FDA slaps Sun Pharma with warning letter on Indian plant

The FDA has issued a warning letter to Sun Pharmaceutical for its plant in Halol, India, a facility that accounts for about 15% of its U.S. sales. The drugmaker says it is making progress on resolving the problems. But until it does, the disruption will continue to wreak havoc with the company's growth plans after buying competitor Ranbaxy Laboratories this year to become the world's fifth-largest generic drugmaker.

Sun Pharma Danaging Director Dilip Shanghvi

Sun Pharmaceutical said over the weekend that it had received a warning letter for the plant that ties back to an inspection last year in which the FDA laid out concerns it had about India's largest drugmaker. Sun said it has brought in consultants and invested in new systems and employee training to respond to FDA concerns but will do what it takes to get the issues resolved.

"While our team is working hard to ensure that the commitments made to the U.S. FDA in September 2014 are fully completed, we will continue to cooperate with the U.S. FDA and undertake any additional steps necessary to ensure that the U.S. Agency is completely satisfied with our remediation of the Halol facility," Managing Director Dilip Shanghvi said in a statement.

The drugmaker, a key supplier of generic drugs to the U.S., said in the meantime it will continue to supply customers with products from the facility but is prevented from launching any new products from the Halol site. According to Reuters, analysts at Indian brokerage Kotak told investors they don't foresee the FDA reinspecting the Halol site before Q2 2017. Morgan Stanley, citing restrictions on the Indian plant, have lowered their earnings estimates for Sun for both 2017 and 2018.

When Sun Pharma announced its plan last year to buy long-troubled competitor Ranbaxy in a $4 billion, all-stock deal, it appeared Sun was on the cusp of realizing Shanghvi's long-held goal of becoming a major player in the U.S. and on the world stage. He pledged at the time to bring Ranbaxy's plants, four of which are been banned by the FDA from shipping to the U.S., back into the good graces of the FDA. But instead it has been Sun's own shortcomings at Halol that have tripped up its growth efforts.

The remediation at Halol forced it to shift production of its approved generic of Novartis' ($NVS) top-selling drug, cancer pill Gleevec, to another facility to meet its Feb. 1 launch date. The restrictions on the Halol site also have stymied its effort to move into new drug development. Sun Pharma Advanced Research Company won its first FDA drug approval in March for epilepsy drug Elepsia XR, only to have it yanked by the FDA 6 months later because of the lingering issues at Halol.

All of this has undermined its earnings at a time that its revenues were already under pressure from the buyout of Ranbaxy. The drugmaker last month reported that U.S. sales, at $510 million, slipped 28% in the last quarter. The U.S. accounted for 48% of total sales of about $1 billion. It blamed some of the shortfall on the Halol plant and some from a tough comparison to a quarter in which Ranbaxy had launched an exclusive of Novartis' blockbuster Diovan.

- here's the press release
- get more from Reuters