Shares of Sun Pharmaceuticals dived 21 percent intra-day, just days after more than 40 states in the US filed a lawsuit alleging drug manufacturers of artificially inflating prices.
At close, the stock price was down 9.06 percent to Rs 398.10 per share on the National Stock Exchange, while in comparison, Nifty50 slipped 1.16 percent to 11,148.20.
The US lawsuit alleges companies of manipulating and increasing prices of generic drugs artificially to increase profit.
“We believe the allegations made in these lawsuits are without merit and we will continue to vigorously defend against them," a Sun Pharma spokesperson told CNBC-TV18.
According to analysts, company-specific regulatory action may be an issue behind the sudden fall in Sun Pharma shares.
“Company-specific regulatory action may be an issue because we have been hearing about cases filed against Teva and other companies for over-pricing some generic products in the US. So, that could be the case, but there are a few other Indian companies who are also involved. In fact, there are a total of 18-19 companies including big names like Teva and Mylan. However that is unlikely to create this kind of panic in the market. However we are positive on the stock, this kind of move has to have some kind of very stock specific news,” says Nimish Mehta, Research Delta Advisor.
The US complaint, which runs into 500 pages, is linked to an earlier complaint filed by US states in December 2016 which is still under litigation. The fresh complaint names 20 pharmaceutical companies, including 7 Indian companies. The Indian companies named are Aurobindo, Dr Reddys, Glenmark, Lupin, Wockhardt, Zydus and Sun Pharma’s US arm Taro.
The complaint covers drugs of all kinds -- from tablets and capsules to creams and gels -- with alleged price fixing dating back to 2006. The allegation is that these companies have colluded to increase drug prices, sometimes by over 1000 percent.
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