Sun Pharma Halol facility gets three observations by US FDA

Down from 9 it received in December 2016

Sun Pharmaceutical Industries’ on Friday said that the US Food and Drug Administration (US FDA) issued three observations to its Halol plant for inspections done during February 12-23.

The Gujarat plant has been under the scanner for good manufacturing practices (GMP) since 2014. Resolution of the regulatory issues at the plant is crucial for the revival of the company’s US business.

In a notification to the stock exchange, the drug maker said: “The company is preparing the response to the observations, which will be submitted to the US FDA within 15 business days. The company remains committed to working closely with the US FDA and continues to enhance its GMP compliance on an ongoing basis."

The outcome of the inspection was taken well by the Street on Friday. The company’s stock gained 5.17 per cent to close at Rs 570.20. The stock was under pressure for past few days as the Street remained cautious on the outcome of the inspections.

“Though the nature of the observations are unknown, the fact that the number has come down to three versus nine issued at the end of the earlier inspection can be taken as a positive,” said Ranjit Kapadia, analyst at Centrum Broking. Amey Chalke, an analyst at HDFC Securities, also said that it would be premature to evaluate without understanding the nature of the observations.

Purvi Shah, an analyst at Sharekhan, said that the closure of these observations with positive clearance from the US FDA would remove the long-standing overhang on Sun Pharma and SPARC, as it would help in acceleration of approvals for products from the plant.

The Halol plant, which contributed 8-10 per cent of the company's sales prior to the US FDA action, was the only facility from where it has filed for injectables. After being served Form 483 in September 2014 and a warning letter in December 2015, Sun has not seen new product approvals from the facility.

Rising competition in the US and price erosion has continued taking a toll on the company’s US sales as well as its domestic business. The country’s largest drug maker by revenue said its net profit declined to Rs 3.65 billion from Rs 14.71 billion seen in the year-ago quarter. Revenue from operations declined about 16 per cent year-on-year to Rs 66.53 billion.