US specialty drugs company Valeant Pharmaceuticals has agreed to pay $1 billion in cash, on a debt-free basis, for female sexual heath firm Sprout Pharmaceuticals. Under the terms of the agreement, Valeant will pay around $500 million upon closure of the deal, subject to customary purchase price adjustments, plus another $500 million in the first quarter of 2016, as well as a share of future profits based upon achieving certain milestones.

The transaction is expected to close in the third quarter of 2015, subject to the usual conditions and regulatory approval, including antitrust clearance.

On August 18, just two days before the acquisition was announced, Sprout received approval from the US Food and Drug Administration (FDA) for its New Drug Application (NDA) on flibanserin, a female sexual health treatment.

The oral pill, to be marketed as Addyi in the US, is a treatment for premenopausal women with acquired, generalized hypoactive sexual desire disorder (HSDD), characterized by low sexual desire which is causing marked distress or relationship difficulties. Sprout, formed out of Slate Pharmaceuticals in 2011, has been solely focused on finding a treatment for women with HSDD.

Valeant expects Addyi to be available in the USA in the fourth quarter of this year through prescribers and pharmacies that are certified under the FDA’s Risk Evaluation and Mitigation Strategy (REMS) program.

Sprout also has worldwide rights for flibanserin and Valeant said it will leverage its global scale to register the drug internationally.

Following completion of the acquisition, Sprout will become a division of Valeant but its headquarters will remain in Raleigh, North Carolina. Cindy Whitehead, Sprout’s CEO, will join Valeant and lead the division dedicated to introducing and commercializing Addyi worldwide.

“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,” said Valeant’s chairman and CEO, J. Michael Pearson.

Cindy Whitehead added: “This partnership with Valeant allows us the capacity to now ensure broader, more affordable access to all the women who have been waiting for this treatment. Beyond building this in the United States, Valeant also offers us a global footprint that could eventually bring Addyi to women across the globe.”