Sun Pharma shares dive after U.S. seizes unit's drugs

MUMBAI Fri Jun 26, 2009 12:52pm IST

A broker looks at her computer terminal at a stock brokerage firm in Mumbai in this May 2009 file photo.  Sun Pharmaceutical shares plunged as much as 17.6 percent on Friday, their biggest intra-day drop, a day after U.S. authorities seized drugs made by its U.S. unit for manufacturing-standards violations. REUTERS/Punit Paranjpe

A broker looks at her computer terminal at a stock brokerage firm in Mumbai in this May 2009 file photo. Sun Pharmaceutical shares plunged as much as 17.6 percent on Friday, their biggest intra-day drop, a day after U.S. authorities seized drugs made by its U.S. unit for manufacturing-standards violations.

Credit: Reuters/Punit Paranjpe

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MUMBAI (Reuters) - Sun Pharmaceutical shares plunged as much as 17.6 percent on Friday, their biggest intra-day drop, a day after U.S. authorities seized drugs made by its U.S. unit for manufacturing-standards violations.

U.S. officials said on Thursday all medicines made at Caraco Pharmaceutical's three manufacturing plants in Michigan were seized. This may include up to 33 drugs, including generic versions of heart, pain and psychiatric medicines.

Sun Pharma, India's largest drugmaker by market value, owns about three-fourths of Caraco. The U.S. firm recently signed an agreement to market Sun's Abbreviated New Drug Applications, or ANDAs, which are either approved or awaiting approval at the U.S. Food and Drug Administration (FDA).

"This is going to have a negative impact on Sun for the near to medium term, but as the stock has fallen significantly today, I don't see a major sell-off," Alex Mathew, head of research at Geojit BNP-Paribas Financial Services, said.

Caraco shares on Thursday plummeted 43 percent to an all-time low of $2.39 after U.S. Marshals, at the request of the FDA, seized drugs and ingredients at the company's facilities.

FDA inspectors found poor control of raw materials, higher-than-normal variability in tablet manufacturing processes and "poor decisions made by the company's management who are responsible for the quality of drugs being manufactured," FDA consumer safety officer David Jaworski said.

Sun and its units supply Caraco with some raw materials and formulations, assist in acquiring machinery and equipment to enhance production capacities, and provide workforce assistance.

Also, four of the nine Caraco directors are, or were, affiliated with Sun, according to Caraco's website.

A spokeswoman for Sun declined to comment, while Caraco could not be immediately reached.

In February, shares of another Indian drugmaker, Ranbaxy Laboratories, had taken a hit after U.S. regulators said a plant owned by the drugmaker had falsified data.

The stock has since recovered after its parent, No.3 Japanese drugmaker Daiichi Sankyo, replaced Ranbaxy chairman and CEO Malvinder Singh, a member of the Indian firm's founding family, with its own executive in a bid to resolve problems.

"We saw similar problems with Ranbaxy a few months back, but Daiichi took action. Sun Pharma can also resolve this problem with U.S. authorities," Mathew said.

Shares in Sun Pharma, which has a market value of about $5 billion, were trading down 12.2 percent at 1,140 rupees by 0710 GMT, after sliding to 1,070 rupees, their lowest since April 8. In comparison, the main BSE index was up 1.3 percent.

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