Why is Valeant's 'blockbuster' libido drug Addyi a dud? Shoddy marketing, investor lawsuit claims

Addyi

When Valeant bought Sprout Pharmaceuticals and its controversial female libido drug Addyi, it agreed to a marketing blitz that would bring royalties to Sprout's former shareholders. Valeant bungled the job, those former investors say. And they’re taking their gripes to court.

The investors slapped the embattled pharma with a lawsuit claiming Valeant failed to market Addyi successfully, both by neglecting its contractual marketing obligations and by pricing the med at $800 per month--twice as high as the market could bear.

"Simply put, Addyi is languishing because of Valeant's operational ineptitude and breach of its obligations under the merger agreement," they said in the complaint, as quoted by Reuters.

The way the suit-bringers see it, Addyi’s high price tag hurt the pill’s chances to snag coverage from insurers and pharmacy benefits managers, leading to poor sales. And when former Valeant CEO moved to cut 140 of Addyi's sales reps, he cited those poor revenues in an internal memo to employees.

Naturally, Addyi's sales didn’t turn around without those reps on the job, and Addyi may wind up generating less than $10 million this year--well below the $1 billion mark Valeant has said it's aiming for by next July. If that happens, those angry former investors will wind up millions of dollars short in royalties, they say.

To make sure they're not shortchanged, they’re seeking unspecified damages, and they're asking the court to require Valeant to live up to its Sprout merger agreement by hiring a 150-member sales force and socking at least $200 million into marketing, research, and development, Reuters reports.

Addyi, whose FDA approval sparked controversy from the get-go, came with a set of marketing challenges. It posted questionable efficacy in trials, and its label was burdened with serious safety warnings, including a risk of loss of consciousness--a risk made worse by the drug's interaction with alcohol.

But Valeant also faced unexpected hurdles, too. For one thing, Valeant shut down Philidor, the specialty pharmacy it had intended to use to distribute Addyi, according to the complaint. Just four days after Addyi's commercial rollout began, a short-seller accused Valeant of using Philidor to inflate its top line, and federal investigators pounced.

With its launch blueprints thwarted, Valeant “jettisoned” Sprout’s prep work and cut ties with its leadership--without having a marketing plan of its own, the complaint says. And further down the road, current CEO Joseph Papa, who replaced Pearson, abandoned plans to relaunch the drug.

Of course, by that time, Addyi may have seemed like an afterthought for Papa, who inherited a host of serious problems--including a price-hike strategy that’s been drawing serious political pushback all year, and a mountain of debt that’s spurred default worries and spooked investors.  

The Philidor saga hasn’t exactly gone away, either. Earlier this week, The Wall Street Journal reported that federal authorities are building an accounting fraud case against Valeant that centers on its Philidor relationship.