India’s largest drugmaker Sun Pharma is reportedly bidding for American pharmaceutical company Organon in a deal that could potentially be worth $10 billion, which would make it the largest overseas acquisition by an Indian pharma company. The drugmaker has secured $10–14 billion in temporary ‘bridge loans’ to fund the move.
The potential deal has split the market, pitting those who trust chairperson Dilip Shanghvi’s track record of value creation against skeptics wary of Organon’s $8.9 billion debt pile and recent governance issues.
Organon was spun off from Merck in 2021 for its women’s health, legacy general medicine brands, and biosimilars businesses. The deal would push Sun further beyond generics into the higher-margin specialty/innovative branded markets, a longstanding goal of the company.
The developments were first reported by Economic Times in two reports on Monday and Tuesday. In an exchange filing on Monday, Sun Pharma termed the reports “speculative in nature”. Sun Pharma and Organon did not respond to Mint’s emailed queries.
While SunPharma’s stock price was little changed on Monday, it closed 3.23% lower at ₹1,621.30 on the NSE on Tuesday over concerns around the deal valuation, as well as Organon’s debt and recent governance troubles. The Nifty Pharma index shed 1.84% on Tuesday.
However, some investors applauded the audacious bet, pointing to Sun Pharma’s strong management team led by Shanghvi, and its track record of extracting value from acquisitions.
What Organon would bring
If the deal goes through, Organon will bring revenue of about $6.4 billion with a healthy Ebitda of $1.96 billion (in FY24). However, it also has a hefty $8.9 billion of debt for Sun to take on.
“This is not a growth asset, but there are elements within this business that can help them,” said Vishal Manchanda, pharma analyst at Systematix Group. “It could grow in the low single digits on the topline.With some cost-related rationalisations, it could also deliver higher earnings growth,” he added.
The acquisition would boost Sun’s US sales of both generic and specialty medicines. The drugmaker is the fifth largest generics player in the US. Organon reported close to $1.6 billion in sales from North America in FY24 and could increaseSun’s US earnings to over $3 billion.
“It is attractive because it is an existing commercial platform in the US and a faster route to scale than building from scratch. I believe this is Sun exercising optionality rather than chasing an R&D pipeline or moonshots,” said independent pharma analyst Salil Kallianpur.
However, investors also flagged concerns over Organon’s pipeline. Its best-selling product Nexplanon, a long-acting reversible contraceptive implant that brought in the largest chunk of revenue in 2024 at $963 million saw sales decline in the most recent quarter and is set to lose patent exclusivity in 2027. The company’s top line also declined marginally in the nine months to 30 September from $4.8 billion in 2024 and $4.7 billion in 2025.
Governance issues such as dubious sales tactics for Nexplanon, which led to chief executive Kevin Ali stepping down in October, have also hit the company hard. Its stock is down nearly 45% over the past year, dragging its market cap down to $2.28 billion.
While the valuation of the deal is still unclear, it will likely be in keeping with the generally accepted global practice of valuing a firm at 1.5 times annual revenue (about $9-10 billion in this case).
Even so, the valuation and huge debt remain a concern for investors. “Indian pharma companies don’t have a great track record of being able to pull off large overseas acquisitions,” said an investor who requested anonymity, citing Biocon’s Viatris acquisition in 2022 ((an acquisition so debt-heavy that Biocon is still scrambling to pay off over $1 billion through recent emergency share sales to institutional investors), or Lupin’s $880 million acquisition of Gavis in 2016, for which the firm took a massive beating as the market dynamics changed.
Sun's return to big buys
Sun’s $4-billion acquisition of Ranbaxy in 2014 stands in stark contrast to these. The deal propelled it to pole position in the domestic market, where it remains to this day.
When it acquired Ranbaxy, Shanghvi seemed to be betting on scale both locally and globally. At the time, he reasoned that Ranbaxy was a great acquisition as it was available for cheap at just two times revenue, compared to the 3.4 times revenue Abbott Laboratories paid for Piramal Healthcare in 2010. Anticipation of the deal catapulted Sun Pharma’s valuation to more than ₹1.3 trillion in April 2014 and made Shanghvi the richest man in India.
However, it wasn’t all smooth sailing. Ranbaxy's woes with FDA continued long after Sun acquired it, requiring the latter to shut down several business lines, including manufacturing plants in India. An FDA stricture at one of its own manufacturing plants added to Sun’s woes, causing its stock to tumble nearly 40% from its peak by 2019.
Since the Ranbaxy experience, Sun Pharma has shunned large acquisitions but has not shied away from smaller deals even if they appear expensive. It acquired Checkpoint Therapeutics for $355 million in 2025, and Concert Pharmaceuticals for $576 million in 2023, which gave it the rights to innovative drugs Unloxcyt and Leqselvi, respectively.
The latest moves thus marks significant transformation. With the Organon bid, Sun is signalling that it is once again willing to pay big bucks for an asset that it considers valuable to its business strategy. Organon will add to Sun's heft in the US specialty sales business, which has dominated Shanghvi's attention over the past year. It also appears to be the most critical part of the future business, given that Shanghvi appointed his son Aalok to oversee it in 2025.