Sun Pharma shares fell over 3 per cent on Monday after India's biggest pharma company said it expects revenues and net profit to be adversely hit in the short term due to supply constraints at its Halol facility in Gujarat and high expenses arising out of Ranbaxy integration as well as remedial actions.
According to Nomura's estimates, supplies from Halol contribute around $350-$400 million in US sales for the Indian pharma company. The Halol facility was inspected by the US Food and Drug Administration last year and received a Form 483 detailing possible deviations from good manufacturing practices. Sun currently faces supply constraints for some products due to the compliance issues at the Halol facility.
Sun Pharma earlier in July this year had said that revenue in fiscal 2016 would be flat at best as it struggles to fix manufacturing problems at Ranbaxy Laboratories, which it bought last year.
Sun Pharma is also seeking to address US import bans on four of Ranbaxy's Indian facilities. Currently, all the four manufacturing facilities of Ranbaxy - Mohali and Toansa in Punjab, Dewas in Madhya Pradesh and Paonta Sahib in Himachal Pradesh - have been banned by the US drug regulator from export of drugs to the American market.
Addressing the company's shareholders during the annual general meeting (AGM) over the weekend, managing director Dilip Shanghvi said in the near term, and especially for 2015-16 fiscal, the company's overall growth in revenues and net profit will be adversely impacted due to temporary supply constraints at the Halol plant.
Mr Shanghvi said the company is the process of implementing corrective steps at the Halol facility and may decide to discontinue certain non-strategic businesses.
Mr Shanghvi, however, said that after the after the Ranbaxy consolidation, the company will be better placed to pursue higher than industry growth in subsequent years.
Sun Pharma shares have underperformed the markets on concerns over the near-term impact arising out of the Ranbaxy merger. Its shares have declined 10 per cent in the past six months as compared to a 7 per cent gain in BSE Healthcare index.
The Mumbai-based pharma company will announce its September quarter earnings on November 07, 2015. The drug maker had reported a 60 per cent decline in consolidated net profit at Rs 478.96 crore for the April-June quarter due to one-time exceptional charges of Rs 685.17 crore related to write-downs and integration of Ranbaxy.
At 11:04 a.m., shares of Sun Pharma were down nearly 2 per cent, underperforming the Sensex which was down 0.50 per cent.