Sun's U.S. sales crater as plant issues cut deeply

Dilip Shanghvi

Sun Pharmaceutical founder Dilip Shanghvi told investors on Saturday that the company faced some challenges in the last quarter, including having drug supplies to the U.S. from one of its key plants squeezed as it addresses FDA concerns. How big are those challenges? Big enough that sales in the U.S., its largest market, were off nearly 30%.

The drugmaker reported that sales in the U.S. were $510 million for the quarter, down 28% compared with the same quarter a year ago. The U.S. accounted for 48% of total sales of about $1 billion.

The FDA issued a Form 483 for the plant more than a year ago. They homed in on it after they first found issues with another Sun plant in Gujarat that ended up with a warning letter and on the import alert list last year. The Halol plant had a number of recalls last year over issues of poor dissolution of meds.

In a conference call, Reuters reports that Shanghvi said, "We are keeping (the FDA) updated on the progress at the agreed frequency. … I think the things that we have promised or assured the FDA, we are addressing."

The issues at Halol are not only squeezing drug shipments and dragging on the bottom line with mounting remediation costs, but they have also gut-punched the company's efforts in drug development. It cost its Sun Pharma Advanced Research Company its first drug approval. In March, the FDA had approved its epilepsy drug Elepsia XR, but in September it yanked that, saying in a complete response letter that "the compliance status of the manufacturing facility was not acceptable on the date of approval."

The Halol plant is one of 6 that Sun is trying to get back into shape and shipping to the U.S. Besides the Gujarat plant, it picked up four plants in its $4 billion buyout of Ranbaxy Laboratories that are currently banned from shipping products to the U.S.

Other issues affected sales and earnings for the quarter, including currency exchange challenges and competition, Shanghvi said. Despite the immediate issues, the managing director assured investors over the weekend that the "full value" of the Ranbaxy deal will be realized by 2018, Reuters reported.

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