Photographer: Michael Nagle/Bloomberg

Valeant Gives $1 Billion Female Libido Pill Back to Old Owners

Updated on
  • Deal ends lawsuit alleging bungled marketing of the pill
  • Valeant paid $1 billion in 2015 as part of acquisition spree

Valeant Pharmaceuticals International Inc. is getting out of the controversial female libido pill business -- but the deal it made in 2015 to buy the drug may continue to haunt its shareholders.

In a strange twist, the drugmaker said Monday it will give the pill -- acquired for $1 billion -- back to its original owners for almost nothing. In return, the owners will end a lawsuit alleging Valeant bungled marketing of the drug.

The pill, called Addyi, was designed to boost women’s sex drives, and the purchase was contentious from the start. Valeant, under its prior management, paid a lot of money for a treatment that critics said offered modest benefits. It was the last in a long line of acquisitions that left the drugmaker crippled with debt.

Under the new deal announced Monday, Valeant will provide a $25 million loan to the former of Sprout Pharmaceuticals Inc. shareholders to cover “initial operating expenses.” It will receive a 6 percent royalty on global sales of the drug starting 18 months from the signing of the agreement.

“Valeant will need to take a very large writedown for the Sprout acquisition," said CIBC Capital Markets Inc. analyst Prakash Gowd, who rates Valeant stock underperform. “We still view Addyi as having very limited sales potential, and it is not likely to be successful even in another party’s hands.”

Valeant is now no longer on the hook for the terms of the initial agreement, which would have required the company to split future profits with the former shareholders.

The shares rose 3.5 percent to $11.94 at 9:39 a.m. in New York. The drugmaker reports quarterly earnings on Tuesday.

Limited Coverage

Addyi struggled because insurers and pharmaceuticals-benefit managers denied or limited coverage for the daily pill. The mail-order pharmacy that could have helped Valeant distribute the drug shut down following a scandal that forced the drugmaker to sever its relationship with it. Valeant also terminated the salesforce for the drug after Addyi failed to gain traction in its first six months in the market.

The drug is the first of its kind for women suffering from a low libido, and the Addyi deal -- within days of its approval by the U.S. Food and Drug Administration -- was a risky proposition. The treatment, which was rejected twice before getting approved, carries a boxed warning, the FDA’s strictest, and women have to sign an agreement acknowledging the risks.

The largest U.S. pharmacy-benefits managers questioned its effectiveness and potential side effects in the months after its approval. Express Scripts Holding Co. Chief Medical Officer Steve Miller said last year that the drug is of “modest efficacy at best, it’s not particularly safe.” And CVS Health Corp. Chief Medical Officer Troyen Brennan expressed concerns about Addyi’s “relatively insubstantial evidence around efficacy.”

High Price

Then there’s the matter of price. Before the sale to Valeant, Sprout’s CEO at the time, Cindy Whitehead, said Addyi would cost about $350 to $400 a month before insurance coverage. Whitehead initially agreed to join Valeant and lead the division, but left the company a few months later. Addyi, which unlike male sexual dysfunction drugs is a daily pill, retails for about $800 to $850 for 30 tablets, according to price comparison website GoodRx.

For Valeant, the Addyi exit follows a number of asset sales over the past year as it looks to simplify its operations and pay down its debt.

“Returning Sprout to its former owners will enable us to further streamline our portfolio and reduce complexity in our business,” Chief Executive Officer Joe Papa said in a statement.

— With assistance by Marthe Fourcade

    Before it's here, it's on the Bloomberg Terminal.