Valeant announced on Thursday it was acquiring private Sprout Pharmaceuticals, who received approval earlier this week for the first drug to boost sexual desire in women, for $1 billion and milestone payments.

The deal calls for Valeant to pay $500 million in cash now and another $500 million installment next year for Sprout.

The new drug Addyi, commonly called “female Viagra”, was finally approved by the FDA for pre-menopausal women, after being rejected twice in the past because of its relatively low effectiveness versus its side effects.

The Sprout deal will be the latest in a recent M&A frenzy for Valeant, which has used multiple acquisitions including Bausch & Lomb, Medicis and recently Salix to beef up its portfolio of eye, skin and stomach treatments.

Valeant Snaps Up Female Viagra Maker Sprout For $1 Billion

More on Sprout and “female Viagra” Addyi

Sprout’s new drug offers a treatment option for the unmet need of premenopausal women with acquired, generalized Hypoactive Sexual Desire Disorder (HSDD) that is not caused by a co-existing medical or psychiatric condition, problems within the relationship, or the effects of a medication or other drug substance.

Addyi is not for use in postmenopausal women or men or to enhance sexual function. Addyi was approved by the FDA with a strong warning. The most common adverse reactions to Addyi are dizziness, somnolence, nausea, fatigue, insomnia and dry mouth.

Addyi should be available in the U.S. in the fourth quarter of 2015 through prescribers and pharmacies certified under the FDA’s comprehensive Risk Evaluation and Mitigation Strategy (REMS) program.

After the deal is finalized, female Viagra maker Sprout will remain headquartered in Raleigh, N.C. and become a division of Valeant. The current CEO of Sprout, Cindy Whitehead, will lead this division dedicated to the introduction and global commercialization of Addyi. Whitehead will be reporting to Anne Whitaker, Executive Vice President and Company Group Chairman.

Statement from Valeant CEO and Sprout CEO

Valeant’s Chairman and CEO J. Michael Pearson noted: “Delivering a first-ever treatment for a commonly reported form of female sexual dysfunction gives us the perfect opportunity to establish a new portfolio of important medications that uniquely impact women. We applaud the efforts of the Sprout team to address this important area of unmet need and look forward to working with them to bring the benefits of Addyi to additional markets around the world.”

Sprout CEO Cindy Whitehead commented: “I am extremely proud of the commitment and passion of our 34 employees who have been mission driven to get to this breakthrough first for women. This partnership with Valeant allows us the capacity to now ensure broader, more affordable access to all the women who have been waiting for this treatment. Beyond building this in the United States, Valeant also offers us a global footprint that could eventually bring Addyi to women across the globe.”

In a research note issued right after the FDA approval, analysts at Euro-Pacifica Canada noted:

After a long road to approval (three times in front of the FDA), Sprout Pharmaceuticals (Private) has achieved approval for the 5-HT1A/HT2A receptor agonist/antagonist flibanserin (commercial name: Addyi), indicated for the treatment of female sexual dysfunction. The approval comes with a set of onerous safety restrictions including online training for doctors/pharmacists prior to prescribing the drug, and a boxed warning that the drug should not be used by those who drink.
The boxed warning is aptly so due to the drug’s poor side effect profile as observed during clinical trials — wherein it was observed that subjects in the trial had episodes of fainting and severely low blood pressure. As part of its efforts to get flibanserin approved, the firm launched a campaign known as Even the Score consisting of women’s groups to advocate for approval. Launch of the drug is anticipated by the firm by October 17th 2015, with the firm lining up over 200 sales representatives to prepare for the launch. Pricing details were not available but were disclosed in a NY Times article that it would be approximate to the monthly cost of erectile dysfunction pills, at an estimated $400/month.