Sun Pharmaceutical Industries on Tuesday said its loan to a third party that sparked corporate governance concerns and a whistleblower complaint was part of its settlement wiSun Pharmaceutical th Atlas Global Trading after it failed to supply drugs because of US regulator USFDA’s restrictions on its Halol plant.
The company also said it has not given any loans or guarantees to Suraksha Realty — controlled by Sun Pharma’s co-promoter Sudhir Valia. “The company states unequivocally that it does not have any financial transactions with Suraksha Realty,” it said.
In September 2014, Sun Pharma’s Halol facility (Gujarat) was impacted by USFDA cGMP issues which were finally resolved in June 2018, after nearly 4 years, it said. “These cGMP non compliances resulted in supply constraints… Sun Pharma was not able to adhere to the agreed supply schedule with Atlas. Sun Pharma, in FY18, has funded Atlas towards non-fulfilment of its supply obligations till the time such obligations are fulfilled as per the agreement,” Sun Pharma said in a stock exchange filing.
“The said funding was included in Loans & Advances schedule of Sun Pharma’s FY18 consolidated balance sheet,” it said. The parties to the supply contract have now agreed in principle that Atlas will assign its rights and obligations arising from this contract, to a wholly owned subsidiary of Sun Pharma, it said.
According to the company, this assignment will ensure that the loans & advances given to Atlas will be settled. On conclusion of this transaction, in the consolidated balance sheet, this loan and the obligation will cease to exist as it gets squared up. This transaction is expected to be concluded in FY19, it said.
As of March 2018, Sun Pharma’s consolidated balance sheet, reflected a liability towards obligation of supplies to Atlas Global Trading amounting to Rs 2,238 crore ($ 345 million). This liability was in respect of Atlas assuming the damages on account of Protonix patent litigation settlement entered by Sun Pharma which was disclosed in Sun
Pharma’s Annual Report FY14, it said. It said the domestic formulations distribution is to be transitioned to Sun Pharma’s wholly-owned subsidiary Sun Pharma’s distribution related to India domestic formulations business will be transitioned from Aditya Medisales Ltd, the current distributor, to a wholly owned subsidiary of Sun Pharma. “This change will be made effective by Q1FY20, post receipt of all requisite regulatory approvals,” it said.
There were media reports last week of a complaint by a whistleblower raising fresh concerns on the company’s corporate governance. The company said it’s not aware of the whistleblower complaint and asked market regulator Sebi “to examine the matter in its entirety, and the role of some media houses and other stakeholders”.
The whistleblower complaint, the second in over a month, alleged that pharmaceutical manufacturer Aditya Medisales Ltd had transactions with Suraksha Realty. The transactions allegedly took place between 2014 and 2017, and were reportedly worth over Rs 5,800 crore. Last year, another whistleblower had approached Sebi with a document alleging various irregularities by Sun Pharma, its promoter Dilip Shanghvi and others.