Why Sun Pharma Shares are Down 8% in 4 Days

Sun Pharma shares traded lower for the fourth straight day and the stock was the top loser in the 50-share Nifty for a second straight session on Friday. The stock has lost nearly 8 per cent in the last four trading sessions.

On Thursday, 23 lakh shares were delivered, more than twice the 10-day average of 10 lakh shares. Meanwhile, open interest in Sun Pharma futures also rose by 5 per cent indicating build-up of short positions.

Here are the reasons for the selloff in Sun Pharma,

1) Sun's unit Taro Pharmaceutical Industries recalled two lots of a key drug on September 2, citing failed content uniformity specifications, according to the US FDA. The recalled Warfarin Sodium Tablets are intended to prevent blood clots. The drug makes up nearly 5 per cent of Taro's sales, analysts say.

This will be a sentimental negative for Sun Pharma given the company is already facing FDA issues, Praful Bohra of Nirmal Bang Securities told NDTV.

2) Sun Pharma has called an annual general meeting (AGM) of shareholders on September 27 to seek approval to raise Rs 12,000 crore through a qualified institutional placement (QIP) issue. The approval is only an enabling resolution, the company has said.

According to Mr Bohra, the only possible reason to raise such a large amount might be for an acquisition. However, Sun Pharma has passed such enabling resolutions in the past, so it may not be utilised, he added.

3) The US regulator conducted surprise inspection at the drugmaker's Halol facility in Gujarat on Wednesday, according media reports. The Halol plant is a major supplier of drug to the US market. According to Nomura, sales from Halol to the US totalled nearly $400 million in FY14, which was 25 per cent of Sun's US sales for the period. (Read the full story here)

As of 09.39 a.m., Sun Pharma shares traded 3.65 per cent lower at Rs 792.30 and underperformed the broader healthcare sub-index on the BSE, which traded down 1 per cent.

(With inputs from Reuters)