Sun Pharma may discontinue some non-strategic businesses

MUMBAI: Sun Pharma, India’s largest drug maker by revenues and market cap, may decide to discontinue some non-strategic businesses as part of its integration process with Ranbaxy, the company it acquired last year in a $4-billion deal.

Addressing shareholders at its 23rd Annual General Meeting in Vadodara on Saturday, Sun Managing Director Dilip Shanghvi said the company expects to incur certain integration charges in order to generate long-term synergies from the merger (with Ranbaxy).

He did not disclose what actually could be the “non-strategic” businesses. Recently, Sun sold to Strides Arcolab two marketing divisions that it had inherited from Ranbaxy that were selling drugs to treat disorders related to the central nervous system.

As its overall strategy, Shanghvi told shareholders its integration with Ranbaxy will help increase R&D productivity, boost presence in the specialty segment and target synergy benefits of $300 million by FY18 from the merger.


Shanghvi indicated that as Sun gears up for its future evolution, it “entail taking multiple initiatives, both organic and inorganic as well as taking higher risks”.

He noted that dermatology and ophthalmic drugs as the key segments targeted through initiatives like in-licensing early-to-late stage clinical candidates and getting access to on-market patented products. Sun’s portfolio of innovative dermatology drugs includes Absorica, Kerastick and the Topicort range.

Shanghvi noted that the in-licensing of Merck’s investigational drug, MK-3222, being tested for treatment of chronic plaque psoriasis, further strengthens its presence in the branded offerings.

At present, with revenues of Rs 13,720 crore, the US forms half of Sun Pharma’s sales of Rs 27,286 crore (FY2015), while India accounts for 24% of sales and 14% is generated via the emerging markets.

On the vexatious issue of manufacturing compliance raised by the US Food & Drug Administration at Sun’s Halol site, Shanghvi admitted that the remediation process has temporarily impacted supplies and product approvals.

This is expected to improve “once the entire remediation process is completed and the facility get recertified,” he added.

The remediation process at Ranbaxy’s four manufacturing sites also continues to move as per plans, he noted, cautioning that this will be a “time-consuming process”.

In the near term and for FY 2016, Sun Pharma’s revenue growth and net profit will be adversely impacted due to the temporary supply constraints at Halol and certain expenses and charges arising out of Ranbaxy’s integration and remedial actions.

“Post the consolidation in FY16, the company will be better placed to pursue higher than industry growth in subsequent years,” Shanghvi added.