MONTREAL _ Valeant Pharmaceuticals International Inc. has signed a deal to sell its Sprout Pharmaceuticals subsidiary and its female sexual dysfunction drug to the company’s former owners.
Under the deal, Valeant will receive a six per cent royalty on sales of Addyi starting 18 months from the signing of the sale agreement.
The agreement also ends a legal dispute between Sprout’s former owners and Valeant.
“Returning Sprout to its former owners will enable us to further streamline our portfolio and reduce complexity in our business,” Valeant chairman and CEO Joseph Papa stated in a news release issued a day before releases its third-quarter results.
He said the company’s turnaround efforts are focused on its core businesses, including eye health, gastroenterology and dermatology.
Valeant (TSX:VRX) bought Sprout in 2015 for US$1 billion in cash, plus a share of future profits.
Addyi is used by premenopausal women to enhance their libidos and improve their sex lives.
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 the year.
Analyst Douglas Miehm of RBC Capital Markets said the transaction isn’t overly surprising given the disappointing sales of Addyi since its launch in October 2015.
“However, the company will need to write off a large part of the US$836 million in intangible asset value plus contingent consideration associated with the drug, making the optics particularly poor,” he wrote in a report.
Valeant has been restructuring and refocussing its business since questions were raised about its business two years ago.
Its shares trade for a fraction of the more $300 they fetched at their peak in 2015, while the company has also faced a string of lawsuits, including one from its former chief executive, and scrutiny over its drug pricing practices.