Sun Pharma gains on report Form 483 may not lead to import alert

Shares of Sun Pharmaceutical Industries on Friday increased 4.3% after a report by brokerage firm Credit Suisse said the company receiving a Form 483 from the US Food and Drug Administration (US FDA) on its Halol facility may not lead to an import alert as the observations raised has “no data integrity issue”. Form 483 was issued to the company on September 19.

However, the report said it will lead to approval blockage since there are some procedural issues that may take time to get resolved.

Submission of Form 483 means the FDA has found certain manufacturing or procedural issues in respect to functioning of a plant and seeks corrective measures. They are inspectional observations, and may or may not lead to an import alert. Any company receiving a Form 483 must submit its responses within 15 business days, irrespective of the number of observations raised.

In a research report, the brokerage house said, “Sun has received Form 483 on the recent FDA inspection of the Halol facility in Gujarat. There are 23 observations with 10 for the Injectable unit, four for the oral solid unit and the rest for the quality control lab. In our view, this facility accounts for nearly 20-25% of Sun’s profits.”

However, the report pointed out that the chances of import alert are low since there are no data integrity issue on the form but many procedural ones. There are several procedural issues where resolution could take time and until then, approvals could be blocked possibly (impacting growth, as the fastest growing division is US sales from the Indian plants).

The inspection at the Halol facility was not a surprise audit and the inspection was scheduled, as the last one at the facility was conducted in September 2012 and the FDA typically inspects a facility within every two years.
During the inspection, according to Credit Suisse, the FDA team inspected the injectable unit, the oral solids unit and the quality control lab, which serves both the injectable and oral solid units.

FDA is said to have raised 10 observations regarding the injectable unit. Most observations focused on aseptic procedures which is not defined within the “Validation Master Plan” and “Risk assessment process” and there are no procedures to document which staff are given access to production equipment.”

The report also said the FDA pointed that contaminated vials are rejected without an assignable cause and not incubating them further precludes the company from ascertaining the cause. “The building is not in a good state of repair, including water stains with ceiling damage and water leaks from the ceiling in the personnel corridor of the injectable manufacturing area,” it added.

In terms of the observation raised at the solid dosage unit and quality control lab, the key observations are regarding no standard challenge test articles are used for routine performance checks of blister pack machines.

There is no documentation of alarm events that occur during routine tablet compression production. Rejected tablets are not evaluated to determine the size and type of the unknown contaminant. The FDA also found that for the two recalls (Metformin ER and Venlafaxine ER), there was no formalised corrective action plan. Investigations of an unexplained discrepancy or failure of a batch to meet any of its specifications did not extend to other batches of the same drug product or other drug products that may have been associated with the specific failure or discrepancy.

“Written procedures for cleaning and maintenance are not exhaustive. Cotton swabs are being used for recovering chemical residues (following equipment cleaning operations) and not defined in procedures applicable to performing cleaning validation. The sterility test method for sterile gloves and the bacterial endotoxin test method,” it further said.

Sun Pharma spokesperson, however, declined to comment on the report.

Credit Suisse also said that Form 483 overhang on stock would remain for the next three months. “Based on past inspections, the FDA typically takes 2-3 months to resolve 483s. The next step is for Sun is to reply to the FDA on its proposed corrective action plan within 15 days,” it added.

The shares of the company, on BSE, rose 6.19% and touched an intra-day high of Rs 821.70 before closing at Rs 807.10 apiece, up 4.3% the previous close.