Sprout Pharmaceuticals to market female libido pill
After accomplishing what many in the pharmaceutical industry didn’t think possible, startup Sprout Pharmaceuticals has capped its remarkable rise by agreeing to be bought by Valeant Pharmaceuticals for about $1 billion in cash.
The sale was agreed to just two days after the Food and Drug Administration made Raleigh-based Sprout’s female libido pill, Addyi, the first in the world approved to boost women’s sex drive.
“It was pretty amazing,” said Carl Tobias, who teaches product-liability law at the University of Richmond in Virginia and previously consulted for the FDA’s chief counsel. “They succeeded where other, much bigger companies did not.”
With the FDA’s approval Tuesday, Sprout became a company sitting on a potential blockbuster drug that could produce annual sales of hundreds of millions of dollars. In reality, interest in the company surged in June after an FDA advisory panel recommended that the agency approve Addyi, which it had twice rejected.
Sprout was approached by several companies interested in acquiring it after the 18-6 panel vote, Sprout CEO Cindy Whitehead said in an interview Thursday. Valeant was an ideal partner in part because the company promised to keep intact the Sprout team that shepherded the drug through the regulatory process.
“We see the world I think through the same lens as Valeant, so they were the ones that really stood out from the pack,” Whitehead said.
The deal came together over the past three to four weeks, said Michael Pearson, Valeant’s CEO. Valeant has built itself into a $78 billion company through a series of acquisitions that have targeted different markets, including dermatology, ophthalmology and gastrointestinal drugs.
In April, Valeant paid $11.1 billion to acquire Raleigh-based Salix Pharmaceuticals, which focuses on drugs that treat gastrointestinal ailments.
“This is our entry into women’s health,” Pearson said of the Sprout acquisition. “We’re very excited now about making Sprout the start of our women’s health company.”
Valeant investors reacted negatively to the deal, sending the Canadian drugmaker’s stock down 6.5 percent on Thursday.
“Although the drug has a potentially large addressable patient population and will benefit from the marketing scale of Valeant’s sales force, acceptance of this product may ultimately be limited,” Morningstar Research analyst Michael Waterhouse told the Reuters news agency. Health insurers may not cover the drug, he added.
Valeant will pay $500 million when the deal closes, which is expected to be in the third quarter. The remaining $500 million will be paid in the first quarter of next year. Sprout shareholders also will receive a share of future profits based on the company reaching certain milestones. Like Salix, Sprout will become a wholly owned subsidiary of Valeant.
Staying in Raleigh
Valeant’s acquisition represents a windfall for Sprout’s investors. The company has raised $100 million from more than 100 private investors, including several in North Carolina. Among the company’s local backers is Capitol Broadcasting Co., which owns WRAL-TV.
Sprout is to remain headquartered in Raleigh. Whitehead will join Valeant and lead the company’s efforts to commercialize Addyi around the globe.
Whitehead said Sprout still plans to expand its workforce from 34 employees to just over 200 as it builds a specialty sales force to market Addyi to physicians. Pearson said that Valeant will provide resources and expertise but that the Sprout team will be in charge of marketing Addyi.
Whitehead said she expects Sprout to grow its headcount in Raleigh as the company ramps up hiring. That would be a different result from what happened to Salix after Valeant acquired the company.
The day Valeant closed on its Salix acquisition, the company laid off 258 people – the vast majority of the company’s Raleigh workforce. Salix now maintains a limited presence in Raleigh.
Whitehead said she expects being a part of Valeant will greatly accelerate access to Addyi. Valeant gives Sprout access to large insurers who are now deciding how to cover Addyi in their health care policies. The company will also allow Sprout to offer more generous copay assistance to help reduce patients’ out-of-pocket costs.
And Valeant’s global footprint will help Sprout as it attempts to get Addyi approved in Canada, Europe and elsewhere.