Valeant Pharmaceuticals International, Inc.
- Company Name
- Valeant Pharmaceuticals International, Inc.
- Stock Symbol
- Class Period
- January 4, 2013 to August 11, 2016
- Motion Deadline
- August 7, 2018
- District of New Jersey
The complaint charges Valeant and certain of its officers with violations of the Securities Exchange Act of 1934. Valeant is a pharmaceutical and medical device company that sells medical devices and pharmaceuticals in over 100 countries around the world.
The complaint alleges that during the Class Period, the defendants made materially false and misleading statements and/or failed to disclose material adverse facts concerning the Company’s business and prospects. Specifically, the complaint alleges that Valeant used a network of specialty mail-order pharmacies it controlled to prop up sales of its high-priced drugs and to keep patients and their insurance companies from switching to less costly generic drugs, which conduct would subject the Company to increased regulatory risks, and that without the use of the specialty pharmacies, Valeant’s financial performance and Class Period financial guidance would have been negatively impacted. As a result of defendants’ false and misleading statements and/or omissions, Valeant call options traded at artificially inflated prices during the Class Period, while Valeant put options traded at artificially deflated prices during the Class Period.
The truth regarding Valeant’s misstatements and omissions was revealed through a series of partial disclosure beginning in September 2015. On September 28 and 29, 2015, it was disclosed that Congress was looking into the skyrocketing prices of certain Valeant drugs, causing the price of Valeant stock to fall more than 20% to a close of $158.08 per share. In October 2015, the disclosures regarding the investigation into Valeant’s drug pricing continued and media outlets questioned whether Valeant was well positioned for growth, given that the price increases on eight Valeant drugs accounted for approximately 7% of the Company’s revenues and 13% of its earnings in the second quarter of the year. This caused the Company’s share price to fall 10%. Later in October 2015, Valeant’s control over its secret network of pharmacies began to come to light. In early November 2015, the Senate Aging Committee formally launched a probe into Valeant’s price increases for three drugs. By this time Valeant’s share price had fallen to $91.98 per share. In March 2016, Valeant reduced its financial guidance, blaming “reduced revenue assumptions for certain businesses, new managed care contracts, and increased investment in key functions, . . . as well as the impact of the weak first quarter of 2016.” On March 15, 2016, Moody’s downgraded the credit ratings of Valeant and its subsidiaries, causing a 50% decline in Valeant’s stock price, from $69.04 per share on March 14, 2016 to $33.51 per share on March 15, 2016.
Finally, on August 10, 2016, The Wall Street Journal reported that Valeant was under criminal investigation by the Department of Justice regarding whether it had defrauded insurers by concealing its relationship with Philidor RX Services, LLC, a specialty mail-order pharmacy in Valeant’s secret network formed with the assistance of Valeant employees, and for a variety of other deceptive business practices. In response to this news, the price of Valeant stock fell to a close of $27.32 per share on August 10, 2016, a decline of nearly 90% from the stock’s Class Period high of $257 per share.