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Sprout Pharmaceuticals, the company behind female libido drug Addyi, has raised $20 million in venture funding.
Sprout CEO Cindy Eckert told Fortune that the drug, often referred to as “female viagra,” received some favorable decisions by the Food and Drug Administration. Instead of telling patients to entirely refrain from alcohol before using Addyi, they can now tell them to discontinue at least two hours prior.
The FDA also removed the requirement for healthcare practitioners or pharmacies to be certified to prescribe or dispense Addyi. Women will now be able to speak with any licensed U.S. healthcare provider to obtain a prescription for Addyi.
“I spent $10 million just to do additional scientific work on Addyi and alcohol interaction,” Eckert said. “On the basis of those findings, the FDA has ruled they will lift the alcohol contraindication.”
This marks Eckert’s second round as CEO of Sprout, the Raleigh, N.C.-based developer of a drug intended to treat hypoactive (or low) sexual desire disorder in pre-menopausal women. She sold the startup to Valeant for $1 billion in August 2015, later sued Valeant for failing to commercialize the drug, and got her company back for free.
In November, Valeant handed over Sprout to Eckert and its former owners without charging an upfront fee. According to the terms of the deal, Sprout’s shareholders agreed to drop the pending lawsuit and Valeant will get a 6% royalty on global sales of Addyi. In turn, Valeant agreed to loan the company $25 million to “fund initial operating expenses.”
Since taking the helm a second time, Eckert has cut Addyi’s price in half — from $800 down to $400 for a monthly prescription. The first eight weeks of Addyi are available to patients at no cost, regardless of insurance coverage. Subsequent refills cost no more than $25 per month with insurance, and no more than $99 per month without insurance. (Sprout subsidizes the remaining cost through a co-pay program). Eckert declined to disclose sales figures for the drug.
Eckert says she decided to raise $20 million in outside capital to increase marketing, expand Addyi’s digital presence, and beef up her sales force. The last time she had to fundraise for Sprout, attracting traditional investors wasn’t easy.
“For male investors, the quick reaction was social discomfort, and they would cope by joking: ‘Isn’t jewelry female Viagra,’” she said in 2017. “I knew I wasn’t going to get classical funding, so I went out and built an incredible network of high-net worth individuals and angels who bet on me early.”
It appears she did the same thing for this round. According to a recent SEC filing, Sprout raised capital from 110 investors, all of which are the same family offices and wealthy individuals who invested in her prior round. When asked why no traditional venture capital firms were listed in the roster of investors, Eckert claims she didn’t need their money. She said the round was exclusively for existing shareholders, and she “didn’t let any externals in.”
Sprout’s first investors already got a big windfall from Sprout’s billion-dollar acquisition in 2015, so in theory, they could double dip. If the company beefs up its business and gets sales off the ground, shareholders could even see a second exit.
Bob Dahl, the former head of global healthcare for the Carlyle Group, was one of the original investors in Sprout and also participated in the latest fundraising. “This is a great time to invest in the company because it’s like getting in on the ground floor again,” he said.
Even with the fresh capital and its progress with FDA, it’s still an uphill battle for “the little pink pill.” Addyi continues to draw criticism from groups that question whether hypoactive sexual desire disorder actually merits drug therapy.
Dahl calls this “nonsense,” adding, “This condition is widely accepted in the literature, and the notion that it’s some sort of contrived condition created by a drug company to sell its products is ridiculous.”
When asked if she plans to raise capital, build up the business, and sell the company for a second time, Eckert says: “Right now, I’m squarely focused on getting it right for women, but it’s not out of the question.”
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