Sun Pharma declines nearly 3% as Halol facility gets 8 US FDA observations

Shares of Sun Pharma cracked as much as 2.84 per cent to Rs 426.50 apiece on the BSE on Monday after the company informed that the US FDA has issued a Form 483, with eight observations for its Halol (Gujarat) facility. The inspection was conducted from December 03-13, 2019, the company said in its regulatory filing.

At 09:30 am, the stock was trading over 1.50 per cent lower at Rs 431.70. In comparison, the benchmark S&P BSE Sensex was trading 72 points or 0.18 per cent higher at 41,082 levels.

Sun Pharma further said it was 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. 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.

According to reports, global brokerage firm Morgan Stanley has maintained 'overweight' stance on the stock with the target price of Rs 530. The brokerage said it was difficult to assess the severity of Halol observations at present and the positive view on the company is on the back of projected earnings growth.

For July-September period, the pharma major's numbers were mostly in line with Street expectations, with pre-tax profit of Rs 1,433.38 crore, against Rs 111.94 crore last year, which was impacted by settlements related to an antitrust litigation concerning Modafinil in the US. It noted that China and Japan are becoming increasingly important markets for growth.

Net profit stood at Rs 1,064 crore, with the resulting net profit margin at 13.4 per cent, against a net loss of Rs 269.6 crore in Q2FY19. Adjusted for the exceptional item of Rs 1,214 crore for Q2 last year (related to the Modafinil settlement), net profit growth was at 12.6 per cent, the company said.

Income from operations came in at Rs 7,949 crore, up 16 per cent YoY. The India business clocked a robust 35 per cent YoY growth to Rs 2,515 crore, while US-finished dosage sales remained flat at $339 million.

Sun Pharma stock has risen only around 2 per cent so far in the calendar year 2019 as against around 14 per cent increase in the benchmark S&P BSE Sensex.