 "Maker of Addyi, 'female Viagra' drug, being sold to Valeant for $1 bn")
Sprout Pharmaceuticals, which on Tuesday won regulatory approval for the first pill to aid a woman's sex drive, will be acquired by Valeant Pharmaceuticals International for about $1 billion in cash.
The deal, announced on Thursday, represents a sizable return for investors in Sprout, a privately held company in Raleigh, North Carolina, with 34 employees. A total of about $100 million has been invested in Sprout since its formation in 2011.
The sale is in particular a triumph for Robert and Cindy Whitehead, a couple with a long history in the pharmaceutical industry who formed Sprout to acquire the drug after the Food and Drug Administration had declined to approve it and its previous owner abandoned it.
Valeant is known for growing through acquisitions, including of Bausch & Lomb, Medicis and Salix. It said Sprout would be the core of a new business focusing on women's health.
Addyi, also known as flibanserin, is controversial, in part because of a lobbying campaign that pressed the FDA to approve it. In clinical trials, Addyi was only modestly effective in increasing desire and the number of satisfying sexual experiences women had, while causing side effects like dizziness, nausea, fainting and sleepiness. The FDA had rejected the drug twice before finally approving it on Tuesday.
J Michael Pearson, the chief executive of Valeant, said the company approached Sprout three or four weeks ago, after an FDA advisory committee had recommended that the drug be approved. But it waited until the approval actually came before signing the deal.
"I thought this would be a drug that a lot of pharmaceutical companies would not want to pursue, given the controversial nature of it," he said, adding that would mean Valeant could pay a reasonable price.
Valeant will pay $500 million in cash initially and another $500 million in the first quarter of next year. Investors in Sprout will also be entitled to a share of future profits based on the achievement of certain milestones.
Although a troubling lack of sexual desire is estimated to affect one in 10 women, there is considerable uncertainty about the commercial prospects for Addyi. Reflecting this, Valeant's shares fell more than 6 per cent Thursday, albeit on a day the markets fell generally.
Addyi is not supposed to be used by women who drink alcohol, which could significantly curb sales. It is also not clear how many insurers will pay for the drug, which might be deemed by some as a lifestyle product rather than a treatment for a medical condition. Addyi is expected to cost about $400 a month without insurance.
"The challenge with this is, Why does an insurance company have to pay for that?' " said John Jaeger, a partner at Decision Resources, a market research and consulting firm, who said health plans were struggling to control escalating expenditures on pharmaceuticals.
Pearson of Valeant said that if health plans paid for male erectile dysfunction drugs like Viagra, it would be difficult for them not to also pay for Addyi.
He said Valeant would make back its cost of capital if Addyi sales were a modest $200 million a year, but the potential sales could be much greater than that.
Within about a year, he said, "We'll have a pretty good sense of whether we threw away a billion dollars or whether we got a really, really good deal."
Flibanserin, which is thought to work by influencing the balance of certain chemicals in the brain, was originally developed by the German company Boehringer Ingelheim, which gave up after the FDA rejected the drug for the first time in 2010.
Irwin Goldstein, a sex-medicine doctor in San Diego with close ties to many drug companies, videotaped the disappointed reactions of some of his patients as he told them the drug they had been taking in clinical trials was being discontinued. He showed the recording to various pharmaceutical executives, hoping to interest them.
"I told them about this amazing drug, it sits on a shelf," Goldstein said recently.
Among those who saw the video were the Whiteheads, who at the time were running Slate Pharmaceuticals, which was selling an implantable testosterone product for men.
The Whiteheads sold Slate and formed Sprout to acquire flibanserin.
Whitehead, who had been a senior executive at various small drug and biotech companies, was the initial chief executive of Sprout and is now vice chairman of the company. Whitehead became the chief executive in January.
Sprout is now "definitely Cindy's show," said Braxton Goodrich, a member of the board. He said Whitehead "inspires loyalty in her employees that I've never seen."
Whitehead, 43, said several companies expressed interest in buying Sprout after the positive advisory committee vote in June. She said Valeant was chosen in part because it promised to retain all of Sprout's employees. Whitehead will continue to run Sprout as a division of Valeant.
She said Valeant's resources would enable Addyi to get to more women around the world faster than Sprout could do by itself. Whitehead said that while studying business at Marymount University outside Washington, she set her sights on working at Merck because at that time it was rated the most admired company by Fortune magazine. After working as a sales representative there, she became a sales representative at Dura Pharmaceuticals, a small company in San Diego. It was there she met Whitehead, who was running the company's commercial operations.
Sprout has never disclosed who its investors are, though all board members are investors. It has avoided traditional venture capitalists and went to family and other acquaintances. Goodrich, whose family ran an engineering and construction business in Birmingham, Ala., is an acquaintance of Whitehead's brother, Douglas Eckert, who is also on Sprout's board.
In 2013, for instance, Sprout raised $10 million total from 88 investors, according to a filing with the Securities and Exchange Commission. This June, the company raised $50 million from five investors in New York and Connecticut, suggesting that more traditional financial firms with deeper pockets were starting to take an interest.
Valeant has been an active acquirer since merging with Biovail of Canada in a $3.2 billion deal in 2010. The company, based in Laval, Quebec, posted revenue of $8.3 billion in 2014 and employs about 18,000 people worldwide.
Valeant paid $2.6 billion for the Medicis Pharmaceutical Corporation, a skin care business based in Arizona, in 2012; bought Bausch & Lomb, the eye care company, for $8.7 billion in 2013; and agreed to acquire Salix, a maker of gastrointestinal drugs, for $11 billion this year.
Valeant lost out last year to Actavis, another drug maker, in a fight for Allergan, the maker of Botox.
© 2015 The New York Times News Service
The deal, announced on Thursday, represents a sizable return for investors in Sprout, a privately held company in Raleigh, North Carolina, with 34 employees. A total of about $100 million has been invested in Sprout since its formation in 2011.
The sale is in particular a triumph for Robert and Cindy Whitehead, a couple with a long history in the pharmaceutical industry who formed Sprout to acquire the drug after the Food and Drug Administration had declined to approve it and its previous owner abandoned it.
Valeant is known for growing through acquisitions, including of Bausch & Lomb, Medicis and Salix. It said Sprout would be the core of a new business focusing on women's health.
Addyi, also known as flibanserin, is controversial, in part because of a lobbying campaign that pressed the FDA to approve it. In clinical trials, Addyi was only modestly effective in increasing desire and the number of satisfying sexual experiences women had, while causing side effects like dizziness, nausea, fainting and sleepiness. The FDA had rejected the drug twice before finally approving it on Tuesday.
J Michael Pearson, the chief executive of Valeant, said the company approached Sprout three or four weeks ago, after an FDA advisory committee had recommended that the drug be approved. But it waited until the approval actually came before signing the deal.
"I thought this would be a drug that a lot of pharmaceutical companies would not want to pursue, given the controversial nature of it," he said, adding that would mean Valeant could pay a reasonable price.
Valeant will pay $500 million in cash initially and another $500 million in the first quarter of next year. Investors in Sprout will also be entitled to a share of future profits based on the achievement of certain milestones.
Although a troubling lack of sexual desire is estimated to affect one in 10 women, there is considerable uncertainty about the commercial prospects for Addyi. Reflecting this, Valeant's shares fell more than 6 per cent Thursday, albeit on a day the markets fell generally.
Addyi is not supposed to be used by women who drink alcohol, which could significantly curb sales. It is also not clear how many insurers will pay for the drug, which might be deemed by some as a lifestyle product rather than a treatment for a medical condition. Addyi is expected to cost about $400 a month without insurance.
"The challenge with this is, Why does an insurance company have to pay for that?' " said John Jaeger, a partner at Decision Resources, a market research and consulting firm, who said health plans were struggling to control escalating expenditures on pharmaceuticals.
Pearson of Valeant said that if health plans paid for male erectile dysfunction drugs like Viagra, it would be difficult for them not to also pay for Addyi.
He said Valeant would make back its cost of capital if Addyi sales were a modest $200 million a year, but the potential sales could be much greater than that.
Within about a year, he said, "We'll have a pretty good sense of whether we threw away a billion dollars or whether we got a really, really good deal."
Flibanserin, which is thought to work by influencing the balance of certain chemicals in the brain, was originally developed by the German company Boehringer Ingelheim, which gave up after the FDA rejected the drug for the first time in 2010.
Irwin Goldstein, a sex-medicine doctor in San Diego with close ties to many drug companies, videotaped the disappointed reactions of some of his patients as he told them the drug they had been taking in clinical trials was being discontinued. He showed the recording to various pharmaceutical executives, hoping to interest them.
"I told them about this amazing drug, it sits on a shelf," Goldstein said recently.
Among those who saw the video were the Whiteheads, who at the time were running Slate Pharmaceuticals, which was selling an implantable testosterone product for men.
The Whiteheads sold Slate and formed Sprout to acquire flibanserin.
Whitehead, who had been a senior executive at various small drug and biotech companies, was the initial chief executive of Sprout and is now vice chairman of the company. Whitehead became the chief executive in January.
Sprout is now "definitely Cindy's show," said Braxton Goodrich, a member of the board. He said Whitehead "inspires loyalty in her employees that I've never seen."
Whitehead, 43, said several companies expressed interest in buying Sprout after the positive advisory committee vote in June. She said Valeant was chosen in part because it promised to retain all of Sprout's employees. Whitehead will continue to run Sprout as a division of Valeant.
She said Valeant's resources would enable Addyi to get to more women around the world faster than Sprout could do by itself. Whitehead said that while studying business at Marymount University outside Washington, she set her sights on working at Merck because at that time it was rated the most admired company by Fortune magazine. After working as a sales representative there, she became a sales representative at Dura Pharmaceuticals, a small company in San Diego. It was there she met Whitehead, who was running the company's commercial operations.
Sprout has never disclosed who its investors are, though all board members are investors. It has avoided traditional venture capitalists and went to family and other acquaintances. Goodrich, whose family ran an engineering and construction business in Birmingham, Ala., is an acquaintance of Whitehead's brother, Douglas Eckert, who is also on Sprout's board.
In 2013, for instance, Sprout raised $10 million total from 88 investors, according to a filing with the Securities and Exchange Commission. This June, the company raised $50 million from five investors in New York and Connecticut, suggesting that more traditional financial firms with deeper pockets were starting to take an interest.
Valeant has been an active acquirer since merging with Biovail of Canada in a $3.2 billion deal in 2010. The company, based in Laval, Quebec, posted revenue of $8.3 billion in 2014 and employs about 18,000 people worldwide.
Valeant paid $2.6 billion for the Medicis Pharmaceutical Corporation, a skin care business based in Arizona, in 2012; bought Bausch & Lomb, the eye care company, for $8.7 billion in 2013; and agreed to acquire Salix, a maker of gastrointestinal drugs, for $11 billion this year.
Valeant lost out last year to Actavis, another drug maker, in a fight for Allergan, the maker of Botox.
© 2015 The New York Times News Service