Canadian ophthalmic health company Bausch + Lomb has signed an agreement to acquire Swiss pharmaceutical company Novartis’ AcuStream dry-eye drug delivery technology.

AcuStream is an investigational device that uses a unique dispensing mechanism to facilitate precise dosing and accurate delivery of certain topical ophthalmic medications to the eye.

The deal also includes the Swiss drugmakers’ other ophthalmology products.

Bausch + Lomb will acquire Novartis’ Xiidra eye drops, experimental chronic ocular surface pain drug libvatrep, rights to AcuStream technology, and OJL332, which is in pre-clinical development.

Novartis will receive an upfront payment of $1.75bn in cash, and up to $750m in milestone payments based on the future sales of Xiidra, libvatrep (SAF312) and OJL332.

The Swiss drugmaker will continue to provide Xiidra to patients on behalf of Bausch + Lomb, for a limited period after closing, to ensure consistent supply for patients.

Novartis chief strategy and growth officer Ronny Gal said: “This transaction will enhance our focus on prioritised innovative medicines to alleviate society’s greatest disease burdens, achieve the greatest patient impact and drive our growth strategy.

“Our ongoing portfolio refinement enables us to best deploy our scientific expertise and resources towards priority programmes and therapeutic areas, while remaining open to opportunistic development for additional high-impact conditions leveraging our advanced technology platforms.

“We believe that Bausch + Lomb has the capabilities, scale, and commitment to continue the work of Novartis in delivering and developing much-needed therapies for patients suffering from dry eye and related conditions.”

The board of directors of both companies have approved the transaction.

The deal is expected to be completed in the second half of this year, subject to receipt of regulatory approval and other customary closing conditions.

Bausch + Lomb intends to finance $1.75bn upfront cash price through new debt and has obtained fully committed financing from JP Morgan for the transaction.

JP Morgan served as a financial advisor, and Wachtell, Lipton, Rosen & Katz as legal advisors to Bausch + Lomb, on the transaction, while Davis Polk & Wardwell served as legal advisors for the financing.

Bausch + Lomb chairman and CEO Brent Saunders said: “This acquisition is a prime example of our strategy in action, as it provides needed scale for the company and transforms our pharmaceuticals business by making us a leader in ocular surface diseases.

“The deal is also expected to accelerate margin expansion through a larger mix of pharmaceutical products in our portfolio, provide strong and immediate earnings accretion and present a clear path to deleverage, making it financially compelling.”