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M&A activities heat up in pharma with unique acquisitions by Sun and Zydus

ICICIdirect Research 13 Mar 2025 DISCLAIMER

Sun Pharma plans to acquire US based Checkpoint Therapeutics, a cancer drug player listed on NASDAQ with focus on developing novel treatments for patients with solid tumor cancers. The company has also received approval from the USFDA in December 2024.

 The transaction cost of US$ 355 million is not very significant given Sun is sitting on ~US$ 2.5 billion and we believe this acquisition is in sync with the company’s strategy to look for niche candidates in specialty segment which remains the main growth driver for the company.

 We remain positive about this acquisition given the Checkpoint's drug has better response rate of 47% compared to similar existing blockbuster drug which has overall response rate of 35% in cancer therapy. If successful, this drug can generate peak sales of more than US$ 1 billion. We believe the recent correction in the stock provides ideal entry point in Sun pharma as these kinds of deals will only strengthen the high-margin specialty portfolio. We have a BUY rating on the stock with a target price of ₹2185.

 Zydus Lifesciences on the other hand plans acquisition of France based medical devises player Amplitude Surgical which has expertise in lower limb orthopaedics at around Euro 300 million(₹2850 crore).

 The company had sales of around Euro 106.0 million in FY24 with EBITDA of Euro 27.1 million (25.5% Margin). The deal values the company at 11x FY24 EBITDA and 2.8x FY24 sales, which seems fair.

 However, we are slightly skeptical about this deal as the segment is an uncharted territory for Zydus and the investment is significant. But for this deal, we have an overall positive stance on the company with a focus on niche launches in the US, improving India franchisee and incremental R&D spend. We have a BUY rating on the stock with a target price of ₹1150.

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