Sun Pharma shares dip 4% on ‘surprise’ USFDA inspection news

Shares of Sun Pharmaceutical Industries ended with a loss of more than 4 per cent on Thursday on reports that its Halol manufacturing plant in Gujarat was subjected to surprise inspection by the American drug regulator United States Food and Drug Administration. The stock, which touched a high of ₹850.70 on the NSE, dropped to a low of ₹808 before recovering to ₹821 at close, a loss of ₹36.80 or 4.29 per cent.. No information was posted on their websites by the stock exchanges till the end of trading about any response from the company regarding the reported inspection. But there was a market buzz about it, leading to the stock coming under pressure.

Sarabjit Kour Nangra, VP — Research (Pharma), Angel Broking, said that it was learnt that Sun Pharma’s manufacturing facility at Halol (Gujarat) “is undergoing a surprise inspection by the USFDA.” The action might be a fallout of a “number of recent recalls from the plant,” she said quoting sources “familiar with the development.”

According to Credit Suisse, which recently rated the stock ‘outperform’ with a revised price target of ₹950 (up from earlier ₹900), key risk remains pending FDA inspection at Halol facility (nearly 25 per cent of profits).

Nangra said in May Sun Pharma’s unit in Karkhadi in Gujarat was warned by the USFDA “after investigators identified violations of current good manufacturing practices and regulations for finished pharmaceuticals.”

She mentioned about Sun Pharma recalling three important medicines from the US market, all of which were produced at Halol.

May hit in profits

She said that the contribution of the Halol plant to overall sales might decline (expected to be around 10 per cent of sales in FY16). While profitability could be hit, it was “too early to call given that the company has voluntarily done some withdrawal, and given the importance of the facility.”