Valeant Pharmaceuticals talks to sell Salix to Japan’s Takeda breaks down

Canada's Valeant Pharmaceuticals International Inc.'s talks to sell its gastrointestinal-drugs division to Japan's Takeda Pharmaceutical Co. for around $10 billion have broken down due to disagreements over price and other matters, The Wall Street Journal reported, citing people familiar with the matter.

A successful deal would have helped Valeant to reduce its huge debt pile it accumulated through aggressive acquisitions.

Valeant had last month said that it was in talks with several parties about selling Salix Pharmaceuticals, but this week, it said that it would focus of building the business by expanding its sales force for Salix's key product, Xifaxin, among other drugs.

Valeant had acquired North Carolina-based Salix last year for $10.1 billion after a fierce bidding war with Endo Pharmaceuticals.

Salix develops and markets prescription pharmaceutical products and medical devices for the prevention and treatment of gastrointestinal diseases.

Salix sells hepatic encephalopathy drug called Xifaxan, which is expected to bring in annual sales revenue of over $1 billion.

Valeant, one of the most aggressive acquirers in the pharmaceutical industry, has been mulling the sale of some assets in order to reduce its massive $30-billion debt.

The company had held talks with investment banks that include Goldman Sachs Group and Centerview Partners to look at strategic options and sought advice on dealing with its creditors. (See: Valeant Pharmaceuticals hires investment banks to review strategic options)

Valeant's then CEO Michael Pearson and William Ackman, CEO of activist hedge fund Pershing Square, who is a member of the board of Valeant, had earlier said that the company was considering selling "noncore assets" to help trim its debt pile.

Post this announcement, Pearson stepped down and Valeant hired Joseph Papa, previously of Perrigo Company.

Valeant's stock soared for several years under Pearson's growth-through-acquisition strategy, which focused on buying older, niche drugs and repeatedly hiking prices. But the company's tactics eventually attracted regulatory scrutiny.

Valeant, which has a product portfolio of about 490 products, has made over 80 acquisitions since 2008 and spent around $36 billion since 2010 on purchasing companies, most of them privately owned.

The troubled Ontario-based drugmaker is under investigation by six US government agencies over price hikes, accounting practices and alleged milking the US Medicaid system.

The Canadian Revenue Agency is also scrutinising the company's books, while investors in Canada and the US are suing the company for insider trading and misrepresentation.

The intense scrutiny of Valeant has triggered repeated sell-offs of company shares, which have lost nearly 90 per cent of their value since reaching peak levels last August.

This year alone, Americans are expected to spend more than $328 billion on prescription drugs.  Of this, individuals will pay about $50 billion out-of-pocket.

The federal government will pick up another $110 billion in payments through Medicare, Medicaid, Veterans Affairs, and other programs.

Some analysts have said that Valeant is an Enron in the making, while others have said that the company is like a pack of cards just waiting to collapse.