Sun Pharmaceutical Industries shares gained 3 percent as a media report indicated that the company is planning to shift production of key products from its Halol, Gujarat factory to other plants.
Halol is an important plant for the company and contributed 10-15 percent to its US sales before the factory received a warning letter from the US Food & Drug Administration for violation of manufacturing norms in December 2015.
The warning letter was after the facility first inspected by the US drug regulator in September 2014 and since then no products have been approved from the plant by the US FDA.
The plan to shift key products from this facility may have come particularly due to the 5 percent decline in profit for the quarter ended December 2016 on slower growth of sales in US and Indian markets. Sequentially, operating profit margin contracted to 31 percent from 38.4 percent.
US generics business, that accounts for nearly half of Sun Pharma's sales, grew at a moderate pace of 4 percent to USD 507 million in the third quarter despite benefit of authorised generic sales of Olmesartan and its combinations. Pricing pressure also hit US sales growth.
Most brokerage houses noted the third quarter earnings were below estimates, but maintained their buy rating on the stock with revision in target price on downside following cut in earnings estimates for FY18-19. According to them, delay in fresh approvals from Halol plant would remain overhang.
In December 2016, after inspection of Halol facility, the USFDA issued a Form-483, citing nine inspectional observations.Meanwhile, Sun Pharma has received tentative approval from the USFDA for Tadalafil tablets that are used to treat erectile dysfunction & arterial hypertension.
At 11:44 hours IST, the stock was quoting at Rs 640.60, up Rs 18.10, or 2.91 percent on the BSE.
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