Sprout, The Company Focused on Women’s Sexual Pleasure, Raises $20 Million: Term Sheet
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 is 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."
BIG SOFTWARE ENERGY: TPG Capital is making its latest move in the realm of software by acquiring dev-ops firm CollabNet VersionOne from fellow private equity firm Vector Capital. TPG is acquiring a majority stake in CollabNet and plans to invest up to $500 million of capital into making it a flagship, integrated dev-ops platform catering to companies' software needs. Read more at Fortune.
WEWORK DIVERSIFIES: WeWork is adding a woman to its all-male board of directors before it makes its public market debut. Harvard Business School professor Frances Frei will join the board, according to a new filing. I wrote about Frei in 2017 when she joined Uber as the senior vice president of leadership and strategy.
The filing also disclosed that WeWork CEO Adam Neumann returned $5.9 million worth of partnership interests initially granted to him as compensation for trademarks used in the company’s rebranding. Read more.
– Clio, a Vancouver-based legal tech company, raised $250 million Series D funding. TCV and JMI Equity co-led the round.
– VillageMD, a Chicago-based provider of primary care, raised $100 million in Series B funding. Kinnevik AB led the round, and was joined by investors including Oak HC/FT, Town Hall Ventures and Adams Street Partners.
– Culture Amp, an Australia-based employee engagement and performance platform, raised $82 million in Series E funding. Sequoia Capital China led the round.
– PerimeterX, a San Mateo, Calif.-based developer of web security solutions, raised $14 million as an extension of its previous Series C funding round. Investors include Deutsche Telekom Capital Partners, Salesforce Ventures, Scale Venture Partners, Adam Street Partners, Canaan Partners, Vertex Ventures and Data Collective (DCVC).
– Bellwether Coffee, a Berkeley, Calif.-based maker of a commercial coffee roaster, raised $40 million in Series B funding. DBL Partners and Lyndon and Peter Rive co-led the round, and were joined by investors including FusionX, Congruent Ventures, Coffee Bell, Tandem Capital, Spindrift Equities, XN Ventures, Balius Partners and Hardware Club.
– Sight Machine Inc., a San Francisco-based digital manufacturing platform, raised funding from the Sony Innovation Fund. Sony is joining the $29.4 million Series C funding round.
– 75F Inc., a Burnsville, Minnesota-based provider of wireless building automation for commercial buildings, raised $18 million in Series A funding. Breakthrough Energy Ventures and Climate Initiative co-led the round, and were joined by investors including Building Ventures, Revolution’s Rise of the Rest Seed Fund, and Clean Energy Trust.
– Kasisto, a New York City-based provider of a digital experience platform for the financial services industry, raised $15 million in funding. Rho Capital Partners led the round, and was joined by investors including Oak HC/FT, Propel Venture Partners, Two Sigma Ventures, Commerce Ventures and the Partnership Fund for New York City.
– Culture Fresh Foods, a Naugatuck, Conn.-based $11 million in Series A funding. Investors include CEI Ventures and FreshTracks Capital.
– Light, a Brooklyn-based company designing a minimalistic phone, raised $8.4 million in seed funding. Investors include Foxconn, Hinge Capital, Bullish, White Bay Group, Able Partners, Product Co-Op, and SOSC.
– RocketBody, a Delaware-based maker of an ECG-based personal trainer app for the Apple Watch, raised $1 million in funding from Gagarin Capital.
HEALTH & LIFE SCIENCES DEALS
– M2i Life Sciences, a France-based producer of pheromones to that aim to sustainably and economically replace chemical pesticides in agriculture, raised 60 million euros ($65.6 million) in funding. ADM Capital Europe led the round.
PRIVATE EQUITY DEALS
– Barcodes Group, a portfolio company of Odyssey Investment Partners, acquired Plasco ID Holdings LLC, a Miami, Fla.-based provider of ID badging, access control, and visitor management solutions. Financial terms weren’t disclosed.
– Pareto Health Inc., a Philadelphia-based company that organizes health coverage for groups of businesses that pay medical bills directly, raised more than $80 million from Great Hill Partners.
– Investcorp acquired a majority stake in CM Investment Partners LLC, an external investment adviser to Investcorp Credit Management BDC Inc. Financial terms weren’t disclosed.
– Therma Holdings, a portfolio company of Gemspring Capital, acquired VarcoMac LLC, a Baltimore-based provider of electrical systems and solutions serving the commercial, institutional and government markets. Financial terms weren’t disclosed.
– Brightstar Capital Partners agreed to acquire Capstone Nutrition, an Ogden, Utah-based developer and manufacturer of nutrition products. Financial terms weren’t disclosed.
– The Carlyle Group agreed to make an investment in HireVue, a South Jordan, Utah-based provider of AI-driven talent assessment and video interviewing solutions. Financial terms weren’t disclosed.
– Metro Pacific Hospitals Holdings, the Philippines’ largest hospital chain, filed for an IPO in the country to raise as much as 83.33 billion pesos ($1.6 billion). Metro Pacific Investments Corp. backs the firm. Read more.
– Envista Holdings, a Brea, Calif.-based maker of dental supplies carved out of Danaher, plans to raise $602 million in an initial public offering. It posted revenue of $2.8 billion and earnings of $237.7 million in 2018. Foresite Capital, Venrock, Paladin Capital, and Fidelity back the firm. It plans to list on the NYSE as “NVST.” Read more.
– Vir Biotechnology, a San Francisco-based biotech focused on immunologic therapies for infectious diseases, plans to raise $100 million in an initial public offering. It posted revenue of $10.7 million and a loss of $115.9 million in 2018. ARCH Venture Partners and SoftBank back the firm. It plans to list on the Nasdaq as “VIR.” Read more.
– 10x Genomics, a Pleasanton, Calif.-based maker of instruments for analyzing biological information, plans to raise $297 million in an initial public offering of 9 million shares priced between $31 to $35 apiece. It posted revenue of $146.3 million and a loss of $112.5 million in 2018. Foresite Capital, Venrock, Paladin Capital, and Fidelity back the firm. It plans to list on the Nasdaq as “TXG.” Read more.
– Satsuma Pharmaceuticals, a South San Francisco-based clinical-stage biotech for migraines, plans to raise $75 million (33% insider bought) in an IPO of 5 million shares priced between $14 to $16. The firm has yet to post a revenue and posted a loss of $7.3 million in 2018. RA Capital, TPG Biotechnology Partners, and Shin Nippon Biomedical Laboratories back the firm. It plans to list on the Nasdaq as “STSA.” Read more.
– Alerus Financial, a Grand Forks, N.D.-based financial services firm, plans to raise $75 million in an IPO of 3.3 million shares likely between $22 to 24. The firm posted net interest income of $75.2 million, noninterest income of $102.7 million, and net income of $25.9 million in 2018. It plans to list on the Nasdaq as “ALRS.” Read more.
– BELLUS Health, a Quebec, Canada-based biotech focused on chronic coughs, filed to raise $60 million in a US offering. OrbiMed backs the firm. It last traded in Toronto at about $7 apiece. It plans to list on the Nasdaq as “BLU.”
– Vertex Pharmaceuticals Incorporated agreed to acquire Semma Therapeutics, a Cambridge, Mass.-based biotech company focused on treating type 1 diabetes, for $950 million in cash. Semma had raised approximately $163 million in venture funding from investors including Eight Roads Ventures, Cowen Healthcare Investments, MPM Capital, F-Prime Capital Partners, ARCH Venture Partners, Novartis, Medtronic, JDRF T1D Fund, ORI Healthcare Fund, Wu Capital, 6 Dimensions Capital and SinoPharm Capital.
FIRMS + FUNDS
– Freeman Spogli & Co, a Los Angeles-based private equity firm, raised $1.85 billion for its fund, FS Equity Partners VIII, L.P.
– Ford Financial Fund, a Dallas, Texas-based private equity firm, raised more than $1 billion for its third fund.
– Atlantic Street Capital, a Stamford, Conn.-based private equity firm, raised $500 million for its fourth fund, Atlantic Street Capital IV LP.
– MiddleGround Capital, a Lexington, Ky.-based private equity firm, raised $459.5 million for its debut fund.
– Xiang He Capital, a China-based venture capital firm, $425 million for its second USD-denominated venture fund.
– Alex Ferree and Eric Kim joined Grant Avenue Capital as senior associates and Sari Ring joined as chief of staff.