Sun Pharma Shares Decline 3% Amid Reports of $13 Billion Organon Bid

Sun Pharma's $13 Billion Bid for Organon Sends Stock Prices Tumbling

Shares of Sun Pharmaceutical Industries fell over 3% on Friday as reports emerged that the company is moving ahead with a binding offer of nearly $13 billion for US-based Organon & Co. The Economic Times reported that Sun Pharma, India's largest drugmaker by revenue and market value, is competing with Swedish private equity firm EQT and German drugmaker Gruenthal for Organon. Gruenthal is known for its pain management portfolio.

On the National Stock Exchange (NSE), Sun Pharma shares were trading at Rs 1,627.50 at 10:50 am, down Rs 52.60 or 3.13%. Organon shares had earlier dropped more than 19% after briefly rallying in January when news of Sun Pharma's interest first emerged. Its market capitalisation currently stands at about $2.4 billion on the NYSE.

Sun Pharma's Market Valuation at Rs 4.03 Lakh Crore

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Sun Pharma ended Thursday with a market valuation of around Rs 4.03 lakh crore ($42.8 billion). The report added that recent activity in Organon shares has shifted investor focus from concerns around debt and muted growth to the value of its portfolio, cash generation and potential carve-out opportunities. Organon is seen as an attractive asset due to its presence in women's health segments such as breast cancer, contraception, osteoporosis and menopause, along with its biosimilars business.

Comparison of Market Valuations

Organon's longer-term positioning remains strong, as women's health growth rebounds and biosimilars become a more meaningful growth driver with recent portfolio expansion. The company also has a solid asset in VTAMA (skin medicine). A potential deal with Sun Pharma could be positive. On the other hand, we view a potential deal as negative for Sun Pharma, as it could be perceived as imprudent capital allocation, diverting focus from the specialty India business while adding leverage.

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ET said Organon has been considered a takeover candidate since late last year after agreeing to sell its JADA post-partum haemorrhage treatment system to Laborie Medical for up to $465 million. The move was seen as a strategic shift from women's health devices toward biopharmaceuticals. EQT is one of Europe's largest investors in life sciences and pharmaceuticals. Earlier this year, it held talks with Oxford BioMedica over a possible acquisition before later withdrawing, ET reported.