Canadian contract drug manufacturer Patheon Inc said it plans to close or sell its plant in Caguas and consolidate its Puerto Rico operations into its manufacturing site located in Manati.

"We will consolidate our people, resources and investments at Manati and therefore concentrate on growing one 'flagship' site," Chief Executive Wes Wheeler said in a statement.

It was not practical to operate two plants within close proximity of each other, Wheeler said.

The company said it was planning to offer available positions at Manati to affected Caguas employees.

Desjardins Securities analyst Maher Yaghi, who has a "hold" rating on the company's stock, said the consolidation was pretty much expected as "the company continues to welcome cost cutting."

The consolidation will be completed by the end of fiscal 2011 and will result in total repositioning expenses of about $7 million, of which about $2.4 million will be booked in the first quarter of 2010, Patheon said.

It also expects to incur an impairment charge of about $1.3 million in the first quarter of 2010 in connection with the consolidation plan.

"We expect operations to improve materially in 2010 and 2011 as new products are introduced, costs controls are felt, the economy slowly gets better and management can refocus on operations," RBC Capital Markets analyst Douglas Miehm said in a fourth-quarter preview note to clients.

Shares of the company were up 4 percent at C$2.29 Thursday afternoon on the Toronto Stock Exchange. (Reporting by Koustav Samanta in Bangalore; Editing by Jarshad Kakkrakandy, Ratul Ray Chaudhuri)