Israeli drug firm Taro sues Sun Pharma in US

Taro Pharmaceutical Industries Ltd of Israel has filed a lawsuit against Sun Pharmaceutical Industries Ltd and its affiliate Caraco Laboratories in the US alleging, among other things, that Sun withheld information on the recent action by the US Food and Drug Administration against Sun's majority-owned subsidiary in the US, Caraco Laboratories Inc.

In a lawsuit filed against Sun in the district court of New York, Taro said Sun and Caraco failed to disclose to Taro shareholders material information such as the recent action by the FDA against Caraco Laboratories, in which the FDA seized $20 million in products, effectively closing down manufacturing operations of Caraco.

Taro alleged that the FDA action apparently grew out of a long pattern of failure to comply with regulatory requirements governing the manufacture of drugs at Caraco under Sun's control and that this would affect its operations, business and its shareholders if Sun were to gain control of Taro.

Taro alleged that Sun has inflicted harm on Caraco's minority public shareholders in order to advantage Sun and Sun's shareholders. The lawsuit also pointed to recent disclosures by Caraco of the resignation of a Caraco outside independent director over serious "corporate governance" issues at Caraco.

Taro also alleges that Sun and its affiliates have misappropriated confidential information about Taro gathered as part of the proposed merger transaction, that it "illegally used such confidential information to disrupt and harm Taro's customer relationships and undermine Taro's revenues."

Sun announced its hostile tender offer after a proposed merger agreement between Sun and Taro failed to get regulatory approval following opposition by some Taro shareholders. That merger agreement was subsequently terminated by the company pursuant to the terms of the merger agreement.