBITDA grew 9% or $24 million to $292 million and margins remained consistent at 63%. FX income decreased from $31 million to $7 million as a result of the strengthening of U.S.

dollar versus Canadian dollar. Tax expenses of $66 million increased $5 million and the effective tax rate increased to 22% from 20% on the same period last year.

Net income attributable to Taro was $234 million compared to $237 million, a $3 million decrease as the increases in operating income was offset again by the decrease of FX income and the increase of tax expenses, resulting in diluted earnings per share of $5.59 compared to $5.54 in prior period. Our cash flow balance remains very strong.

Cash from operations for the six months ending on September 30, 2016 were $193 million compared to $129 million for the six months ended in September 30, 2015. Cash including marketable securities decreased $319 million to $909 million from March 31, 2016.

This was mainly due to a $241 million impact from the company share repurchases as well as a $251 million increase in long-term bank deposits. As Kal mentioned before, we successfully completed our $250 million share repurchase program.

The company bought back 1.8 million shares in open market transactions in accordance with a 10b51 program at an average price of $138.80 per share. Now let me hank back the floor to Kal.

Thanks Mariano. Before we open the floor for your questions, I want to briefly address the recent announcement concerning Department of Justice investigations.

While we do not comment on any specifics concerning active legal matters, I can tell you that the company and two of its senior members received subpoenas from the Department of Justice relating to pricing and communication with competitors. Our understanding is that the subpoenas relate to the same industry-wide investigations into the generic industry that have been going on since 2014.

As far as we are aware, the Department of Justice has not brought any legal action against the company in connection with the investigation to date. We take this matter seriously and are working actively with our [indiscernible] to cooperate with the Department of Justice.

We also remain committed to strong, long-term corporate governance and fostering a complaint culture at Taro. Finally, I want to thank Taro’s Board of Directors, Taro’s management team and all Taro employees, our customers and shareholders for the support that was extended to me during my tenure with Taro.

I’m confident Taro will continue to grow and is well positioned for the future. With this, I’d like to open the floor to ask questions.

Thank you.

Yes, hi. Thanks for taking my question.

Kal, on your comments on being cautiously optimistic from a medium term perspective, given the pricing environment and the competition particularly in product segments that you represent and the fact that we have already a large base of around $900 million sales with [indiscernible] spending, I find it a bit surprising actually because the noise we hear about pricing competition, and so many companies developing and planning to launch [indiscernible] products, for instance, that there would be [indiscernible] competition. What makes you feel optimistic?

Are you factoring in the acquisition, given the cash balance that you have, when you say you’re optimistic about growth going forward?

Saion, probably I’m going to give you a two or threefold answer. The first answer is as have always been emphasizing, [indiscernible] on long-term strength comes from our pipeline.

We’ll continue to invest in R&D, and as you know, we have [indiscernible] some of the best quality reputation and service reputation in the industry, so in such a scenario naturally everything is at a competitive--we see other companies [indiscernible], so in that respect we are well positioned with good pipeline as well as very good quality service record. That is out first point.

The next is--maybe I’ll even ask my boss too, Mr. Shanghvi to comment.

This is a generic industry, but it has its own cycles, so inasmuch as we enjoyed good sales growth in the recent past, naturally it will come pressure. That’s what we are seeing, and we have already seen some competitive pressures and that has an effect on sales, which we are offsetting with our future products.

So [indiscernible] medium to long term, I am of the belief that we will ride out these ups and downs. The last point is like I was saying, we have a very healthy balance sheet.

If a very sort of suitable, attractive acquisition opportunity which can create further shareholder value comes, of course we will capitalize on it. So I don’t--what do you say, I don’t get too nervous about one quarter, two quarter, one year, two year; but [indiscernible] if you go back three or four years, also we cautioned that there will come a time we’ll be subject to pricing pressure, so it was anticipated.

Okay, thank you. I’ll jump back in the queue.

Thank you.

Yes, hi. Thanks for the opportunity.

So my question is in the past, we have talked about that the growth has been largely due to the pricing, higher pricing, and this quarter after a long time, you talked about price erosion in the existing portfolio. Now, there are two things playing out.

One is the channel consolidation and new players adding [indiscernible], so what has really impacted us more, and if you should share what’s the near term outlook.

I think it varies for a given product. If the product comes under pricing pressure, it’s very difficult for us to determine how much is due to customer consolidation, how much is due to competitive pressures.

As more players come into the market, it will certainly have an effect on both the price volume as well as market share, so that’s what we have experienced. So sorry, Prakash, what’s your second question?

You had a follow-on question to what you asked in the beginning.

Yes, the outlook in the near term as we just started to see the pricing pressure, both from new players as well as channel consolidation. So what’s the near term outlook?

I think what we have seen in the first quarter, first half, the pricing pressure that we faced, we made a bit [indiscernible] back from new products. My own personal expectation is we should be in--given our good pipeline, we should be in a position to offset any sort of pressure that we will get on the existing products through launch of new products.

So what are the main reflection of what we see in the future?

That’s what I’m saying. I would really say our objective will be to--aim will be to offset near term pricing pressures through launch of new products.

Okay, and any color in terms of launches that you can give us?

Prakash, come back again?

Is there any color on the launches for the next six, 12 months you can give us on the product portfolio?

Prakash, a lot depends when the FDA gives their approval, so that’s not in our hands. We have some very good quality products which we are anticipating approval, so depending upon the timeline, once we get approval we will immediately launch the product.

So if you ask if the next couple of quarters will we come under more pricing pressure, the answer is certainly yes; but those quarters we will pick up, assuming we get FDA approval that we are anticipating, we will get healthy sales from those new products. Let’s go on, please.

Thank you for taking my question. Just to clarify, you mentioned that we are likely to see more pricing pressure versus what we are seeing now in the next few quarters.

Is that correct? So should we assume further deterioration in pricing for Taro?

Look, a lot depends on what the competitive intensity in the market, so it will be very difficult to what is a crystal ball guess, but [indiscernible] competitive intensity continues to be the way we are seeing in the next quarters will [indiscernible] possibly [indiscernible], but what I want all of you to take into account is given our sales base of a billion dollars, the pricing pressures as a percent of the total base will not be--I can’t say it will be insignificant, but it’s not going to be something that is too big for us to be worried about. [Indiscernible]

Because if I look at our numbers for the quarter, so adjusted for last time, last quarter, the prior quarter runoff, we grew by 1%. You said the volume growth was about 7%.

That implies a high single digit sort of price erosion, and my concern is it could probably grow double digit on a billion dollar base where the competition in terms of products is increasing. It would be difficult to offset that, at least for the next--even if we get new product launches.

Is that the correct assumption?

That’s a possibility, but what I also want you to take into account is [indiscernible] the first half, some of our base prices have come down, and with that we are able to offset the losses through new product launches. So it’s a combination of price erosion, some offset.

What it’s going to be further, it would be very difficult for me to predict at this point.

Okay, and on R&D, what would be a normalized level of R&D? I understand it could be lumpy quarter on quarter, but on an annualized basis, are we comfortable with the run rate that we’ve been spending in the past in terms of an absolute number, or would that number increase?

If you look at our last three, four, five years, there has been a steady increase, so I would expect the momentum on the increase will continue on a year-on-year basis.

Got it. Thank you so much.

I’ll get back in the queue.

Thank you.

Yes, thank you. One question for Mr.

Shanghvi. Mr.

Shanghvi, how do you measure the R&D efficiency at Taro, like [indiscernible] payback period, and how is Taro tracking against that? Because if I see the numbers since we acquired Taro, we’ve almost spent more than $320 million in R&D.

In the past, you mentioned that the payback [indiscernible] acquisitions that we have looked at Sun is about six years, so is that the kind of number that’s a reasonable number we look at here, and how does this parameter compared against Sun when we compare the R&D efficiency of Sun Pharma?

Actually [indiscernible] overall productivity and the type of products that we are able to file out of Taro, so--and also I think the degree of complexity, normally clinical studies which are required for doing the filing, I think I’m quite happy with what they are able to deliver.

But with Sun, how do you measure that performance? Let’s say is there--like, in the acquisitions you mentioned, that the best metric is Sun looks at its payback period.

No, I think we have probably different metrics about measuring return on investment [indiscernible] because there is a lead time between which the R&D will start producing. So you have to factor that delay, and ultimately R&D needs to produce a return which is significantly higher than the original spend, so that philosophy needs to be kept for deciding on the investment in R&D.

Dilip, with your permission?

Sure.

In Taro’s portfolio, a number of products, most of the products will require clinical development, so you’ve got to build in that original timeline. [Indiscernible] on one hand, you’re putting more time.

On the other hand, clinical development, a complex product by itself also has the potential to create larger value. That’s the balance.

Agreed. If I can ask a follow-on on this?

Mr. Shanghvi, when you compared, let’s say, a dollar spent on Taro R&D with a dollar spent on Sun Pharma R&D, based on any parameter that you track performance of two companies, would you say that efficiency would be similar in two companies in, let’s say, last five years?

Actually I haven’t done this comparison, so it’s a good point. We should find a way to do that comparison.

But we haven’t, so I think it’s good for me to internally do this before I share it publicly.

Thank you.

Thank you.

Yes, hi. Is it possible, Kal, to give a rough idea on the price and the volume spreads for the first half of the year for Taro?

What do you mean by that, Kartik? Can you amplify your question?

Yes, so in terms of overall revenue growth in that, what would be roughly the volume and what would roughly be the overall increase? I mean, so from the new products that we have launched before, kind of I mean it would be like half of it would have contributed to this?

Kartik, I would say it would be--as I understand your question, what is our split of new products versus existing products, is that what you’re asking?

Yes.

Good try. In the beginning, I told you I don’t get into specific details on product level discussions.

All I’ll tell you will be the products that we launched performed quite well and they helped to substantially offset the pricing pressure that we came under. So there are two ways you can look at it: [indiscernible] have a lot of pricing pressure and a low set of new product sales, or we had good pricing pressure but good new product sales.

So very healthy new product performance is what I’ll emphasize.

But it is the long term, or maybe sort of you are in that so there is some DoJ things which we have [indiscernible], so philosophically would you think that you would keep some cash on the books and do a share repurchase or an asset acquisition? I mean, would that be on your mind when you would do that?

I’m just trying to understand--

I hear your question. Like I said, as I said in my readout, to date we have no evidence or we have not received any specific--we have not been charged with anything by the Department of Justice, so [indiscernible].

Again, I want to emphasize we have good--we follow some good practices, good training processes set out within the company, and to the best of my knowledge we have not done anything wrong. But at the same time, naturally this is a subpoena inquiry, we have an obligation to respond and cooperate with the government.

Yes, thanks for taking my questions. Just [indiscernible] understanding on the 36 pending approvals, I know you--

Hello?

Can you hear me?

No, the line was a bit feeble. Come back again/

Now is this okay?

Yes.

Okay, yes. So my question is on the 36 pending approvals.

I know you are--you cannot give me the year by year launch calendar, but broadly, how many years will it take for you to launch these 36 ANDS?

[Indiscernible] It’s a combination of some of the [indiscernible] have a longer term horizon, but for the rest of the products, [indiscernible]. So for the rest of the products, if you ask me [indiscernible] next three years, [indiscernible] to launch [indiscernible] on what we have spent so far.

I’m sorry, there was again line breaking, but if you can please repeat. I’m very sorry for that.

Okay. Can you hear me now?

Yes, this is okay.

We’ve got to split these 36 products into some products [indiscernible] challenges with the longer term horizon. So if we put those aside from the rest of the products, it’d be talking about [indiscernible] 18 month timeline, given it will take sort of 18 months, 24 months.

[Indiscernible] probably the next three years or so, we should be in a position to capitalize on if not all of them, most of them.

Okay, so--

We are seeing steady increase in [indiscernible] for the products that we filed in the past.

Understood, okay. We have seen some [indiscernible] decline sequentially as well as year-on-year, so is this all related to the pricing pressure?

Is that a fair understanding?

Some of the volumes have gone up, and I’d say it depends on the product mix too, so it’s a combination of product mix and the volumes.

I see, so it’s not only because of pricing pressure? Okay.

If I can squeeze, on the CEO, appointment of the CEO, we understood earlier that--hello?

Hello, Operator?

Okay.

Yes, okay. Good.

Sorry we got disconnected. So where were we?

We can restart the queue again now, please.

Yes, thank you for taking my questions. I just wanted to know, does Taro have a sales force in the U.S.

which is used to retail products to prescribers?

We do have a field force to retail products to, but we keep focusing on dermatologists, yes.

And how big would that sales force be, given the fact that you’re a predominantly generic product, the portfolio?

I think it’s more sort of the number of doctors that we call on than the number of [indiscernible] whether it’s generic or brands. So--yes, go on?

Go ahead. I interrupted you, apologies.

[Indiscernible] there are 60 people or so, should be normally what is adequate to cover key dermatologists.

And they basically use this [indiscernible] generic portfolio as well?

They focus on--when we talk to the doctors, we largely focus on the brands. So where are you coming from?

Hello?

Yes, thanks for taking the follow-up. You mentioned about new launches, but the [indiscernible] data doesn’t indicate much contribution from new launches, so [indiscernible] seen significant pricing pressure.

We have seen in the last couple of quarters, right, I mean the company put a number and IMS numbers have--they have--I mean, the ratio has turned more in favor of the company reported number. So what do you think about it?

Are there any comments that you would like to make?

I think one needs to look to see the channels IMS captures and the channels IMS is not good at capturing. IMS will be--more if you go through the conventional channels, the closer you will be to IMS.

If you deviate from that, the delta will increase.

Do you think is it a phenomenon of the new launches that you had, or even your older products this kind of difference in the channel mix has [indiscernible]?

I would characterize it’s not product dependent, it’s more channel dependent.

Okay. So my second question, if I can, on receivable days.

Over a period of time, we have seen that increasing quite a lot, you know, receivable days over the three, four year period. Now, is this is a phenomenon in the U.S.

market, or if you can throw some light on how you see that going forward?

Maybe later on I’ll ask Mariano to provide more color if required. Naturally receivables is a function of your sales, isn’t it, so one of the factors in the last few years is while sales have been going up, the receivables go up.

For the [indiscernible] I would say it’s more a timing difference. Other things being equal [indiscernible] assuming it’s at constant sales, your DSOs should be corresponding to that.

So as of now, we have--we are collecting all our bills on time, we have no contentious matters with our customers, we have an excellent system that captures our sales [indiscernible]. Mariano, you want to comment anything on it?

Sure, thank you, Kal. Basically as you clearly say, our accounts receivable has no credit issues.

Our DSO is driven mostly by our largest customers in terms of what they have. In any given period, DSO can be impacted by factors such as customer mix or the amount of charge-backs due to customers.

So as Kal said before, we haven’t seen any issue in our accounts receivable so far, and this we consider to be a normal fluctuation of the business.

Actually I was referring to receivable days. If you see, that has gone up, mostly150 days two years back to 200 days, and even if you go back, it used to be closer to 100 days.

So there seems to be a steady increase in receivable days over the years, actually.

Saion, I don’t have those numbers today right in front of me. All I’d sort of say is the industry norms will be somewhere in the region of 100 days or so.

I think that we’re very broadly speaking will be in that range. One thing that you’ve got to take into account will be the inter-customer consolidation, that depending upon the change in that mix and the resultant consolidated customer base, what their terms with us can have an influence on the number of days.

For example, Customer A is, say, 30 days, Customer B is 90 days. If the Customer B starts buying for Customer A, that also can reflect in an increase.

But if you think about 150 days, etc., again I don’t have the actual numbers in front of me but I’m fairly confident that we are nowhere near that type of number.

Kal, if I can give you some numbers there, we were above 110 days two quarters ago. We dropped down below 100 days last quarter, and now we are at 100 days, so as I say before, we do not see any issue in our credit.

This is part of the normal fluctuation of the business, and if you go back in history, you will see the same fluctuation. Even more, market trends, there is something going down there, so basically we are in good shape.

And we have already--go on?

Yes, sorry. On the balance sheet, you report accounts receivables and other receivables.

So what is the other receivables? What are those?

Other receivables would be [indiscernible] and things like that. Sorry, I was an accountant long time ago, so I will ask--Mariano can answer that.

Yes, other receivables includes some of the deferred tax, so I want to take that into consideration to mention that piece.

Saion, other receivables had nothing to do with [indiscernible].

Any other questions, otherwise we need to move forward.

Yes, a very good morning to all of you, and thanks for taking my question. If you look at in the last few quarters, our sales have been more or less in the vicinity of around $230 million to $250 million kind of range.

While you alluded that the new products are something which are going to drive the growth going forward, but if I look at even the R&D expense over the last two years and in the first half of this fiscal year also, I think it has been more or less--I would say steady kind of thing, like it’s not growing despite being a billion dollar base, and obviously we are seeing pressure in terms of pricing and all those things. So just would like to get your comments in terms of maybe mid to long-term growth prospects for the business.

Manoj, in the beginning I mentioned, particularly in dermatology, the development timelines are longer than let’s say [indiscernible], because for most of the products we have full clinical development. So over a period of time, we have been accumulating a pipeline, so historically we’ve seen in the last two, three years the new product contributions have been insignificant.

But that said, you’ve got to take into account when you look at the future launches that that thing is also historically, if you look at the FDA, they were taking upwards of, let’s say, 36 months on average to approve a product. Now, we are talking 18 months, somewhere in that region let’s say, so there has been acceleration of approvals that also benefits for us in terms of our pipeline.

It also will have an effect on somebody’s ability to bring their product. So answering and sort of summarizing what you are asking me, there is a time lag between the R&D spend and the product approvals, so in the past whatever that we have filed, we’ll see the benefit of that in the next one, two, three years [indiscernible].

Okay, so just continuing with this question only, so are we fairly confident that despite the price erosion, we should be able to grow our top line as we move forward over the next 12 months?

I think [indiscernible] quite a lot here. All in all, the company [indiscernible] the underlying strength of the company will depend on our portfolio and the quality and the service.

On all fronts, I’m very confident that we are doing what I’d say by all comparisons a good job. Based on the [indiscernible] medium to long term, we look healthy, and I also said earlier on in generics it’s a cyclical business.

We will have sort of competitive pressures, they go down, sort of then it goes up, so one has to take a fairly long term view of the company.

Thank you and greetings everyone. Kal, would Taro look to therapeutically diversify out of derma, or do you think there is ample opportunities out there for you to continue to work your R&D engine?

I think what you say, we’ll continue to look for opportunities in derma and beyond, but by and large we are a specialty generics focusing on derm. We have a good portfolio of [indiscernible] products where the product complexities [indiscernible] more demanding.

So anything that fits that criteria, we’ll continue to look. Similar in the [indiscernible]--

So you see ample opportunities there?

What is in the specialty space, [indiscernible] have reasonable opportunities.

Okay, and very quickly on the DoJ investigation, I don’t want to be specific about what’s going on with you, but theoretically speaking, what kind of a road map do such investigations take? Is it broad timelines, does it go through the court route?

How should we think about it - is it one year, is it a five-year thing here from?

Again, the good news is that I don’t have a lot of experience in this. If you look at other companies, some of the other companies, the investigation started in 2014.

Nothing has been done, we are not aware of any charges, but the investigations are going on. So I think it will be--it’s not going to get over in a month or two.

It will be for a longer period.

Again, what’s your capacity utilization at Israeli and Canadian facilities?

We have ample capacity to take all our new products.

Hi, thank you for taking my question. Just probing again on the DoJ, I know you’re not giving us any detail.

Some of your competitors have filed products which you sell, so can you give us any color on--any additional color on the DoJ probe? I know there is [indiscernible], but anything you can share additionally would be very--

I think--go on?

Yes, and provisioning now ahead of that event? I know that charges have not been framed, but any kind of conservative provisioning that we can as a company do?

Do think it makes sense, or you think it’s too early?

It’s too early, and what I’m saying is we will process it. At this point, we have no reason to believe that there is going to be any damage.

Depending upon the [indiscernible] the way the investigation dialog, etc. goes, if there is a requirement in future, of course we will consider that at that point.

As of today, we don’t have any reason to believe that we need to make any provision.

Just following up again, just the fact that--do you think just from your conversations with the Department, is there a case that they could--I know we are speculating here, but is there a case that they could set this as an example to prevent future price increases in the industry, because they’re just probably upset at--

Okay, I think we also said that we are speculating here.

Okay, thank you.

Yes, thank you for the opportunity. So on the M&A front, we’ve seen both generic as well as [indiscernible] company valuations coming off.

Does this change the environment in terms of what is available for Taro, or in terms of assets now sort of falling into your overall criteria?

[Indiscernible] my answer will be yes [indiscernible] value correction makes the opportunity more attractive than it was in the past. So if it kind of meets our, what do you say, business strategy, financial strategy, of course we’ll go for it.

But is the correction good enough for it to sort of fit into your criteria versus [indiscernible]?

Depends on the company, depends on the product isn’t it? We are continuing to monitor, and then if the opportunity [indiscernible] at that point certainly we will--what do you say, [indiscernible] to act on it.

Sure, and just if I can squeeze, what would be the tax [indiscernible] Taro?

Sorry, say that again?

Effective tax rate so that we can build in?

What are you saying? Again, this is futuristic, so I don’t want to comment on it.

But this current number is sustainable? There is no one-off, or there is no quarterly skew in this?

Mariano? There is no skew for that, I think.

Right, thank you so much. That’s fine.

Yes, thanks. One question on the cost of sales.

There is certainly a very sharp increase in cost of sales for the last two quarters. Our average cost used to be around $45 million a quarter, now we are doing 15% higher.

I know you have said the volumes are higher, but I doubt volumes are 15% higher. What I’m trying to say is that of course there is some currency element, volumes are higher, but a 15% move is very high to be explained by just product mix or just volumes.

I think you saw even what we said, the volumes are up by some 7% or so. Also, I mentioned about the product mix.

Not all products carry the same margin, so depending upon the product mix, the cost of goods also will vary.

But only be cost of goods side?

Yes. What is [indiscernible].

So you think the volume, maybe got the higher volume, the cost of those goods are much, much higher? That’s the point you’re trying to say?

[Indiscernible] higher than the average.

Okay. And--

Let me give you some color here. We already say during the script where we presented to you two impacts here.

One is the volumes were going up, the mix are different, as well as we do outsource some of the product. I explained that also in the tax impact, so you have to consider that, and that is impacting our cost.

So when you factor in all the three components into the cost, that’s why you see an increase. I hope that’s helping to answer your question.

[Indiscernible] you mention that you outsource it as well from outside, [indiscernible] also for this to go up?

Anubhav, like I mentioned, we consider this more of a product mix. As to why, how, etc., the reasons can be very many.

Sure. Just one more question on the R&D.

Can you give [indiscernible] roughly we have 36 outstanding ANDS with FDA, but on the products that you’re working right now--not the product names or the areas, but how many products are under development right now and how many trials we’re running? I’m just trying to get some idea about other than the [indiscernible] it’s not in quantity terms, let’s say.

I’m trying to say that what kind of progress are we seeing? Like, are we working on 2x molecules now that we were looking at two years back, or one and a half time molecules, or are we doing [indiscernible] right now, so some kind of color would be very helpful because we have zero idea about other than Taro doing R&D spend of $75 million a year and [indiscernible] spending in India, so we have no idea other than clinical trials where we can see how many [indiscernible] clinical trials are on right now.

Number one, I don’t have the numbers in front of me, but if you go to that [indiscernible] of what I mentioned, it can take anywhere upwards of three years for a dermatological product from start to filing. So honestly, I don’t have the numbers in front of me, but during the longer time frame to file, one can assume an accumulation of products in the pipeline.

Thank you everyone for joining us today and taking the time to be on our Q2 2016 - ’17 earnings call. We look forward to speaking to you again in the future.

This concludes our call and our conference. Again, thank you for joining us.