Insider trading case against Ackman, Valeant approaches trial: report

A judge declined to toss insider trading charges against Valeant and Pershing Square as the case approaches a trial.

Valeant and former activist partner Bill Ackman may once again be thwarted in their efforts to get insider trading claims against them tossed. 

On Friday, U.S. District Judge David Carter issued a tentative ruling denying the pair’s request to throw out the allegations, Bloomberg reports. And if the parties don't reach a settlement, the case is slated for trial next month. 

Those allegations came from Allergan shareholders and center on Ackman’s role in Valeant’s failed attempt to take over the drugmaker, which later was bought by Actavis. The way they see it, Ackman’s purchase of a 9.7% stake in Allergan—which he picked up to help facilitate a Valeant takeover—was a no-no, since the value of that stake skyrocketed after Valeant took its proposal public. 

The judge seems to be leaning in the Allergan investors’ favor on a couple of key issues regarding what constitutes insider trading, the news service noted, based on comments from Valeant lawyer John Hueston. But according to Bloomberg and court filings, the hearing adjourned without a final decision. 

RELATED: U.S. judge orders Valeant, Ackman to face insider trading suit 

In their complaint from December 2014, the Allergan shareholders say Valeant tipped Ackman's Pershing Square hedge fund off to the fact that it was looking at buying Allergan. Pershing Square then acquired shares before the broader market knew in order to make a significant profit, the shareholders say. 

"Ackman and Pershing Square were only able to generate such outsized profits unlawfully by … taking advantage of insider information—provided by Valeant—and acquiring a very significant stake in Allergan ahead of the broader market in violation of the securities laws," the filing states. 

When Valeant announced its intention to negotiate a merger with Allergan in April 2014, the value of Pershing Square's investment in the California pharma company grew by $1 billion, according to the complaint.  

Valeant, for its part, said in a statement that it had "always anticipated that this is a case that may proceed to trial."

"We remain confident in our position and will vigorously defend the company in these matters. We look forward to a trial on the merits of the case," a spokeswoman said via email.

The saga has been playing out for several years, with the same U.S. judge refusing to toss the allegations back in 2015. More recently, Valeant and Pershing Square agreed to split their legal costs. Under the deal, Valeant will pick up 60% of any potential settlement the defendants can reach with Allergan shareholders. 

As industry watchers know, Valeant and Pershing Square have had their share of struggles since the deal proposal fell through and Allergan instead went to Actavis. Valeant's shares have declined dramatically as scrutiny on the drugmaker's strategies intensified, and Pershing Square lost billions on its drawn-out Valeant investment.

Editor's note: This story has been updated with comments from a Valeant spokeswoman.