Sun sets on DUSA’s independence as derma hots up

Sun Pharmaceutical’s $230m move on DUSA Pharmaceuticals last week not only speaks volumes about the Indian’s company’s continued desire to widen its reach beyond its home shores in the largest pharmaceutical market in the world, but also about the increasing interest in dermatology products.

Recent months have seen Valeant Pharmaceuticals International continue to build its presence in the space, and and the likes of GlaxoSmithKline and Novartis have snapped up companies and products (Novartis puts another plug in patent gap with Fougera buyout, May 3, 2012). With consensus data from EvaluatePharma forecasting that dermatology sales are likely to grow from $13.7bn to $17.1bn between 2011 and 2018, the appeal of the space becomes a little clearer. Those looking to do future deals in the space, however, could find that prices are being pushed up.

Paying the price for success

Sun has itself paid a 38% premium to DUSA’s closing price, which looks like a full-priced offer.
Part of this might have been to win over shareholders and avoid the torrid time it has had with its proposed takeover of Taro Pharmaceutical Industries. The Taro deal has yet to close thanks to minority shareholders questioning its value; a decision by the board is expected on December 6.

But by paying such a premium for what will hopefully be a no-fuss takeover, Sun will need DUSA and its products to live up to expectations. According to EvaluatePharma sales of DUSA’s photodynamic therapy combo, Levulan Kerastick Topical, are set to hit $123bn by 2018, and the product is also in the top 15 growth drivers for dermatology over the next six years.

The combination therapy uses aminolevulinic acid HCI and then blue light illumination to treat non-hyperkeratotic actinic keratosis (AK), or sunspots, on the face and scalp. AK caused by excessive exposure to sunlight can progress to squamous cell carcinoma, the second most common skin cancer. 

New departure

The deal marks a definite departure for Sun, which has previously confined itself to buying generic companies, meaning there are no synergies with its existing products. As such, Sun must feel pretty confident about the growth prospects of dermatology to make such a departure and buy an IP-based company.

However, if the takeover of Taro does go through the acquisition starts to make a lot more sense and Sun could see itself among the top 10 dermatological companies. And the group’s ambitions are unlikely to stop there if management is to be believed.

Top 10 Dermatology companies
Company WW Rx & OTC Sales ($m) Market share Market rank
2011 2018 CAGR 2011 2018 2011 2018
GlaxoSmithKline 1,568 2,355 +6% 11.4% 13.8% 2 1
Galderma 1,949 2,013 +0% 14.2% 11.8% 1 2
Bayer 1,278 1,218 -1% 9.3% 7.1% 3 3
LEO Pharma 860 1,079 +3% 6.3% 6.3% 4 4
Medicis Pharmaceutical 669 974 +6% 4.9% 5.7% 6 5
Allergan 623 890 +5% 4.5% 5.2% 7 6
Valeant Pharmaceuticals International 336 768 +13% 2.5% 4.5% 10 7
Anacor Pharmaceuticals - 705 - - 4.1% - 8
Taro Pharmaceutical Industries 506 601 +2% 3.7% 3.5% 8 9
Merck & Co 806 556 -5% 5.9% 3.3% 5 10

Sun has indicated that a derma franchise might be in the offing, with much larger acquisitions on the cards. To facilitate all this it will seek shareholder approval to raise a war chest of up to $2bn.

On the radar

If this is Sun’s new strategy it is likely to face competition in the form of the acquisition-addicted Valeant, which over the past two years has spent $3.6bn on dermatology deals and has made no secret of its desire to dominate this highly fragmented space (Valeant gears up for another assault on dermatology, September 4, 2012).

Dermatology is an attractive therapy area thanks to the fact that many products are over the counter and tend to have loyal brand followers. Also, until recently there had been little interest from big pharma, meaning smaller players could carve out a decent living.

But big pharma has started to wake up to the potential of dermatology.  In 2009 Glaxo struck one of the biggest deals in the space by acquiring the private German company Stiefel for $3.2bn. Others have followed: in May Novartis surprised the market by buying Fougera for $1.53bn, just over 3.5x the company’s global sales. At $230m Sun is paying slightly more than 5x DUSA’s sales of $45m last year.


Recently, Leo Pharma has stated that it expects to be a lot more active in the space in the coming years, and the biggest player in the space, GlaxoSmithKline, appears to be unwilling to lose its top spot in the derma rankings (EP Vantage Interview – Leo on the prowl for derma deals, June 26, 2012).

Earlier this year Glaxo licensed Basilea Pharmaceutica’s hand eczema drug Toctino for a surprisingly large $227m up-front fee, with milestones of up to $77.7m (Toctino beauty is in the eye of the beholder, June 13, 2012).

While it is unclear whether the price Sun has paid is a direct consequence of competition or just a way to ensure that it bags DUSA, with more companies chasing derma assets price inflation could be a new reality.

To contact the writer of this story email Lisa Urquhart in London at

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