Valeant Pharmaceuticals is in advanced discussions with Takeda Pharmaceutical to sell its Salix Pharmaceuticals subsidiary for $10 billion, according to The Wall Street Journal.
The purchase price of Salix, Valeant’s stomach-drug business, would include approximately $8.5 billion in cash as well as future royalty payments to Valeant.
Valeant purchased Salix in 2015 for approximately $11 billion. Salix makes treatments for stomach-related disorders, including irritable bowel syndrome and diarrhea.
However, there is no guarantee the two companies will reach an agreement.
“We are currently in discussions with third parties for various divestitures including but not limited to Salix. The discussions may or may not lead to a definitive agreement,” said Valeant on Tuesday.
In addition, there are reports that there is another potential bidder.
Investors previously called on Valeant to reduce its debt load. Reuters cites that the company has roughly $12 billion in bank loans. The company has also been under scrutiny for its accounting practices.
“Valeant CEO Joseph Papa disclosed earlier this year that the Canadian drugmaker could move to offload certain non-core assets to repay debt, although he specified that such a sale would not include Salix gastrointestinal drugs,” said one report from FirstWord Pharma.
According to The Wall Street Journal:
Should Valeant strike a deal, it would allow the company to largely pay back its bank lenders, removing a big area of concern for investors ever since the drugmaker became embroiled in an accounting scandal last year. Valeant has told investors it would work to reduce its debt load, but the company was expected to do so through a series of smaller steps.
It would also likely allow Valeant’s new chief executive, Joseph Papa, to focus on rebuilding Valeant’s core franchises in skin and eye drugs, which have been struggling.
Reuters adds that “Valeant has been struggling to revive its dwindling share price since late last year, when controversy around its drug pricing practices sent shares plunging. Its stock is down around 90 percent since its 2015 highs.”
Japan-based Takeda, on the other hand, seeks to grow its business in the U.S. and other “lucrative markets to offset pressures in its home country” and believes that treatments for stomach-related disorders could potentially do just that.