Coverage: The bad news continues at Valeant Pharmaceuticals

Struggling Valeant Pharmaceuticals can’t keep itself out of the headlines. It’s being sued for bungling the marketing of a female libido drug, its former executives are being investigated in a criminal probe, and it may sell its stomach drug business to raise cash.

Lydia Ramsey has the news about the lawsuit:

The investors behind Sprout Pharmaceuticals, the drugmaker that developed what came to be known as “female Viagra” are suing Valeant Pharmaceuticals.

They claim that Valeant failed to commercialize the drug, pushed Sprout into a deal with Valeant’s secret pharmacy just days before it faced accusations of fraud, and hiked the drug’s price to a point that made it too costly.

Valeant acquired Sprout for $1 billion in August 2015. The deal was struck right after Sprout won approval for Addyi, which intends to treat women with chronically low sex drives, a condition called hypoactive sexual desire disorder (HSDD).

But sales of Addyi have not taken off, and in a complaint filed Wednesday in Delaware, former Sprout shareholders claimed that “Valeant has abdicated its duty to use diligent efforts to develop and commercialize Addyi.”

David Benoit and Jonathan Rockoff of The Wall Street Journal broke the news about the sale of the stomach drug business:

Valeant Pharmaceuticals International Inc. is in advanced talks to sell a big stomach-drug business to Japan’s Takeda Pharmaceutical Co. for about $10 billion, a move seen easing pressure on Valeant over its hefty debt load.

The companies could reach a deal for Salix Pharmaceuticals Ltd., which Valeant bought just a year-and-a-half ago for roughly $11 billion, in the coming weeks, people familiar with the matter said. The purchase price would include about $8.5 billion in cash and future royalty payments to Valeant, the people said.

There is no guarantee the companies will reach a deal and, indeed, there is another unnamed potential bidder in the mix, the people said.

Valeant confirmed the discussions late Tuesday, saying, “We are currently in discussions with third parties for various divestitures including but not limited to Salix. The discussions may or may not lead to a definitive agreement.”

Valeant shares jumped after The Wall Street Journal reported on the potential deal, rising 34% to close at $23.86.

Christian Berthelsen, Greg Farrell, Neil Weinberg and Cynthia Koons have the story about the criminal investigation:

U.S. prosecutors are focusing on Valeant Pharmaceuticals International Inc.’s former CEO and CFO as they build a fraud case against the company that could yield charges within weeks, according to people familiar with the matter.

Authorities are looking into potential accounting fraud charges related to the company’s hidden ties to Philidor Rx Services LLC, a specialty pharmacy company that Valeant secretly controlled, the people said. Federal prosecutors in Manhattan and agents at the Federal Bureau of Investigation in New York have been investigating the company for at least a year.

Prosecutors are examining the actions of J. Michael Pearson, Valeant’s former chief executive officer, and Howard Schiller, the ex-chief financial officer who became interim CEO during a medical leave by Pearson, according to the people, who discussed the confidential proceedings on the condition of anonymity. Prosecution of individual executives could go beyond just those two, one person said, adding that Philidor executives could also be charged.

“We are in frequent contact and continue to cooperate” with U.S. authorities, Valeant said in a written statement. “We do not comment on rumors about investigations, and cannot comment on or speculate about the possible course of any ongoing investigation. Valeant takes these matters seriously and intends to uphold the highest standards of ethical conduct.”