According to people familiar with the matter, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is already in advanced talks with Takeda Pharmaceutical Co Ltd (TYO:4502) to sell Salix Pharmaceuticals, Ltd. for roughly $10 billion.
Unloading Salix Pharmaceuticals
Accordingly, the company is nearing to close a deal with Takeda Pharmaceutical in the coming weeks. The transaction is said to include an upfront cash payment of approximately $8.50 billion and future royalties.
However, it is uncertain whether the deal between the two companies will push through or not given the fact that there is another potential buyer.
“We are currently in discussions with third parties for various divestitures including but not limited to Salix,” confirmed the pharmaceutical giant.
On the other hand, Takeda Pharmaceutical has declined to comment on the rumored talks with the company despite reiterating that it is considering multiple deals to further its growth prospects.
Salix Pharmaceuticals primarily manufactures drugs for stomach illnesses such as diarrhea and irritable bowel syndrome (IBS).
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Valeant Pharmaceuticals International has acquired Salix Pharmaceuticals in 2015 for about $11 billion.
What It Means for the Companies
Should the company successfully unload Salix Pharmaceuticals, it can gradually settle its hefty debt load, which has long been a major concern among investors.
The deal can also help Joseph Papa, Valeant Pharmaceuticals International CEO, to restructure the company’s core drug portfolio, especially its skin and eye treatments. Aside from these, Valeant Pharmaceuticals International is also looking forward to the approval of brodalumab, a psoriasis drug, for commercialization.
While unloading Salix Pharmaceuticals will enable the company to breathe from its obligations to its lenders and regain investors’ confidence, selling Salix Pharmaceuticals for less than what it paid for last year can potentially lead to substantial losses.
Meanwhile, for Takeda Pharmaceutical, acquiring Salix Pharmaceuticals will give it access to Xifaxan, an IBS drug that can generate $1 billion in sales this 2016. The Japanese drugmaker is confident that it can improve Xifaxan sales as well, doing better than the beaten Canadian drugmaker.
Valeant Pharmaceutical International has closed at $23.86 on Tuesday, up by 33.74%.
