FDA import alert on Sun's Gujarat plant, shares dip 6%

In a setback to the country's largest drug maker Sun Pharmaceuticals, the US FDA has issued an import alert for all products manufactured at its cephalosporin facility located at Karkhadi, Gujarat. The company manufactures API and formulations in this unit.

Following the reports, Sun Pharma shares dipped more than 6% intraday on BSE. Shares were closed at Rs 573.6, down by 5.03%. The plant accounts for less than 1% of its overall sales. According to a company statement, the contribution of this facility to Sun Pharma's consolidated revenues is negligible.

An 'import alert' results in detention without physical examination of drugs from firms that have not met 'good manufacturing practices'.

According to the company, this import alert was issued by the US FDA as a follow up to the last inspection of the facility, during which some non-compliance of current good manufacturing practice (cGMP) regulations was identified.

"The company remains fully committed to compliance and has already initiated several corrective steps to address the observations made by the US FDA," it said.

As of March 2013, the company had 12 US FDA facilities, with around 6 in the US, 3 in India and one in Canada, Israel and Hungary, respectively.

Sarabjit Kour Nangra of Angel Broking said, "The news will not have major impact financially, as the plant's contribution to the overall sales is not significant. The company has well diversified manufacturing infrastructure to cater to the US markets, which contribute around 54% of its sales (FY2013). Also, its subsidiaries of the likes of Taro, Caraco and the recent acquisitions, contribute a major chunk of the sales and its growth. Moreover, the company has successfully resolved the issues successfully in the past. as with respect to Caraco."

The shares had fallen early this week, after the company had withdrawn bottles of diabetes drug from the US market. Sun's Detroit-based subsidiary Caraco Pharmaceutical Laboratories recalled 2,528 bottles of Metformin HCL, a drug meant to treat Type 2 diabetes, after a customer complained of finding tablets of Gabapentin, an epilepsy drug, in a bottle.

The US Food and Drug Administration classified the recall as a "Class II," which signifies a remote chance of severe adverse consequences or death due to the product flaw.

Sun Pharma stock had underperformed the market over the past one month till March 10, falling 2.52% compared with the Sensex's 7.87% rise. The scrip also underperformed the market in past one quarter, rising 1.49% as against Sensex's 3.2% rise.

Other pharma majors like Ranbaxy and Wockhardt are already under USFDA scanner following several import alerts.