Manufacturing problems contribute to $14B slide in Sun founder's worth

Dilip Shanghvi
The net worth of Dilip Shanghvi, head of Sun Pharma, has lost $14.1 billion from its peak two years ago as issues at India's largest drugmaker have cut the value of his shares.

Manufacturing problems that delay a drug launch can cost a company tens of millions of dollars in revenues. A warning letter for a plant might result in hundreds of millions in investments. But what about problems that result in a $14.1 billion hit?

That is how much the net worth of Sun Pharma founder and managing director Dilip Shanghvi has fallen from its peak two years ago, reports the Economic Times as FDA regulatory problems have prevented new drug launches from its key plant.

Shanghvi has descended from India’s richest person to now rank sixth, with a net worth of $11.1 billion, the newspaper says, citing the Bloomberg Billionaire’s Index.  

The slide has come as problems at the company’s plant in Halol, India, have prevented new drug launches for several years. In that time, pricing pressures on existing drugs in the U.S. market have materialized, taking a toll on earnings, and so on his holdings. That was illustrated two weeks ago when the  company reported revenues in the U.S. had been gut-kicked last quarter by the dual factors.

Sun Pharma, India’s largest drugmaker, reported sales for fiscal 2017 at about $4.7 billion, up 9%. But in the U.S., revenues were off 34% to $381 million for its fourth quarter ended March 31. The U.S. shortfall contributed to an 8% fall in revenues across the board for India’s largest drugmaker. Sun’s profit was down 14% to $189.6 million in the quarter.

Sun has been hobbled by the fact that it has been unable to launch new drugs from its plant in Halol since FDA concerns surfaced there in 2014. The agency slapped the plant with a warning letter in 2015.

The company brought in consultants and invested in new systems to meet FDA expectations. Sun believed that with all of that effort, a return visit by FDA inspectors late last year would finally clear the plant of its regulatory overhang, allowing Sun to again launch new products from the facility. Instead, the FDA cited the facility again, leaving Halol in limbo for new drugs while the company continues to address issues.

During a conference call, Shanghvi told investors to expect more revenue shrinkage this year. He said the pricing situation in the U.S. appears to be the new normal and that growth will continued to be constrained by the issues at Halol.