 "A man carrying a gas cylinder walks out of the research and development centre of Sun Pharmaceutical Industries in Mumbai. Photo: Reuters")
Sun Pharmaceutical Industries' stock price slipped to a multi-year low of Rs 654 on Friday, with the company among those being investigated for alleges collusion and price increases in the US market. The news that the American legislature, which initiated this a couple of years earlier, had completed the probe and could levy penalties has led to a sharp fall in Indian pharma stock prices.
Sun, Dr Reddy’s and Cadila Healthcare were among 14 companies asked to initially respond; later, some more companies, including Taro, the US subsidiary of Sun, were asked for detailed responses.
This has added to the concerns on Sun, already under US Food and Drug Administration (FDA) issues at its Halol (Gujarat) unit. That manufacturing facility had an FDA warning letter and with approvals for new launches becoming difficult, the company’s US growth has suffered.
The respite for Sun has been coming from Taro, maker of many popular dermatology products that have been a growth driver and aided the parent's margins. Taro has seen regular approvals drive its growth and price increases on its existing range was also a major contributor. With drug price rises now under a scanner, concerns on Taro are also bound to increase.
For Sun, most of the negatives are already priced into the stock. It saw a high of Rs 898 in early 2016 and has since fallen significantly, after the management said it expected only 10 per cent revenue growth in FY17. The competitive intensity for Taro is expected to increase in the year's second half. With the company declaring its September quarter performance next week, what the management says will be awaited, to provide more clarity on pricing issues, Halol remediation and the Ranbaxy integration. The growth numbers are likely to be muted.
