Did Valeant Pharmaceuticals Intl Inc (VRX) Pay Too Much For Libido Pill?


The immediate reaction to Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s acquisition of the drug Libido, the female Viagra, is that it’s a risky investment. The company has been successful so far in growing its portfolio of drugs through the acquisition route rather than spending on R&D to develop fresh drugs. However, this one is raising some concerns among the investors for the money involved.

Effectiveness Remains A Question

The doubts have increased because there is a concern whether Valeant Pharmaceuticals Intl Inc (NYSE:VRX) did its due diligence completely before taking a decision to buy Sprout Pharmaceuticals. Only two days back, the FDA gave its approval for the pill for the treatment of low sexual desire during the premenopausal women. A lot depends on the sales of the drug. If the company can generate the kind of sales it expects, then the company might be in a safe position and this could be a booming success.

However, the concern is about the effectiveness of the drug. There are already worries about the side effects of the Viagra. There is every chance that there could be some regulatory restrictions thus impacting its sales. Some also question the process in which the libido drug received approval.  One must also note, during the peak time of Viagra, Pfizer Inc. (NYSE:PFE) could sell only $2 billion.

CEO Comments

Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’ CEO, Mike Pearson, said that though he is sure about hundreds of millions of annual sales, he is also hopeful of generating billions of revenue. That will be a great accomplishment. However, the company does not need such a strong sales amount to validate the purchase. As a matter of fact in the biotech sector, the companies sell for five times of its revenue.

Therefore, there is a sense of perception that even if Valeant Pharmaceuticals Intl Inc (NYSE:VRX) could achieve $300 million annual sales, then it is a smart investment. However, the doubts are due to its mediocre efficacy, and the pill helped only 10% more than the placebo during the study. Though the results might enthuse patients to try the pill, there is no guarantee that they will come back to buy the same drug.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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