Sun Pharma falls 3% post Halol observations; Nomura remains neutral

Shares of Sun Pharma fell around 3 percent intraday on Monday as investors turned wary of observations issued to its Halol plant by the US drug regulator.

US FDA issued three Form 483 observations for its Halol site in Gujarat.

The company didn’t disclose the nature of these observations.

A Form 483 is issued by the US FDA inspectors at the end of the inspection outlining any deviations from GMP.

The US FDA conducted Good Manufacturing Practices (GMP) inspection of Sun Pharma’s Halol facility from February 12 – 23.

“The company is preparing the response to the observations, which will be submitted to the US FDA within 15 business days. The company is committed to addressing these observations promptly,” said Sun Pharma in a statement to stock exchanges.

“The company remains committed to working closely with the US FDA and continues to enhance its GMP compliance on an ongoing basis,” the statement added.

The company’s founder and managing director Dilip Shanghvi expressed confidence about resolving the three issues pointed out by the American drug regulator.

Brokerage houses are neutral on the stock citing closure time for the observations and EIR issuance.

Brokerage: Nomura | Rating: Neutral | Target At Rs 479

Nomura said that it is awaiting 483 observation details to assess potential time to resolution. Further, it expects closure of inspection and EIR issuance to take about six months. It expects slight slippage from assumption of early FY19 resolution.

Brokerage: Jefferies | Rating: Hold | Target: Rs 520

The global research firm said that it is building a resolution for Halol in the current quarter. Further, the resolution remains a key with valuations at 21.5 times FY20 PE. Earnings recovery will be gradual as investment in specialty to continue.moneycontrol