The pharmaceutical industry is just getting its breath back after Schering-Plough’s surprise acquisition of Akzo Nobel’s Organon BioSciences unit for 11 billion euros and observers have been weighing up the pros and cons of the deal.

Although it is perceived in some quarters that S-P has paid over the odds for the Dutch-headquartered firm, there is agreement that the acquisition fills a gap in its late-stage pipeline by adding five compounds in Phase III development. The New Jersey-based group will also receive a significant revenue boost from Organon’s contraceptives (notably NuvaRing) and infertility treatment Puregon/Follistim (follitropin beta).

As a result, Goldman Sachs notes, the move will reduce S-P’s reliance on earnings from its joint venture with Merck & Co for the cholesterol-lowerers Zetia (ezetimibe) and Vytorin (ezetimibe and simvastatin) and also said that the Organon acquisition makes S-P one of the top players in the animal health sector. Deutsche Bank analyst Barbara Ryan issued a note echoing this view and said that “while we do not view this as a compelling acquisition, either in terms of the in-line portfolio or the pipeline potential, it makes strategic sense in that it does allow S-P to further leverage its cost base, build the breath of its product offerings, and reduce its dependence on the cholesterol JV.”

There is universal backing for the deal that Akzo has signed, given that its planned initial public offering had been expected to raise just 8-9 billion and the company’s shares soared 16% on the news. Akzo said it will use the proceeds from the sale to buy back shares, reduce pension liabilities and make acquisitions and this has reignited speculation that a bid for the UK's ICI may be in the offing.

As for concerns over job losses at Organon, S-P's chief executive Fred Hassan said some cuts were inevitable but would be limited. Mr Hassan added that he has had his eye on the Dutch firm for a long time but the planned IPO meant that he had to move quickly and while he believes Organon is a “valuable asset," how valuable it really is will become clear as the drugs in late-stage development progress.