U.S. FDA Relief For Sun Pharma As Halol Plant Moves Towards Clearance
In a major relief to Sun Pharma, U.S. FDA issued a ‘voluntary action indicated’ status to its Halol plant.
Sun Pharmaceutical Industries Ltd. rose the most in nearly six months after the U.S. drug regulator concluded an inspection at its Halol plant and said it may not pursue any further regulatory action.
In a relief for the country’s largest drugmaker by market capitalisation, the U.S. Food and Drug Administration issued a so-called ‘Voluntary Action Indicated’ status to its Halol plant in Gujarat. That decision to change the status of the plant from ‘Official Action Indicated’ was uploaded on the regulator’s website overnight. The VAI status means Sun Pharma will now have to make voluntary changes to the plant if needed but any adverse action by the regulator is unlikely.
This means “the Halol plant is likely to get cleared within a few months,” said Amey Chalke, pharma analyst at broking firm HDFC Securities. However, Sun Pharma will still need the U.S. FDA warning letter against the Halol plant to be lifted before it can start exporting to the U.S. market again.
In February 2018, the FDA issued a Form 483 with three observations after its inspection of the Halol facility. BloombergQuint had earlier reported that the observations are likely procedural in nature.
The Halol plant currently contributes 11 percent of Sun Pharma’s U.S. sales and almost 4 percent of its total sales. Before the initiation of regulatory action by the U.S. FDA, the plant contributed close to 22 percent of U.S. sales and around 12 percent of the total sales. The sales contribution was halved on account of a higher base due to the integration of Ranbaxy Labs and due to price erosion and competition in the world’s largest pharmaceutical market.
The drugmaker, in its fourth quarter conference call, had flagged off continued pricing pressure in the U.S. The trend can be reversed if regulatory issues at its Halol facility is resolved soon, Managing Director Dilip Shangvi had said. The clearance will allow the plant to speed up several complex generic filings and ramp up its existing products in the U.S., and is expected in the second half of the year, he had said.
“The resolution is in line with the management’s guidance in the fourth quarter conference call,” Chalke said. “The Halol resolution is priced into our [earnings] estimates.”
Shares of Sun Pharma today closed 8.1 percent higher at Rs 528.25 apiece after rising 9 percent intraday.