Sun Pharma slumps over 6% on USFDA import alert; doxycycline prices fall

MUMBAI: Shares of Sun Pharmaceuticals plunged over 6% in trade today after the USFDA issued import alert for its Karkhadi unit. The import alert is for all products manufactured at Karkhadi unit.

Ranjit Kapadia an analyst at Centrum Broking doesn’t see more than 4-5 per cent revenue hit for the company due to import alert.

“We will have to re-work the price target based on more information from the management. Investors should wait for clarity to emerge before buying the stock,” he said in an interview to ET Now.

It’s a double whammy for the company as US-based competitor Hikma Pharmaceuticals expects 60 per cent decline in Doxycycline sales and indicated fall in doxycycline prices over three months.

According to Credit Suisse report, Doxycycline contributes about 6-7 per cent of Sun’s FY15E EPS. The brokerage expects Sun Pharma to guide for 15-16 per cent FY15 sales growth.

URL Pharma, US-based subsidiary of Sun Pharma supplies doxycycline hyclate amd had benefited due to drug shortage.

Bank of Americal Merrill Lynch recently downgraded the stock to "neutral" from "buy", citing stiff competition for certain key drugs. In its report, the brokerage said antibiotic doxycycline and Doxil, a cancer drug, are set to face incremental competition over the next 12 months.

The stock of Sun Pharma closed at Rs 573.60, down 5.03%, on the BSE. It touched a high of Rs 610 and a low of Rs 565.60 in trade today.