A securities class action suit has been filed against a multinational specialty drugs company based in Canada, following allegations that the firm and some officers and directors violated federal securities laws.
The class action filing against Valeant Pharmaceuticals International Inc. was filed in the U.S. District Court for the District of New Jersey on behalf of investors who purchased securities in the company during the class period between Feb. 28, 2014 and Oct. 21, 2015, according to a press release. The firm develops and manufactures specialty drugs and medical devices. These include various branded, generic, and so-called “branded generic” over-the-counter products, pharmaceuticals and medical devices. Some of the products Valeant sells include contact lenses, ophthalmic surgical equipment, aesthetics devices and intraocular lenses.
Alleged specialty pharmacy networks went undisclosed
The class action lawsuit alleges that the company and certain executives made false and misleading statements and/or failed to disclose adverse information about Valeant’s business and prospects. The defendants specifically failed to reveal that it was using a network of specialty mail-order pharmacies that it oversaw to maintain sales of high-priced drugs to ensure that patients and insurance companies wouldn’t switch to low-cost generic drugs. In addition, Valeant allegedly failed to disclose that the use of these specialty pharmacies left it open to regulatory risks. The defendants also failed to disclose that without this network, its financial performance and guidance would have suffered negative effects.
“Specialty pharmacies left Valeant open to regulatory risks.”
Due to these allegedly false and misleading claims, the class action suit noted that Valeant stock traded at artificially inflated prices during all relevant times, sometimes climbing as high as over $260 per share.
Revelations of subpoenas lead Valeant securities to tumble
On Sept. 28, Bloomberg reported that Democrats in the House of Representatives sought to subpoena Valeant for documents concerning drug price increases in an effort to slow down a trend of price hikes on certain pharmaceuticals. The politicians named the heart drugs Nitropress and Isuprel in a letter to Jason Chaffetz (R-Utah), the chairman of the House’s Committee on Oversight and Government Reform. The day Valeant acquired the rights to sell the medications, the price of the former surged 212 percent while the cost of the latter jumped 525 percent.
This news, along with Democratic presidential candidate Hilary Clinton’s assertion that she would reform the drug industry to curb such price increases if she were elected president, caused Valeant’s stock prices to fall. The revelation of the subpoena led securities to drop 16.53 percent to close at $166.50 on Sept. 28.
Valeant securities continued taking hits from there. On Oct. 14, the company disclosed that it received subpoenas from the two U.S. Attorney’s Offices, focused, for the most part, on its product distribution, patient assistance program, pricing decisions and information it provided to Centers for Medicare and Medicaid Services. Following this news Valeant’s stock price fell once again, this time 4.75 percent to close at $168.87 on Oct. 15.
When Democrats from the House of Representatives subpoenaed Valeant, its stock started falling.Less than a week later, another disclosure caused Valeant stock to fall once again. On Oct. 19 the defendants disclosed the allegedly previously hidden relationship between Valeant and its specialty pharmacy networks. Following the revelation of this news, securities in the company fell 10.43 percent to close at $146.74 on Oct. 20. The following day, a report claimed that Valeant was using its relationships with these pharmacy networks to store inventory and track those transactions as sales. Additionally, the report noted that the company was allegedly using phantom accounts to trick auditors and investors. Following the disclosure, Valeant stock prices fell once again, dropping 19.17 percent to close at $118.61 on Oct. 21.
For more information on this case or other class action litigations, please contact Adam Foulke at 203-987-4949 or info@battea.com.