Valeant Pharmaceuticals International’s $1 billion purchase of the maker of the first U.S.-approved libido drug for women is a bet that demand for the drug will one day resemble the multibillion-dollar market to treat men’s sexual dysfunction.
It’s a risky proposition. The deal to acquire Sprout Pharmaceuticals Inc., which also includes undisclosed future payments based on profits, gives Valeant a drug that was only approved by regulators on Tuesday. The Food and Drug Administration is requiring the medication, Addyi, to carry a warning label, and the once-daily pill’s modest benefit may limit its appeal.
Still, Valeant is confident enough in the potential of the women’s sexual dysfunction market that it’s already talking about other investments in the same area. The market for men’s erectile dysfunction is $4.3 billion and includes blockbuster drugs like Pfizer’s Viagra, Eli Lilly’s Cialis and Bayer’s Levitra, according to 2014 sales data by Symphony.
“I think you can look to the market for erectile dysfunction to be somewhat similar in terms of size, which is a multibillion-dollar market on global basis,” Valeant Chief Executive Mike Pearson said. “It will take time to develop the market.”
Valeant will be able to use its sales expertise to get Addyi to market quickly, said Alex Arfaei, an analyst at BMO Capital Markets. The company got a good price for a drug that’s the first of its kind in what could be a large market, he said.
The FDA has said that doctors will have to take a training course to be certified to prescribe Addyi, which will be available as soon as Oct. 17. Patients must sign a form acknowledging risks that include fainting and extreme sleepiness.