How acquiring Concert Pharmaceuticals can boost Sun Pharma's speciality pipeline

Global pharma major Sun Pharmaceutical Industries Limited’s specialty pipeline is expected to get another boost with acquisition of US-based Concert Pharmaceuticals for $576 million in cash. 

The acquisition, Sun Pharma said, is aimed at accessing Concert’s experimental drug—Deuruxolitinib--a potential treatment of Alopecia Areata, a skin disease causing partial or complete loss of hair on the scalp and body.

Deuruxolitinib is Concert Pharmaceuticals’ lead product candidate, which is in late-stage development with clinical trials ongoing in North America and Europe. Concert has a plan to submit a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) in the first half of 2023.

While Alopecia Areata affects around 2.5 per cent of the United States and global population during their lifetime, currently there are limited treatment options available for the medical condition. Sun Pharma already has a strong specialty business in the US. Following its strategy of inorganic growth, the move will strengthen Sun Pharma’s global dermatology franchise by adding a late-stage product in an area with significant unmet need.

“Sun Pharma has added a potential product to its specialty pipeline through the Concert acquisition. Sun Pharma is already tracking $ 200m per quarter sales from its specialty portfolio. In addition to its own portfolio under development, Sun Pharma has used the inorganic route to strengthen its new product offering in the dermatology space,” said Tushar Manudhane, Research Analyst at Motilal Oswal, a financial services platform in a report.
 
“Moreover, Sun Pharma continues to outperform in branded generics in India, as well as other emerging and rest of the world markets (RoW). We expect a 16 per cent earnings CAGR over FY23-25, led by a 17/11 per cent sales CAGR in the US and emerging markets and RoW, aided by a 110 bp margin expansion,” he said.

Motilal Oswal's report also said that the development potential of Concert synergizes with marketing capabilities of Sun Pharma, thereby aiding significant value accretion on the combined basis.

Sun Pharma said that it will acquire all outstanding shares of Concert through a tender offer for an upfront payment of $8.00 per share of common stock in cash which represents a premium of approximately 33% to Concert’s 30-day volume weighted average price as of the last trading day, Sun Pharma said in an exchange filling on Thursday.

“Sun Pharma is building a global dermatology and ophthalmology franchise and aims to be a preferred development and commercial partner in these therapies worldwide. The acquisition of Concert adds a late-stage, potential best-in-class treatment for Alopecia Areata in deuruxolitinib,” said Abhay Gandhi, CEO North America, Sun Pharma.

“There is a significant unmet need in the Alopecia Areata space and we aim to build on Concert’s commitment to supporting the Alopecia Areata patient community. We are well-positioned to successfully bring this product to market globally,” said Gandhi.

According to the definitive agreement, Concert stockholders will also receive a non-tradeable contingent value right (CVR) that will entitle the stockholders of Concert to receive up to an additional $3.50 per share of common stock in cash, payable upon deuruxolitinib achieving certain net sales milestones within specified periods, subject to the terms and conditions.

Sun Pharma said that the transaction is expected to be completed in the first quarter of 2023.

For the nine-month period ending September 2022, Concert reported total revenue of $29 thousand and a net loss of $90.6 million. The R&D expense for that nine-month period was $75.7 million.

In last ten years, Sun Pharma has entered into at least 20 mergers and acquisitions. For instance, to access the dermatology generics portfolio through the manufacturing facilities at Israel and Canada, Sun acquired Taro Pharmaceutical Industries Ltd in 2010. The company in 2012 acquired DUSA Pharma to access to specialty drug-device combination in dermatology segment in the US.

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Also read: Sun Pharma to acquire US-based Concert for $576 mn