Valeant Pharmaceuticals International Inc said Thursday it would sell its iNova Pharmaceuticals business for $1.25 billion as the embattled company stepped up efforts to slash its crushing debt load.

Laval, Que.-based Valeant announced it would sell iNova, which sells prescription and over-the-counter medical products, to a company jointly owned by Pacific Equity Partners and The Carlyle Group LP.

Proceeds from the deal will go toward repaying debt under its senior credit facility. Valeant debt totalled US$28.5 billion as of the first quarter of 2017.

“It’s not my goal to get the debt to zero,” Chief Executive Joseph Papa told Reuters. “The right place for our debt is somewhere … in the range of US$15 billion to US$20 billion.”

But analysts said the deal will not make much of a dent in Valeant’s debt loads.

The deal would be “slightly deleveraging” for Valeant, but “will not have much of an impact” on its overall debt levels, particularly after taxes and other payments that could be associated with the deal, analysts at Wells Fargo said in an investor note.

The company’s stock jumped more than 10 per cent in Toronto trading Thursday on the news. Its shares are down more than 7 per cent year-to-date. Valeant’s stock price nosedived in mid-2015 after reports emerged that the company was under congressional investigation in the U.S. over allegations that it had inflated the prices of some of its medical products. Valeant shares were trading over $330 per share in July of 2015.

In early 2016, Valeant CEO Michael Pearson stepped down from his position. His successor, Papa, has since been attempting to restructure the company’s corporate structure through asset sales and a refocusing on a few specific fields, including in dermatology and eye car.

“It’s not a linear, direct improvement every single day. But there’s clearly progress that we’re making,” Papa said at an investor event Wednesday.

The company now looks likely to reach its goal of paying down US$5 billion in debt by February 2018, according to analysts. The company has paid down US$4.5 billion in debt since the first quarter of 2016.

On Tuesday Bloomberg reported the company was in talks to sell its Bausch & Lomb eye surgery unit for around US$2 billion, citing anonymous sources. 

However, the company still has a long way to go before its restructuring could be considered complete.

The deal was “only a short-term positive” for the company, CIBC analysts said in a note to investors.

The analysts said the deal would only reduce annual interest payments by roughly US$55 million, at the expense of nearly US$250 million in foregone revenue.

Analysts at RBC Capital Markets said they were “not overly satisfied with the valuation achieved” in a research note to clients.

When Valeant announced its iNova business would be put up for sale in September 2016, several reports estimated the total value of the deal to be around US$1 billion.

The all-cash deal is expected to close in the second half of this year.

Financial Post