Sun Pharma Organon Acquisition: What the $10 Billion Deal Means
Sun Pharma, India’s one of the big drug maker is planning a huge move. The company is planning and is talking about buying one of the largest pharma companies, Organon. The buy is set to be around $10 billion.
This move could be one of the biggest ones taken by an Indian pharma company abroad. Sun Pharma made its feature on the headlines 10 years ago for a major deal of buying Ranbaxy Laboratories. The company is about to make an even bigger impact in the American pharma market.
You will have a question on “Who is Organon”. It is a company that produces medicines dedicatedly focusing on women’s health. The company initially started as Merck Sharp & Dohme and was a giant one back the. But slowly, the company broke off in 2021. The catch to this is that Organon took a huge debt of $9.5 billion when it went independent. And even today, the company is running with a big debt of $8.9 billion.
The company’s stocks also has been facing a rough ride, and the shares were trading around $17-18 last year. But today they have come down to $8.76 approximately. But the most interesting part is that when the rumours of this sale started spreading the stock values increased by 28%. Wall Street clearly likes the idea of someone buying Organon.
The company, Organon are big player in the birth control and fertility treatments. You might have heard of brands like Nexplanon, Nuvaring, or Marvelon. The single medicine Nexplanon alone makes $179 million every three months. The company also makes biosimilars, which are basically less expensive versions of expensive biological medicines. The company gets around $660 million a year from the biosimilar business. To produce these, the company works with Samsung Bioepis.
Why would Sun Pharma Buy This Company?
Why would someone want to buy a company that is already drowning in debt? The reason Sun Pharma is doing this is that they already have a strong value in America, with products worth $1.21 billion sold there last year. One of their biggest hit is Ilumya, a drug that treats a skin condition called plaque psoriasis. If Sun Pharma buys Organon, it would create a whole new area. It would create a new market for women’s health products and would also have good margins in profit. Additionally, they will get a strong hold in the biosimilar market and can compete with big brands like Pfizer, Sandoz, and Amgen.
Dilip Shanghvi is the brains behind this ambitious plan. He is the founder and chairman of Sun Pharma. The good news is that the company has the ability to pull this deal off. Sun Pharma is worth $45 billion, and they have ₹20,000 crore in the bank without any debts. The company made a ₹52,041 crore revenue last year, and financially, they are in a good position now.
Another funny part is that this is not the first time the companies have planned this deal. There has been a discussion about this before, but they couldn’t execute it because of the price. Now that the stocks of Organon has gon down, the company is desperate to sell off parts of its business to manage debt. This has started the conversation again. European investment banks are helping Sun Pharma put together a proposal.
There are no official statements regarding this, and Sun Pharma put out a statement saying “ the reports are speculative”. If this deal happens positively, it will not be easy for Sun Pharma. They have to deal with the heap of debt if they are taking over Organon. The combined company would have a debt-to-profit ratio of about 2.5 times. Sun Pharma should also work hard to fix the company, which has been struggling. But they have done this before and have experience with Ranbaxy and Taro Pharmaceutical. From troubled companies, they changed it to a successful company.
Since the expensive drugs lose their patent protection, the biosimilar m,arket is expanding and is gaining more attention. There is a lot of scope now for companies that can produce cheaper alternatives. Organon’s biosimilar business will put Sun Pharma in a bigger position instantly.
A big question is “Will It Happen?”. No one in the industry knows it. There might be companies that will make competing offers or the negotiation between the two companies might fall apart again. But after all this, if Sun Pharma pulls this off successfully, then it would be a landmark moment for Indian pharma companies that are going global.
