Fastest Growing Companies 2015

Growth eclipse

After a dream run, Sun Pharma is grappling with growth and regulatory issues. Can the country’s biggest drug maker rediscover its mojo?

Soumik Kar

Form 483 has been a source of chronic pain for Indian pharma companies that have a major presence in the US. Issued by the US food and drug administration (USFDA), the form notifies a company of objectionable conditions found at its drug units. At the conclusion of an inspection, companies have to respond to the US regulator about their corrective action plan and then implement these plans expeditiously.

While most well-known Indian drug majors have found themselves in the middle of an FDA tangle, Sun Pharmaceuticals, owned by reticent billionaire Dilip Shanghvi, has never found infamy in this department. That is, until now. Following a 15-month-long inspection of Sun’s largest manufacturing plant at Halol in Gujarat, the US regulator had issued a Form 483 to the company, detailing deficiencies in the processes at the facilities or controls used for manufacturing, processing and packing, which did not conform to good manufacturing practices.

A warning letter from the USFDA followed late last month — even though corrective plans were already underway — meaning that additional efforts were required. “The management expects a resolution to happen less than 12-15 months from now,” says a report by Motilal Oswal Securities.

Although the drug maker, a big supplier of generics to the US, can continue to supply customers from the facility, it cannot launch any new products from the site. Till corrective action is taken and the facility gets reinspected, earnings could be under pressure. Analysts at Kotak don’t foresee the FDA reinspecting the site before the second quarter of FY17, while Morgan Stanley has lowered its earnings estimates for both FY17 and FY18. The sudden turn of events has been rather dramatic for the first-generation company, which has had a stellar record so far: from a turnover of under Rs.700 crore in 2002, revenue has grown manifold to almost Rs.28,000 crore in FY15.

The company has almost made a habit out of acquiring distressed companies and turning them around. For instance, Sun Pharma bought over Israeli drug firm Taro, which had a significant presence in cardiovascular neuropsychiatric diseases and skin treatment products in the US, after a three-year-long battle with its shareholders. Taro&


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