Why Sun Pharma Share Price is Falling

Pharma stocks experienced a significant rally during the pandemic. However, post the pandemic, they failed to keep up with the overall market performance due to a decline in demand and a rise in input costs.

This can be seen in the performance of the Nifty Pharma.

Over the past two years, Nifty Pharma has witnessed a decline of 10.6%, while benchmark indices have delivered substantial gains of over 23%.

This is now changing driven by a sustained momentum in Indian sales and the anticipated growth in US sales propelled by niche products. These specialized offerings are expected to offset the short-term challenges.

Amid this favorable outlook for the pharmaceutical sector, shares of the pharmaceutical behemoth Sun Pharma have experienced a significant downturn.

Over the last month, the stock is trading lower by 5%.

Let's find out what triggered the fall in the share price.

#1 USFDA Concerns over Mohali unit

Sun Pharma, on 24 April 2023, received a letter from the US drug regulator, United States Food and Drug Administration (USFDA), indicating non-compliance for the Mohali facility, which had previously faced an import alert for four years until 2017 due to non-compliance.

The USFDA's letter addressed four main issues. It raised issues regarding the cross-contamination of API Clonazepam and Sun Pharma's failure to identify the source of contamination.

The regulator also criticizes the backdating of data by employees and highlights inadequate investigations conducted by site personnel.

Issues were also found in water sample collection and the inadequate validation of the manufacturing process for the cardiac drug ranolazine.

As a result, the facility was categorized as official action indicated (OAI), the most severe classification within three months of an inspection.

An OAI designation raises the risk of adverse action by the regulator and potential delays in new approvals.

This raised concerns over potential disruptions and the potential permanent loss of market share dragging the stock lower.

#2 Clinical trials on hold

USFDA, on 2 May 2023, ordered a halt to Sun Pharma's clinical trials for a dermatological drug, Deuruxolitinib, due to the potential of blood clots.

It found that it can result in hair loss on the usage of 12 mg of the Deuruxolitinib drug.

The company is currently working closely with the USFDA to address the agency's concerns, which the drugmaker expected to be communicated within the next 30 days.

Sun Pharma acquired Deuruxolitinib when it bought US-based Concert Pharmaceuticals for US$ 576 million (m) earlier this year.

This was Sun Pharma's second run-in with the USFDA in less than two weeks of the Mohali unit concern.

#3 Recalling drug

Sun Pharma, on 8 May 2023, initiated recalling more than 24,000 prefilled syringes of generic medication in the United States.

The recall comes in response to concerns regarding the presence of particulate matter in the syringes, which could risk the health of the patients.

The affected medication is bupivacaine hydrochloride injection commonly used as a local anesthetic.

The recall is classified as a Class II recall, indicating a situation where the use of the product may cause temporary or medically reversible health consequences.

The recalled syringes were distributed across the United States, and the company is actively communicating with its customers and arranging for the return and replacement of the affected products.

This back-to-back blow from the USFDA triggered the fall in the share price.

How Sun Pharma shares have performed recently

In the past month, shares of Sun Pharma have plunged 5% while the shares have declined 3.7% so far in 2023.

Sun Pharma has a 52-week high of Rs 1,072.2 touched on 30 January 2023 and a 52-week low of Rs 789.9 touched on 17 June 2022.

It is currently trading at a PE (Price to Earnings) multiple of 160.6x, while PB (Price to Book) ratio stands at 8.8x.

About Sun Pharma

Sun Pharma including its subsidiaries and associates is the fourth largest global specialty generic company that is ranked 1st in India and 8th in the US.

It's the largest Indian pharmaceutical company in the US and among the leading Indian pharmaceutical companies in emerging markets.

The company manufactures and markets a large basket of pharmaceutical formulations covering a broad spectrum of chronic and acute therapies.

It includes generics branded generics complex or difficult to make technology intensive products over the counter (OTC) products anti-retrovirals (ARVs) Active Pharmaceutical Ingredients (APIs) and intermediates.

To know more about the company, check out Sun Pharma company fact sheet and quarterly results.

For a sector overview, read our pharmaceuticals sector report.

You can also compare Sun Pharma with its peers.

Sun Pharma vs Lupin

Sun Pharma vs Alembic Pharma

Sun Pharma vs Natco Pharma

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