Valeant's Salix Story: To Sell Or Not To Sell?

Shares of Valeant Pharmaceuticals Intl Inc VRX soared Tuesday after The Wall Street Journal reported the company is in talks to sell its Salix unit for up to $10 billion.

Salix, a leader in the gastrointestinal market, was acquired by Valeant back in February 2015 for $158 per share, which yielded an enterprise value of $14.5 billion. Factoring in Salix's debt and cash on hand, the all-cash transaction cost Valeant around $10.1 billion.

WSJ's report on Tuesday suggested an asset sale would consist of an upfront payment of $8.5 billion plus future royalty payments, which implies that Valeant would divest its asset at an initial loss and may need to wait years to recover just the initial investment.

The specifics of any divestment aren't immediately known and for the time being remain unconfirmed and open to speculation. Valeant could also decide to sell only specific assets within the Salix unit. Investors should also be reminded that just one day prior to reports of a potential divestment of Salix, Valeant's stock tanked on reports the company's ex-CEO and ex-CFO are part of a potential accounting fraud investigation.

Valeant CEO Joseph Papa told CNBC in early September that Salix, along with its Bausch & Lomb unit, are "very important" to the company's future and the company is likely to focus on selling on-core assets.

Nevertheless, no option will be left off the table.

"Would we have to look at something if someone came forward with something?" the CEO said in reference to selling its Salix or Bausch & Lomb unit. "Of course we would because we are a public company. We have over $30 billion of debt. We would have to look at it."

Stay tuned as this saga continues to develop.