$1 billion deal will help bring the controversial 'female Viagra' drug to market

The company that just won approval for a little pink pill that’s been called “female Viagra” also just got a huge bump in funding.

Valeant Pharmaceuticals International Inc. said on Thursday it would buy Sprout Pharmaceuticals, whose drug flibanserin (Addyi) became the first approved treatment for low sexual desire in women, for about $US1 billion with milestone payments.

The drug treats a condition called hypoactive sexual desire disorder (HSDD), which can cause chronic low desires to have sex in women. Addyi is a non-hormonal treatment that sends chemicals to the brain in the hopes of increasing sexual desire for women.

Sprout Pharmaceuticals is based in Raleigh, North Carolina and currently employs 34 people. It’s been banking on Addyi as its main drug, and with that getting approval, the company needs this boost in funding to expand its operations.

Sprout’s controversial pink libido pill was approved on Tuesday by the U.S. Food and Drug Administration for pre-menopausal women, after being rejected twice over concerns about its effectiveness and side-effects.

Addyi, popularly known as the “female Viagra”, comes with strong warnings about potentially dangerous low blood pressure and fainting, especially when taken with alcohol. This has raised some questions about how it will do when it becomes commercially available.

Raghuram Selvaraju, managing director of brokerage H.C. Wainwright & Co, has estimated peak sales of $US100 million a year for Addyi. Viagra – a “blockbuster” in drug industry parlance – generated sales of about $US1.7 billion in 2014.

There are also concerns that the FDA was pressured into approving Addyi, given that Viagra – the first treatment for male sexual dysfunction – was approved more than a decade ago.

Unlike Pfizer Inc’s Viagra, which affects blood flow to the genitals, Addyi is meant to activate sexual impulses in the brain.

Sprout, was co-founded in 2011 by husband and wife Cindy and Robert Whitehead.

The couple had previously sold another small drugmaker they founded, Slate Pharmaceuticals, which had received repeated warnings from the FDA about its marketing tactics.

Slate marketed an implantable testosterone pellet for men with low levels of the male sexual hormone, called Testopel.

Valeant, which has grown rapidly through acquisitions, said it would pay $US500 million upfront and make another instalment next year for privately owned Sprout.

The Canadian company said it expected the deal to close in the third quarter of 2015. After its approval, Sprout estimated that Addyi would be available in the US by October 17, and Valeant says they have a similar timeline of getting the drug available by fourth quarter 2015.

Reuters reporting by Natalie Grover, additional reporting by Supriya Kurane and Ankur Banerjee; Editing by Kirti Pandey and Ted Kerr)

NOW WATCH: Amy Schumer may be a big deal — but she still lives in a walk-up

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.