Sun Pharma on 19 December 2015 announced that the USFDA has issued a warning letter for its Halol formulation facility.
The warning letter follows the inspection in September 2014. In a conference call held after the announcement, management said that it has yet to carry out a detail review of the warning letter and assess the implications of the remediation process and timeline.
However, the management noted that the warning letter is largely based on initial observations made during the inspection in September 2014 and the company has already taken significant remediation measures.
Based on the commentary, management at this stage does not seem to expect a very significant deviation from its previously undisclosed timeline for resolution. As a base case, we have estimated resolution at Halol in early FY17 and factored in $140mn in sales from new approvals ex Gleevec.
The warning letter presents downside risk to our sales estimates, given that Halol accounts for the largest number of pending ANDAs including all injectables.
Assuming exemption for gDoxil, an import alert would cut our EPS estimate by R3.0-4.5/sh. However, we do not expect an import alert at Halol.