The share price of India’s leading pharmaceutical player, Sun Pharmaceutical Industries (Sun) reacted on Thursday on reports of drug regulator, US Food and Drug Administration (FDA) conducting a surprise inspection of the company’s manufacturing plant at Halol in Gujarat.
As against Wednesday’s close of Rs 859.65 on the Bombay Stock Exchange, Sun fell to a low of Rs 808 in early trade on Thursday before closing at Rs 822.8, down 4.29 per cent.
The company refused comment on reports of the inspection, but sources indicate that the move may have been triggered by a number of recent recalls from the plant. In May, Sun Pharma’s other manufacturing facility in Karkhadi, Gujarat had received a warning letter from the US FDA after investigators had identified violations of current good manufacturing practice (cGMP) and regulations for finished pharmaceuticals.
“Of late, Sun Pharma recalled three important medicines from the US market,” said Sarabjit Kour Nangra, VP – Research, Angel Broking. It recalled 40,000 bottles fo Venlafaxine Hydrochloride extended release
tablets after it failed the dissolution test, Gemcitabine for manufacturing issues and Metformin for packaging problems. While all recalls were limited to specific batches, all three products are manufactured at Halol.
The Halol plant was last inspected in September 2012 and reportedly contributes around 40 per cent of Sun’s US sales and around 25 per cent of the consolidated profit of the company. “Results of the ongoing inspection at Sun Pharma’s Halol plant would be significant given its importance to the company’s US revenues as well as for its overall performance going forward,” Ms. Nangra said, adding that in 2013-14, US business accounted for 60 per cent of Sun’s overall sales.
“Going forward, after the merger with Ranbaxy Labs, its dependence on the region would reduce to around 45 per cent of the expected sales in 2015-16. Thus, the share of the plant in the overall sales would reduce going forward (expected to be around 10 per cent of sales in 2015-16), while profitability could be impacted given the low profitability of Ranbaxy Labs in case of an adverse implication.”