This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (November 7, 2017).
Valeant Pharmaceuticals International Inc. will sell Sprout Pharmaceuticals to former Sprout shareholders, the company said Monday, after they accused the struggling pharmaceutical giant of botching the marketing of a female libido treatment.
Valeant purchased Sprout and its only drug, Addyi, two years ago for about $1 billion. Sales of the drug haven't provided close to a return on the investment, and this year RBC Capital Markets forecasted the drug will ring up less than $10 million in sales.
In a lawsuit filed last year, former Sprout shareholders alleged Valeant didn't market the drug effectively. Women's health advocates also have questioned whether Addyi, at one point dubbed "female Viagra," actually increases libido.
As part of the sale agreement, the lawsuit will be permanently dismissed, Valeant said.
Valeant will receive a 6% royalty on Addyi sales beginning 18 months after signing the agreement to sell Sprout and will lend Sprout $25 million to fund initial expenses.
Valeant also will be released from obligations of the original purchase.
The companies didn't disclose the sale price. They expect the sale to close by the end of the year, subject to certain approvals.
Activist investor William Ackman, who had personally invested in Sprout before it was acquired by Valeant, isn't among the former shareholders purchasing Sprout and wasn't involved with the lawsuit, according to a person familiar with the matter.
Valeant, weighed down by more than $27 billion in debt, is in the middle of what Chief Executive Joseph Papa says is a turnaround. Mr. Papa said in prepared remarks Monday that selling Sprout will allow Valeant to streamline its business and focus resources on three core areas: eye health, gastroenterology and dermatology.
Shares in the company, down 18% this year, were recently trading up 3% on Monday.
--David Benoit and Jonathan D. Rockoff contributed to this article.
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(END) Dow Jones Newswires
November 07, 2017 02:47 ET (07:47 GMT)