Canada's Valeant Pharmaceuticals is to buy Sprout Pharmaceuticals, the manufacturer of the FDA-approved libido pill Addyi, for approximately US$1bn in cash.
Under terms of the agreementl, Valeant will pay approximately $500m on closing the transaction and a second payment of about $500m in the first quarter of 2016, plus a share of future profits on reaching certain milestones.
The deal takes Valeant, which develops a range of pharmaceutical products primarily in the areas of dermatology, gastrointestinal disorder, eye health, neurology and branded generics, into the women's health sector for the first time.
This week (15 August), Sprout received approval from the US FDA on its New Drug Application (NDA) for flibanserin 100mg, which will be marketed as Addyi in the US, to treat sexual dysfunction in premenopausal women.
Sprout, headquartered in Raleigh, North Carolina, US, also has global rights for flibanserin and Valeant will register the drug internationally.
The firm will remain in Raleigh and become a division of Valeant following the completion of the deal, headed by Chief Executive Cindy Whitehead.
Addyi carries a strong warning about potentially dangerous low blood pressure and fainting, especially when taken with alcohol. It is not indicated for use in postmenopausal women or men or to enhance sexual function.
Valeant expects Addyi to be available in the US in the fourth quarter of this year through prescribers and pharmacies that have been certified under the US FDA's comprehensive Risk Evaluation and Mitigation Strategy (REMS) programme to assure safe use.
Following the closing of the deal, Valeant, under the REMS, will offer physicians and pharmacists the required certification programmes for prescribing and dispensing Addyi.
Valeant's Chairman and Chief Executive Officer, Michael Pearson, said: '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.'
The transaction is expected to close in the third quarter of 2015.