Halol clearance: A big boost for Sun Pharma

The stock of Sun Pharma rose as much as 3 per cent on Wednesday tracking the report that the company’s Halol facility has received an establishment inspection report (EIR) from the US drug regulator.

The clearance report was for the re-inspection conducted at the facility by the USFDA from February 12-23, 2018.

On June 8, 2018, the company shares rose sharply by 9 per cent as the US regulator changed the site’s status to voluntary action indicated (VAI), suggesting early clearance of warning letter.

The receipt of EIR reinforces the view that the warning letter issued on December 2015 will get lifted very soon. This is an important development for the company as the facility had been under US regulatory scanner over the last four years that barred exports to US from the facility.

The clearance now allows the company to file for new ANDA approvals in US. It is expected that the Halol facility will contribute more than $100 million to its overall revenue annually going ahead. Before the ban, the Halol plant accounted for more than 10 per cent of US sales and about 4 per cent of total sales.

The company can begin exports to US from the facility as soon as the warning letter is withdrawn by the USFDA. In the fourth quarter earnings call, the company has guided for positive growth in its US business in FY19, driven by key speciality product launches and clearance for the Halol plant.

The expected launch of speciality products - Illumya, Seciera, Yonsa - is likely to boost its US revenue in the next one-two years. The Halol plant is likely to contribute to its niche filings. Of the 150+ pending ANDA approvals in US, the facility is expected to contribute to more than 50 products.

However, the growth outlook for Sun Pharma in the near term is likely to be tepid due to continued pricing pressure and competition in the US market and lack of meaningful launches.

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