<div><em>As predicted by analysts and industry experts, Sun Pharma will cut production units, divest non-strategic businesses of Ranbaxy to increase cost savings from the merger deal , says <strong>C H Unnikrishnan</strong></em><br><br>Drug maker Sun Pharmaceutical Industries Ltd, which is in the process of operational integration of merged entity Ranbaxy into the combined business, says that its profits and revenue will continue to be impacted in the whole financial year of 2015-16 due to the integration costs. The company, as predicted by the industry analysts and experts, is now planning to rationalise manufacturing units and divest some of the non-strategic businesses of Ranbaxy to increase cost savings from the $4 billion merger deal that it signed in 2014. </div><div> </div><div>The industry analysts and consultants had predicted job cuts in production and sales soon after the deal as the company would initiate manufacturing rationalisation and also by optimising marketing and sales network, although Sun Pharma had strongly denied this earlier. </div><div> </div><div>"As a part of the integration process, the company expects to incur certain integration charges in order to generate long-term synergies from this merger. Also, as a part of the integration process, the company may decide to discontinue certain non-strategic businesses," Sun Pharma said on Monday. </div><div> </div><div>"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 financial year 2018. This will be achieved by focusing on overall profitability improvement driven by revenue and procurement synergies, manufacturing rationalization and various additional cost-management measures," said the senior management of Sun Pharma in a Monday late evening conference call. </div><div> </div><div>Soon after Sun Pharma's acquisition, Ranbaxy witnessed an exodus of its US leadership team. It also saw the exit of several more senior executives in its India leadership leaving the company after the formal merger with Sun Pharma in 2015. </div><div> </div><div>Sun Pharma acquired the troubled Ranbaxy through an all stock merger deal in 2014. Ranabxy, the then largest drug maker in India by sales, had lost half of its $2 billion revenue contributed by the US market due to serious manufacturing compliance issues at four of its key export units in India. The industry analysts had recently said that the company might discontinue some of these manufacturing units instead of investing further in these units for making it compliant with the US quality norms. </div><div> </div><div>While the company says that it will continue the remedial measures at the affected units, it will focus and expedite the process for one of these units.</div><div> </div><div>"The remedial action at the Mohali, Dewas, Poanta Sahib and Toansa facilities (the US export units of Ranbaxy in India those were banned from imports by the US Food and Drug Administration (FDA) for violation good manufacturing practices) is on track. 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," said Sun Pharma promoter and managing director Dilip Shangvi. </div><div> </div><div> Meanwhile, a couple of Sun Pharma's own manufacturing units in India which cater to the US market are also under US FDA scrutiny over the manufacturing norms violations. </div><div> </div><div>"A key priority for us is to ensure continued current good manufacturing practice compliance by continuously enhancing systems, processes and human capabilities to meet global regulatory standards at all our manufacturing facilities. As a part of this process and in order to address the deviations at its Halol facility, the company has undertaken various remedial measures. 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," Sun Pharma said. </div><div> </div><div>However, these measures are likely to adversely impact the overall revenues and profits of the company for financial year 2016. </div><div> </div><div>"Consolidated revenues will remain flat or show a decline over the previous year and the consolidated profits may also be adversely impacted due to certain expenses/charges arising out of integration as well as remedial actions, although the above initiatives will help the company revert to a more sustainable growth trajectory going forward," the company said.</div><div> </div><div> </div>
