Sun Pharma shares: Jefferies sees healthy upside after recent acquisition

Q2 Results

Jefferies said in a note that Dr. Maurice Raycroft, Ph.D., the analyst, offered insights on the positioning of Concert’s lead drug Deuruxolitinib for treating alopecia areata. Jefferies shared its key takeaways from the call with the US analyst from Jefferies regarding Concert Pharma’s acquisition up until its recent acquisition by Sun Pharma.

He spoke about Deuruxolitinib’s possible ramp-up, profitability, drug usage, and IP difficulties. Regarding profitability, Maury stated that COGS for Deuruxolitinib can be 6-12% of sales value, marketing costs can be $50-100 m (if the product sells USD500 m), and the current open-label studies and initial opex for the product may require $20-40 m of annual costs (we modelled USD50 m cost for Deuruxolitinib NPV calculation). The brokerage firm has kept its Buy rating and a 1,200 per share price objective on Sun Pharma shares.

Sun Pharma, a large pharmaceutical company, signed an agreement to buy Concert Pharmaceuticals in January for $576 million, and completed the transaction earlier this month.

The brokerage emphasised that Concert Pharma’s clinical studies indicated it would outperform rival medications from Eli Lilly and Pfizer, and this was supported by Phase III data as a reason why Sun received a fair price on Concert. Less than $1 billion was the market valuation of Concert Pharma at the time of the trading halt.

“The company had a best-in-class product, but Big Pharma passed it by, possibly due to IP concerns with the product and some of them having their own programmes for alopecia areata, such as Lilly, Pfizer, and BMS. Moreover, Concert Pharma need a collaboration because it lacked a cash runway after 2023. Sun Pharma may have gotten a decent deal on the Concert acquisition thanks to Concert’s declining financial reserves and the transaction’s low level of competition, it continued.

The opinions and suggestions listed above are not Currency Veda’s rather, they represent the opinions of certain analysts or brokerage firms.