Valeant Pharmaceuticals (VRX) will pay about $1 billion to buy Sprout Pharmaceuticals, the maker of the first prescription drug designed to boost sexual desire in women.
The deal Thursday comes one day after regulators approved the pill. The Food and Drug Administration's decision earlier this week to approve the drug, called flibanserin, came after months of lobbying and debate over the drug's effectiveness and side effects.
The drug's manufacturer, Sprout Pharmaceuticals, plans to market it under the brand name Addyi. It's expected to hit the U.S. market in mid-October. The deal to buy the company should close in this quarter.
The FDA had rejected the drug twice before, in 2010 and 2013, but in June an FDA advisory panel voted to recommend approval on the condition that the drug's manufacturer develops a plan to limit safety risks. Flibanserin can cause low blood pressure, nausea, drowsiness and dizziness, especially when combined with alcohol.
"No drug comes without side effects. I think that's very important. Addyi is no different than countless other drugs," Sprout CEO Cindy Whitehead told CBS This Morning on Wednesday.
Addyi could find a lucrative pool of potential patients. Given the drug will cost between $30 to $75 a month, Sprout could end up raking in more than $120 million annually, if one assumes that half of the 10 percent of U.S. women with hypoactive sexual desire disorder, or HSDD, sign on and pay at least the lower end of the prescription cost.
Despite Addyi's commercial potential, sales are expected to be affected by a strong warning label attached to it and an FDA-imposed safety plan for prescribing. The warning will alert doctors and patients to the risks of dangerously low blood pressure and fainting, especially when the pill is combined with alcohol.
Under the safety plan, doctors will only be able to prescribe Addyi after completing an online certification process that requires counseling patients about the drug's risks. Pharmacists also will need certification and be required to remind patients not to drink alcohol while taking the drug.
Valeant, a Canadian drugmaker, will pay about $500 million at closing for Sprout and then make another milestone-based payment of around $500 million in the first quarter of next year.