LIVE Press Conference: Sun Pharma’s Major Orgenon Deal Announcement & Strategic Growth

Yeah, good morning and thank you for coming on such a short notice. Today I feel very excited and very proud. This is a historic day in Sun's journey as we are accelerating Sun's transformation toward becoming a global pharma company. I think in the next 15-20 minutes, I will try to explain the deal rationales and what is a compelling story why these two companies are coming together, and we'll also take some of your questions, some of your doubts, so that should also help you to understand the rationale behind the acquisition of Organon. So there are initial few slides about Sun. I will run them through fast and then talk more about Organon. These are some disclaimers and forward-looking statements. So all of you know Sun well. We are like a $6 billion company present in 100 countries. We are number one in India. We are number one in another two-three geographies like Romania. And 20% of our business comes from innovation. So what we have been focusing on for the last few years is to increase the innovative part of the business, and then we have a strong balance sheet, $3 billion of cash as on FY25. So this is all about Sun, that is the business part. Second is, like you know, Sun is all driven by values of Sunology. We always focus on patients. I always look at how do we solve unmet needs of patients. How do we come with new products which will solve some of the patients' problems. And the third thing which is important is execution rigor, and Sun has been doing things well, executing it well, and that helps the company to grow to the next level. If you look at our track record, which Dilip also mentioned, is the acquisition of Taro and Ranbaxy. I think post-acquisition we did well. We grew the business. We also integrated the team well on both sides, and the new Sun which was formed was growing faster than what we used to go earlier.

This is a history of Sun, and these are not all the milestones but major milestones, which includes the acquisition of the companies on the top and on the bottom is some of the major licensing deals what we have done. So 2010 around we acquired Taro. Then of course DUSA was entry into dermatology. Then in 2015 Ranbaxy, which was also like the same size of the company, we were 2 billion, Ranbaxy was also 2 billion at that point of time, and then Concert and Checkpoint acquisition happened recently. Incidentally, the Isuprel product which we have licensed from Merck was developed by Organon. So this is just a coincidence, like we are acquiring a company which developed this product historically a few years back. So what we have seen in the last say 15 years, just if you can focus on the bottom part of the slide, is like from 2010 to 2025, our CAGR of revenue is 14.4% and the EBITDA is also in line, almost like 13%. So consistently the objective for the business is to continuously grow the business, and sometimes some of the businesses are also growing faster than the market.

What's Organon? And I will spend maybe a couple of minutes on this slide because the earlier part was more on Sun. So Organon has three business verticals. One is women's health, and women's health is mostly an innovative part of the business. In women's health, in contraception they are number two, in fertility they are number three. So that's one part of the business. The next big part is established product business, which is almost like 50%, and there are strong 50 brands. Some of the brands I will also show, is like a household name, every doctor, patient knows this brand. And out of this 50 brands, 15 brands are large size, and that is 100 million and above. What Organon also helps us is our entry into biosimilars. So we become like the number seven player worldwide in biosimilars. I think the next point is most important, is what I will keep repeating throughout my presentation, is what Organon is giving to Sun is a global commercial presence and a global platform to commercialize our existing products as well as future products, and it also gives us entry into some of the markets where we are not present today, and one notable market is China, and I will talk about more details in China going forward. In terms of manufacturing footprint, Organon has six sites, three of them in EU and three in the emerging market, and has a good manufacturing footprint where most of the products they are able to manufacture on their own. So this is the business part, but even if you look at it financially, it's a very stable EBITDA company where the margins are in excess of 30% over the last five years, and they are generating free cash flow of about a billion dollars. And most important is the history of any company like Organon has a legacy of more than 100 years, and in this 100 years they have developed complex products, they have developed complex biologics like Isuprel, like that new biologics were also developed in Organon in the past. So all of these things, how does it help Sun to achieve our transition and go to the next level is what will follow in the next part of the presentation.

So three parts of the business: women's health and some other innovative products. So the top four products are women's health products. The biggest product is Nexplanon, which is a contraception used for five years. Then we have a product like Follistim, which is also into women's health fertility. Then there are two products, one is Emgality and Vitama, they are for say migraine and vitamins for dermatology. So this is almost like 33% of the current revenues of Organon. But more important is the central piece, which is established products, and some of you may be very familiar with some of these brand names like Zetia, Zocor, Hyzaar, Cozaar, Singulair. These are like, though they are not like a consumer product, but they are recognized brands and well-known brands across the world, not only in India but mostly outside India. This part of established brands contributes almost 55% of the business. And the third area, which is also equally interesting, and I will explain you in more detail, is biosimilar. So currently they have five-six products in biosimilar, and that contributes around 11% of the revenues.

So coming to all three areas, I will explain. Like women's health is a large unmet need. Today the market size is almost like 35 billion, growing at 6 to 10%. And there are more than 100 opportunities or assets which are under development in women's health. So what I'm trying to say for growth of the business on the women's health side, we may have to do future licensing, and such assets are also available. And this is an area where the complexity of developing products is also very high. So for somebody to really replicate or come with a generic product has always been challenging. In terms of ranking, I already told, number two in contraception, number three globally, and also have a complex product like Nexplanon and NuvaRing which are difficult to develop. Coming to the next part of the business, which is established brand business. So established brand business, I will correlate to like what we do, branded generics in India, it's very similar. These are the brands which were launched before patent expiry, and they continue to do well. As an example, like some of these brands having multiple generics in many markets, I am just giving as an example, like Propecia in China is a very big brand in spite of there being 25 to 30 generics being available. So all these 50 brands have strong brand equity and very close association with both doctors as well as the patients, and they still want to use this brand in spite of availability of many generic products. So like that, Organon is present in cardiovascular, bone health, Nasonex and Singulair are very strong brands in respiratory, and then they have other brands in dermatology and also Propecia, Proscar, so very strong brand franchises, out of which like 15 brands of about 100 million. And this is a big portfolio, so why I'm talking to you about this portfolio? Because what do we do with this portfolio going forward to grow the business, that is a question I'm anticipating from all of you. So as Sun Pharma, as a company, and with our background, we understand that how do we develop the line extensions of these brands. How do I combine this product one with another? How do I have new forms of this formulation which can help us to grow this franchise going forward.

The third piece of the business is biosimilar. So this is also like entry of Sun into biosimilar. We have a very small biosimilar business in India, but outside India we have no biosimilars. And if you look at the track record of Organon also, from 2021 till 2025, this business is growing at 13% CAGR. So it's a good business and continues to grow. But what is more important is the future opportunities. If you look at the IMS, what it tells you, there are $320 billion worth of biologics which are losing the patent by 2035, and roughly if you convert this 320 billion into a biosimilar market, there can be an opportunity for us to look at like something like a 70 billion type of a market in which we can play. So today there are six products, but it also gives us an opportunity to in-license more products in biosimilars and make them available globally across the markets. So it's a transformative opportunity for Sun, and what I'm looking at is how do we use this platform to grow the business faster. So I'm focusing on only two-three parts of it. One is the innovative part, I will discuss with you. Then branded generic play, where we have a lot of experience in India, in emerging markets, on how do we promote this brand to the doctors. So similar will be used when we look at established product business. And biosimilar is a new opportunity, like we will be ranked seven globally, and there is opportunity to grow this business. The last important part on this slide is also this commercial platform can be used to become a licensing partner of choice, and that would also bring the next level of growth.

So if you look at the innovative portfolio of both companies together, women's health is an area we are adding into our innovative basket which was not there earlier. Dermatology, we are familiar, we have Illumia, XLV, Vitama added into dermatology portfolio. Then women's health and some other products like Emgality, these are all innovative products, ophthalmology and oncology. So what happens is our focus on innovative business continues even further. Our current 20% of the sales come from innovative business, now this is going to 27% on a combined company basis. So some of the questions which came early in the morning also is how do we, we are looking at innovative business going forward. Are we losing focus on innovation? No, we are going, this is the area which is even becoming bigger and it can grow from where it is today. So all of this will strengthen our position into advanced markets. So the way I'm looking at the innovative business will help us to become big into advanced markets, and the emerging market portfolio with the line extension and new ideas will also help us to become big into emerging markets like India and all other markets.

So coming to established brand business, I just looking at this slide, like there are established brands from Organon, Sun also has a lot of brand legacy. These are all branded generic products, like Pantop is one of our biggest brand, I'm not saying only in India but worldwide including emerging markets. So like that we also have brands in branded generic area, and the beauty of branded generic area is like this brand continues to grow if you add new products, if you do line extensions, you introduce new forms of the formulation. So it's not like after patent expiry the product sales goes down, it's like continuously growing, and that what we have seen in our numbers about India and emerging markets, the branded generic piece continues to grow. Now the established product is what we are thinking in a similar way, the way we played in a branded generic market, we can play into established brand business to make this even grow further. The third piece of course is biosimilar and generic. So biosimilars, we have no current business, but it gives an opportunity for us to grow, and as I said, the potential for biosimilars going forward is quite big. The regulatory environment in biosimilar is changing. So that would also help us to look at some of the opportunities differently, and of course we will continue to focus on our generic business going forward.

Coming to next about market, and this is what I told about what Organon is all about. So when we looked at both the companies together, then we are present in almost like 150 countries. Organon is present in 140 countries. We are present in 100 countries, and there are certain markets on both sides, almost like 10 markets which are complementary to each other. As an example, like we are not present in China, we are not present in South Korea. These are the entry for us, and these are the new markets. What this slide shows, there are about 18 markets which are sizable. Sizable means they have sales of more than 100 million, and some of them are quite big like US, India, China, Canada, Brazil, Romania, Russia, Japan. These are all big markets, and there we have all portfolios, like innovative portfolio, then there is established product and branded generics. So what it gives us is a global platform to commercialize any product. So we can commercialize our own product. So I give an example is like we are commercialized only in 35 countries, then rest of the countries I had to partner with somebody else and they can commercialize the product. Now Organon is giving me a platform to commercialize my own innovative product across the globe.

Coming to China, what I was talking, very interesting market, and I thought we'll spend a couple of minutes on China because any pharmaceutical company, if they want to become global, they must be present in China because China has become the world's second biggest market today. It is 150 billion, growing at 5 to 7%, and there are many innovative products being launched into China. So the Organon presence in China is substantial. Their FY25 revenues are more than 800 million, and they have eight large brands. Like one of the examples I said earlier is Propecia, but they have fertility brands like Follistim, and which are growing brands. So this brand has a very strong equity in China in spite of a large number of generics in each of these products. Some products there may not be generics, but most of the products being generics and being part of VBP, this business is growing. Now we supplement this business with new products and new ideas, then we can really grow the China business further. So this accelerates the established product portfolio in China. It also gives a platform for us to enter into China. Otherwise today our business in China was very small, and all our innovative assets we license through a partner. So what message I'm giving, the world's second biggest market, now we will be present on our own, and we can use both Sun's portfolio as well as Organon's portfolio to grow this business further.

How does the combined company look? And this is what everybody is looking at, is asking for. Like we become double in size, almost like 6.2 billion becomes 12.4 billion. The innovative business contribution from 20% goes to 27%. The established product and branded generics, this I have clubbed together, is more than 50%. And there are 18 markets where we have a scale, we have a scale to launch existing products, launch new products, and most importantly, both sides there is great talent. We will have 24,000 commercial front-end teams in all these markets to promote the products. So that is also equally important. So how does the combination look like? And on the left side we are showing you how Sun presents these numbers during our investor calls and our interaction with all the media. We divide business into BGX, branded generics, generics, innovative medicine, and API. And the way Organon gives their numbers is of course innovation side is both same. So and then they talk about established brands and biosimilar, and then there is a small component of others. When we look at the combined company, it looks like the innovative business from 20% has grown to 27% the contribution. Established brand business has become the biggest pie, it's more than 50% of the business. Biosimilar is 6%, and the generic business is 15%. So if somebody asks me, any pharmaceutical company, if they have to be present in different areas including innovation, to established products, to generics, to biosimilars, we are there. So our revenue gets divided into all the segments.

In terms of geographies, I think we still have to rework on how do we present geographies going forward. But the way we look at today's geographies is like US, India, emerging markets, ROW which also includes Europe, and then the other markets. And the way Organon presents is like EU and Canada put together. Then there is a US, then they have a region called LATAM, which is Latin America and some other markets. Then Asia including Japan and China is a separate market. So when we look at the combined company, and I'm just presenting the combination together, is what you're looking at, the emerging market piece becomes quite big, like it's one-third or 29% of the company's revenue will come from emerging markets. Next big will be ROW, which includes Europe. So all of you know our presence in Europe was not small, when I'm talking of both Western Europe and Eastern Europe together, but Organon is giving us opportunity even the Europe becomes a very important part of our business, and then of course all other contribution going up, the India contribution goes down to 17%.

So we also looked at the synergy of the business, and what we are presenting you is the cost synergy, and also the next part of the business Jayashree will explain you on the financial part and on the synergy part, and in the end then we will have questions from you.

Good morning all, and thank you Kirti. Kirti over the past 15-20 minutes alluded on various opportunities that we see on propelling the growth and rejuvenating the portfolio of Organon. We do believe that this combined business has significant upsides on the revenue front, whether it be enhancing the patient access across various geographies using the portfolio of Sun or Organon, or cross-pollinating and launching products which could be of meaning to the end patients. Given the size and scale of the business, I think we would become a preferred partner of choice for several companies to out-license their products to us. And this could also be another way that we could look at new products which can further help grow the business. On top of it is the R&D capabilities which is inherent with Sun and with the combined R&D and innovation mindset of Organon. This will also augur well in terms of looking at growth in the future. Having said that, there are opportunities on the cost front given the DNA of Sun in terms of running lean and efficient operations. We do believe that there is a potential to realize up to $350 million in terms of cost synergies over the next two to four years. With all of this, we see that the balance sheet and the financials of the combined entity becoming stronger and enabling us to repay the debt in a shorter time frame. As you could see, both the revenues and the EBITDA of the combined business is nearly doubling, and there is free cash flow that is also enabling looking at early debt repayment. Both the entities together generate close to $2.5 billion of cash on an annual basis. And with some of these growth opportunities that could come in in the future, coupled with some of the cost synergies, we do believe that there will be cash that will help us to accelerate and make the debt repayments. Let me also draw attention to the net debt to EBITDA. While Sun has remained positive on cash, with this acquisition of Organon, on a combined basis our net debt to EBITDA would be at 2.3x, which is in a decent range if I were to use a word. Our endeavor obviously will be to look at opportunities to accelerate the debt repayment and also augment cash which can support investments which will help Sun to grow in the future.

Quickly getting into the transaction overview of the details. The transaction is done at $14 per share for closing. It consists of both equity and the enterprise value. Equity value being at $3.99 billion and enterprise value at $11.75 billion on a fully diluted basis. We plan to fund this acquisition both with our internal cash surpluses and also committed financing from our bankers. About $2.2 billion dollars will be deployed from our own cash resource, and the balance would be borrowed from the banks to fund the transactions. Obviously the transaction will have to go through the necessary approvals both from the shareholders of Organon as well as regulatory approvals, and we estimate that the transaction would close say in about 6 to 9 months, early 2027 calendar year.

In terms of next steps for the deal execution, our focus would be to submit the regulatory filings, obtain the necessary approvals from Organon shareholders for the deal and relevant regulatory approvals in the various markets. Post that would be the target closing. And from planning for this integration, the initial step is to set up an integration management office. We would be assessing the combined organizational capabilities of both the entities as we believe there are a lot of good talent which could be deployed purposefully in this new combined business. Cross-cultural assimilation will be of great importance because it's a marriage of two different cultures. That's not something very new to Sun. At the same time we are open to look at the strengths and build on it as we go along. While we do all of this, we will continue to keep a sharp focus to ensure that we sustain the momentum of our existing businesses. Both Sun and Organon have their values. Sunology is amplified through humility, integrity, passion, and innovation. Similarly, the Organon way of doing business is to be real, to belong, bring in the fire, own it, rise together, and keep moving. We will merge these two values and principles and focus on patient centricity being the core to build our shared culture. Finally, as we accelerate Sun's transformation journey to become the global pharma company, we will be amongst the top 25 global companies. This will enable us in reaching our mission of reaching people, touching lives more. So when we look at various parameters, we will be number one pharma company in four countries globally. We will be number three in women's health, which is relating to contraceptives and fertility. Number seven in biosimilars globally, and in 18 countries we will have business of scale which will be more than $100 million in revenue. 27% of our revenue coming from innovative medicines, going up from our existing 20%, and 51% of our revenues coming from established brands and branded generics in over 140 markets. We will have presence with a strong field force of 24,000 to support us in the growth. We have the core pillars in Sun: value-driven growth, patient centricity, and execution rigor. These will remain strong as we accelerate and work through this transformation journey. With that, we thank you all for being with us today, and I will hand it over to Dilip for his closing comments.

So first of all thank you to the leadership team for sharing perspective on this deal. So I'll request all of you to please ask one question. If time permits we'll come back to you. So Akta, do you want to go first? Please introduce yourself briefly and just ask the question.

Hi Mr. Shanghvi, this is Akta Batra from CNBC TV18. Congratulations on the deal. There are two main concerns with regards to the deal. One is obviously the debt that you would be taking on. A lot of the shareholders have bought Sun Pharma stock because you're a net cash company. You're a safe investment, and now you're a net debt company. I know you've given a timeline, a brief timeline in terms of how you'd like to reduce the debt, and the net debt is at 2.3 times, so that's comfortable for you, but a little more granular details in terms of the journey on debt reduction. One, and two, the revenue for Organon has been sluggish for the past three years on the top line, 6.2 to 6.4 billion. What is the plan to possibly build up all of the verticals, from women's health to established brands to the biosimilars business?