At the height of its success, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) thought it could buy drug companies in the billion-dollar range, raise prices and profit. That includes the time the company bought Sprout back in 2015. That gave it access to Addyi, a female libido drug. We all know how that story unfolded. Now, Sprout Pharmaceuticals will make a second attempt to sell the drug but using a different method.

Cindy Eckert, who was the CEO of Sprout when Valeant bought the company, will return once again to the same role; however, her strategy for launching the drug will differ this time, as the company will use a telehealth model to sell the drug. Sprout will also have a website that doctors may access to make the patient diagnosis and then prescribe it. Most importantly, Sprout will sell the drug for just $400, a 50% markdown from Valeant’s selling price. Both companies have an interest in getting patients prescribed on Addyi. Valeant had paid a billion dollars from Sprout, failed to produce any meaningful profits from the acquisition. It sold the drug’s rights back to Sprout by giving the company $25 million. In return, Valeant gets a 6% royalty from Addyi sales.

Sprout is privately listed, so investors would need to buy VRX stock to benefit, albeit indirectly, from Sprout’s potential success for the Addyi drug therapy. Investors should have low expectations for Addyi: prescriptions for the drug could stall early on as Sprout builds its sales force, spends on marketing the drug and develops its channels for getting the drug to patients. Plus, Valeant’s potential upside lies in the turnaround for Salix and B+L. Last quarter’s stronger results for both units sent the stock higher already. So, prudent investors may want to wait for VRX stock pulling back first.

Valeant’s failure to produce meaningful sales of Addyi may point to the headwinds Sprout faces. Its acquirer could have stumbled because management had its focus on other parts of the business. As a result, Addyi sales may not have totaled more than $10 million.

Sprout has plenty of data points it may consider to prevent the same failure. The drug’s high pricing will have turned off patients. Valeant gave little to no effective advertising to support the drug’s launch. If used effectively, Valeant’s $25 million loan to Sprout to cover initial expenses could drive initial sales higher. Both companies are willing to subsidize the drug’s costs if insurance does not give patient’s coverage. This will lower the price of the drug to between $25 to $99 per month, which is sharply lower than the previous $800 price tag.

Keeping Costs Low

Sprout plans to keep its staff count low, from 25 employees now to no more than 35 in the future. Plus, each new employee added will work in the “home office” setting, which limits the related costs of adding staff to the roster. Sprout certainly needs the resources to counter the negative publicity that is already building against Addyi. The Verge, for example, writes that the drug is more harmful than ever and it does not believe that the hotline is the right answer.

Valuation

Addyi’s success ultimately has a small impact, if any, on Valeant’s stock. Investors could assume that the drug will add no more than $50 to $100 million in annual revenue to the company. From there, investors may enter growth assumptions (on finbox.io) to model out a fair value on the stock. Pfizer Inc. (NYSE:PFE) is another drug company investors may refer to in forecasting Addyi sales. But Addyi must first be considered a potential blockbuster like Viagra was when it first launched.