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UPDATE 1-Novartis buys Takeda's dry eye drug for $3.4 bln

(Adds Takeda statement, details on Xiidra, background)

May 8 (Reuters) - Swiss drugmaker Novartis AG said on Wednesday it agreed to acquire Takeda Pharmaceutical Company Ltd's dry eye drug Xiidra for $3.4 billion, as well as potential milestone payments of up to $1.9 billion, to expand its portfolio of eye care medicines.

The deal is expected to close in the second half of 2019, Novartis said in a statement.

Takeda said separately that the sale is part of its strategy to focus on business areas core to its long-term growth and cut down debt following its acquisition of Shire.

The Japanese company said it is also selling TachoSil, a surgical patch for bleeding control, to Ethicon for about $400 million.

Takeda completed a $59 billion deal to acquire peer Shire in January, joining the ranks of the world's biggest 10 drugmakers by sales - and also becoming one of the world's most indebted.

Dry eye occurs when tears are not able to provide adequate lubrication, and if left untreated, can become extremely painful, leading to permanent damage to the cornea and vision. It is estimated that more than 34 million people in the United States are affected.

Novartis said it will take on about 400 employees associated with Xiidra, which earned $400 million of revenue in 2018.

Xiidra, which is approved to treat signs and symptoms of dry eye in the United States, Canada and Australia, would bolster Novartis' front-of-the-eye portfolio and ophthalmic leadership, the company said. (Reporting by Tamara Mathias Arundhati Sarkar in Bengaluru; Editing by Anil D'Silva and Leslie Adler)