Sun Pharmaceuticals is to buy US-based $50-million-turnover skincare company Dusa Pharma for $230 million. Sun said the deal has been approved by both the boards.
Dusa will give the Indian company an entry into dermatological treatment devices where Sun sees “good growth opportunities”, said Dilip Shanghvi, MD.
Taro, the Israeli generic company in which Sun holds a 66% stake, also has a strong dermatological focus. Experts believe Sun is gradually positioning itself as a “skincare player”.
Bhavin Shah, analyst at Dolat Capital, said, “Sun might be looking at greater focus on the derma space and an acquisition is an easier method.” But another analyst said the deal looks a bit expensive.
A 100% subsidiary of Sun will commence a tender offer for all of the outstanding common stock of Dusa at a price of $8, a 38% premium to the closing price on the NYSE on Wednesday. At 9 pm India time on Thursday, Dusa’ s shares were up a whopping 38% at $7.97, just a whisker away from Sun’s offer price.
Estimates by research consultancy Express Scripts state that spending on derma products increased 18% on-year in the US in the first five months of 2012, driven mainly by rising cost of individual prescriptions.
Sarabjit Kour Nangra, vice-president of research at Angel Broking, said margins on dermatological products in the US are slightly better (in the 20-25% range) than other products due to muted competition. Skincare is seen as a tough segment to crack, he said.
For, the generic players have to demonstrate to the USFDA, the food and drugs regulator, that their products, ointments and creams are absorbed through the skin in the same manner as the brand name drugs. Complexities thus restrict the number of players in the US in this segment.