(Bloomberg) -- Valeant Pharmaceuticals International Inc. agreed to pay about $1 billion in cash for Sprout Pharmaceuticals Inc., the U.S. drugmaker that this week received approval to sell a pill for low libido in women.

Valeant will also give closely held Sprout a share of future profits if certain milestones are achieved, according to a statement on Thursday.

Buying Sprout would move Valeant, which specializes in eye care and dermatology, into the women’s health market.

Valeant’s strategy is to grow through acquisitions. The company has announced 12 purchases in the past year valued at $14.9 billion, according to data compiled by Bloomberg. The biggest is the $11.1 billion purchase of Salix Pharmaceuticals Ltd. for gastrointestinal disorder treatments.

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Sprout’s pill received approval on Tuesday from the U.S. Food and Drug Administration. The drug has been controversial due to modest benefits and serious side effects, and was caught up in a debate about whether male sexual dysfunction has received more attention.

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Valeant said it will use its “global scale” to market the drug internationally. The purchase will have no effect on earnings this year and will add to earnings in 2016, it said. Sprout Chief Executive Officer Cindy Whitehead will join the company to lead the division.

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Sprout acquired the rights for flibanserin for an undisclosed amount from Boehringer Ingelheim GmbH in 2011, after the FDA told Boehringer that the drug hadn’t been proven safe or effective.

Sprout conducted new tests with new measures of how women’s sexual desire was measured.

Marketing hurdles

Hurdles in marketing the pill will include convincing insurers to cover it, and educating doctors and patients on the benefits and risks. Without insurance support, women may have to pay as much as $400 a month to try the pill, called Addyi, or flibanserin.

The FDA has said that doctors will have to take a training course to be certified to prescribe the drug, which will be available as soon as Oct. 17. Patients must sign a form acknowledging risks that include fainting and extreme sleepiness.

Humana Inc., the fifth-largest U.S. health insurer by market value, said Thursday that Addyi will fall into the same category as erectile-dysfunction drugs, which typically aren’t covered. Anthem Inc., the third-largest, will cover the drug in its third tier, which means it will require higher copays than for generics and preferred brand-name drugs. UnitedHealth Group Inc., Aetna Inc. and Cigna Corp. said they’re studying Addyi.

Sexism backlash

U.S. regulators had rejected the drug in 2013 for its modest effect, and then faced a backlash from some doctors and researchers who said the agency was being sexist. Drugs to treat male sexual dysfunction have become ubiquitous since Pfizer Inc.’s Viagra was approved in 1998.

Valeant will pay $500 million upon completion of the transaction, expected in the third quarter, and an additional payment of $500 million in the first quarter of 2016, plus a share of future profits.

Valeant, which is managed from the U.S., merged with Biovail Corp. in 2010 and moved its legal address to Canada. Its acquisition record in the last 12 months is second only to Roche Holding AG of Switzerland in terms of the number of deals. Sprout is based in Raleigh, North Carolina.

--With assistance from Anjali Cordeiro in Hong Kong and Johannes Koch in Berlin.

Instant Insights /

Valeant buys female libido-drug maker Sprout for $1B

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