Valeant Pharmaceuticals International Inc., a corporation based in Quebec, is currently in talks to sell Salix Pharmaceuticals Ltd., a company that manufactures gastrointestinal drugs. Valeant originally acquired Salix in March 2015 for $14.5 billion. The purchase was part of a growth strategy of buying pharmaceutical businesses with reputable products and cutting their research costs to maximize profits. However, Valeant lost much stock value over the past year due to unethical business activities, including price hikes, unreliable accounting, and secret collusion. Recently, the company undertook major efforts to change its leadership, settle its legal suits, pay off its debts, and re-establish growth. Selling Salix could be instrumental to these plans; just this week, news of the potential sale increased Valeant's stock by 34%. While prospective clients have been mostly kept anonymous, Japan's Takeda Phamaceutical Co. Ltd. has expressed public interest.
Takeda, which grosses the most revenue out of all of Japan's pharmaceutical companies, is currently attempting to expand its reach in international markets. The company appears to be pursuing a strategy of mass acquisition, similar to Valeant's plans in 2015. Acquiring Salix would allow Takeda to focus on stomach drugs and expand its global consumer base. The company boasts of an strong sales force that could efficiently market and trade Salix's most renowned products, including an antibiotic known as Xifaxan. It is not guaranteed that Takeda will buy Salix at this point, since there is another anonymous company in talks for Salix. However, it is apparent that Takeda will strongly aspire for the potential acquisition.
As for Valeant, any sale of Salix could only be good news. A confirmed deal could bring in $10 billion, which would pay off a sizable portion of Valeant's $31 billion debt. However, business strategy post-Salix is more uncertain. Pending legal cases and a lack of product diversity may force the company into desperate measures. Valeant would have to double-down on its current product selection, including antidepressants and products for eye and skin health. Unfortunately, these products have not sold highly in the past year. The company also developed a new drug for psoriasis treatment; if approved, it could bring some much-needed revenue for the company. This would be largely contingent on Valeant's marketing and sales efficiency, which proved inadequate when it came to Salix's products.
At this point, the future is hazy for Valeant. While potential buyers for Salix are in the mix, it is still uncertain whether the company will be sold at all. Plus, the sale will not solve all of Valeant's mounting troubles. Still, it could be a positive direction forward for Valeant after a notorious year.