Valeant Pharmaceuticals in discussion with Takeda for Salix sale: report
03 November 2016
Valeant Pharmaceuticals is in discussion with Takeda of Japan for the sale of its Salix unit for $10 billion, The Wall Street Journal reported. The stock shot 30 per cent on the news.
Salix's product line includes it biggest asset, Xifaxan, a drug that cures irritable bowel syndrome. At the time it acquired Salix, investors were told Xifaxan would be a $1-billion drug in 2016, which had not turned out to be the case so far.
Meanwhile, Takeda told Business Insider about the discussion, "while we are always evaluating opportunities, we don't comment on industry rumors."
Valeant, is in debt to the tune of $30 billion with its stock down 90 per cent from its peak last year. The stock crashed over accusations from a shortseller and a government scrutiny over its pricing practices. Company executives and top investors had earlier said they would not sell top assets like Xifaxan.
Salix was acquired for $11 billion in April 2015 along with $4 billion of its debt.
According to Valeant's projection the drug was expected to generate $390 million in Q4, but sales fell short by $180 million, grossing only $207 million in revenue.
''We are currently in discussions with third parties for various divestitures including but not limited to Salix,'' Valeant said in a statement. ''The discussions may or may not lead to a definitive agreement.''
Meanwhile, CNBC said in a source-based report that the $10-billion deal could include $8.5 billion in cash plus future royalty payments for Valeant. Thought the agreement was expected within weeks, the source said there was no guarantee as there was another suitor for Salix.
According to commentators, the sale of Salix would help Valeant lighten its massive debt load. The company's new CEO, Joseph Papa, had said in June that paying off some of the company's debt formed part of is vision for rebuilding the company.
"If we can sell some of those non-core assets to pay off the debts, it will allow us to pay down our additional debt," he told shareholders.