The future looked very bright indeed in August 2015 when the Food and Drug Administration gave its stamp of approval to a new drug that promised to fire up sexual desire in women whose interest in sex had all but disappeared. The drug, known as Addyi, was the sole product of a small North Carolina-based drugmaker known as Sprout Pharmaceuticals.
The fanfare surrounding Addyi’s approval was not unlike that which accompanied FDA’s 1998 approval of Pfizer’s Viagra as an oral treatment for erectile dysfunction. So it came as little surprise two days later when multinational pharmaceuticals company Valeant snapped up Sprout — and the rights to Addyi — for a cool $1 billion.
Addyi Sales Disappointing
Despite the promising outlook for the new drug, often — but misleadingly — referred to as “female Viagra,” Addyi’s sales have been disappointing in its first several months on the market. It first became available on October 18, 2015, but by February 2016, it was reported that only about 4,000 prescriptions for the drug had been filled.
A number of factors could account for Addyi’s poor performance. The FDA attached some burdensome conditions to its approval of the drug, requiring physicians who wanted to prescribe the drug and pharmacists seeking to dispense it to first take online courses familiarizing them with the drug’s side effects. The FDA also mandated the inclusion of a boxed warning on the drug’s label and packaging materials indicating that the drug could not be taken while using alcohol. For women who valued their occasional glass of Pinot Grigio, this ruled out using Addyi.
Missteps by Valeant
Added to the conditions put in place by the FDA was a series of missteps by Valeant, which according to some Sprout investors and many market observers helped to derail the Addyi marketing campaign. And some of those missteps seemed more attributable to Valeant’s tarnished reputation and questionable activities than to Addyi’s shortcomings.
In an interview with The New York Times in early April 2016, market analyst Vicki Bryan of Gimme Credit characterized Valeant’s acquisition of Sprout as “a colossal failure.” Bryan went on to say that the speed with which the outlook for Addyi went from bright to gloomy was “very alarming.”
Valeant’s Internal Memo
In early April 2016, according to a Reuters report, Valeant circulated an internal memo indicating that the company was cutting back on its sales force charged with promoting Addyi. Specifically, the memo said that Valeant would not renew its contract with an outside sales force when it expired on April 15, 2016. In that same memo, outgoing Valeant CEO Michael Pearson said the company would relaunch the product with a new marketing strategy and an in-house sales team later this year. In the meantime, Addyi remains on the market but continues to experience extremely slow sales.
Shortly after its acquisition of Sprout, Valeant doubled the price of Addyi and announced that it would sell the drug to patients through Philidor Rx Services, a mail order pharmacy with which Valeant cut ties in October 2015, the same month Addyi first went on sale. According to The New York Times, Valeant’s decision to break with Philidor effectively left Addyi without a distributor.
Valeant’s Activities Scrutinized
Valeant’s dealings with Philidor and accusations of predatory drug pricing have landed the Quebec-based pharmaceuticals company in hot water with federal regulators who have made the company’s activities the subject of a probe. Valeant’s brand was further damaged in mid-March 2016 when a disappointing fourth-quarter 2015 earnings report sent the company’s stock spiraling downward.
Until recently, hedge fund manager William A. Ackman had been one of Valeant’s biggest supporters, according to The New York Times. Ackman’s fund, Pershing Square Capital Management, was a major shareholder in Valeant, and Ackman had been generally supportive of the job being done by Valeant CEO Pearson. All that changed in March 2016 when Ackman took a seat on Valeant’s board of directors and began pushing for management changes. Not long after that, the company announced that it would soon replace Pearson.
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Sprout Investors Alarmed
In mid-March 2016, according to Bloomberg News, investors in Sprout suggested that some of Valeant’s moves, including its doubling of Addyi’s monthly price from $400 to $800, put Valeant at risk of violating its merger agreement. In addition to the sharp increase in price, Sprout investors cited Valeant’s failure to successfully market the drug. A group made up of all Sprout’s shareholders at the time of the acquisition sent a letter to Valeant requesting assurances that Valeant would fulfill its obligations under the merger agreement going forward.
Although the Sprout investor group received cash at the time of the acquisition in August 2015, the agreement specifies that those original shareholders would receive royalties if Addyi is a success. Their letter to Valeant demanded that the latter supply them with all “books, contracts, documents and records” related to Addyi’s development and commercialization.
The Sprout shareholder group is represented by the law firm of Boies Schiller & Flexner LLP. In an email to Bloomberg News, managing partner Jonathan Schiller said that the Sprout investors “have legal remedies under the merger agreement to pursue claims against Valeant for its failure to perform its obligations.”
Sprout Founded by Whiteheads
Sprout was founded by John and Cindy Whitehead for the sole purpose of promoting Addyi as a treatment for hypoactive sexual desire disorder, or HSDD, the most common form of female sexual dysfunction. The company in 2011 purchased the rights to flibanserin, a drug originally developed by German pharmaceuticals giant Boehringer Ingelheim. After its attempt to win FDA approval for the drug failed in 2010, the German drugmaker announced that it was abandoning its efforts to get the drug to market.
What followed was a four-year struggle by Sprout to get the drug — tentatively brand-named Addyi — approved. Based on comments made when the FDA rejected Boehringer’s petition to market the drug, Sprout conducted multiple studies that it hoped would satisfy regulators of the drug’s efficacy as well as its safety. In June 2013, Sprout filed a revised petition for the approval of Addyi with the FDA. Not long thereafter, the regulatory agency once again rejected Addyi, suggesting that its modest benefits were outweighed by the severity of certain side effects.
Sprout Files an Appeal
Sprout filed an appeal to the FDA rejection and in return was provided with guidance on further testing that might be sufficient to get the drug approved. Sprout followed the agency’s suggestions and conducted a number of additional trials to establish the medication’s effectiveness and safety. In February 2015, a third revised petition for Addyi was sent to the FDA. In early June 2015, an FDA advisory panel voted 18-6 to recommend that the agency approve the drug for use as a treatment of HSDD in premenopausal women. On August 18, 2015, the FDA gave Addyi its thumbs-up, albeit with the conditions outlined earlier in this article. Two days later, Valeant announced its acquisition of Sprout.
If you’d like to read more about Addyi and female sexual dysfunction, check out our blog.
Don Amerman is a freelance author who writes extensively about a wide array of nutrition and health-related topics.
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