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Valeant and Pershing take $290m hit over insider trading

Published on 02/01/18 at 09:26am

Valeant Pharmaceuticals will be hoping it can begin 2018 as a fresh start, after a turbulent few years, to say the least, with the settlement of a case claiming that it had been involved in alleged insider trading in 2014.

The case relates to Pershing Square, a hedge fund, and its CEO, Bill Ackman, who had previously been a big supporter of the pharmaceutical company. The hedge fund had bought billions of dollars’ worth of share in Allergan, whilst holding a significant number of shares in Valeant, not long before the latter company began to push for a deal to acquire the former company.

The move led to cries of insider trading from those who had sold shares to Pershing, who later profited handsomely when Actavis stepped in to acquire Allergan for $70 billion.

Now, Valeant and Pershing have agreed to settle the case before it went to court on 30 January, paying $290 million to end the proceedings.

Disagreement over the course of the litigation has led Pershing to take a greater hit than it had previously agreed, with it covering $193.75 million of the settlement and Valeant paying $96.25 million.

This goes against the previous agreement that had seen Valeant decide to pay 60% of the cost; the reasons behind this change was suggested as being due to disagreement over the “timing” and “desirability” of settling the case.

“We continue to believe the case had absolutely no merit,” said Ackman. “We decided, however, that it was in the best interest of our investors to settle the case now instead of continuing to spend substantial time and resources pursuing the litigation.”

For Ackman and Pershing, it has been an expensive alliance with Valeant. After the pharma company failed to takeover Allergan, Ackman strengthened his position in the company.

The move proved to be unwise, as the acquisition-spree and price hiking strategy Valeant had taken, on top of some questionable practices with Philidor Rx Service, led to a downward spiral for the company. In turn, this led to a nearly $4 billion loss for Ackman and Pershing, he will be aiming for this latest loss to be the last incurred over the ill-fated venture.

Ben Hargreaves

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