Sun may divest Ranbaxy’s non-strategic businesses

Drugmaker Sun Pharma has indicated that it may discontinue certain non-strategic businesses of Ranbaxy as part of the integration process.

Sun had announced the closure of its $4-billion acquisition of Ranbaxy earlier this year.

As part of the Ranbaxy integration process, Sun has identified two-three businesses and these are being evaluated internally, Sun Managing Director Dilip Shanghvi told analysts late on Monday.

These would be low-margin businesses with no long-term strategic value, he explained, adding that they could be certain geographies, or products or APIs (active pharmaceutical ingredients).

Ranbaxy’s over-the-counter business though would not on this radar, he indicated, as it is a high margin, high volume business and would be a base for Sun’s business growth in the US. Meanwhile, Sun expects to incur certain integration charges in order to generate long-term synergies from the merger, the company added.

Further, it said: “Our target for the synergy benefits from the Ranbaxy acquisition has increased by 15-20 per cent as compared to our original target of $250 million by FY18. This will be achieved by focusing on overall profitability improvement driven by revenue and procurement synergies, manufacturing rationalisation and various additional cost-management measures.”

On regulatory issues in the US, Sun said its key priority is to ensure continued compliance to cGMP (current Good Manufacturing Practice) norms by enhancing systems, processes and human capabilities to meet global regulatory standards at its manufacturing facilities.

The company has undertaken various remedial measures to address cGMP deviations at its Halol facility.

“These remedial measures have resulted in supply constraints for some of the products. We expect this situation to continue for some more time till all the remedial steps at Halol are completed,” the company said.

The remedial actions at Ranbaxy’s Mohali, Dewas, Poanta Sahib and Toansa facilities are on track, it added.

“We are working towards the fulfilment of the requirements of the US consent decree and will try to expedite the resolution for at least one of these facilities,” it added.

Ranbaxy has been facing issues raised by the FDA and other American authorities and health regulators in the European markets.

As a result of the integration and regulatory challenges, Sun said, it expects its consolidated revenues to remain flat or show a decline over FY15 and profits to be adversely impacted.

However, it hopes to revert to a more sustainable growth trajectory post FY16.

On growth plans, the company said it will continue to strengthen and build leadership position in key markets and business segments.