Novartis has agreed to sell ophthalmology assets to Bausch + Lomb for an upfront payment of $1.75 billion, with potential milestone payments of up to $750 million. The total value of the deal could reach $2.5 billion. Novartis expects the deal to improve their focus more on higher-margin drugs.

Under the terms of the deal, Bausch + Lomb will get Novartis’ Xiidra, a treatment for dry eye disease, as well as two experimental products: libvatrep (formerly SAF312), an experimental treatment for chronic ocular surface pain with Phase 2b test results expected later this year. It will also receive AcuStream, a medical device being for delivery of topical eye medications.

Xiidra generated more than $487 million in 2022 revenue.

In addition to Xiidra, Bausch + Lomb already has a presence in the dry eye disease market, bagging FDA-approval for a drug called Meibo in May. The two drugs are expected to complement each other, targeting different aspects of the dry eye disease cycle. Bausch + Lomb financed the deal through debt from J.P. Morgan. The deal will likely close by the end of this year.

Novartis and Bausch + Lomb deal part of a broader trend

The deal reflects appetite for M&A strengthening product offerings, especially in specialized areas like ophthalmology. For acquirers, marketed products leverage commercial infrastructure and gain complementary treatments. For companies divesting, it concentrates efforts on higher priorities, gains milestones, and supports continuity of care.

In June, Novartis also agreed to spend up to $3.5 billion to acquire Chinook.

In the first half of 2023, pharma M&A deals have surged as companies look for pipeline growth ahead of patent expirations. While the prospect of increasing regulatory scrutiny may scuttle some deals, the volume of deals remains fairly robust.

The second quarter of 2023 had a mix of large strategic M&A deals and smaller targeted acquisitions. While megadeals of over $10 billion were sparse relative to the beginning of the year, mid-sized transactions dominated.