Sun Pharma share price falls over 3%, product approvals to take a hit after USFDA initiates action

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Published: March 30, 2020 10:57:48 AM

Pharmaceutical giant Sun Pharma saw its share price fall by 3.6 per cent during the early hours of trade on Monday as investors reacted to the news of the United States Food and Drug Administration classifying the Halol facility of the company as Official Action Indicated.

USFDA, Sun Pharma, Sun Pharma Halol facility, US market, gujarat, latest news on sun pharmaUnde the OAI classification of the USFDA, the drug regulator is likely to withhold approval of any pending product applications or supplements filed from the Halol facility.

Pharmaceutical giant Sun Pharma saw its share price fall by 3.6 per cent during the early hours of trade on Monday as investors reacted to the news of the United States Food and Drug Administration (USFDA) classifying the Halol facility of the company as Official Action Indicated (OAI). The facility was inspected in December last year by the US Drug Regulator after which Form 438 with eight observations was issued to the company. The stock was trading at Rs 326 per share. Sun Pharma has seen its share price fall 30 per cent since the start of this year. 

Unde the OAI classification of the USFDA, the drug regulator is likely to withhold approval of any pending product applications or supplements filed from the Halol facility. According to a separate filing to the stock exchanges, Sun Pharma said that it currently has 19 Abbreviated New Drug Applications (ANDA) and 2 New Drug Applications (NDA) pending for approval for the US market. “As a result, product approvals for the US market may get delayed till the outstanding corrective actions are completed and Halol facility comes back into compliance with USFDA norms,” Sun Pharma said in the filing. Although the company is still allowed to generate and supply already approved drugs to the US Market, the worry remains on how long will the reassessment take owing to the coronavirus lockdown. Halol facility contributes 3-4 per cent of business for Sun Pharma.

While Sun Pharma has fallen close to 30 per cent since the beginning of the year, the slump seen by peers is of a lesser magnitude. Cipla has fallen 11 per cent; Aurobindo Pharma is down 12 per cent; Biocon has taken a slight dip of 4 per cent; Lupin is the only one close to Sun Pharma after tanking 26 per cent. Dr Reddy’s on the other hand has gained 4 per cent since January 1.

ICICI Securities has revised the target price for Sun Pharma with the latest development. Now the brokerage has a target price of Rs 458 down from the earlier 478 but continues to have a ‘buy’ call on the scrip. “Sun Pharma’s domestic business remains strong with 11.9% growth in 9MFY20 (200bps higher than industry). We expect this business segment to continue its outperformance vs the industry driven by strong chronic portfolio, high brand recall and ~10% increase in MR strength in the near term,” ICICI Securities said in a note. The brokerage says that key concerns for the share have already been priced in. 

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