Shares of Sun Pharmaceutical Industries dropped nearly 2% in early trade on Monday after the world's fourth largest specialty generic pharmaceutical company received a warning from the U.S. Food and Drug Administration (FDA) on possible violations of Current Good Manufacturing Practice (cGMP) regulations for its Halol facility in Gujarat.
The share price of the Mumbai-headquartered company opened 1.1% lower at ₹982.05, against the previous closing price of ₹993.25 on the Bombay Stock Exchange (BSE). In the first hour of the trade so far, the pharma stock declined as much as 1.95% to hit a low of ₹973.80, while the market capitalisation slipped to ₹2.36 lakh crore. In comparison, the BSE benchmark Sensex was trading 253 points higher at 61,590 levels, tracking mixed cues from Asian peers.
Sun Pharma share price trades 9% lower than its 52-week high of ₹1,070.80 touched on November 2, 2022, while it hit a 52-week low of ₹753.30 on December 17, 2021. The stock has given 29% positive return to its shareholders in the past one year, while it has risen 22% in the six month period. In the last one month, the stock has fallen 2.5%, as compared to a 1.6% drop in BSE healthcare index and 0.3% fall in the Sensex.
The stock saw surge in selling activities after Sun Pharma in a late evening filing on Friday said the company received a warning letter from the U.S. drug regulator for the Halol facility. The U.S. FDA conducted the inspection of the facility from April 26 to May 9, 2022.
“The warning letter summariSes violations with respect to Current Good Manufacturing Practice (cGMP) regulations. The U.S. FDA shall make public the contents of the Warning Letter in due course. As per our communication dated December 8, 2022, the Halol facility was placed under import alert by the U.S. FDA,” it said.
On December 8, Sun Pharma stated its Halol facility was listed under import alert by the U.S. FDA with products manufactured at the unit now subject to refusal of admission in the U.S. market. “The USFDA has excluded 14 products from this import alert subject to certain conditions,” it said.
For the year ended 31 March 2022, supplies to the U.S. market from the Halol facility accounted for nearly 3% of the company's consolidated revenues, including the 14 excluded products.
For the July-September quarter of 2022, Dilip Shanghvi-led pharmaceutical major reported 10.5% YoY growth in profit at ₹2,262 crore on the back of double-digit topline growth and strong margins in India. The company's revenue surged 13.1% to ₹10,809 crore, while its India formulation sales stood at ₹3,460 crore, a growth of 8.5% YoY. The pharma company's Q2 EBITDA rose 12.4% to ₹2,956.5 crore, including other operating revenues, while the EBITDA margin declined to 27% versus 27.3% in the same period last year.
The company’s U.S. formulation sales were at $412 million, up 14.1% YoY; global specialty sales were up 27.5% at $200 million; emerging markets formulation sales were up 6.7% at $259 million. In the rest of the world, the company's formulation sales dipped 3.8% YoY to $181 million, impacted by adverse currency movements. For Q2 FY23, the company says the external sales of API (active pharmaceutical ingredients) increased 8.5% YoY to ₹473 crore. For the first half, API sales grew 13% YoY to ₹1,071.7 crore, it said.