(Bloomberg) -- Sun Pharmaceutical Industries Ltd. shares extended a rally after U.S. regulators lifted sanctions on a key plant, clearing the way for India’s biggest drugmaker to renew product launches from the facility after a two and a half year ban.
The U.S. Food and Drug Administration has closed its inspection of the Halol plant after the issues contained in a 2015 warning letter were addressed, Sun Pharma said in a filing to exchanges on Tuesday. In February the FDA noted three observations of potential manufacturing violations, which Sun Pharma said it was addressing.
Sun Pharma’s shares climbed as much as 3.8 percent in Mumbai early Wednesday, heading for the highest level since February. The stock surged 8.1 percent on Friday, the most since April 2015, on a report that the FDA had concluded its investigation.
Lifting of sanctions at the plant in India’s Gujarat state will help the company controlled by billionaire Dilip Shanghvi boost sales in the world’s biggest drug market and offset the deterioration in U.S. generic drug prices that are roiling the whole industry.
“This approval was critical because without it the U.S. business can’t grow, and the U.S. is a critical part of the business," said Nitin Agarwal, an analyst covering India’s drug industry at IDFC Securities Ltd. Sun’s U.S. generic business “hasn’t been growing the last several years because they haven’t had too many approvals. Most of the approvals were filed from that facility.”
Sun received a warning letter from the U.S. regulator in December 2015 following an inspection at its Halol facility. A reinspection in 2016 produced 14 pages of new observations, including poorly designed tests and tardiness reporting results. While a warning letter does not prevent drugs already approved being shipped from a facility, it does place restrictions on new ones.
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