‘The US FDA has informed Sun Pharma ... that after a June 2011, re-inspection of its Cranbury, New Jersey, US manufacturing facility, the site has an acceptable regulatory status,’ Sun Pharma said in a statement. Therefore, the issues noted in the warning letter are considered to be resolved. The problems had been to do with violation of good manufacturing practice (GMP) standards, such as its inability to produce batches of consistent quality and lack of sufficient corrective actions.

Caraco still a stumbling block

However, it confirmed that its other US-based subsidiary, Caraco, has yet to resolve similar issues. In June 2009, FDA seized all drugs manufactured by Caraco, including raw materials and active pharmaceutical ingredients. Since then the agency has stopped the firm from distributing any drugs produced at its troubled Cranbury facility in New Jersey until the company complies with GMP requirements. The problems have also caused FDA to withhold approval of pending new drug applications for drugs produced at the Cranbury site [1].

Sun Pharma hopes that the 2012 fiscal year will see a resolution of Caraco’s issues with FDA. Becoming FDA compliant again will open the route for product introductions in the US market from a number of facilities. That could give a significant boost to sales and profit growth.

The company is optimistically forecasting revenue growth of 28—30% for financial year 2012, indicating that it is anticipating good news during 2011. One factor is the acquisition of a controlling stake in Israel-based Taro Pharmaceutical Industries (Taro) in September 2010 [2]. Taro’s numbers are reflected in Sun Pharma’s earnings, in full, since the December 2010 quarter.

In the first quarter of 2011, Sun Pharma’s sales rose 35%. Taro’s sales during this period gained 21% to US$107 million (Euros 80 million). Without Taro’s sales, Sun Pharma’s revenue would have fallen slightly. While Taro has added to revenue, its profitability is relatively lower. During the March 2011 quarter, Sun Pharma’s operating profit margin fell by nearly 9% from a year ago. Lower margins at Taro were the main reason, and others were a change in Sun Pharma’s product mix and charges incurred by Caraco as it works to resolve its production issues.

Though Taro’s inclusion has affected Sun Pharma’s profitability, it also provides an opportunity. The US is also Taro’s main market and closer integration with Sun Pharma’s US operations will lower costs and improve margins for Taro. Taro has also received a few product approvals for the US market in recent months and its Canadian manufacturing facility—which had also received a warning from FDA—has been declared compliant.

Global position is good

Meanwhile, Sun Pharma’s domestic operations in India continue to do well, growing ahead of the market. Its April 2011 deal with Merck will see Sun Pharma introduce branded generics in India and emerging markets [3]. As this side of its business scales up, it will also become a significant contributor to growth. So the market waits to see whether Sun Pharma will meet its upbeat forecast for 2012 and when Caraco gets the green light from FDA.

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References

1. GaBI Online - Generics and Biosimilars Initiative. Caraco and Sun to merge [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2011 October 7]. Available from: www.gabionline.net/Pharma-News/Caraco-and-Sun-to-merge

2. GaBI Online - Generics and Biosimilars Initiative. Sun Pharma finally wins battle for Taro [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2011 October 7]. Available from: www.gabionline.net/Pharma-News/Sun-Pharma-finally-wins-battle-for-Taro

3. GaBI Online - Generics and Biosimilars Initiative. Branded generics and generics branding for Merck and sanofi-aventis [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2011 October 7]. Available from: www.gabionline.net/Generics/News/Branded-generics-and-generics-branding-for-Merck-and-sanofi-aventis