Valeant announces $1-billion deal for maker of women’s sex drug
Quebec pharma giant set to acquire U.S. firm that manufactures Addyi
Valeant Pharmaceuticals International Inc. has entered the women’s health sector with a US$1 billion deal for the makers of Addyi, the first drug approved by the U.S. Food and Drug Administration for the treatment of female sexual dysfunction.
“We think this is a wonderful start to a potential platform in women’s health,” said Valeant CEO Michael Pearson said Thursday. “The best way to enter into a specialty business is to have a product that is of great interest both to the physicians as well as the patients.”
The Quebec pharma giant will pay for the acquisition of North Carolina-based Sprout Pharmaceuticals Inc. with US$500 million in cash up front and US$500 million in the first quarter of 2016, plus a share of future profits.
The announcement comes only two days after the FDA approved Addyi after twice rejecting the medication because of the potential for serious side effects when combined with alcohol and some other drugs.
Shares of Valeant fell more than six per cent in both New York and Toronto, largely on worries the acquisition would be too risky for the big drugmaker, which has done six other deals this year worth a total of $18.2 billion.
But some analysts also expressed concerns about the impact of possible recalls because of the medication’s side effects.
“On the positive side, it’s addressing a major medical need. I expect the initial interest in the drug to be high,” said Len Yaffe, managing director of hedge fund Kessef Capital Management in San Francisco, who believes initial sales will be about US$300 million a year.
“The side effects in those people who experience them will be there all the time, not just as it relates to sexual activity and I think that’s going to be a significant issue.”
In June an FDA advisory panel concluded the drug should be approved with strict measures in place to ensure patients are fully aware of the risks, and will only be available through specially trained health care professionals.
Sprout CEO Cindy Whitehead there is demand in the marketplace for the pink pill, but that it has to be met “in a very responsible way.
Whitehead, who will head the new Valeant division, said in an interview she decided to work with the Quebec company in part because of its global reach. She and Sprout’s 34 employees will continue to work with the company, which also has the global rights to the drug. Valeant expects to register the rights for the drug’s sale internationally.
“Now with this partnership, it gives us the ability to go forward and give more women even more affordable access (to Addyi),” said Whitehead.
“I think the other important piece of this is the ability now to replicate what we did in the United States in other markets. It’s important to serve this need across the world,” she said.
Valeant expects the pink pill will be available in the United States by Oct. 17 through certified prescribers and pharmacies. It’s aiming to take the drug to international markets, including Canada. An application will be filed with Health Canada this year with a decision expected within a year, Pearson said.
Moody’s Investors Service commented that it viewed the acquisition as credit negative because it will delay Valeant’s deleveraging, though there are no changes to the company’s ratings, including the Ba3 Corporate Family Rating or the positive rating outlook.
Since Pearson took the helm in 2008, Valeant has done more than 140 acquisitions and deployed over $40 billion in capital in sectors ranging from dermatology to veterinary medicine.
Pearson said the deal is still in line with the Valeant’s aim to respect the company’s commitment to reduce its leverage ratio to less than four times the equity by the end of 2016.
“What this deal does is provides us with another great organic growth opportunity for the company,” he said.
Addyi is expected to be priced similar to male sexual dysfunction medications.
With Addyi, Valeant is establishing a new portfolio of medications that uniquely impact women, a business it hopes to grow either with acquisitions or through the development of new products.
Addyi is a daily treatment that effects chemicals in the brain by having a positive effect on dopamine and a negative effect on serotonin.
“There is a balance of key chemicals that allows sexual desire to take hold,” said Whitehead.
Although anti-depression medications can also involve dopamine and serotonin function, Whitehead says those drugs often actually have a negative effect on libido.
“Anti-depressants’ most common side affect is to kill your sex drive or really diminish it and in the initial work with Addyi those scores went the opposite direction,” she said. “(Researchers) realized it had a pro-sexual affect and changed the direction of the study.”
It gives us the ability to go forward and give more women even more affordable access (to Addyi).