Valeant divests ADDYI maker Sprout Pharmaceuticals

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By Ted Liu

Valeant Pharmaceuticals International, Inc. (NYSE/TSX: VRX) has sold Sprout Pharmaceuticals subsidiary to a buyer affiliated with former shareholders of Sprout in exchange for a 6% royalty on global sales of ADDYI® (flibanserin) beginning 18 months from the signing of the sale agreement.

On October 1, 2015, Valeant Pharmaceuticals acquired Sprout Pharmaceuticals, Inc. for US $1,447 million, on a debt-free basis. Valeant Pharmaceuticals paid US $530 million at closing, and an US $500 million in Q1 2016 (acquisition date fair value of US $495 million). The transaction called for contingent payments to the former shareholders and former holders of vested stock appreciation rights of Sprout for a share of future profits. The total fair value of the contingent consideration was estimated at US $422 million as of the acquisition date was determined using a Monte Carlo Simulation.

In connection with the completion of the sale, Valeant will be released from the ongoing obligations of the original transaction to split future profits with the former shareholders, as well as certain related provisions, including the obligations to make certain marketing and other expenditures.

Additionally, in connection with the completion of the sale, the existing litigation against the Valeant Pharmaceuticals brought on behalf of the former shareholders of Sprout will be dismissed with prejudice.

In connection with the sale, Valeant will provide a US $25 million loan to fund initial operating expenses. The sale is expected to close before the end of 2017, subject to certain closing conditions, including the approval of the requisite portion of the former shareholders to the amendments to the original transaction described above.

“Returning Sprout to its former owners will enable us to further streamline our portfolio and reduce complexity in our business,” said Joseph C. Papa, chairman and CEO, Valeant. “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.”

ADDYI is the first and only FDA-approved treatment for acquired, generalized hypoactive (low) sexual desire disorder—HSDD— in women who have not gone through menopause.

photo credit: Valeant Pharmaceuticals