"Sun Pharma's $355M Bet on Checkpoint: A Game Changer in Oncology?"

In the ever-evolving landscape of biotech and pharmaceuticals, sun pharmaceutical Industries Inc. (Sun Pharma) has made a bold move that could reshape the oncology and dermatology sectors. The Indian pharmaceutical giant has announced its acquisition of checkpoint therapeutics, a Nasdaq-listed immunotherapy and targeted oncology company, for an upfront cash payment of $4.10 per share, aggregating up to $355 million. This strategic acquisition brings UNLOXCYT, an FDA-approved treatment for advanced skin cancer, into Sun Pharma's portfolio, bolstering its innovative onco-derm therapy offerings.



The acquisition of Checkpoint Therapeutics aligns with Sun Pharma's long-term strategic goals in the oncology and dermatology sectors by enhancing its innovative portfolio in onco-derm therapy. Dilip Shanghvi, Chairman & Managing Director of Sun Pharma, emphasized that "Combining UNLOXCYT, an FDA-approved anti-PD-L1 treatment for advanced cutaneous squamous cell carcinoma, with Sun Pharma’s global presence means patients with cSCC may soon have access to an important, new treatment option. The acquisition further bolsters our innovative portfolio in onco-derm therapy."

The financial implications of this acquisition are significant for both Sun Pharma and Checkpoint Therapeutics. For Sun Pharma, the acquisition represents a strategic investment in the oncology and dermatology sectors, particularly with the inclusion of UNLOXCYT, an FDA-approved treatment for advanced cutaneous squamous cell carcinoma (cSCC). The upfront cash payment of $4.10 per share, aggregating up to $355 million, represents a 66% premium to Checkpoint's last closing price of $2.47 per share. This substantial premium underscores the strategic value Sun Pharma places on Checkpoint's assets, particularly UNLOXCYT.

For Checkpoint Therapeutics, the acquisition provides immediate liquidity to its shareholders and eliminates the commercialization execution risk. Checkpoint reported minimal revenue of $0.04 million and a net loss of $27.3 million for the nine months ending September 2024. The company had only $4.7 million in cash against $17.6 million in liabilities as of September 2024. This severe cash constraint would have made independent commercialization of UNLOXCYT extremely difficult without substantial dilutive financing. The acquisition by Sun Pharma provides immediate liquidity to Checkpoint's shareholders and eliminates the commercialization execution risk.

The deal structure, including the contingent value right (CVR), adds potential value to the deal. Checkpoint's stockholders will receive a non-transferable CVR entitling them to receive up to an additional $0.70 per share if cosibelimab is approved prior to certain deadlines in the EU. This CVR structure adds potential value to the deal, bringing the maximum potential value per share to $4.80, nearly double Checkpoint's current trading price. The CVR provides a financial incentive for Sun Pharma to pursue European regulatory approvals, which could significantly boost the drug's market penetration in Europe.

The royalty agreement with Fortress Biotech ensures that the economic interests of the original developers are aligned with the commercial success of the drug, providing an additional layer of motivation for Sun Pharma to maximize UNLOXCYT's potential in Europe. The total upfront consideration of $355 million represents approximately 3x Checkpoint's current market capitalization, reflecting the strategic value of the FDA-approved asset despite the company's operational losses. The deal structure intelligently preserves economic interests through a royalty agreement with Fortress Biotech (Checkpoint's controlling stockholder), while providing immediate liquidity to shareholders.

The regulatory approvals and market penetration of UNLOXCYT in the US and Europe are crucial factors that could significantly impact the overall success of the acquisition. UNLOXCYT has already received FDA approval for the treatment of adults with metastatic cutaneous squamous cell carcinoma (cSCC) or locally advanced cSCC who are not candidates for curative surgery or curative radiation. This approval allows Sun Pharma to immediately start marketing and selling the drug in the US market. As Dilip Shanghvi, Chairman & Managing Director of Sun Pharma, stated, “Combining UNLOXCYT, an FDA-approved anti-PD-L1 treatment for advanced cutaneous squamous cell carcinoma, with Sun Pharma’s global presence means patients with cSCC may soon have access to an important, new treatment option.”

However, securing European regulatory approvals will be critical for expanding UNLOXCYT's market reach. The CVR structure provides a financial incentive for Sun Pharma to pursue these approvals, which could significantly boost the drug's market penetration in Europe. The royalty agreement with Fortress Biotech ensures that the economic interests of the original developers are aligned with the commercial success of the drug, providing an additional layer of motivation for Sun Pharma to maximize UNLOXCYT's potential in Europe.

Challenges that Sun Pharma could face in navigating these regulatory landscapes include the complexity and variability of regulatory requirements in different European countries. The CVR structure is contingent on approvals in specific European countries, including Germany, France, Italy, Spain, or the United Kingdom, which adds an additional layer of complexity. Sun Pharma will need to navigate these regulatory hurdles effectively to secure the necessary approvals and maximize the potential value of the CVR.

Additionally, Sun Pharma will face competition in the market from other oncology and dermatology treatments. The clinical value proposition of UNLOXCYT is significant, as it is the first and only FDA-approved anti-PD-L1 therapy specifically approved for cSCC. However, Sun Pharma will need to compete effectively in the market to ensure that UNLOXCYT gains market share and achieves commercial success. The global commercial infrastructure of Sun Pharma will likely accelerate UNLOXCYT's market penetration compared to what Checkpoint could achieve independently with its resources and early commercial capabilities.



In conclusion, Sun Pharma's acquisition of Checkpoint Therapeutics is a strategic move that could reshape the oncology and dermatology sectors. By acquiring UNLOXCYT, Sun Pharma gains a valuable asset with global commercial potential, while Checkpoint's shareholders receive a substantial premium and potential additional value through the CVR. The regulatory approvals and market penetration of UNLOXCYT in the US and Europe will be pivotal for the success of this acquisition. While the FDA approval provides a strong foundation, Sun Pharma will need to navigate regulatory hurdles in Europe, compete effectively in the market, and address the financial challenges to maximize the acquisition's potential. This bold bet by Sun Pharma could pay off handsomely, solidifying its position as a leader in oncology and dermatology.