8-K: Sun Pharma to Acquire Checkpoint Therapeutics for Up to $416 Million

Sun Pharma will acquire Checkpoint Therapeutics, adding the FDA-approved UNLOXCYT (cosibelimab-ipdl) for advanced cutaneous squamous cell carcinoma (cSCC) to its oncology portfolio.

Summary

• Sun Pharmaceutical Industries Limited will acquire Checkpoint Therapeutics, Inc. for an upfront cash payment of $4.10 per share, representing aggregate upfront consideration of up to $355 million.
• Checkpoint stockholders will also receive a contingent value right (CVR) for up to $0.70 per share upon achieving a milestone.
• The total transaction value is estimated to be up to approximately $416 million.
• The acquisition will add UNLOXCYT (cosibelimab-ipdl), an FDA-approved anti-PD-L1 treatment for metastatic or locally advanced cSCC, to Sun Pharma's global onco-derm franchise.
• The transaction is subject to customary closing conditions, including approval by Checkpoint's stockholders.
• For the nine-month period ending September 2024, Checkpoint reported $0.04 million in revenue and a net loss of $27.3 million.
• As of September 30, 2024, Checkpoint had a cash balance of $4.7 million, outstanding accounts payable and accrued expenses of $15.6 million, and outstanding accounts payable and accrued expenses related party of $2.0 million.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The acquisition provides Checkpoint stockholders with an upfront cash payment and potential future value. Sun Pharma gains a valuable asset in UNLOXCYT, which aligns with its strategic goals. However, Checkpoint's recent financial performance and the risks associated with the CVR temper the overall sentiment.

Positives

• The acquisition provides Checkpoint stockholders with an upfront cash payment and potential future value through the CVR.
• Sun Pharma's global presence is expected to accelerate patient access to UNLOXCYT.
• The addition of UNLOXCYT bolsters Sun Pharma's innovative portfolio in onco-derm therapy.

Negatives

• Checkpoint reported a net loss of $27.3 million for the nine-month period ending September 2024.
• Checkpoint had a relatively low cash balance of $4.7 million as of September 30, 2024.

Risks

• The transaction is subject to customary closing conditions, including regulatory approvals and approval by Checkpoint's stockholders.
• There is uncertainty regarding the timing of completion of the merger.
• There is a risk that the CVR milestone may not be achieved, resulting in no additional payment to Checkpoint stockholders.
• The integration of Checkpoint into Sun Pharma may present challenges.

Future Outlook

The transaction is expected to be completed in the second calendar quarter of 2025, subject to customary closing conditions.

Management Comments

• Dilip Shanghvi, Chairman & Managing Director of Sun Pharma, said, 'Combining UNLOXCYT, an FDA-approved anti-PD-L1 treatment for advanced cutaneous squamous cell carcinoma, with Sun Pharmas 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.'
• James Oliviero, President and Chief Executive Officer of Checkpoint, said, 'Sun Pharma is aligned with Checkpoints commitment to improving the lives of skin cancer patients, and I believe this transaction will maximize value for our stockholders and provide accelerated access to UNLOXCYT in the United States, Europe and other markets worldwide.'

Industry Context

The acquisition reflects a trend in the pharmaceutical industry where larger companies acquire smaller, innovative firms to expand their product portfolios and leverage their global reach.

Comparison to Industry Standards

• The acquisition of Checkpoint Therapeutics by Sun Pharma can be compared to other recent acquisitions in the pharmaceutical industry, particularly those involving companies with approved oncology drugs.
• For example, Pfizer's acquisition of Seagen for $43 billion aimed to bolster its oncology pipeline with antibody-drug conjugates (ADCs).
• Similarly, Merck's acquisition of Prometheus Biosciences for $10.8 billion focused on immunology assets.
• In terms of deal structure, the combination of upfront cash and a CVR is a common approach to bridge valuation gaps and share the risk associated with future regulatory or commercial milestones.
• The premium offered by Sun Pharma (approximately 66.0% to Checkpoint's closing share price) is within the typical range for acquisitions of publicly traded biotech companies.

Corporate Governance

Related Party Transactions

• In connection with the transaction, Checkpoint, Sun Pharma and Fortress Biotech, Inc., Checkpoints controlling stockholder (Fortress; Nasdaq: FBIO), have entered into a royalty agreement, under which following the closing of the transaction Fortress would be entitled to receive royalty payments based on future sales of cosibelimab during a specified term, in lieu of royalty rights that were granted to Fortress in connection with its founding of Checkpoint.

Stakeholder Impact

• Checkpoint stockholders will receive an upfront cash payment of $4.10 per share and a contingent value right (CVR) for up to $0.70 per share.
• Patients with cSCC may have access to an important, new treatment option through Sun Pharma's global presence.
• Checkpoint employees may experience changes in their roles and responsibilities following the acquisition.

Next Steps

• Checkpoint will file a preliminary and definitive proxy statement with the SEC.
• Checkpoint will hold a special meeting of stockholders to vote on the proposed acquisition.
• The parties will seek required regulatory approvals.
• The transaction is expected to close in the second calendar quarter of 2025.

Key Dates