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Sun Pharmaceutical is back in the spotlight, and this time, investors seem to like what they see.
What’s going on: the stock jumped 5% after the company announced it will acquire US-based Organon & Co in an all-cash deal worth $11.75 billion, including debt.
Let’s rewind a bit: when news of the deal first surfaced earlier this month, the stock had actually fallen. Why? Because this is a big-ticket acquisition, and investors were worried Sun Pharma might take on a lot of debt, which could strain its balance sheet.
Organon, which was spun off from Merck in 2021, focuses on women’s health and biosimilars. It has over 70 products sold across 140 countries, giving Sun Pharma a strong global footprint overnight.
The why: this deal could push Sun Pharma into the top 25 global pharma companies, with combined revenues of about $12.4 billion.
It also gives the company an entry into the biosimilars space and strengthens its presence in key markets like Europe, China, South Korea, Mexico, and Thailand.
What about the debt: the company says it’s careful with borrowing, but not scared to take smart risks. The idea is simple, use the combined earnings of both companies to slowly pay off the debt.
Analysts believe this is manageable. In fact, Sun Pharma could become debt-free again in about 3-4 years. At the same time, its higher-margin innovative business is expected to grow and contribute more to overall revenue.
