CIC, Sunshine drop healthcare biz merger move

CIC Holdings Plc and Sunshine Holdings Plc have decided to abandon previously-announced plans to merge their healthcare businesses. 

CIC said it would continue to operate its healthcare business in the present manner, introducing measures as may be deemed necessary for maintaining and improving the competitiveness as a leading healthcare business in Sri Lanka.

The proposal to merge the businesses was first announced in March this year on a 60:40 basis with Sunshine exercising effective management control. In March the deal was under negotiation and subject to due diligence findings.

In its 2018/19 Annual Report, CIC said in its Health and Personal Care cluster, the performance of both sub segments Pharmaceutical and Medical Devices remained under stress largely due to political, economic and regulatory challenges.

Healthcare and Personal Care revenue amounted to Rs. 8.09 billion in FY19, down from Rs. 8.27 billion in the previous year. Pre-tax profit was Rs. 282 million, down from Rs. 459 million.

The Pharmaceutical segment remained under pressure most part of the year, amidst ongoing regulation and stricter price controls on a majority of essential drugs which account for a sizeable portion of portfolio. 

Shifting focus, it was quite aggressive in promoting the range of nutritional supplements. Towards this end, it worked to create awareness among the prescriber community around the island regarding the premium range of nutrition enhancers and special dietary supplements, a strategy that delivered excellent results.  CIC also said the political uncertainty following the constitutional crisis in October 2018 and depreciation of the rupee put a severe strain on the Medical Devices segment amidst delays in evaluation of tender proposals submitted for the supply of medical devices to Government hospitals.

However, by far the most notable performance in the Health and Personal Care cluster came from LNP (Link Natural Products), where focused efforts to pursue opportunities in all key markets enabled LNP to register impressive top line and bottom line results for the year ended 31 March 2019.

The year 2018/19 also marked LNP’s maiden entry to the export market, with selected products from the Link Personal Care and Ayurvedic ranges shipped out to B2B markets in USA, Russia, India, Australia and New Zealand.

In terms of outlook and prospects, CIC 2018/19 Annual Report stated that with healthcare being a growing market, the key priority going forward would be to build captive market share in both Pharmaceuticals as well as the Medical Devices segments.  Strengthening business resilience against the impacts of market forces will also remain a key focus in the Pharmaceuticals segment. 

Accordingly, strong emphasis will be placed on expanding production capacity as well improving downstream efficiency at the company’s manufacturing plant.  In addition the Company will focus its attention on further diversifying its portfolio through the release of new products that would spearhead efforts to gain a foothold in areas not tapped yet, especially in the Medical Devices segment and in particular the Diagnostics sphere.

For LNP the key focus would be to build on the successes achieved so far. This means further deepening the penetration into the local market, while aggressively pursuing export opportunities in high growth potential markets around the world.