Valeant Pharmaceuticals said Monday that it is selling the former Sprout Pharmaceuticals back to Sprout’s one-time shareholders.
Those shareholders will receive a $25 million loan to fund initial operating expenses and Sprout’s only product, the female libido drug Addyi. In return, Valeant will receive 6 percent of the royalties on the global sales of Addyi. The deal also resolves a lawsuit brought by former Sprout shareholders against Valeant.
The sale is expected to close by the end of the year.
“Returning Sprout to its former owners will enable us to further streamline our portfolio and reduce complexity in our business,” Joseph Papa, chairman and CEO of Valeant, said in a statement. “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 acquired Raleigh-based Sprout in 2015 for $1 billion, soon after Sprout received FDA approval for Addyi. The “little pink pill” was supposed to help women who suffer from low sex drive and was initially expected to sell for between $350 and $400 a month before insurance coverage kicked in. But Valeant ended up charging $800 for a 30-day supply of the pills, and some insurers limited coverage of the drug.
In addition, the Food and Drug Administration required its strictest warning on the pills because of the risks associated with the treatment.
Valeant’s pattern of buying small companies and increasing the cost of medications prompted a Senate investigation into its drug pricing and led to several lawsuits.
Sprout’s former owners also sued Valeant, saying the company had failed to properly market the drug.