Sun Pharma Halol unit gets 3 adverse notices from US FDA: shares rise

Sun Pharmaceutical Industries Ltd, India's largest drug maker, on Friday said the US Food and Drug Administration (FDA) had made three observations after inspecting its factory at Halol in Gujarat for not meeting good manufacturing practice standards.

''The US FDA conducted a Good Manufacturing Practices (GMP) inspection of Sun Pharmaceuticals Industries Ltd's Halol facility. At the conclusion of the inspection, the agency issued a Form 483 with three observations,'' the drug maker said in a regulatory filing. The inspection was conducted between 12 February and 23 February.

The Gujarat plant has been on the FDA's radar for good manufacturing practices (GMP) violations since 2014. Resolution of the regulatory issues at the plant is crucial for the revival of the company's US business.

In its notification to the bourses, Sun Pharma 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 FDA strictures seem to have been taken well by Dalal Street, as the shares ended 5.17 per centhigher to close at Rs570.20 on the BSE on Friday.

''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,'' Ranjit Kapadia, analyst at Centrum Broking, told Business Standard.

However, Kapadia told Mint, ''We still need details on these three observations. How serious they are before making any further comments. It is not known whether these observations are the same as earlier or new observations. The number of observations going down doesn't matter.''

Amey Chalke, an analyst at HDFC Securities, also said that it would be premature to evaluate without understanding the nature of the observations.

Sun Pharma's US supplies were hit over the past year after the FDA found violations of manufacturing practices at the company's Halol manufacturing unit. The FDA conducted its first inspection of the facility in 2014 and another in December 2015. The company was given a warning letter with six observations, preventing it from making fresh filings of new drug applications.

In November-December 2016, Sun Pharma's Halol plant was re-inspected and the US FDA issued Form 483 with nine observations. The FDA inspectors found the drugmaker's testing programmes inadequate and said the company had failed to report potential contamination issues on time.

Observations are made in Form 483 when the investigators feel conditions or practices in a facility are such that products may become adulterated or could be injurious to health.

The facility at Halol, one of Sun Pharma's biggest units, is a key plant for its US formulation business. Sun Pharma gets about half of its revenue from the US market and the Halol unit contributes a majority of its drug filings.

Barred from new drug filings in the American market, the company's US business has been severely impacted in last couple of years due to the US FDA's observations on Halol. Resolution of concerns at the Halol unit is therefore critical for the company's US business. Sun Pharma has been struggling to fix quality control problems at the facility. Clearance from the FDA will unlock several complex generic filings and allow the company to bolster existing products.

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 Rs365 crore from Rs1,471 crore seen in the year-ago quarter. Revenue from operations declined about 16 per cent year-on-year to Rs66.53 billion.