Sun Pharma’s deal to buy Merck-spinoff Organon ticks the right box on acquisition cost if not R&D

The US pharma company had outstanding debt of $8.6 billion at the end of 2025, annual sales of $6.2 billion and adjusted Ebitda of $1.9 billion (i.e., earnings before interest, taxes, depreciation and amortization). Its enterprise value of $11.75 billion, as widely reported, is the sum of its stock value and debt, less cash on hand.

While its price-earnings ratio (a more common yardstick) goes by net income and not Ebidta, the latter calculated per share makes it clear that Sun is paying a competitive price for this maker of assorted healthcare products focused on women’s health and some biosimilars.

The company has marketing channels in 140 countries that Sun gets to snap up, apart from production centres in the UK, Netherlands, Belgium, Indonesia, Brazil and Mexico. It does not have a plant in the US, a condition for relief from a 100% US import tariff on patented drugs.

But its American lineage is blue chip, as it was spun off from Merck in 2021. Sun already has some manufacturing capacity in the US and could expand that to qualify for duty exemptions, helped along perhaps by Organon’s antecedents.

While this acquisition makes sound commercial sense and catapults Sun into the global league of pharma players, a slight let-down is that it does not give Sun much R&D muscle.

The reason Merck spun Organon out of itself was that it wanted to focus on finding new therapies and vaccines. Sun is buying a subsidiary for legacy drugs that was cleaved apart and listed separately.

Ideally, Sun should leverage its latest acquisition to lay fresh emphasis on innovation, even if existing product lines and a market-access boost prove lucrative enough. With specialized AI tools such as AlphaFold having figured out the likely shapes of over 200 million proteins, drug discovery has become far simpler than it has long been.

China has been making rapid gains in the field of advanced therapies, with Western pharma companies now buying marketing and drug-trial licences from Chinese ones.

It is high time India played a more active role in advancing the frontier of medicine. With genomic data and AI, gene-adapted therapies are an emerging opportunity for a country of India’s genetic diversity.

A feature of Sun’s snap-up of Organon is the minimal role played by Indian entities in the financial services used for the deal and also the acquisition finance going into it. As reported by Bloomberg, JPMorgan and Jefferies acted as financial advisors to Sun Pharma, which turned to Citigroup, JPMorgan and Mitsubishi UFJ for funds.

Loans will reportedly finance a chunk of it, with Sun using cash on hand too. Organon’s lead financial advisor was Morgan Stanley, with added advice from Goldman Sachs.

Many of these financial companies have lots of Indians on their rolls, experts at structuring buyout deals, but somehow Indian firms have not yet broken into the league of cross-border acquisitions. This should change as Indian companies look overseas for targets.

Globally, there may be other deals waiting to be done in the pharma space. And other Indian drugmakers might want to follow Sun’s lead. Overnight presence in multiple markets could tempt others looking for inorganic expansion. In time, maybe we can expect the odd high-risk, high-return R&D play too.