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In Re Valeant Pharmaceuticals International, Inc. Securities

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In Re Valeant Pharmaceuticals International, Inc. Securities Case 3:15-cv-07658-MAS-LHG Document 80 Filed 06/24/16 Page 1 of 286 PageID: 2366 TRIEF & OLK TED TRIEF SHELLY L. FRIEDLAND 9 Kansas Street Hackensack, NJ 07601 Telephone: 201/343-5770 [email protected] [email protected] Local Counsel JAMES E. BARZ ROBBINS GELLER RUDMAN & DOWD LLP 200 South Wacker Drive, 31st Floor Chicago, IL 60606 Telephone: 312/674-4674 312/674-4676 (fax) [email protected] Lead Counsel [Additional counsel appear on signature page.] UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY In re VALEANT PHARMACEUTICALS ) Master No. 3:15-cv-07658-MAS-LHG INTERNATIONAL, INC. SECURITIES ) LITIGATION ) CLASS ACTION ) ) CONSOLIDATED COMPLAINT FOR This Document Relates To: ) VIOLATIONS OF THE FEDERAL ) SECURITIES LAWS ALL ACTIONS. ) ) DEMAND FOR JURY TRIAL Case 3:15-cv-07658-MAS-LHG Document 80 Filed 06/24/16 Page 2 of 286 PageID: 2367 TABLE OF CONTENTS INTRODUCTION ...........................................................................................................................1 JURISDICTION AND VENUE ....................................................................................................13 EXCHANGE ACT CLAIMS ........................................................................................................14 Plaintiffs .............................................................................................................................14 Defendants .........................................................................................................................15 Non-Defendant Relevant Parties ........................................................................................20 FACTUAL BACKGROUND ........................................................................................................21 Valeant’s Non-Traditional Business Strategy ....................................................................21 Price Gouging ....................................................................................................................22 Valeant’s Deceptive Use of Patient Assistance .................................................................26 Valeant’s Clandestine Pharmacy Network ........................................................................30 Philidor’s Efforts to Deceive Payors..................................................................................37 The R&O Lawsuit ..............................................................................................................44 Valeant’s Use of Philidor to Book Fictitious Sales ...........................................................47 DEFENDANTS’ FALSE AND MISLEADING STATEMENTS DURING THE CLASS PERIOD .............................................................................................................................48 THE TRUTH BEGINS TO EMERGE ........................................................................................106 Valeant’s Price Gouging Practices Are Revealed ............................................................106 Valeant’s Secret Relationship with Philidor is Revealed ................................................109 Valeant Reveals that the Deceptive Practices Require Philidor’s Closure ......................115 Additional Disclosures of the Financial Impact of the Fraud ..........................................121 Valeant’s Fraudulent Accounting is Revealed .................................................................124 POST-CLASS PERIOD DEVELOPMENTS ..............................................................................129 VALEANT’S FINANCIAL STATEMENTS WERE MATERIALLY MISSTATED ...............133 Case 3:15-cv-07658-MAS-LHG Document 80 Filed 06/24/16 Page 3 of 286 PageID: 2368 ADDITIONAL SCIENTER ALLEGATIONS ............................................................................154 The Individual Defendants’ Role in Valeant’s Non-Traditional Business Strategy ........155 The Individual Defendants’ Monitoring of and Decision to Close Philidor ....................160 Valeant’s Refusal to Pursue Remedies Against Wrongdoers ..........................................163 Valeant Admits it Made Misrepresentations During the Class Period ............................164 Pearson’s and Schiller’s Admissions and Obstruction During the Congressional Hearings ...............................................................................................................165 Executive Departures .......................................................................................................171 Pearson’s Misrepresentations to Ackman ........................................................................173 Executive Compensation .................................................................................................176 Inflating Valeant’s Stock Price to Facilitate Cheaper Acquisitions .................................179 LOSS CAUSATION/ECONOMIC LOSS ..................................................................................180 PRESUMPTION OF RELIANCE ...............................................................................................204 THE SAFE HARBOR DOES NOT APPLY ...............................................................................206 CLAIMS FOR RELIEF UNDER THE EXCHANGE ACT........................................................207 COUNT I For Violations of Section 10(b) of the Exchange Act and Rule 10b-5 ...........207 COUNT II For Violations of Section 20(a) of the Exchange Act ...................................209 SECURITIES ACT CLAIMS ......................................................................................................211 Securities Act Parties .......................................................................................................213 Plaintiffs ...........................................................................................................................213 Defendants .......................................................................................................................214 CLAIMS FOR RELIEF UNDER THE SECURITIES ACT .......................................................219 COUNT III For Violations of Section 12(a)(2) of the Securities Act in Connection with the July 2013 Debt Offering ..................................................................219 - iii - Case 3:15-cv-07658-MAS-LHG Document 80 Filed 06/24/16 Page 4 of 286 PageID: 2369 COUNT IV For Violations of Section 12(a)(2) of the Securities Act in Connection with the December 2013 Debt Offering .........................................................227 COUNT V For Violations of Section 12(a)(2) of the Securities Act in Connection with the January 2015 Debt Offering .............................................................234 COUNT VI For Violations of Section 12(a)(2) of the Securities Act in Connection with the March 2015 Debt Offering ...............................................................243 COUNT VII For Violations of Section 11 of the Securities Act in Connection with the March 2015 Stock Offering .............................................................253 COUNT VIII For Violations of Section 12(a)(2) of the Securities Act in Connection with the March 2015 Stock Offering ..........................................274 COUNT IX For Violations of Section 15 of the Securities Act ......................................276 CLASS ACTION ALLEGATIONS ............................................................................................278 PRAYER FOR RELIEF ..............................................................................................................279 JURY DEMAND .........................................................................................................................280 - iv - Case 3:15-cv-07658-MAS-LHG Document 80 Filed 06/24/16 Page 5 of 286 PageID: 2370 Plaintiffs, by their undersigned attorneys, individually and on behalf of all other persons similarly situated, herein allege the following based upon personal knowledge as to Plaintiffs and Plaintiffs’ own acts, and upon information and belief as to all other matters, based on the investigation of Plaintiffs’ attorneys. This investigation included, but was not limited to, a review and analysis of: Defendants’ public documents, conference calls, announcements, and United States Securities and Exchange Commission (“SEC”) filings; releases published by and regarding Valeant Pharmaceuticals International, Inc. (“Valeant” or “Company”); analyst reports and advisories about the Company; Valeant’s own documents, which included emails, correspondence, and agreements by or among Valeant, Philidor Rx Services, LLC (“Philidor”), and R&O Pharmacy (“R&O”); Congressional hearings, Defendants’ testimony, interrogatory responses, and documents submitted by Valeant relating to those hearings; former Philidor and Valeant employee statements; media articles; and other publicly available information. Plaintiffs believe that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. INTRODUCTION 1. This securities class action is brought on behalf of purchasers of Valeant equity securities and senior notes between January 4, 2013 and March 15, 2016, inclusive (“Class” and “Class Period”), seeking to pursue remedies under §§10(b) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), SEC Rule 10b-5 promulgated thereunder (17 C.F.R. §240.10b-5), and §§11, 12(a)(2), and 15
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