Sun Pharma may discontinue certain non-strategic businesses as part of its integration process with Ranbaxy Laboratories, which it acquired in a USD 4 billion deal last year.
The Mumbai-based firm also expects its revenues and net profit to be adversely hit in the short term due to supply constraints at Halol facility in Gujarat and high expenses arising out of Ranbaxy integration as well as remedial actions.
“As part of the integration process (of Ranbaxy), the company expects to incur certain integration charges in order to generate long-term synergies from this merger. Also, the company may decide to discontinue certain non-strategic businesses,” Sun Pharma Managing Director Dilip Shanghvi said.
Addressing the company’s shareholders during the annual general meeting on the weekend, he said that in the near term and especially for 2015-16 fiscal, the company’s overall growth in revenues and net profit will be adversely impacted due to temporary supply constraints at Halol plant.
The US Food and Drug Administration (USFDA) had pointed out certain current good manufacturing practice (cGMP) deviations at the company’s Halol facility.
The company’s profitability is also expected to be hit by certain expenses and charges arising out of Ranbaxy integration as well as remedial actions, he added.
“Post the consolidation in this fiscal , the company will be better placed to pursue higher than industry growth in subsequent years,” Shanghvi said.
Sun Pharma eyes synergy benefits of USD 300 million (around Rs 2,000 crore) by 2017—18 from the merger.
Shanghvi said the “remediation process at the erstwhile Ranbaxy facilities, which were found to be non-compliant in the past, also continues as per the plan“.
While significant efforts to make these facilities compliant are on, this will be a time-consuming process, he added.
Currently, all the four manufacturing facilities of Ranbaxy — Mohali and Toansa in Punjab, Dewas in Madhya Pradesh and Paonta Sahib in Himachal Pradesh — have been banned by the USFDA from export of drugs to the US market.
While Paonta Sahib and Dewas facilities have been under US import alert since 2008, the US health regulator has since banned the other two as well.
The company is also in the process of implementing corrective steps at Halol facility.