Sun Pharma finally free of FDA restrictions on its key plant in India

After more than two years of intense effort, Sun Pharma has returned its key plant to the good graces of the FDA. Being free of the restrictions tied to a 2015 warning letter makes it possible for India’s largest drugmaker to again launch products in the U.S. from the Halol facility and accelerate its financial growth.

In a brief announcement that belies the significance of the development, Sun today said it has received an Establishment Inspection Report (EIR) for the Halol facility in Gujarat, India, following a February inspection. An EIR means the plant has overcome the FDA’s concerns laid out in a warning in December 2015.

“This is an important development for Sun Pharma,” Dilip Shanghvi, managing director, said in an emailed statement.

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That is an understatement, given that the warning letter has kept Sun on the sidelines as competitors launched copies of some top-selling branded drugs as they came off patent. It also resulted in complete response letters for a novel epilepsy drug that Sun licensed from its drug development arm SPARC. Sun formed SPARC several years ago to develop novel drugs in an effort to move away from its heavy reliance on small molecule generics, a market that has seen prices squeezed significantly in recent years.

Sun has been been at this remediation and reconciliation effort since September 2014, when the FDA first noted issues at the Halol facility in a Form 483. While Sun has about 40 manufacturing sites worldwide, Halol is the plant from which Sun launches most of its new products for the U.S., its largest market. But new launches were cut off when the FDA in 2015 vilified the plant in a warning letter. A reinspection in late 2016 was unable to lift the stigma. That visit resulted in 10 observations, some of which the FDA noted were repeats.

The warning letter landed just months after Sun’s $4 billion buyout of long-troubled Indian drugmaker Ranbaxy Laboratories, an acquisition that was expected to set Sun up as the dominant generics player in India and place it among the largest in the world. But instead of being able to build on that deal, Sun found itself investing time and millions of dollars on upgrades at Halol. It also had to look for contractors to produce some important generics that otherwise would have been manufactured at Halol.

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The problems have weighed heavily on Sun's finances. Just last month Sun reported in its fourth-quarter and full-year 2018 report that it expects full-year 2019 revenues won’t meet analysts’ expectations due to poor generics sales and rising competition in the U.S. market, which accounts for about 35% of its total revenues. It also noted the limits imposed by the FDA warning letter on Halol. U.S. sales for the fourth quarter were $368 million, representing a 3% decline from the same period last year. Full-year 2018 U.S. sales were $1.3 billion, a 34% drop from the previous year.