Sun Pharmaceutical: USFDA Prescribes GMP For Halol Plant

Sun Pharmaceutical

Sun Pharmaceuticals Industries announced that USFDA conducted a Good Manufacturing Practices (GMP) inspection of the company’s Halol facility (Gujarat, India) from 03-13 December 2019.

At the conclusion of the inspection, the agency issued a Form 483, with eight observations.

The company is preparing the response to the observations, which will be submitted to the US FDA within 15 business days.

The company is committed to addressing these observations promptly.

The Company remains committed to working closely with the US FDA and continues to enhance its GMP compliance on an ongoing basis.

Morgan Stanley has an ‘overweight’ call on the stock with a target at Rs.530 per share.

As per the brokerage, it is difficult to assess the severity of Halol plant observations at this point.

The brokerage is positive on the company in view of projected earnings growth.

Sun Pharma, India’s leading drugmaker and the eighth largest pharma company in the US generics market, earns 37% of its business from the US market.

The drugmaker earned Rs.2,389.77 crore from the sale of formulations in the US in Q2FY20 against Rs 2,397 crore in the corresponding quarter of the previous year.

Sun Pharma’s US and overall business over the past two years were mainly impacted by a settlement case.

What does the current newsflow mean for sun Pharma shareholders?
We believe that the near term impact of this newsflow is likely to be negative as the markets would be concerned that any fresh lapses from the Halol plant would impact near term earnings as this plant is crucial for its exports to the US markets.
We believe that longer-term however there has been a healthy growth seen in volumes seen in the domestic markets for Sun Pharma and expect FY21 to be s significantly better year ahead but near term impact of these us FDA related issues will be known only over the next few months.

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