Sun Pharma: What JM Financial says as Halol plant gets OAI tag; check key stock drivers

Shares of Sun Pharmaceutical Industries Ltd declined in Wednesday’s trade as the company disclosed that the US Food and Drug Administration (US FDA) has classified its Halol facility as Official Action Indicated (OAI) following a recent inspection.

On Wednesday, Sun Pharma stock fell  as much as 0.95 per cent to hit the day’s low of Rs 1,580.05 apiece on the BSE, over its previous close of Rs 1,595.10. At 10:16 am, the company shares were up 0.18 per cent at Rs 1,597.95.

In a stock exchange filing, Sun Pharma said the FDA carried out an inspection at its Halol facility between June 2 and June 13, and subsequently designated the plant as OAI. “This means the FDA considers the facility to be not fully compliant with regard to certain current good manufacturing practices (CGMP),” the company said

The Halol plant, which has been under Import Alert since December 2022 due to earlier compliance violations, will continue to face restrictions on shipping products to the US, except for limited exemptions in cases of drug shortages. “Sun Pharma remains committed to working with the FDA and maintaining CGMP standards at all of its facilities to provide high-quality medicines to patients globally,” Sun Pharma added

Brokerage JM Financial said that the latest OAI status underscores ongoing gaps at Halol despite the company’s corrective actions over the past three years. The brokerage highlighted that Sun Pharma’s dependence on the US generics business has reduced significantly—from 24 per cent of operating revenue in FY21 to an estimated 14 per cent in FY25—making Halol less critical to the company’s overall performance. “The company’s growth outlook and stock performance are now more closely tied to its US and global specialty businesses, which remain the key drivers,” JM Financial said.

The FDA’s June inspection had resulted in eight Form-483 observations, mainly related to process and documentation lapses. The OAI classification implies that easing of regulatory restrictions at Halol is unlikely in the near term.