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Business News/ Market / Mark-to-market/  Sun Pharmaceutical eyes InSite Vision’s research portfolio
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Sun Pharmaceutical eyes InSite Vision’s research portfolio

InSite Vision has developed a drug delivery platform for ophthalmic products and has three late-stage research programmes in the lab, slated for the US market

Sun Pharmaceutical Industries bid of $0.35 a share has found favour with InSite Vision’s board, trumping the earlier offer by Canada-based QLT Inc. that was in a range of $0.25-0.30 a share. Photo: Hemant Mishra/MintPremium
Sun Pharmaceutical Industries bid of $0.35 a share has found favour with InSite Vision’s board, trumping the earlier offer by Canada-based QLT Inc. that was in a range of $0.25-0.30 a share. Photo: Hemant Mishra/Mint

US-based InSite Vision Inc. finds itself in the happy position of a sought-after target. Sun Pharmaceutical Industries Ltd’s bid of $0.35 a share has found favour with InSite Vision’s board, trumping the earlier offer by Canada-based QLT Inc. that was in a range of $0.25-0.30 a share. QLT had already revised its offer once, after an unsolicited offer from an entity whose identity had not been disclosed then.

If no other competing bidder emerges, then Sun Pharma will pay $48 million as equity consideration for InSite Vision, which also had debt of $11.3 million as of 30 June.

Additionally, the Indian drug maker will also bear the $2.7 million break-up fee payable by InSite to QLT.

InSite Vision earned a revenue of $3.8 million in the six-month period ended 30 June. Sun Pharma’s interest is not in the US company’s current revenue, but in what it can grow to. InSite Vision has developed a drug delivery platform for ophthalmic products and has three late-stage research programmes in the lab, slated for the US market.

Sun Pharma and QLT both seem confident that one or more of these will make it to market.

Why does InSite Vision need Sun Pharma (or QLT for that matter)?

The final stages of clinical trials involve significant expenditure. Funding that can break the back of a small company, especially if the drug fails in a trial. Bigger firms can not only fund the trials, and absorb a loss or two, but they also have the marketing networks in place to commercialize these products, if and when they get regulatory approval.

The therapeutic area of ophthalmology itself is an attractive one, and having three drug candidates does increase the chance of commercial success. Even if it does not, the financial bet for Sun Pharma is not sizeable at this juncture, although the trials themselves will see an increase in funding needs.

The company’s shareholders appear to like what they see—a low-cash outflow acquisition that offers the promise to become a significant contributor to US revenues.

But the 2.4% increase in Sun Pharma’s share price on Wednesday seems to be a premature celebration; there is a long way to go before this acquisition yields tangible returns.

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Published: 17 Sep 2015, 07:36 AM IST
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