Shares in India's largest drugmaker, Sun Pharmaceutical Industries Ltd, skidded more than 7 per cent on Monday after US regulators warned of standards violations at a key plant in the latest blow to India's generic drug industry.
The warning comes barely a month after rival Dr Reddy's Laboratories Ltd was reprimanded by the US Food and Drug Administration for issues including record-keeping at three of its plants. The company said it was working to resolve the FDA's lingering concerns about the Halol plant, disclosed in a statement by Sun Pharma on Saturday.
Analysts and investors say the warnings highlight how even the country's biggest drugmakers are struggling to establish uniform manufacturing standards across their facilities, nearly two years after they set out to revamp their processes.
At around 12.20 pm, the stock was down 5.7 per cent at Rs 745.25, having fallen as much as 7.3 per cent in early trading on the BSE. The benchmark index was up 0.5 per cent.
In a conference call on Saturday, Sun Pharma said it has been implementing remedial actions at the Halol plant since the FDA inspected it in September 2014 and highlighted a series of concerns.
India's largest drugmakers have been overhauling processes and procedures since then-industry leader Ranbaxy Laboratories Ltd in 2013 paid $500 million to settle US charges that it falsified data and misled regulators.
Since then, the FDA has also significantly scaled up inspections of foreign plants, leading to a series of warnings and import bans on manufacturing plants in India over problems ranging from compromising data to hygiene and repair issues.
Some in the Indian pharma industry say standards have become stricter over the past two years, and it has been difficult for companies to keep up. India supplies about 40 per cent of the generic and over-the-counter medicines available in the United States.
The latest warning increases the risk the FDA may ban imports from the Halol plant altogether, which would hit Sun Pharma's US sales, about 15 per cent of which come from the plant in question.
Morgan Stanley analysts said in a note on Monday they had lowered their estimates for 2017 and 2018 earnings per share, citing expectations of slower US growth due to delays in Sun Pharma getting U.S. approvals to launch products made at Halol.
Meanwhile, analysts at Indian brokerage Kotak, who have a "sell" rating on the stock, said they now expect the FDA to re-inspect the Halol site only by the second quarter of 2017, a delay of three to six months from the brokerage's original timeline.