Deal size: $1 billion
Date announced: August 19, 2015
It’s the smallest deal in our M&A mistake ranks, but Sprout Pharmaceuticals certainly made big headlines a few years back. The company won a controversial FDA approval in 2015 for its female libido drug Addyi, and one day later, Valeant swooped in with a deal.
The drugmaker picked up Sprout for $1 billion plus future milestones in what then-CEO Michael Pearson called the “perfect opportunity to establish a new portfolio of important medicines that uniquely impact women.” At the time, the company figured it could make the most of a first-of-its-kind treatment in what was expected to be a blockbuster field.
Needless to say, the company’s hopes didn’t pan out. In just one early sign of trouble, Valeant and Sprout CEO Cindy Whitehead agreed to a mutual split four months later, a Valeant spokesperson told The New York Times.
Addyi proved a tough sell. It hit the market with some handicaps; the FDA had rejected it twice before, and agency officials said it offered only “modest” efficacy. Women were warned not to drink alcohol while taking the drug. Doctors were skeptical.
To hear disgruntled investors tell it, Valeant also slapped Addyi with a too-high price—$800 a month—and wasn't great at marketing it.
Meanwhile, as Valeant’s fortunes sank, so too did its plans and ambitions for Sprout. The company notoriously came under scrutiny for its specialty pharmacy Philidor, plus enormous price hikes and even the growth-by-M&A business model that had sent its shares skyward in the past.
After peaking in the summer of 2015, the company’s shares lost 90% of their value over the span of a few years. Pearson launched a cost-cutting drive in March 2016, and part of that included cutting loose the 140 contract sales reps promoting Addyi. Soon after that, current CEO Joseph Papa took the reins, promising a fresh look at its business.
In 2017, under that new leadership, Valeant abandoned its Sprout quest. The drugmaker sold the company to a group of former Sprout investors in exchange for a 6% royalty on Addyi sales after 18 months. The deal amounted to an admission that Valeant had made a mistake.
With that sale, the investors who'd sued Valeant for breaking its Addyi marketing commitments withdrew their lawsuit.
The Sprout sale was just one of the changes Papa has made to revamp the company, a Valeant representative told FiercePharma. The company's new leadership has worked to transform the drugmaker; for one thing, it now goes by the moniker Bausch Health Companies.
"The divestiture of Sprout enabled us to streamline our portfolio and reduce complexity in our business so that we could focus resources on eye health, gastroenterology and dermatology—our core business areas where we can best serve our stakeholders, customers and patients," she added.