Business / Corporate

Takeda sells dry-eye drug to Novartis for deal valued at up to $5.3 billion

Reuters/bloomberg/kyodo

Takeda Pharmaceutical Co. Ltd has agreed to sell its dry eye drug to Swiss drugmaker Novartis AG for $3.4 billion and potential milestone payments of up to $1.9 billion, in the first divestment since its takeover of the U.K.’s Shire.

Japan’s biggest drugmaker aims to dispose of $10 billion worth of assets to cut debt taken on for the $62 billion Shire acquisition sealed in January, which catapulted it into the world’s top 10 drugmakers by sales but also made it one of the most indebted.

The sale of Shire’s Xiidra dry eye treatment is likely to close in the second half of 2019, Takeda and Novartis said in a statement.

Dry eye is a common condition that occurs when tears fail to provide adequate lubrication. If left untreated the condition can become extremely painful, leading to permanent damage to the cornea and vision. It affects an estimated 34 million people in the United States, Novartis’ statement showed, and can hinder daily activities ranging from reading to driving.

Xiidra, approved to treat signs and symptoms of dry eye in the United States, Canada and Australia, would bolster Novartis’ front-of-the-eye portfolio, the Swiss drugmaker said. The drug had about $400 million in sales last year, according to Novartis. With its sale, the first and only prescription treatment for dry-eye disease approved by the U.S. Food and Drug Administration, about 400 employees who are based primarily in the United States and Canada will be transferred to Novartis, Takeda said.

Novartis has just spun off its Alcon contact-lens and surgical-products unit but previously transferred eye drugs from the unit to its main pharmaceutical business in 2016.

Xiidra competes with Allergan Plc’s blockbuster Restasis. The drug could generate peak sales of as much as $1.4 billion, according to Elizabeth Krutoholow, a Bloomberg Intelligence analyst.

The transaction is the first major deal for Takeda since it laid out a scenario of a potential $10 billion in divestments, in an effort to deleverage after net borrowings more than doubled with the takeover of Shire. The company is looking to divest overseas businesses where it isn’t an industry leader and doesn’t have critical mass.

Takeda said it had also agreed to sell its business for sealant patch products, designed to help stop bleeding during surgery, to Ethicon Inc., a subsidiary of major U.S. drugmaker Johnson & Johnson, for about $400 million in cash.

“These initial divestitures represent important steps in advancing the growth strategy Takeda outlined following our transformational acquisition of Shire earlier this year,” said Takeda President and CEO Christophe Weber in a statement.

The Japanese firm said it will focus on treatments for diseases in key business areas including gastroenterology, oncology and neuroscience, “creating long-term value for Takeda shareholders.”

The company’s completion of the purchase of Shire in January was the biggest-ever Japanese acquisition of a foreign firm. Its shares rose as much as 3.3 percent in early trading Thursday before ending up 0.2 percent, compared with a 0.9 percent loss in the 225-issue Nikkei average.

Under CEO Vas Narasimhan, Novartis is narrowing its focus on cutting-edge drugs for cancer and rare diseases and betting on treatments such as gene therapies to potentially cure severe illnesses. In his first year at the helm, the new chief split with Alcon, ditched a stake in a consumer-health venture and carried out three crucial acquisitions to revamp the Basel, Switzerland-based company.