Valeant to buy 'female Viagra' maker Sprout Pharma

Thu Aug 20, 2015 2:37pm EDT
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By Natalie Grover, Caroline Humer and Ransdell Pierson

(Reuters) - Canada's Valeant Pharmaceuticals International Inc (VRX.TO: Quote) (VRX.N: Quote) said on Thursday it would buy Sprout Pharmaceuticals, which makes a controversial new drug to treat low sexual desire in women, for about $1 billion.

Valeant shares fell about 5 percent as Wall Street questioned whether the acquisition would be too risky for the big drugmaker, which has done six other deals this year.

The U.S. Food and Drug Administration approved Sprout's Addyi on Tuesday after rejecting it twice. The pink pill proved only marginally effective in clinical trials and carries a strong warning about potentially dangerous low blood pressure and fainting, especially when taken with alcohol.

"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 said. Health insurers may not cover the drug, he added.

While Addyi has been nicknamed "female Viagra," it works differently from Pfizer Inc's (PFE.N: Quote) product, which was introduced nearly two decades ago as the first drug for erectile dysfunction. Addyi is meant to activate sexual impulses in the brain and is taken daily, while Viagra affects blood flow and is taken as needed.

Valeant will pay $500 million now and $500 million early next year in cash, delaying the company's plans to reduce debt from its $800 million purchase of Amoun Pharmaceutical announced last month and its $11 billion acquisition of Salix Pharmaceuticals, Moody's Investors Service said. Including Sprout, the company has done $18.2 billion in deals so far this year.

Addyi's prospects are anything but certain, said Raghuram Selvaraju, managing director of brokerage Wainwright & Co.

Besides Addyi's limited effectiveness and serious side effects, “we don't know how big the market is for this condition,” Selvaraju said.   Continued...

The company logo of Valeant Pharmaceuticals International Inc is seen at its headquarters in Laval, Quebec May 19, 2015.   REUTERS/Christinne Muschi