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Systematix Research Report
In November 2022, the U.S. food and drug administration had classified Sun Pharmaceutical Industries Ltd.’s Mohali facility under Official Action Indicated status, which impacted its ability to receive approvals for its pending filings. The U.S. FDA has now issued a consent decree correspondence / non-compliance letter, which causes a temporary halt to products exported from Sun Pharma's Mohali facility to the U.S. until Sun Pharma takes certain corrective actions.
One of the corrective actions include – Retaining an independent CGMP expert to conduct batch certifications of drugs manufactured at the Mohali facility. We estimate that about 15 products are manufactured and exported to the U.S. from this facility and they contribute to 1-1.5% of overall sales of the company.
In the base case, we expect Sun Pharma to put the desired corrective actions in place over the next three months and in such a situation, impact on FY24E net earnings should be less than 1%. In the worst case scenario (assuming a six–12 month delay), we expect an adverse impact of 2 to 3.5% on Sun Pharma’s FY24E earnings.
We believe that if Sun Pharma is able to execute a potential high value complex generic approval, the same can help the company more or less offset this adverse impact, which we are currently not building in our numbers. A larger than expected ramp-up in gRevlimid can also lead to an earnings surprise in FY24/FY25.
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