Investors in Sprout, the female libido pill makerbought by Valeant Pharmaceuticals International Inc. for $1 billionlast year, said Valeant has failed to successfully commercializethe treatment by setting the price too high and neglecting tomarket it, putting the drugmaker at risk of violating the mergeragreement.

The group, representing all Sprout shareholders at the time ofthe acquisition, sent Valeant a letter on March 14 requestingmaterials showing that the drugmaker can fulfill its obligationsunder the deal going forward. Among the documents, the investorsare seeking evidence that Valeant plans to spend $200 million formarketing and research and development for 2016 and half of 2017,as part of the agreement. They also ask for assurance that Valeantwill keep a sales force of 150 to distribute the drug, calledAddyi, which has posted disappointing sales since its introductionfive months ago.

“Valeant predatorily priced Addyi at $800 a month even thoughSprout had established a price point of approximately $400 a monthfor the drug based on market research,” the investor group said inthe letter. “As a result of this predatory pricing, insurancecompanies refused to cover the drug, which has led to the drug notbeing affordable for millions of women.”

Valeant has received theletter and will respond in due course, spokeswoman Laurie Littlesaid in an e-mail. “While confidentiality obligations under themerger agreement prohibit us from commenting on specificcontractual terms, Valeant intends to comply with all of itsobligations under our agreement with the former shareholders ofSprout, including as they relate to marketing spend, number ofsales reps, and post-marketing studies.”

The demands from Sprout’s investors are another problem for theembattled drugmaker. Valeant, whose stock has declined more than 85percent since its peak in August, is struggling to cut costs, fixunderperforming businesses and pay down a debt that ballooned tomore than $30 billion. The Laval, Quebec-based company, which hasdelayed filing its annual report pending an internal investigation,also needs to reset a strategy after its business practices cameunder scrutiny, and is looking for a new chief executive officer toreplace Mike Pearson.

The investor group, represented by Boies Schiller &Flexner LLP managing partner Jonathan Schiller, received cash inthe acquisition, but they stand to collect royalty payments if thedrug is successful. They are requesting that Valeant provide all“books, contracts, documents and records” related to thedevelopment and commercialization of Addyi by April 13, accordingto the letter.

“The Sprout shareholders have a contractual right to obtain theinformation that we have requested of Valeant,” Schiller saidby e-mail. “They also have legal remedies under the mergeragreement to pursue claims against Valeant for its failure toperform its obligations.”

Sprout is one of four business lines that have performed poorly and need fixing, Pearsontold senior managers this month. The struggling unit has started tocut jobs and eliminated the positions of its two national salesdirectors, according to people familiar with the matter, who askednot to be identified because the moves aren’t public. In addition,about 12 regional sales directors have been asked to interview fortheir jobs, the people said.

At the time of the merger agreement in August -- within days of its approval by the U.S.Food and Drug Administration -- both parties expected Addyi to hit$1 billion in net sales in the first full seven quarters followingits introduction, the investors said in their letter.

By December, Pearson told investors in a meeting that 2016 salesexpectations were in the range of $100 million to $150 million. OnMarch 15, after the letter was sent, Pearson told analysts on aconference call that Valeant had cut that forecast “significantly,”without giving more details.

“Valeant remains strongly committed to Addyi and to ensuringthat it remains affordable and accessible to premenopausalwomen who have been waiting for a medical treatment option,”Little, the company spokeswoman, said in her e-mail. “We continueto work closely with pharmacists, health-care providers, andpatients to educate them about Addyi.”

One of Sprout’s investors before Valeant acquired the companywas Bill Ackman, the billionaire who runs Pershing Square CapitalManagement LP. Pershing Square is one of Valeant’s top threeshareholders, according to filings; Ackman this month gained a seaton the company’s board and has promised to help turn around thedrugmaker. He took a less then 1.5 percent stake inSprout during a fundraising round, a person familiar withthe matter said last year. He declined to comment on theletter.

Addyi has been been struggling in part because the mail-orderpharmacy that could have helped distribute the drug, Philidor RxServices, is now out of the picture following a scandal that forcedValeant to sever the relationship in October.Insurers are denying or limiting coverage for the daily pill, andlarge pharmaceuticals benefit managers have been blocking it.

Addyi sales are growing after a difficult start, Anne Whitaker,company group chairman, said on a March 15 conference call. About57 percent of prescriptions written are now being filled and paidfor, up from 25 percent to 30 percent in the fourth quarter, shesaid.

The treatment, which was rejected twice before getting approved,carries a boxed warning, the FDA’s strictest, and women have tosign an agreement acknowledging the risks.

In their letter, the Sprout investors said Valeant failed tocomply with its obligation to educate patients and physicians aboutthe product. Valeant was obligated to spend at least $200 millionover six quarters starting in January to advertise it in print ortelevision, develop disease-awareness campaigns and makeeducational materials, among other things, they said.

“Letters like that are designed to get a response and suggestthat there may be litigation,” said Charles Elson, director ofthe John L. Weinberg Center for Corporate Governance at theUniversity of Delaware. “It will go on for a while. These thingsstretch on for a few years.”