Former Sprout Pharma investors sue Valeant Pharmaceuticals over failure of female Viagara

Valeant Pharmaceuticals International faces a suit brought by former investors in Sprout Pharmaceuticals, which it bought last year for $1 billion, over its alleged failure to successfully market the female libido pill Addyi.

In a complaint filed on Wednesday in Delaware Chancery Court, Valeant was charged with having neglected its contractual obligations to market Addyi, also dubbed ''the female Viagra,'' and pricing it at $800 per month, twice the price the market could support.

Consequently, the drug had poor sales, partly due to insurers and pharmacy benefit managers refusing to cover the pill at the ''inflated'' price, making Addyi unaffordable for millions of women facing an ''unmet medical need,'' the complaint said.

Addyi might this year gross sales of less than $10 million, far short of the $1 billion targeted by next July, ending up hitting Sprout investors to the tune of millions of dollars of royalties, according to the complaint.

''Simply put, Addyi is languishing because of Valeant's operational ineptitude and breach of its obligations under the merger agreement,'' the complaint said.

The suit calls for unspecified damages and a requirement that Valeant stand by the merger agreement, by hiring a 150-member sales force for Addyi and spend at least $200 million on marketing, research and development.

The investors claim that Valeant failed to commercialise the drug, pushed Sprout into a deal with Valeant's secret pharmacy only days ahead of facing fraud allegations, and jacked up the drug's price to a point that made it too costly. 

Valeant acquired Sprout for $1 billion in August 2015 and the deal was struck following Sprout winning approval for Addyi, which is aimed at women with chronically low sex drives, a condition called hypoactive sexual desire disorder (HSDD).

But sales of Addyi failed to take off and in the complaint, former Sprout shareholders claimed that "Valeant has abdicated its duty to use diligent efforts to develop and commercialize Addyi."