An employee inspects tablets as they move along the production line at a pharmaceutical plant (Photographer: Dhiraj Singh/Bloomberg)

U.S. Drug Regulator Clears Sun Pharma’s Halol Plant

Sun Pharmaceutical Industries Ltd. said it has received U.S. drug regulator’s report for its Halol, Gujarat plant that paves the way for fresh approvals for its products in its largest market.

India’s largest drugmaker received the establishment inspection report from the U.S. Food and Drug Administration for the unit, it said in an exchange filing. The inspection is now closed and issues raised in the December 2015 warning letter have been addressed, it said.

“This is an important development for Sun Pharma,” Dilip Shanghvi, managing director at Sun Pharma, said in the statement. “We remain committed to following the highest levels of quality and 24x7 cGMP [good manufacturing practices] compliance at all our manufacturing facilities globally.”

Shares of Sun Pharmaceuticals ended about 1 percent higher compared with a 0.5 percent gain in the Nifty 50 Index. The stock had spiked over 8 percent on June 8 after the U.S. FDA changed the status of Halol plant to VAI (voluntary action indicated)—suggesting that it was on the verge of getting cleared.

U.S. Drug Regulator Clears Sun Pharma’s Halol Plant

Here’s all you need to know about the FDA report and why it matters:

Does it mean Halol plant has been cleared?

Yes. The establishment inspection report states that all the concerns raised in the December 2015 warning letter have been addressed. Which means, the regulator is open to approving new products to be manufactured at the facility.

How important is the Halol plant for Sun Pharma?

The drugmaker’s all niche future filings, including injectables, will come from this plant. The clearance paves the way for new approvals after four years.

Also read: U.S. FDA Relief For Sun Pharma As Halol Plant Moves Towards Clearance

What’s the revenue contribution of the Halol plant?

The facility accounts for 11 percent of U.S. sales and about 4 percent of total sales—down from 22 percent and 12 percent, respectively, before it ran into regulatory trouble, the company had said in a conference call with analysts. The reason for the drop is twofold: an increased base after the Ranbaxy Laboratories Ltd. acquisition and price erosion due to competition in the U.S.

Can Sun Pharma start exports to the U.S. immediately?

The U.S. regulator has to lift the warning letter for Sun Pharma to start exporting fresh products made at Halol. There was no bar on existing products. Since the report by the U.S. regulator indicates all pending issues have been resolved, the warning letter would be lifted in all likelihood.

Does its research arm benefit?

Yes. Sun Pharma Advanced Research Ltd. has two important drugs Xelpros (for eye disease called Glaucoma) and Elepsia XR (for seizures) that were to be manufactured at Halol.

Did Sun Pharma expect Halol clearance in this financial year?

Yes. The company after its earnings for the quarter ended March had said that it expected a clearance in the second half. It forecast a double-digit revenue growth based on Halol approval and launch of specialty drugs.

Does Sun Pharma’s stock price factor in Halol resolution?

Brokerages including Macquarie, HSBC and Edelweiss have indicated post the company’s fourth quarter earnings that the current price fully factors in the Halol clearance. The focus in now on the ramp-up of Sun Pharma’s specialty portfolio (Ilumya, Yonsa and Seciera), they said.

Which are the key drug applications filed from Halol?

Sun Pharma never disclosed drug filing by plant. However, all injectables are filed mainly from Halol. The company said in conference calls with analysts over the past four years that it shifted filings to other plants without giving details.

Are other Sun Pharma plants also under FDA scanner?

Yes. The Karkhadi, Gujarat plant is still under import alert. The acquired Ranbaxy plants at Paonta Sahib, Himachal Pradesh and Dewas, Madhya Pradesh too are under import alert. Drugs made at these facilities can’t be exported to the U.S.

Also read: Sun Pharma Rallies Most In 2018 As Earnings Beat Outweighs Bearish Brokerage Commentary