Valeant Sells Sprout Pharma to a New Company 'Associated' With Sprout Founders

A little more than two years after acquiring North Carolina-based Sprout, Valeant Pharmaceuticals is selling off the developer of the female sex drive drug Addyi.

Valeant said it will divest Sprout to a buyer affiliated with former shareholders of the company in exchange for a 6 percent royalty on all global sales of Addyi 18 months after the agreement. It was not mentioned if those buyers included Cindy Whitehead, Sprouts founder who stepped down after Valeant acquired her company. As part of the sale agreement, Valeant said it will be released from the “ongoing obligations” from the original acquisition agreement that called for the Canadian company to split future profits with the former shareholders. The agreement also called for Valeant to maintain certain marketing and other expenditures.

Valeant acquired Sprout in its $1 billion August 2015 acquisition of North Carolina-based Sprout shortly after the drug gained regulatory approval. Addyi was approved by the U.S. Food and Drug Administration for a low sex drive, called hypoactive sexual desire disorder (HSDD) in premenopausal women, after being rejected twice by the regulatory agency in 2010 and 2013. Unlike the drug’s oft-compared male counterpart Viagra, Addyi addresses desire, not performance. Another difference between male erectile dysfunction drugs, Addyi is a once-daily dose that takes some time before the patient begins to see a difference in sexual desire. In clinical trials, patients began to show desire after about four weeks.

Once Addyi was approved, the drug failed to find traction with prescribers. After Addyi was initially approved, Sprout said the medication will only be able to be prescribed by pharmacies certified by Sprout and will require training on counseling patients on the risks and side effects, especially the interaction with alcohol. Sales continued to be dismal for Addyi following Valeant’s acquisition. Critics have challenged the overall efficacy of Addyi. Earlier this year, Valeant announced plans to relaunch the drug in order to boost revenue.

By returning Sprout to a coalition of original shareholders, Valeant said 2016 litigation filed against the company by former shareholders will be dismissed with prejudice. Sprout shareholders filed a lawsuit against the Canadian company over marketing practices of Addyi – including dumping the sales team specially trained to market the drug and doubling its price.

Not only is Valeant returning Sprout to those original shareholders, the company said it will also provide the newly-released Sprout with a $25 million loan to fund initial operating expenses.

Valeant Chief Executive Officer Joseph Papa said the divesture of Sprout will enable the company to streamline its portfolio and “reduce complexity” in its business. 

"As we transform Valeant, we are focusing our resources on our core businesses to best serve our shareholders, customers and patients. These areas include eye health, gastroenterology and dermatology,” Papa said.

Embattled Valeant has been struggling for more than a year to cut its debt that is nearly $29 billion – all while its revenue stream has been declining. In May, Papa said the company has been able to cut $3.6 billion from its debt since the first quarter of 2016.

Earlier this year, Valeant sold off equity interests in Dendreon Pharmaceuticals, Inc., the manufacturer of prostate cancer drug Provenge, to China’s Sanpower Group Co., Ltd. for about $820 million. The company also sold three skincare brands to L'Oréal and divested itself of a manufacturing facility in Brazil.