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Sun Pharma shares surge after US FDA lifts sanctions from Halol plant

Lifting of sanctions at Sun Pharma’s Halol plant will help the company controlled by billionaire Dilip Shanghvi boost sales in the world’s biggest drug market and offset the deterioration in US generic drug prices.

business Updated: Jun 13, 2018 13:04 IST
Ari Altstedter
Ari Altstedter
Bloomberg
Sun Pharma,Sun Pharma Halol plant,Sun Pharma shares
Sun Pharma’s shares climbed as much as 3.8% early Wednesday, heading for the highest level since February. (Kuni Takahashi/Bloomberg)

Sun Pharmaceutical Industries Ltd. shares extended a rally after US regulators lifted sanctions on a key plant, clearing the way for India’s biggest drugmaker to renew product launches from the facility after a two and a half year ban.

The US Food and Drug Administration has closed its inspection of the Halol plant after the issues contained in a 2015 warning letter were addressed, Sun Pharma said in a filing to exchanges on Tuesday. In February the FDA noted three observations of potential manufacturing violations, which Sun Pharma said it was addressing.

Sun Pharma’s shares climbed as much as 3.8% early Wednesday, heading for the highest level since February. The stock surged 8.1% on Friday, the most since April 2015, on a report that the FDA had concluded its investigation.

Lifting of sanctions at the plant in India’s Gujarat state will help the company controlled by billionaire Dilip Shanghvi boost sales in the world’s biggest drug market and offset the deterioration in US generic drug prices that are roiling the whole industry.

“This approval was critical because without it the US business can’t grow, and the US is a critical part of the business,” said Nitin Agarwal, an analyst covering India’s drug industry at IDFC Securities Ltd. Sun’s US generic business “hasn’t been growing the last several years because they haven’t had too many approvals. Most of the approvals were filed from that facility.”

Sun received a warning letter from the US regulator in December 2015 following an inspection at its Halol facility. A reinspection in 2016 produced 14 pages of new observations, including poorly designed tests and tardiness reporting results. While a warning letter does not prevent drugs already approved being shipped from a facility, it does place restrictions on new ones.

First Published: Jun 13, 2018 13:03 IST