DUSA Pharmaceuticals Inc. signed to acquire dermatology drug company Sirius Laboratories Inc. for $30 million in cash and common stock.

Privately held Sirius, founded in 2000, focuses primarily on treating acne vulgaris and acne rosacea. The Vernon Hills, Ill.-based company will bring to DUSA an expanded line of dermatology products, as well as development pipeline candidates that could soon reach the market.

"We basically started our own dermatology sales force in late 2003," said DUSA's chairman and CEO Geoffrey Shulman, "and as we gradually developed relationships with dermatologists, we wanted to begin adding other products."

Shulman would not disclose too many specifics about Sirius, since the merger agreement involves stock being issued through a private placement.

The $30 million price is based on a "combination of top-line, bottom-line" revenues and the potential of pipeline products, Shulman said, adding that $8 million will be paid in cash upon closing, $17 million will be paid in stock through the private placement and up to $5 million in cash or common stock, at DUSA's option, will be paid based on certain milestones achieved, including new product approvals or launches, as well as reaching certain cumulative sales levels with Sirius products.

The companies expect the transaction to close this quarter.

Sirius sells the dermatology products Nicomide, Avar and Psoriatec, among others. It launched its first product in 2001 and has introduced a total of 11 products since then, positioning itself within the acne vulgaris and rosacea marketplaces. Ten of those products were developed internally.

In the pipeline, the company has products to address eczema, seborrheic keratoses, xerosis, ichthyosis and seborrheic dermatitis.

DUSA also was attracted to the company for its ability to seek out and fill market niches, and to do so "without a long expensive development program," Shulman said.

Sirius claims that within its first two years of operations, its prescriptions have at least doubled the growth rate of other specialty dermatology companies in their early years. An example of the Sirius strategy is the company's work on sodium sulfacetamide (Avar), which represents an old ingredient for acne that the company put into a new formulation and re-introduced in August 2004 for rosacea patients.

"It's a simpler route for approval and/or marketing," Shulman said.

A number of Sirius' pipeline products also could be moved aggressively onto the market either this year or next year, he added.

Wilmington, Mass.-based DUSA is best known for developing and marketing Levulan (5-aminolevulinic acid, or ALA) photodynamic therapy to treat dermatological conditions. It was approved in 1999 for actinic keratoses, a pre-cancerous skin condition, and it is in late-stage development for acne and photodamage, or sun damage. DUSA expects to announce results from those Phase II trials in March at the American Academy of Dermatology meeting.

The company also has a clinical trial agreement signed in September 2004 with the National Cancer Institute's Division of Cancer Prevention, which plans to conduct a Phase II study of Levulan PDT for Barrett's esophagus dysplasia. The condition involves the reflux of acid into the esophagus, which then changes the lining of the esophagus into a stomach-like lining and can lead to esophageal cancer.

In November 2004, DUSA signed a second clinical trial agreement with the NCI, of Bethesda, Md., covering the clinical development of Levulan PDT to treat oral cavity dysplasia.

DUSA reported $2.4 million in net revenues for the quarter ended Sept. 30, compared with $2 million posted for the same period last year. It had a net loss of $3.6 million, or 21 cents per share, in the quarter, and reported 16.9 million shares outstanding and $35.3 million in cash, cash equivalents and marketable securities.

The company's stock (NASDAQ:DUSA) fell 17 cents Tuesday to close at $10.60.