The Pharmaceutical Business That Sold To Valeant for $1 Billion Just Before Major Scandal

Pharmaceutical business sold for $1 Billion

The Pharmaceutical Business That Sold To Valeant for $1 Billion Just Before Major Scandal

Cindy Whitehead started Sprout Pharmaceuticals and created the drug ADDYI, which has become known as the “female Viagra”.

After years of fundraising to finance clinical trials and research, Whitehead finally got ADDYI approved by the Food & Drug Administration (FDA) in the United States. With approval to market the drug, Whitehead became the darling of the pharmaceutical industry and she quickly received three competing offers from large pharmaceutical companies to buy her business.

In 2015, Whitehead agreed to be acquired by Valeant, who paid her and her investors a cool $1 billion in cash for the drug, along with a royalty stream from the sales of ADDYI post acquisition.

And that’s about when things got interesting.

Valeant started to come under criticism for hiking the price of some drugs. The company’s stock price plummeted more than 90% and Valeant began circling the wagons. Valeant never launched ADDYI, so there were no royalties paid. Whitehead and her investors sued Valeant for the lost royalty stream.

The two parties have apparently reached a deal where Whitehead and her investors will get the drug back from Valeant and get to keep the billion dollars cash they were paid.

Now that’s an exit!

In this episode, you’ll learn:

  • Why you should never accept the acquirer’s shares as compensation for your company
  • How to vet potential investors
  • How to deal with what Whitehead calls “the dilution dilemma”
  • How forecasting can help boost the value of your business
  • How to structure a licensing deal (and the dangers of “best efforts” clauses)
  • Why your company should never be managed by a spreadsheet

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