Valeant Pharmaceuticals International Inc. is currently engaged in negotiations with a Japanese drug company over the sale of its gastrointestinal drug business, according to the Wall Street Journal.
People familiar with the matter told the newspaper that Valeant is in advanced negotiations with Japanese company Takeda Pharmaceutical Co. over the sale of Salix Pharmaceuticals Ltd., which it bought just last year in a deal worth around $11 billion.
The deal being discussed is said to be worth roughly $10 billion. It would include around $8.5 billion in cash, with the rest coming in future royalty payments.
The talks were confirmed by Valeant late on Tuesday, even though the other party involved was not revealed.
“We are currently in discussions with third parties for various divestitures including but not limited to Salix,” the company said in a release. “The discussions may or may not lead to a definitive agreement.”
But Takeda refused to comment directly on a potential Salix deal, with spokeswoman Linda Calandra saying “while we at Takeda are always evaluating opportunities, we do not speculate on industry rumors.”
Valeant has been reeling under a heavy debt burden while also being the subject of probes and political pressure. Its shares have tumbled significantly in 2016 as a result of the different challenges confronting it.
The Laval, Quebec-based drugmaker would lose one of its most-treasured assets if it decided to complete a sale of Salix, which it acquired in March 2015. It would mark a reversal of the promise by new chief executive officer Joseph Papa not to sell “core” assets of the company.
Salix produces medications for treatment of stomach disorders, such as irritable bowel syndrome (IBS) and ulcerative colitis. Its anti-diarrheal drug Xifaxan was Valeant’s biggest single product during the second quarter with sales of $200 million. That medication combined with another ulcerative colitis drug by the unit called Uceris to account for roughly 10 percent of revenue made by Valeant in the second quarter.
Wellbutrin, an antidepressant, and Bausch & Lomb’s SoftLens disposable contact lenses would become Valeant’s top-selling products if Salix is sold. There will be increased focus on growing the skin and eye drug businesses of the company.
A successful sale will, however, help the Canadian drug company ease its debt burden of about $30 billion, a sizeable portion of which came as a result of the Salix acquisition. The most troubling for investors is the $12 billion owed to banks. Fears over the debt load have caused the drugmaker’s shares to tumble more than 90 percent from record levels in 2015.
The shares closed 34 percent up at $23.86 in New York on Tuesday, putting Valeant’s market value at roughly $8.3 billion. They had slumped a day before after reports emerged that prosecutors in the U.S. were probing two of the company’s former executives for fraud.
Takeda, the biggest drugmaker in Japan by revenue, had made a previous attempt to acquire Salix. Like other Japanese companies, it is seeking new markets for growth outside its home country.