Valeant says it will return the maker of “female Viagra” to its former owners, in effect giving the company away less than three years after buying it for $1bn.
When Valeant acquired Sprout Pharmaceuticals in August 2015, analysts and investors said the Canadian drugmaker had vastly overpaid for the first medicine designed to boost a woman’s libido.
Just a few weeks later, Valeant was rocked by an accounting scandal and its shares have since lost more than 95 per cent of their value. Many investors worry that the group will struggle to service the debts it amassed during its years-long acquisition spree.
Valeant said it would hand Sprout to some of its former owners without charging an upfront fee. At first, it will lose money on the deal — it has agreed to loan the company $25m to “fund initial operating expenses”.
However, the Canadian drugmaker is entitled to 6 per cent of future sales of the female libido drug, sold under the brand name Addyi. The owners of Sprout also agreed to drop a lawsuit against Valeant, which alleged that the Canadian drugmaker had failed to market the pill effectively.
“Returning Sprout to its former owners will enable us to further streamline our portfolio and reduce complexity in our business,” said Joseph Papa, chief executive of Valeant, who joined the company after the deal had been completed.
The Sprout acquisition capped several years of frenzied debt-fuelled dealmaking under Michael Pearson, Valeant’s former chief executive, and the group now has about $26bn of net borrowings. The deal is seen as symbolic of the drugmaker’s hubris.
Sales of Addyi have been far lower than the annual target of $1bn, with the drug pulling in less than $10m last year. That prompted the company’s former owners — who had been entitled to royalties — to launch their legal action.
Addyi is a pink pill intended for women suffering from a form of suppressed libido known as hypoactive sexual disorder. It was quickly termed “female Viagra” — a nod to the wildly successful treatment for male erectile dysfunction — when it was given a green light by the US Food and Drug Administration in 2015.
However, the agency’s decision to approve the drug was controversial and proved divisive among doctors, some of whom claimed it was barely effective and only worked in a minority of patients.
Critics said the benefits did not outweigh the considerable safety risks: low blood pressure, fainting spells and potentially dangerous interactions with alcohol and other prescriptions drugs.
The FDA responded by implementing curbs designed to limit the number of prescriptions, including a certification process for doctors and pharmacies and a warning that the drug should not be prescribed to anyone who might use it while drinking alcohol. The restrictions have weighed on sales of the medicine.
Addyi was first developed as an antidepressant in the 1990s by Boehringer Ingelheim, the German pharmaceuticals group, but failed to make it through clinical trials.
The medicine was twice rejected by the FDA which eventually approved it following a campaign that suggested the agency’s refusal was indicative of institutional sexism.
Get alerts on Valeant when a new story is published