Sun Pharma drops the ball again at Halol plant

When the answer finally came, it was a disappointing no. Sun Pharmaceutical Industries Ltd was unable to convince the US Food and Drug Administration inspection team to give its Halol (Gujarat) plant an all-clear.

An establishment inspection report would have given it closure and closed the warning letter on the plant. That would then see pending generic drug approvals filed from Halol come through, adding to Sun Pharma’s revenues and profits. That would be welcome considering the pressure on its US generics business.

Instead, the company got another form 483 which is issued when the FDA finds lapses in compliance, with three observations this time, which was the only consolation. The previous inspection in December 2016 had resulted in nine observations. This one should have ideally resulted in none. Sun Pharma had spent considerable time and money in ensuring this plant was up to the USFDA’s compliance levels.

What next? The 5% increase in Sun Pharmaceutical’s shares was a bit surprising, considering its press release gave no details about the observations. It did not clarify if any of these were repeat observations. A repeat observation would be seen as a negative development. The statement states the standard line of taking prompt action and replying to the FDA in 15 days.

Once the form 483 becomes available, the severity of the lapses and whether there were any repeat ones will be known. If these are minor in nature and do not require a re-inspection by the regulator, it could be resolved relatively quickly. That will be the outcome investors will be looking for.

If this calls for remedial action and another inspection, then there may be a long wait. That will prolong their agony over the loss in earnings due to Halol’s non-compliant status. In the recent quarterly earnings, the company had said that pricing pressure was still visible in the US market. If Halol had come back on stream, then it could have eased some of that pressure. That plant goes right back on the watch list of triggers that investors should watch out for.livemint