Sun Pharma Shares Rebound on Value-Buying

Shares of Sun Pharma rebounded on Tuesday after slumping 4.5 per cent on Monday. Shares of India's biggest pharma company gained as much as 2 per cent today on value-buying at lower levels. 

Shares of Sun Pharmaceutical saw a selloff yesterday after the drugmaker disclosed that it has received a "warning letter" from US regulator over violation of manufacturing standards at its Halol plant in Gujarat, which is its largest manufacturing facility.

The US Food and Drug Administration's (US FDA) warning letter to Sun Pharma indicates the agency is dissatisfied with the remedial measures the company has implemented since last September, when the FDA first notified the company of its concerns after an inspection.

The Halol plant makes up about 15 per cent of Sun Pharma's sales in its largest market, the United States. It is critical to the company as it has the capabilities to manufacture injectable products, which are difficult to make and hence a niche and lucrative market for drugmakers.

Sun Pharma said in a statement that it had made "significant investments" in automation and training to improve quality systems at the plant, hired consultants, and was updating the FDA on all the corrective measures it was taking.

Some analysts say that the correction in the stock price has already factored in issues related to the Halol plant.  Sun Pharma shares have corrected nearly 35 per cent from its 52-week high of Rs 1200, hit in April this year. Concerns over Ranbaxy-merged related issues and FDA concerns have weighed on the stock. 

Sarabjit Kour Nangra of Angel Broking said the brokerage has been vouching Sun Pharma as a buy since the stock corrected to 720-730 levels as the market had factored in issues related to the Halol unit. Our view has not changed, she added.  

G Chokkalingam of Equinomics Research advises investors to buy the stock in declines, saying that pharma companies with multiple plants are taking mitigating measures to minimise impact of regulatory issues.

Sun Pharma shares ended 1.3 per cent higher at Rs 764.