Shares of Sun Pharmaceutical Industries fell 3% in morning trade on April 24 after the drugmaker temporarily halted production at its Mohali manufacturing unit to implement corrective measures in line with US Food and Drug Administration guidance.

The drugmaker’s Mohali facility has been flagged as “Official Action Indicated” (OAI) following inspections by the USFDA between August 3 and August 12, 2022. In a recent letter titled Consent Statutory Letter/Non-Compliance Letter, the US drug regulator directed Sun Pharma to implement certain corrective actions at the Mohali facility before releasing more final product batches into the United States.

One required corrective action is to have independent CGMP (Current Good Manufacturing Practice) experts perform batch certification of pharmaceutical products produced at the facility. Sun Pharma said it was taking necessary corrective actions in an exchange filing. Nonetheless, batch releases from Mohali will remain suspended until mandatory measures are implemented. Shipping from Mohali to the US will resume once measures are in place.

Shares of Sun Pharmaceutical Industries were down 2% at Rs 975.02 on the National Stock Exchange at 9:46 am.

After conducting inspections, the FDA places manufacturing facilities into one of three categories — no action taken, voluntary action is taken, or official action is taken. OAI is the strictest classification issued when US regulators are not satisfied with a company’s response to observations made during inspections.

Brokerage ICICDirect highlighted that the production unit under review in Mohali was formerly the Ranbaxy factory. It received an import alert in 2013, which was lifted in 2017 under a US FDA consent order. While ICICIdirect did not see any significant overall impact on OAI status, the USFDA’s move could lead to greater scrutiny of other plants.

The Mohali facility specialises in oral solid dosage forms and manufactures products such as Pantoprazole ODT and Diltiazem caps XR. Since Sun Pharma is the only generic in Pentasa, it could be a very high-margin product. As such, Nomura believes that supply disruptions could adversely affect the pharmaceutical giant’s profit margins in the short term.