From $1 billion to zero – with royalties to come later.
Such is the return on investment for Canada-based Valeant on its deal for Raleigh-based Sprout Pharmaceuticals.
The founders of Sprout are reacquiring Sprout from drug giant Valeant. Investors sold the company that commercialized a nicknamed “female Viagra” pill to Valeant two years ago for $1 billion.
Cindy Whitehead, the CEO who led the original sale of Sprout, is involved in the new deal.
In a stunning deal announced Monday, Valeant said it basically is giving the company back to its founders and helping restart it with a $25 million loan. Crucially to Valeant, the deal also means the dropping of a lawsuit against Valeant by Sprout shareholders who charged the drug giant didn’t do enough to promote sales of the sexual enhancement drug after acquiring it.
The drug is known as Addyi and has been called the “little pink pill.”
Whitehead is involved in the team of owners, but her role is not quite clear.
Contacted by WRAL TechWire, Whitehead declined any comment.
”Returning Sprout to its former owners will enable us to further streamline our portfolio and reduce complexity in our business,” said Joseph Papa, chairman and CEO of Valeant in a statement early Monday. “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.”
Valeant referred only to “former owners.”
Addyi was approved by the FDA in 2015.
Valeant will provide the loan to help “initial operating expenses” and will receive future royalties on Addyi sales, the company added.
Addyi must be taken daily and costs $800 to $850 for 30 tablets, Bloomberg news reports, citing price comparison website GoodRx.
Valeant said it will receive royalties from sales of Addyi of some 6 percent beginning 18 months after the deal is completed.
The deal is expected to close before the end of the year.
As part of the deal, litigation against Valeant that had been brought by Sprout shareholders was dismissed, Valeant added.
Sprout shareholders had charged Valeant was not doing enough to drive sales of Addyi. Sales had been expected to run as much as $2 billion but have been sluggish.
They charged sales were less than $10 million, far short of an expected $1 billion, according to Reuters news service.
Sprout investors had been paid in cash from the original deal but also were due roaylities from Addyi sales, and in March of last year they sued Valeant.
“Valeant predatorily priced Addyi at $800 a month even though Sprout had established a price point of approximately $400 a month for the drug based on market research,” said in a letter acquired by Bloomberg news.
“As a result of this predatory pricing, insurance companies refused to cover the drug, which has led to the drug not being affordable for millions of women.”
The investors said they expected Valeant to spent some $200 million for marketing and research as well as development through 2016 and the first half of 2017. They also wanted Valeant to keep a sales of force of 150 to sell the drug, Bloomberg noted.
