Sun Pharma To Buy Dusa Pharmaceuticals for USD 230 Million

Sun Pharma Industries, which announced its earnings a few days ago, has stated that it will acquire the American pharmaceutical company Dusa. Dusa is a market leader in photodynamic therapy (PDT). It has top brands like Levulan and BLU-U which are approved by the USFDA. Sun Pharma proposed to buy the shares of Dusa at USD 8 per share after which the scrip of Dusa, listed on NASDAQ, appreciated by a whopping 37 per cent. On the BSE however Sun Pharma’s shares declined marginally by 0.24 per cent at the time of Friday’s closing. 

Sun Pharma will be acquiring this company at a total value of USD 230 million. The transaction has been approved by the boards of both the companies. The company has, for the September quarter, reported strong growth in its business. On a consolidated basis, the company reported net sales of Rs 2,657 crore as compared to Rs 1,894 crore during the same period last fiscal. It however reported a 46 per cent drop in its net profit after it made a provision of Rs 584 crore towards potential damages that it may have to pay in a patent infringement case on heartburn drug Protonix in the U.S. 

Dusa on the other hand reported 4 per cent rise in its revenues in the September quarter to USD 9.7 million (about Rs 52 crore). The company however reported loss of USD 1.4 million (Rs 7 crore) compared to profit of USD 3.5 million (Rs 19 crore) in the corresponding quarter last year. As per its September quarter results, Dusa has a cash reserve of USD 28.7 million (Rs 157 crore). The loss in this quarter is mainly on account of loss in the fair value of its warrants and hence this can be termed an ‘exceptional’ item. For the nine months of this year the company has been in profits. 

After the acquisition Sun Pharma said that it was looking for more acquisitions in the global space and Dusa was a beginning. The company has also revealed that their future acquisitions may be of bigger value than that of Dusa. The key question that may come to an investor’s mind is whether this acquisition is good for Sun Pharma or not? In our opinion, it is too early to comment on this matter. However, we believe that the recent acquisitions of the Indian pharmaceutical companies have been fairly good on the revenue and profitability front. Sun Pharma, which is one of the largest Indian origin pharmaceutical companies, has the right kind of capabilities to capitalize on this acquisition.