Struggling firm is returning Sprout Pharmaceuticals subsidiary to original shareholders to resolve dispute over marketing

Beleaguered drugmaker Valeant has agreed to return subsidiary Sprout Pharmaceuticals to its original shareholders, in exchange for 6% royalties on sales of Sprout’s female libido drug Addyi (flibanserin).

Valeant originally paid $1 billion (£640 million) for Sprout in 2015 – just after Addyi had finally been approved by the US Food and Drug Administration (FDA) following a long and chequered development history. However, sales of the drug were poor, which led to former Sprout shareholders suing Valeant, saying it had set the price too high and hadn’t fulfilled its promises in marketing the drug effectively. That case will be dropped as part of this agreement. Valeant will also loan Sprout $25 million to cover the changeover of operations between the two companies.

Valeant is charting a slow path to recovery after collapsing in 2016, following revelations of improper accounting and debt-fuelled expansion. Chief executive Joseph Papa pitched the Sprout deal as part of that process: ‘Returning Sprout to its former owners will enable us to further streamline our portfolio and reduce complexity in our business,’ he said in a statement.