A new wave of upheaval and transformation has long since begun.

Sun Pharmaceutical, India's largest generic drugmaker, is acquiring Organon for $117.5 billion — the largest overseas acquisition in Indian pharmaceutical history — revealing the anxiety gripping the generic drug industry.

With buyer consolidation in the U.S. market, persistent pricing pressure, and intensifying competition, even global generic giants are being swept along by industry trends, saying goodbye to the era of "easy money" in generics. As Sun Pharma Chairman Dilip Shanghvi stated, 'This is a critical step in our strategic transformation. Organon's specialty drug assets will help us escape the quagmire of generic price wars and build a sustainable growth engine.'

Before Sun Pharma, another generic giant, Teva Pharmaceutical, had already staged a turnaround through innovation-driven transformation, with its stock rising nearly 240% since 2024. These signals collectively point to a fact: the global generic drug industry is undergoing a profound strategic pivot, with giants attempting to break into the high-end game of patented and specialty drugs through large-scale M&A and innovation investment.

This scene is familiar. Years ago, Chinese generic drug companies were forced onto the innovation track by volume-based procurement (VBP) and consistency evaluation policies. After a painful transition, they are gradually beginning to reap the rewards.

The world still needs affordable generics, but capital always favors those who can define their own value. Generic giants are increasingly eager to "get ashore."

/ 01 /
Sun Pharma's Bold Gamble

Sun Pharma's rise is itself a history of M&A. From a small workshop starting with 10,000 rupees in 1983 to today's market cap of over $48 billion — India's largest and the world's fourth-largest generic drugmaker — each leap for Sun Pharma has been accompanied by a landmark acquisition: Ranbaxy for $4 billion in 2015, Concert Pharma for $576 million in 2023, and Taro Pharmaceutical in 2024.

This time, swallowing Organon for $11.75 billion in cash far exceeds previous deals in scale and significance.

According to its FY2025 financial report, Sun Pharma has only 102.7 billion rupees (~$1.1 billion) in cash on hand, plus short-term investments totaling about $2.7 billion. This means Sun Pharma will need significant debt financing to complete the largest overseas acquisition in Indian pharmaceutical history.

So why is Sun Pharma taking such a big risk? The answer lies in its "growth anxiety."

Although Sun Pharma's innovative drug revenue reached $1.22 billion in FY2025, up 19.7% year-over-year, it still accounts for less than one-fifth of total revenue, while the profit compression in the generic drug track has become an irreversible trend.

The golden age of generics is ending. With buyer consolidation in the U.S. market and persistent pricing pressure, gross margins on ordinary generics have fallen from 60%+ a decade ago to below 30% today. In 2025, Sun Pharma's generic business growth rate dropped to 2.1%, far below the industry average. Meanwhile, although biosimilars are seen as a growth area, their commercialization difficulty far exceeds expectations.

Dilip Shanghvi stated bluntly that the company needs to expand into innovative research while maintaining its advantage in generics. Acquiring Organon is the core lever of this strategy — it allows Sun Pharma to quickly enter the women's health sector, securing the blockbuster product Nexplanon with annual sales approaching $1 billion. At the same time, Organon's commercial network spanning over 140 countries provides a fast track for Sun Pharma's own innovative drug pipeline (such as Ilumya, Winlevi, etc.) into the U.S. and European markets, while also filling gaps in biosimilars.

After the acquisition, total revenue reaches $12.4 billion, with innovative drug revenue share rising to 27%, making Sun Pharma a top-3 global player in women's health and establishing a second pillar in innovative drug business.

However, this "bold gamble" does not come without cost. Organon itself carries $8.6 billion in debt and is mired in a sales scandal — the company was found to have engaged in improper sales practices from 2022 to 2025, requiring U.S. wholesalers to purchase more Nexplanon products than actual demand, leading to the resignation of its then-CEO.

Meanwhile, analysts point out that integration risk is the biggest challenge. As a century-old multinational, Organon's corporate culture, management style, and compliance systems differ significantly from Sun Pharma's.

Faced with severe growth challenges, Sun Pharma has decided to bet everything.

/ 02 /
Teva's "Rebirth"

The significance of Sun Pharma's acquisition goes beyond the deal itself — it represents an exploration of how to break through the systemic challenges facing India's generic drug industry.

Despite being called the "Pharmacy of the World," beyond the aforementioned issues of shrinking profit margins and innovation gaps, the most criticized aspect of Indian generics is quality problems. In recent years, the FDA has exposed numerous instances of systematic data fraud and cGMP violations at Indian pharmaceutical companies.

This is also the underlying logic behind Sun Pharma's continued "gambling." Without joining the high-end table, they cannot break out of the old cycle and ceiling. Of course, Sun Pharma is not completely shifting from generics to innovative drugs; rather, it hopes to maintain cash flow through generics and mature brands while using innovation and M&A to break through profit ceilings and break the vicious cycle of India's low-price generics.

Essentially, this is "using money to buy time." In contrast, the transformation of Israeli generic giant Teva Pharmaceutical is more like "using strategy to buy space."

Teva's predicament once gripped the entire industry. In 2016, the company's total debt reached $35.8 billion, with six consecutive years of revenue decline and deep involvement in litigation. At that time, almost everyone inside and outside the industry was writing off the former "King of Generics." However, CEO Richard Francis, who took office in 2023, brought a "Pivot to Growth" strategic transformation: focus on high-margin branded drugs, cut non-core generic businesses, strictly control costs, and repay debt.

Specifically, under the innovation orientation, Teva hopes to leverage its growth engine potential by accelerating its powerful innovative product portfolio to achieve short-term growth recovery, while fully developing its promising biosimilar pipeline. On the other hand, it aims to consolidate its advantageous position by focusing on a leading high-quality generic product pipeline to make it a sustainable strong pillar.

The strategic transformation has already shown results. In 2025, full-year revenue reached $17.3 billion, up 4% year-over-year in USD terms; net profit was $1.42 billion, successfully reversing the loss from the same period in 2024. The core innovative drug segment showed strong growth momentum, with Ajovy (for Huntington's disease/tardive dyskinesia) achieving sales of $2.26 billion in 2025, up 34% year-over-year, and growing 41% year-over-year in Q1 2026. Austedo and Uzedy also performed strongly, with the former growing 30% to $673 million (ranked #1 in new prescriptions at top U.S. headache centers) and the latter growing 63% to $191 million, becoming another potential blockbuster in Teva's neuroscience portfolio.

Beyond the growth momentum of existing innovative drugs, Teva estimates that its pipeline has peak sales potential exceeding $10 billion, covering multiple major disease areas including inflammatory bowel disease, asthma, etc. The company plans to submit 4 innovative drug applications for market approval within the next five years. Among them, the most anticipated is the TL1A monoclonal antibody Duvakitug, developed in collaboration with Sanofi for treating inflammatory bowel disease.

Previously, Sanofi's R&D head called its clinical results "unprecedented," adding: 'If the magnitude of efficacy is maintained in the Phase III study, we believe this will be a differentiated drug.'

Another Teva drug — an olanzapine long-acting injection developed with MedinCell for psychiatric conditions — has been submitted for U.S. marketing approval and may become the first olanzapine LAI without post-injection delirium/sedation syndrome.

At the end of April, Teva announced it would acquire Emalex Biosciences for $700 million in cash, along with its Phase III innovative pipeline for Tourette syndrome, doubling down on its neurosciencefootprint.

This is its first M&A in nearly a decade, and the announcement drove its stock price up nearly 12%. Since 2024, Teva's stock has risen more than 240%.

Clearly, after several years of transformation, Teva's innovation strategy and footprint are gaining recognition from the capital markets.

/ 03 /
The Brewing of a New Order

The most severe patent cliff in history is approaching rapidly, with over $300 billion in branded drugs facing patent expiration before 2030. As a result, we see major pharmaceutical companies buying aggressively across the board.

In 2025, there were 46 M&A events in the biomedical field, with a total deal value of $113.606 billion. 2026 has seen even more explosive growth. In Q1 alone, global biotechnology M&A transaction volume reached $84 billion, nearly doubling year-over-year. The anxiety of big pharma is palpable.

Facing the patent cliff, generic giants can no longer afford to wait. They must quickly fill gaps in innovative drugs and biologics through M&A or in-house R&D, or face elimination from the industry.

Thus, nearly all of the world's top five generic drugmakers are doing the same thing: strategically migrating from generics to innovative drugs and biosimilars. After divesting non-core businesses, Viatris focused on branded drugs and improved innovative drugs, acquiring ophthalmic company Oyster Point Pharma for $750 million and entering a global R&D collaboration with Idorsia.

Sandoz, meanwhile, is firmly embracing the biosimilar track. Its biosimilar revenue grew 15% in 2023 and further increased to $3.292 billion in 2025, accounting for 30% of total revenue. Currently, its pipeline includes over 20 biosimilars, making it the undisputed king in the biosimilar space today.

Global generic giants all want to "get ashore." Unlike Chinese companies, which were more "passively transformed" by policy pressure, global giants are being driven by a combination of industry profit pool changes and the "patent cliff." Different paths, same destination — they are all searching for the same answer: how to survive in the world of innovation.

This will also drive the industry to upgrade from homogeneous price competition to differentiated value competition, accelerating the integration and stratification of the global pharmaceutical industry. After all, in the world of innovation, there is no such thing as "too big to fail" — otherwise, those big pharma companies holding blockbuster drugs wouldn't be so anxious or spending money like water.

Going further, the global industry value chain may also berestructured. Sun Pharma is leaping into specialty drugs through acquisition, Teva is entering the innovative drug track through in-house R&D, Indian pharmaceutical companies are penetrating upstream in the value chain with cost advantages, and Chinese pharmaceutical companies are accelerating overseas expansion through "license-in + independent R&D" models. The global pharmaceutical industry is shifting from "Western dominance" to "multipolar coexistence," and a new industry order is brewing.

For Chinese pharmaceutical companies, this trend is both a warning and an opportunity. Global generic giants accelerating their "landing" through M&A means Chinese companies will face more intense overseas competition. But on the other hand, the rapid rise of Chinese companies in biosimilars and innovative drugs also provides possibilities for their own overseas expansion.

In any case, only those companies that ultimately succeed in "getting ashore" will have the opportunity to become the founders of a new era in this industry.