Regulatory troubles continue for Sun Pharma as the drug manufacturer’s Mumbai unit has been issued an "official action indicated" (OAI) tag by the US Food and Drug Administration, which may affect new launches.
Analysts at HSBC expect the FDA move to add to the regulatory overhang for the drugmaker, while those at Nomura see it as a negative surprise.
After a 4 percent fall in the previous session, shares of Sun Pharma opened another 2 percent lower on April 15.
The OAI classification for Sun’s Dadra unit follows recent regulatory trouble for Halol and Mohali facilities in the recent past, which had an impact on Sun Pharma's generic sales.
In that backdrop, Nomura said the recent development is likely to increase concerns among investors.
HSBC also expects the drugmaker's US generic sales, excluding cancer drug Revlimid, to remain range-bound due to regulatory issues.
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Nomura anticipates new product approvals from the site to be stalled until the compliance requirements are addressed and FDA clears the site.
"In our view, it is likely that new approvals may not come through from the site over the next two years factoring in the time for remediation and subsequent reinspection by the USFDA," the brokerage said in a note.
The existing sales from the plant however, could sustain, unless the remediation measures require temporary suspension of production, Nomura said.
The Dadra formulation site makes oral solid dosage forms. The site also manufactures blockbuster drug Revlimid, which is a significant contributor to Sun Pharma's generic revenue. Including Revlimid contribution of $170 million, Nomura estimates a contribution of around $240 million in annual sales from the Dadra site to the US market in FY24.
In the wake of delays in new generic launches, HSBC said specialty sales remain key for Sun Pharma's earnings growth, offsetting challenges in US generics.
The drugmaker's strong standing in the specialty segment, however, has HSBC bullish on growth prospects. The brokerage retained its “buy” call on the stock with a price target of Rs 1,790. Nomura has a “neutral” call on Sun Pharma, with a target price of Rs 1,444.
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