Regulatory issues persist for Sun Pharma as its Mumbai unit receives an “official action indicated” (OAI) tag from the US Food and Drug Administration, potentially impacting new launches.
HSBC analysts foresee the FDA’s action compounding regulatory concerns for Sun Pharma, while Nomura views it as an unfavorable development. Following a 4 percent decline in the previous session, Sun Pharma’s shares opened 2 percent lower on April 15.
This OAI classification for Sun’s Dadra unit follows recent regulatory challenges at its Halol and Mohali facilities, which affected the company’s generic sales. Nomura suggests that this latest development could heighten investor apprehensions.
HSBC also expects Sun Pharma’s US generic sales (excluding the cancer drug Revlimid) to remain stagnant due to regulatory hurdles. Nomura anticipates a halt in new product approvals from the site until compliance issues are resolved and the FDA provides clearance.
The brokerage estimates that the site may not secure new approvals for the next two years considering the time required for remediation and subsequent reinspection by the USFDA. However, Nomura believes that existing sales from the plant could persist unless production is temporarily suspended for remediation measures.
The Dadra formulation site primarily produces oral solid dosage forms and manufactures the blockbuster drug Revlimid, which significantly contributes to Sun Pharma’s generic revenue. Nomura estimates an annual sales contribution of around $240 million from the Dadra site to the US market in FY24, including Revlimid’s contribution of $170 million.
Despite delays in new generic launches, HSBC emphasizes the importance of specialty sales for Sun Pharma’s earnings growth, mitigating challenges in US generics. With a bullish outlook on the company’s specialty segment, HSBC maintains its “buy” rating on the stock with a price target of Rs 1,790. Nomura, on the other hand, maintains a “neutral” stance on Sun Pharma with a target price of Rs 1,444.
Disclaimer : The opinions and investment suggestions provided by experts on LegalParivar are their own. It is advisable for users to consult certified experts before making any investment decisions.
