Judge signals early support for Valeant settlement, company says

A judge indicated early support for a settlement involving Valeant and Pershing Square. (Valeant)

Valeant and Pershing Square are one step closer to putting years of insider trading allegations in the past. After reaching a settlement proposal worth $290 million last month, the court has indicated its early support for the deal. 

The court vacated the trial date and "indicated its preliminary approval of the settlement subject to submission of final papers and associated hearings," a Valeant spokesperson said Wednesday. 

"We continue to believe the resolution of this legacy litigation is in the best interests of the company, because it enables us to focus our attention and resources on the transformation of Valeant," she added. 

The allegations stem from Valeant's attempted Allergan takeover in 2014. Ahead of Valeant's announcement it was pursuing Allergan, Pershing Square manager and Valeant supporter Bill Ackman bought up a 9.7% share in Allergan to help facilitate a buyout. The value of that investment jumped dramatically when news of the potential deal broke, and ex-Allergan shareholders sued for insider trading. 

Valeant and Ackman have said the cases have no merit. In a statement accompanying the settlement proposal, Valeant CEO Joseph Papa said that while "we always have remained confident in our position and were prepared to try these cases on their merits, this agreement will eliminate disruption to our business." 

Originally, Valeant agreed to pay 60% of any settlement, but in December Pershing Square "acquired control of the settlement of the litigation in exchange for agreeing to pay a greater percentage." 

Valeant will now pay 33% of the settlement, or $96.25 million. Pershing Square will pay $193.75 million if the deal goes through. Both companies admit no fault under the agreement.

In another recent legal development against Valeant, the drugmaker and former executives failed in an attempt to get a shareholder suit thrown out. That case, highlighted in a recent note by Wells Fargo analyst David Maris, alleges the company was dishonest about business practices, that when unveiled, devastated its share price.  

Maris wrote that the decision "serves as a good reminder that this case continues to move forward, as do numerous other securities-related suits, inquiries, and investigations, including those from the SEC and NY Southern District." 

"We continue to believe that litigation and investigative risks are underappreciated risks for Valeant," Maris wrote. 

Valeant's representative didn't immediately respond to a request for comment on the suit.

Since the failed Allergan buyout attempt, Valeant has faced significant troubles and Pershing Square ended up losing billions on its investment in the drugmaker. Papa came on board in 2016 to help facilitate a turnaround after the company lost more than 85% of its value.  

Allergan ultimately sold to Actavis for $66 billion and the combined company took Allergan's moniker.