Sun Pharma eyes speciality drug future with Organon buy

The deal will place the company among the top 25 global pharmaceutical giants

Bengaluru: A week ago, India’s largest pharmaceuticals company Sun Pharmaceutical Industries Limited announced the largest overseas acquisition in the country’s history. Sun Pharma said it would acquire US-based Organon & Co, which specialises in women’s health, for $11.75 billion.

While the deal details are already known, let’s look at what this acquisition means for the company in the larger sense. Once completed, the acquisition of Organon would place Sun among the 25 largest global pharma companies.

For billionaire Dilip Shanghvi, who established Sun Pharma on a small scale in 1983, the acquisition of a 103-year-old New York-listed healthcare company Organon is a major milestone. It will double the company’s annual revenue to $12.4 billion and transform it from a generics player to a global speciality drugmaker. 

Announcing the deal, Dilip Shanghvi, Executive Chairman of Sun Pharma, said, “This transaction represents a significant opportunity for Sun Pharma to build on its vision of Reaching People and Touching Lives. Organon’s portfolio, capabilities and global reach are highly complementary to our own, and we believe that bringing the two organisations together will create a stronger and more diversified platform.”

Shanghvi started his career in the pharmaceutical distribution business in Kolkata with his father. He began with psychiatric medicines and treatments for bipolar disorders, and Sun Pharma grew in size over the years. He set up the first manufacturing facility for tablets in Vapi, Gujarat. Later, Sun forayed into cardiology, R&D, and exports. 

Sun Pharma has an impressive track record of acquiring companies and integrating them into its business. It has so far made eight major acquisitions, ranging from Taro to Ranbaxy, and Checkpoint Therapeutics. 

Sun Pharma’s takeover of Organon is primarily aimed at expanding speciality offerings in the women’s health portfolio, positioning it among the top 3 globally in this segment. The deal boosts its Established Brands presence, given Organon’s 50+ brands and around 55% revenue share, leading to about a 51% share in the combined entity and improving scale and cash-flow stability. 

A key strategic gap being addressed is biosimilars, where Organon’s position as the seventh-largest player enables Sun Pharma to enter a $20 billion+ high-growth market, with potential upside from large LoEs and in-licensing opportunities using Organon’s commercial platform. The addition of 550+ approved ANDAs (Abbreviated New Drug Applications) fortifies Sun Pharma’s complex generics capabilities, according to a research note from JM Financial.  

“The merger also expands its global footprint to 150+ markets, notably in China, and opens access to Korea, Mexico, and Thailand. Sun Pharma aims to leverage its execution to drive growth across Organon’s therapies, including CVS, respiratory, bone, and dermatology. Overall, the deal enhances portfolio diversification, improves global scale and builds entry into biologics-led growth segments,” says JM Financial. 

Established brands sector will grow in the emerging markets. 51% of the revenue share comes from established brands and Sun Pharma will further grow this Organon business going forward.

Biosimilars is a new platform for Sun Pharma to enter. “It is a good commercial platform for us to in-license and Organon has a good portfolio in the biosimilar sector. There is a big $320-billion opportunity for Sun in this space. The entire business which is growing by 13% will grow much higher in the next 2-3 years,” says Kirti Ganorkar, Managing Director, Sun Pharma.

Organon is present in 140 countries and Sun’s presence will increase to 150. And 18 markets where Sun’s revenue will exceed $100 million. Starting from India, the US, China, Canada, Brazil, and Romania, etc, what helps the company is its strong marketing team of 24,000, selling products and helping consumers. 

One of the focus markets is China, which is the second-biggest in the world. Currently, Sun Pharma has a negligible presence there. China is a $150-billion market, growing at 5-7% annually. There are over 2,000 innovative products in development in that country. “For any company to become global and have a meaningful scale, it needs to be present in China. So, Organon provides a presence for Sun Pharma in China, where it has a good presence with eight large brands and $800-million sales, growing in the single digits. It helps us take this platform to the next level and grow further,” adds Ganorkar.

The combined entity will accelerate growth of the existing business and launch Sun’s innovative products business and in-license products for the global markets. Combined company revenues will be $12.4 billion, with 51% of its business coming from established brands, 27% from innovative medicines, 15% from generics, and 6% from biosimilars.  

In terms of global footprint, the combined entity will get 29% of its revenues from Europe, 27% from the US, 17% from India, and the balance from the rest of the world. Currently, Organon has a presence in LAMERA, the US, Asia including Japan, the EU, and Canada. 

Emerging markets will be one of the big focus markets for Sun Pharma. Broadly, sales will come from across the world, helping the company grow further, ensuring revenues are not dependent on one geography or one country.