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Takeda to sell Dry Eye Drug Xiidra to Novartis

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In an attempt to expand its portfolio of eye care medicines, Swiss drugmaker Novartis AG has acquired Takeda Pharmaceutical Company Ltd’s dry eye drug Xiidra for an upfront payment of USD 3.4 billion.

The deal includes potential milestone payments of up to USD 1.9 billion and is expected to close in the second half of 2019.

According to the Swiss drug maker, the main product in the deal is Xiidra, a prescription eye drop for adults with dry-eye disease. Along with USD 3.4 billion in cash up front, Novartis will pay as much as USD 1.9 billion in milestones.

Novartis mentioned that Xiidra had about USD 400 million in sales last year. It expects the deal to close in the second half of the year and plans to bring over about 400 employees. The drug could generate peak sales of as much as USD 1.4 billion, according to Elizabeth Krutoholow, a Bloomberg Intelligence analyst.

The transaction is the first major deal for Takeda since Chief Executive Officer Christophe Weber said in January that the Japanese company plans to move quickly on disposals to reduce debt after its takeover of Shire.

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Novartis has just spun off its Alcon contact-lens and surgical-products unit but previously transferred eye drugs from the unit to the main pharma business in 2016. Xiidra competes with Allergan Plc’s blockbuster Restasis. Dry-eye disease is a common condition that can hinder daily activities ranging from reading to driving.

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.

Takeda has laid out a scenario of a potential USD 10 billion in divestments in an effort to deleverage as 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.

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