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Valeant: Fixing a Billion Dollar Mistake?

Valeant has been accused of mishandling both the launch and the marketing of Addyi, a drug some referred to as “female Viagra.” It is Sprout’s only product, and sales have been weak.

Well Fargo’s David Maris, who rates Valeant at an Underperform, weighed in on Valeant’s decision.

We have long wondered about Valeant's managerial decision to keep investing in Addyi even though it was not profitable and showing no positive signs of responding to additional marketing. The fact that VRX bought it for $1 billion (plus milestones) and is now selling it for a modest single digit royalty and providing a loan to the buyer to boot to us is a sign that Addy's value is negligible. According to IMS, 2017 YTD Addyi sales are ~$6 million. We have also previously stated that we expect that Addyi, which had a carrying value of $1 billion, would face a write-down of nearly all of its value. Valeant did not disclose any potential write-down in today's press release. Overall, while we did not agree with the company's decision to acquire Sprout let alone for $1 billion, it is smart to stop investing in a brand that had no prospects of making money for Valeant.

Wall Street seems to agree. Valeant’s share price popped almost 3% to $11.82 a share in morning market action.


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