Sun Pharma shares fell almost 7% in the early trading session on Monday after the pharma major's Halol facility was classified an OAI (Official Action Initiated) by USFDA.
Sun Pharma received a letter from the USFDA classifying the Halol plant in Gujarat as official action indicated. The drug regulator has issued Form 483 with eight observations to the plant.
"The OAI classification implies inter alia that the USFDA may withhold approval of any pending product applications or supplements filed from this facility till the outstanding observations are resolved," the filing added.
Following announcement by the company, Sun Pharma stock opened with a loss of 2.71% and later touched an intraday low of Rs 315.3, declining 6.76% as against the previous close of Rs 338.15. Later, the share erased losses and traded unchanged at Rs 338.25.
Sun Pharma share price trades lower than its 5, 20, 50, 100 and 200-day moving averages.
Sun Pharma stock has fallen 8.5% in one month and 21% year-to-date.
The USFDA has mentioned that they may put all new approvals from the Halol facility on hold, the company clarified in another filing. Halol contributes approximately 3-4% of the company's consolidated revenues.
The company added later that it continues to manufacture and distribute existing products for the US market, thereby not likely to have any adverse impact on current business from the facility.
Meanwhile, rating firm CLSA has cut FY21-22 EPS estimates of Sun Pharma by 4% and its sales estimates by 3% on Halol plant updates.
Despite that, CLSA continued to find risk-reward attractive and said valuations largely reflect higher security. It maintained buy rating on the stock, at the target price of Rs 520. CLSA's earlier target price stood at Rs 540.