Judge Denies Valeant’s Motion to Dismiss Insider Trading Lawsuit

In another blow to embattled drugmaker Valeant Pharmaceuticals, a federal judge has denied the company’s motion to dismiss an insider trading lawsuit filed by shareholders.

The lawsuit was initiated by investors who sold shares of Allergan between Feb. 25 and April 21, 2014. They accuse Valeant and hedge fund manager William Ackman of failing to provide legally required information in the company’s failed $51 billion bid for Allergan in April 2014. They allege that Ackman's Pershing Square Capital Management quietly acquired 9.7 percent of Allergan’s stock two months before Valeant’s bid — a move that runs afoul of the Securities Exchange Act, which prohibits trading while in possession of nonpublic material information related to the offer.

Judge David Carter of the U.S. District Court for the Central District of California determined that the defendants failed to show why the case should be dismissed. They had claimed, among other arguments, that two of the plaintiffs lacked standing to sue for insider trading.