Discovery Letter to Andy Davenport

7/23/2019 Discovery Letter to Andy Davenport

1/65

EXHIBIT N

Case 3:15-cv-07658-MAS-LHG Document 9-16 Filed 11/20/15 Page 1 of 65 PageID: 210


2/65

R o b b i n s

G e l l e r

R u d m a n

&

o v u d

~ ~

J a c k R e i s e

j r e i s e @ r g r d l a w . c o m

Andrew

Davenport

P h i l i d o r I~

e r v i c e s LLC

330 .

Warminster Rd 350

Hatboro,PA

19040

A t l a n t a

Chicago M e l v i l l e P h i l a d e l p h i a

San F r a n c i s c o

Boca

a t o n

M a n h a t t a n N a s h v i l l e San Diego W a s h i n g t o n ,

DC

November

13,

2015

VIAOVERNIGHT

DELIVERY

Re: P o t t e r v .

Valeant harmaceuticals n t e r n a t i o n a l , Inc.

N o .

:15-cv-07658 D.N.J.)

Dear

Mr.

avenport:

We

e p r e s e n t

P l a i n t i f f Laura P o t t e r i n

t h e ab ove- r e f e r e n c e d s e c u r i t i e s

f r a u d

a c t i o n a g a i n s t

V a l e a n t

P h a r m a c e u t i c a l s I n t e r n a t i o n a l ,

I n c . ( V a l e a n t ) ,

J .

Michael

P e a r s o n ,

Howard B. S c h i l l e r ,

and

Robert

L.

R o s i e l l o

( c o l l e c t i v e l y ,

D e f e n d a n t s ) .

A

opy of h e complaint i n

our a c t i o n

i s

a t t a c h e d h e r e t o .

Based on our

i n v e s t i g a t i o n t o d a t e ,

a s w e l l

a s p u b l i c

comments

m ade

b y

V a l e a n t and i t s

e x e c u t i v e s ,

we

n d e r s t a n d

t h a t P h i l i d o r

Rx

e r v i c e s

LLC P h i l i d o r )

and i t s o f f i c e r s , d i r e c t o r s ,

owners,

employees,

and a g e n t s

a r e

i n p o s s e s s i o n

of

numerous

documents r e l e v a n t t o

our

c l a i m s

a g a i n s t

D e f e n d a n t s . I n l i g h t of

h e f a c t

t h a t

P h i l i d o r i s going

o u t of

u s i n e s s a s soon

s

p o s s i b l e , b u t

no

l a t e r

t h a n

January

30,

2016

(as

s t a t e d

b y

V a l e a n t

CEO

.

Michael Pearson

on November

1 0 ,

2015),

you a r e hereby

n o t i f i e d t h a t we

n t e n d t o subpoena P h i l i d o r , and

t h a t

P h i l i d o r , i t s o f f i c e r s ,

d i r e c t o r s ,

owners,

employees, and

a g e n t s

must

a k e

a l l

a p p r o p r i a t e s t e p s

t o

p r e s e r v e

a l l p o t e n t i a l l y

r e l e v a n t

documents

and

n f o r m a t i o n ,

i n c l u d i n g

e l e c t r o n i c a l l y

s t o r e d i n f o r m a t i o n , i n

t h e i r

p o s s e s s i o n

o r

c o n t r o l .

Enclosed s

a

r a f t

Schedule

A

d e n t i f y i n g

t h e docum ents and t o p i c s

of n f o r m a t i o n

t h a t

we i l l

s e e k .

Should

you hav e any

q u e s t i o n s ,

p l e a s e do

n o t h e s i t a t e t o c o n t a c t

m e.

S i n c e r e l y , :

~ ~

:

~ , . ~ ~ ' ~ ~ J A C K

R E I S E

J R : c t

E n c l o s u r e s

120

a s t P a l m e t t o

P a r k

Road

S u i t e 500 Boc a

a t o n , FL

33432

T e l 561

750

3000 Fax 561 750

3364

w w w . r g r d l a w . c o m

Q2 2

~



3/65

COHN LIFLAND PEARLMANHERRMANN & KNOPF LLP

PETER S. PEARLMANPark 80 West-Plaza One250 Pehle Avenue, Suite 401Saddle Brook, NJ 07663Telephone: 201/845-9600201/845-9423 (fax)

[email protected]

ROBBINS GELLER RUDMAN &DOWD LLP

ROBERT J. ROBBINS120 East Palmetto Park Road

Suite 500Boca Raton, FL 33432Telephone: 561/750-3000561/750-3364 (fax)[email protected]

Attorneys for Plaintiff

[Additional counsel appear on signature page.]

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

LAURA POTTER, Individually and onBehalf of All Others Similarly Situated,

Plaintiff,

vs.

VALEANT PHARMACEUTICALSINTERNATIONAL, INC., J. MICHAELPEARSON, HOWARD B. SCHILLER,and ROBERT L. ROSIELLO,

Defendants.

))))))

)))))))

o.

COMPLAINT FOR VIOLATIONS OFFEDERAL SECURITIES LAWS

CLASS ACTION

DEMAND FOR JURY TRIAL

Case 3:15-cv-07658 Document 1 Filed 10/22/15 Page 1 of 41 PageID: 1Case 3:15-cv-07658-MAS-LHG Document 9-16 Filed 11/20/15 Page 3 of 65 PageID: 212


4/65

- 1 -

Plaintiff Laura Potter (Plaintiff), who resides at 1112 West Avenue,

Richmond, Virginia 23220, by her undersigned attorneys, individually and on behalf

of all other persons similarly situated, alleges the following based upon personal

knowledge as to Plaintiff and Plaintiffs own acts, and information and belief as to all

other matters, based upon, inter alia, the investigation conducted by and through

Plaintiffs attorneys, which included, among other things, a review of Defendants

public documents, conference calls, announcements, and United States Securities and

Exchange Commission (SEC) filings; wire and press releases published by and

regarding Valeant Pharmaceuticals International, Inc. (Valeant or the Company);

analysts reports and advisories about the Company; and information readily

obtainable on the Internet. Plaintiff believes that substantial evidentiary support will

exist for the allegations set forth herein after a reasonable opportunity for discovery.

NATURE OF THE ACTION

1. This is a federal securities class action on behalf of all persons who

purchased or otherwise acquired Valeant stock between February 23, 2015 and

October 20, 2015, inclusive (the Class Period), against Valeant and certain of its

officers and/or directors for violations of the Securities Exchange Act of 1934 (1934

Act). These claims are asserted against Valeant and certain of its officers and/or

directors who made materially false and misleading statements during the Class

Period in press releases, analyst conference calls, and SEC filings.



5/65

- 2 -

2. Valeant is a specialty pharmaceutical and medical device company that

develops, manufactures, and markets a range of branded, generic, and branded

generic pharmaceuticals, over-the-counter products, and medical devices, such as

contact lenses, intraocular lenses, ophthalmic surgical equipment, and aesthetics

devices. Valeant utilizes two operating and reportable segments: (a) Developed

Markets; and (b) Emerging Markets.

3. The Company states that its strategy is to focus on coregeographies

and therapeutic classes that offer attractive growth opportunities while maintaining

our lower selling, general and administrative cost model and decentralized operating

structure. It also states that a critical element of its strategy is business

development through acquisitions.

4. In that regard, Valeant is a serial acquirer, using an advantageous tax

structure to make purchases and then slashing research and development costs to

boost profits. Within the past five years, Valeant completed more than $30 billon in

deals, including the purchase of Bausch & Lomb Inc. in 2013 and the purchase of

Salix Pharmaceuticals, Ltd. (Salix) in 2015.

5. In large measure, the Companys tactics worked. Revenues skyrocketed

along with the Companys stock price, which climbed from $173.26 on February 20,

2015just before the start of the Class Periodto $262.52 on August 5, 2015, an

increase of more than 50%.



6/65

- 3 -

6. But questions surrounding the Companys business practices began

flooding the market in late September 2015. For example, on September 28, 2015,

the Company issued a press release announcing that it had distributed a letter to its

employees relating to recent changes in the price of Valeant stock to address concern

that Valeants business model and strategy is dependent upon large price increases

in our U.S. pharmaceutical business and [c]oncern around our exposure to U.S.

government drug price reimbursement. That same day, it was reported by

Bloombergthat [a]ll Democratic members of House Oversight and Government

Reform [Committee] sent a letter to Chairman Jason Chaffetz urging him to subpoena

Valeant Pharmaceuticals documents related to massive price increases for two

drugs used to treat heart conditions, according to an e-mailed statement.

7. In the September 28, 2015 Congressional Committee letter, U.S.

Representatives wrote, in part:

[I]n February, Valeant purchased the rights to sell Nitropress, which isused to treat congestive heart failure and hypertensive episodes, andIsuprel, which is used to treat heart block and abnormal heart rhythm.The same day, Valeant increased the prices of these drugs to $805.61 and$1,346.62, respectively (increases of 212% and 525%). When askedabout its price increases, a Valeant spokeswoman responded: Our dutyis to our shareholders and to maximize the value of the drugs.

8. The letter also revealed that on July 31, 2015, staff members from the

House Oversight Committee had a joint call with representatives from Valeant, but

that they failed to adequately answer our questions about the basis for their



7/65

- 4 -

skyrocketing prices. It also stated that on August 12, 2015, Ranking Member

Cummings sent the document request to Valeant and that on September 3, 2015,

Valeant rejected Ranking Member Cummings request in a dismissive two-page

letter that refused to provide any of the requested documents.

9. After closing at $199.47 on September 25, 2015, the price of Valeant

stock dropped $32.97 per share, or more than 16%, to close at $166.50 per share on

September 28, 2015. The stock continued its decline on September 29, 2015, falling

an additional $8.42, or 5%, to close at $158.08 as media outlets reported that Valeant

was in [the] crosshairs of U.S. Congress for its practice of engaging in a business

strategy of buying old neglected drugs and turning them into high-price specialty

drugs.

10. On October 5, 2015, as U.S. stocks saw broad increases, shares of

Valeant dropped again, falling by $18.86, or more than 10%, to close at $163.46 as a

result of, as Jim Cramer stated on CNBCs Mad Dash segment, a continued

overhang thanks to the U.S. Congress and its investigation into rising drug prices,

specifically Valeants drugs. On that day, The New York Times, in an article titled

A Drug Companys Price Tactics Pinch Insurers and Consumers, reported in depth

on Valeant, further detailing the skyrocketing costs of the Companys drugs,

including their impact on Medicare and patients. Among other things, the article

described how in 2015 alone, Valeant raised prices on its brand-name drugs an



8/65

- 5 -

average of 66 percent. . . about five times as much as its closest industry peers. The

article stated that Valeant is known for buying companies and laying off their

employees to achieve savings and that it spendsan amount equivalent to only 3

percent of its sales on research and development compared to [t]raditional big drug

companies [that] spend 15 to 20 percent of sales on research and development. The

article shed specific light on how Valeants egregiousdrug price increases were

negatively impacting hospitals:

Jeffrey M. Rosner, the senior director for pharmacy sourcing andpurchasing at the Cleveland Clinic, said that nine drugs with particularlyegregious price increases had cost the hospital an additional $11.2million annually, an increase of about 10 percent in drug costs forhospitalized patients. And Valeants products represented 80 percent ofthat additional cost, he said.

The price of one Valeant drug, Mephyton, which helps blood clot better,has been increased eight times since July 2014, he said, and now costsabout $58.76 a tablet, up from $9.37. The price of another, Edecrin, adiuretic, has gone up nine times since May 2014 and is now at $4,600 avial, up from about $470. When his staff called to inquire, Valeantrefused to discuss pricing over the phone, Mr. Rosner said.

11. The October 5, 2015New York Timesarticle also called into question

Valeants Chief Executive Officer (CEO) J. Michael Pearsons (Pearson)

September 28, 2015 letter to Company employees, which argued that increased prices

accounted for only a small and declining part of the Companys business, stating,

Valeant is well positioned for strong organic growth, even assuming little to no price

increases. But, as the October 5, 2015 article pointed out, the Companys second



9/65

- 6 -

quarter 2015 financial results filed on Form 10-Q with the SEC stated that Valeants

growth in the United States and other developed markets was driven primarily by

price, not by increased volume.

12. Then, after the market closed on October 14, 2015, Valeant issued a

press release revealing that it recently received subpoenas from both the U.S.

Attorneys Office for the District of Massachusetts and the U.S. Attorneys Office for

the Southern District of New York. The Company stated that most of the materials

requested by the subpoenas relate to documents with respect to our patient assistance

programs, and also include requests relating to financial support provided by the

company for patients, distribution of the companys products, information provided

to the Centers for Medicare and Medicaid Services, and pricing decisions.

13. On October 15, 2015, the price of Valeant stock dropped by $8.42 per

share, or 4.75%, to close at $168.87 on unusually high trading volume of more than

10 million shares. That day,Bloombergreported that U.S. Senator Claire McCaskill

wrote in an emailed statement that [i]t appears obvious to me that Valeant has been

anything but responsive or transparentit refused to take any action until served with

federal subpoenas, and is still refusing to provide answers to many of the questions

Ive asked.

14. On October 19, 2015, the Company reported its third quarter 2015

financial results and hosted an earnings conference call. Although the Company



10/65

- 7 -

raised its fourth quarter and full year 2015 revenue and earnings per share (EPS)

guidance, the price of Valeant stock crumbled an additional 7.7% that day as the

Company announced a shift to its business model and questions swirled regarding a

previously unknown connection between the Company and a specialty pharmacy

called Philidor Rx Services, LLC (Philidor).

15. Specifically, the Company stated that it may spin-off its line of drugs for

which it had pushed through significant price increases that had drawn regulatory

scrutiny, and that the Company would focus less on acquisitions that depend on

buying old treatments and raising their prices. To that end, Pearson discussed

seriously considering spinning off or selling the Neuro and Other portfolio, which

is dependent on price and that internal R&D will become more of a focus.

16. In a slide deck accompanying the earnings conference call, Valeant

included a list of anticipated Questions from Investors. One of the anticipated

questionsdespite the fact that Valeant had not previously discussed Philidor in its

SEC filingswas How does Valeant work with specialty pharmacies and what is

Valeants relationship with Philidor. In the presentation, Valeant stated, in part:

We have viewed our relationship with Philidor and our other

specialty pharmacies as proprietary and as one of our competitiveadvantages

Similar to many pharmaceutical companies in the U.S., anincreasing percentage of our revenue is coming from productsdispensed through multiple specialty pharmacies



11/65

- 8 -

We find specialty pharmacies improve patients access tomedicines at an affordable price and help ensure physicians areable to prescribe the medications they believe most appropriate fortheir patients

In almost all cases, our inventory with specialty pharmacies andthe title for our medicines only transfer to the pharmacy when theactual prescription is filled this significantly reduces ourdistribution fees and product returns. Less than

5% of our U.S. channel inventory sits in the specialty pharmacychannel

Philidor, one of our specialty pharmacy partners, providesprescription services to patients across the country, and providesadministrative services for our copay cards and is a dispensarythat fills prescriptions. We have a contractual relationship withPhilidor and late last year we purchased an option to acquirePhilidor

Based on a VIE (variable interest entity) assessment in accordancewith ASC 810, we consolidate the financials of Philidor.Inventory held at Philidor remains on Valeants books and is notincluded in the specialty pharmacy channel inventory

For many of our dermatology products, many of our specialtypharmacies, including Philidor, dispense Valeant medicationsbefore adjudication of the reimbursement may be finalized.Patients get their medicines more quickly and Valeant takes therisk for non-reimbursement

We understand that Philidor:

Provides services under our programs for commercially

insured and cashpaying claims only. Any claim that wouldbe reimbursed in whole or in part by government insuranceis not eligible for our co-pay subsidy programs

Does not restrict prescriptions it fills to any particularmanufacturers (including Valeant)



12/65

- 9 -

Dispenses generic products as specified in patientsprescription or as requested by patient

17. During the October 19, 2015 call, Pearson admitted that the Company

had previously omitted disclosure of the nature of its relationship with specialty

pharmacies, stating:

The topic of specialty pharmacies has not been a focus of ours on pastcalls because we believe this was a competitive advantage that we didnot want to disclose to our competitors.

18. Pearson also stated that an increasing percentage of our revenue is

coming from products dispensed through multiple specialty pharmacies.

19. The next question addressed on the slide deck involved R&O Pharmacy,

LLC (R&O) and was titled, Why did Valeants General Counsel send a letter

inquiring about the $69M owed to Valeant by R&O pharmacy? The Companys

slide deck stated that R&O is one of the specialty pharmacies in our network and

that Valeant shipped approximately $69 million at WAC to R&O, representing

approximately $25 million in net revenue to Valeant, and that R&O sold a

substantial amount of Valeant product but was improperly holding significant

amounts it received from payers. Pearson also saidthat inventory held by R&O

remains on Valeants financial statements.

20. As the call continued, Pearson declined to discuss the subpoenas from

federal prosecutors, stating, [w]e will not be answering questions and providing

more information that was already covered in the press release on these matters.



13/65

- 10 -

21. Reporting on the newly disclosed relationship between Valeant and

certain specialty pharmacies, on October 19, 2015, The New York Timespublished an

article entitled, Drug Makers Sidestep Barriers on Pricing. The article discussed

how Valeant uses Philidor to keep the health system paying for high-priced drugs

and that Valeant uses Philidor to keep prices high for its dermatology products,

quoting a Florida dermatologist as stating that Valeants program is designed to

buffer physicians from insurers and complaints from their patients about high prices.

Discussing Philidor, the article stated, in part:

Philidor, based in Hatboro, Pa., reveals little about itself of its website. Itwas denied a license in California in 2004 because, the state said, itsapplication had not truthfully identified its owners and financial officers.Calls on Monday asking to speak to Philidor executives were notreturned.

Valeant had said little about Philidor until Monday, when J. MichaelPearson, Valeants chief executive, revealed on his companys quarterlyearnings call that Valeant had purchased an option to acquire Philidorlate last year. He said that Valeant consolidated Philidors results in itsown financial reports.

* * *

Specialty pharmacies are most known for providing patients withassistance with complex drugs, many of them requiring refrigeration andinjections, for diseases like cancer, multiple sclerosis and rare genetic

disorders. But the drugs dispensed through the specialty pharmaciesused by. . . Valeant are for common ailments like arthritis pain, acne, andtoenail fungus.

22. Then, on October 21, 2015, Citron Research published a report entitled,

Valeant: Could this be the Pharmaceutical Enron? Among other things, the report



14/65

- 11 -

questioned why Valeant a major big cap pharma, a darling of the hedge fund crowd,

a suitor of Allergan and an aggressive acquirer of pharmas like Salix, Bausch &

Lomb, etc., etc., would be secretly maneuvering to buy a little known pharmacy

with a dubious ownership structure and questioned [w]hy was this entity NEVER

disclosed in any prior company disclosure?

23. Continuing, the Citron report charged that Valeant is using a network of

specialty mail-order pharmacies that Valeant actually controls to prop up sales of its

high-priced drugs and to keep patients and their insurance companies from switching

to less costly generics. In addition, the Citron report brought to light a recently

issued investigative report from Southern Investigative Reporting Foundation that

questioned the nature of Valeants relationship with specialty pharmacies. Citrons

report asserts that Philidor and another specialty pharmacy tied to Valeant, R&O, are

actually the same company with the same management. The Citron report included

images of documents from both the R&O and Philidor websites indicating that the

two companies were interrelated, including overlapping privacy notices, identical

toll-free numbers to reach their privacy officer, and a facsimile number from the

R&O website that linked to Philidor. The report continued:

And as if this isnt enough, it appears to Citron that Va leant/Philidorhave created an entire network of phantom captive pharmacies. . . thesame privacy notice appears on several other ghost ship putative

pharmacy websites.

http://westwilshirepharma.com/downloads/ww_npp.pdf



15/65

- 12 -

http://saferxpharma.com/downloads/saferx_npp.pdf

http://orbitpharmacy.com/downloads/orbit_npp.pdf

Oh, and as by mere coincidence, these all have the same Privacy Officer

contact phone number: (855) 815-7688. And these domains were allregistered on the same day!

24. Ultimately, the Citron report posited that Valeant was using a secretive

relationship with Philidor to store inventory and record those transactions as sales,

and that the Company uses phantom accounts to fool auditors and investors.

Summarizing the Citron report, Bloomberg reported that Valeant shares took a

beating, falling by more than 30 percent [intra-day], after a stock-commentary site

run by a short seller accused the company of an Enron-like strategy of recording fake

sales by using phony customers.

25. Among other things, the Citron report also shed additional light on

issues between R&O and Valeant. Expanding on the mention of R&O during the

Companys October 19, 2015 earnings call, the Citron report described a lawsuit filed

in the United States District Court for the Central District of California in which

R&O sued Valeant and alleged it had gotten a letter from Valeants general counsel

on September 4, 2015 indicating that R&O owed Valeant more than $69 million.

R&O, however, stated it never received a previous invoice from Valeant for any

amount and that either Valeant and R&O are victims of a massive fraud perpetuated

by third parties or that Valeant is conspiring with other persons or entities to



16/65

- 13 -

perpetuate a massive fraud against R&O and others. Commenting on the lawsuit,

Citron stated it was evidence that Valeant is creating invoices to deceive the auditors

and book revenue and that Valeant/Philidor have created an entire network of

phantom captive pharmacies to create fake sales of drugs or to avoid scrutiny from

auditors.

26. The market reacted swiftly to the disclosures in the Citron report. On

October 21, 2015, trading in Valeant shares was halted on a circuit breaker because

of the rapid price decline after Citron published its report on its website. When

trading resumed, Valeant shares fell nearly 40%, at which point trading was again

suspended. After swooning down nearly $60 a share in intra-day trading, Valeant

shares closed down approximately 19%, or $28.42 per share, on highly abnormal

trading volume of more than 88 million shares, paring losses as the Company issued

a denial of the charges in the Citron report.1

27. The following day, the price of Valeant shares dropped again after an

analyst who had advised buying the stock for more than two years downgraded the

shares, citing questions about Valeants close ties to specialty pharmacies that

1 After the market closed on October 21, 2015, Philidor issued a press releasedisclosing that it did indeed have a contractual relationship with affiliated

pharmacies, including R&O, and stating that Philidor does not currently have adirect equity ownership in R&O Pharmacy or the affiliated pharmacies, but does havea contractual right to acquire the pharmacies now or in the future subject to regulatoryapproval.



17/65

- 14 -

distribute its drugs. BMO Capital Markets (BMO) stated it cannot defend the

specialty structure and downgraded the shares to market perform. Continuing,

BMOs report stated, Weve been strong, vocal Valeant bulls but that we find

Valeants arrangements with specialty pharmacy Philidor as not just aggressive, but

questionable.

JURISDICTION AND VENUE

28. Jurisdiction is conferred by Section 27 of the 1934 Act, 15 U.S.C. 78aa.

The claims asserted herein arise under Sections 10(b) and 20(a) of the 1934 Act, 15

U.S.C. 78j(b) and 78t(a), and SEC Rule 10b-5, 17 C.F.R. 240.10b-5.

29. Venue is proper in this District pursuant to Section 27 of the 1934 Act.

The violations of law complained of herein occurred in part in this District, including

the dissemination of materially false and misleading statements complained of herein

into this District. Valeants United States headquarters are located in this District at

400 Somerset Corporate Boulevard, Bridgewater, New Jersey 08807.

30. In connection with the acts alleged in this Complaint, Defendants,

directly or indirectly, used the means and instrumentalities of interstate commerce,

including, but not limited to, the mails, interstate telephone communications, and the

facilities of the national securities markets. Valeant trades in an efficient market on

the New York Stock Exchange (NYSE).



18/65

- 15 -

PARTIES

31. Plaintiff Laura Potter purchased Valeant stock as described in the

attached certification and suffered damages as a result of the securities fraud alleged

herein.

32. Defendant Valeant Pharmaceuticals International, Inc. is incorporated in

British Columbia, Canada and has its United States headquarters in this District.

Shares of Valeant stock trade on the NYSE under the ticker symbol VRX.

33.

Defendant J. Michael Pearson is and at all relevant times was CEO and

Chairman of Valeants board of directors.

34. Defendant Howard B. Schiller (Schiller) was an Executive Vice

President and the Chief Financial Officer (CFO) of the Company until June 30,

2015, when he resigned those positions. Schiller is a member of the Companys

board of directors and a consultant to the Company.

35. Defendant Robert L. Rosiello (Rosiello) has been the Companys CFO

since July 2015 and is also an Executive Vice President of the Company.

36. Defendants Pearson, Schiller, and Rosiello (collectively, the Individual

Defendants), because of their positions with the Company, possessed the power and

authority to control the contents of Valeants quarterly reports, press releases, and

presentations to securities analysts, money and portfolio managers, and institutional

investors, i.e., the market. They were provided with copies of the Companys reports



19/65

- 16 -

and press releases alleged herein to be misleading prior to or shortly after their

issuance and had the ability and opportunity to prevent their issuance or cause them

to be corrected. Because of their positions with the Company and their access to

material information available to them but not to the public, the Individual

Defendants knew that the adverse facts specified herein had not been disclosed to and

were being concealed from the public and that the positive representations being

made were then materially false and misleading. The Individual Defendants are

liable for the false statements pleaded herein.

FRAUDULENT SCHEME AND COURSE OF BUSINESS

37. Defendants are liable for: (a) making false statements; or (b) failing to

disclose adverse facts known to them about Valeant. Defendants fraudulent scheme

and course of business that operated as a fraud or deceit on purchasers of Valeant

stock was a success, as it: (a) deceived the investing public regarding Valeants

prospects and business; (b) artificially inflated the price of Valeant common stock;

and (c) caused Plaintiff and other members of the Class, as defined below, to

purchase Valeant stock at inflated prices and suffer economic loss when the

revelations set forth herein reached the market.

CLASS ACTION ALLEGATIONS

38. Plaintiff brings this action as a class action pursuant to Rule 23 of the

Federal Rules of Civil Procedure on behalf of all persons who purchased or otherwise



20/65

- 17 -

acquired Valeant stock during the Class Period (the Class). Excluded from the

Class are Defendants and their families; the officers and directors of the Company, at

all relevant times; members of their immediate families and their legal

representatives, heirs, successors, or assigns; and any entity in which Defendants

have or had a controlling interest.

39. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide

substantial benefits to the parties and the Court. Valeant trades on the NYSE and has

more than 341 million shares outstanding, owned by hundreds, if not thousands, of

persons.

40. There is a well-defined community of interest in the questions of law

and fact involved in this case. Questions of law and fact common to the members of

the Class which predominate over questions which may affect individual Class

members include:

(a) whether Defendants violated the 1934 Act;

(b) whether Defendants omitted and/or misrepresented material

facts;

(c) whether Defendants statements omitted material facts necessary

to make the statements made, in light of the circumstances under which they were

made, not misleading;



21/65

- 18 -

(d) whether Defendants knew or recklessly disregarded that their

statements were false and misleading;

(e) whether the price of Valeant stock was artificially inflated; and

(f) the extent of damages sustained by Class members and the

appropriate measure of damages.

41. Plaintiffs claims are typical of those of the Class because Plaintiff and

the Class sustained damages from Defendants wrongful conduct.

42.

Plaintiff will adequately protect the interests of the Class and has

retained counsel who are experienced in class action securities litigation. Plaintiff

has no interests which conflict with those of the Class.

43. A class action is superior to other available methods for the fair and

efficient adjudication of this controversy.

DEFENDANTS FALSE AND MISLEADING STATEMENTS AND

OMISSIONS ISSUED DURING THE CLASS PERIOD

44. On February 22, 2015, the Company issued a press release reporting its

fourth quarter and full year 2014 financial results, and stated that full year 2015

guidance reflecting recent acquisitions, as well as expected business

outperformance would be updated on first quarter 2015 earnings call. The press

release quoted Pearson as stating:

Valeants relentless focus on buil ding diversif ied, durable businesses

with strong organic growth platforms, coupled with disciplined

business development, is paying off for all of our stakeholders.



22/65

- 19 -

Outstanding growth in the U.S., most notably dermatology, offset thenegative impact from foreign exchange. In addition, we continued to seestrong organic growth in several emerging markets such as China, theMiddle East and Russia. With our strong fi ni sh to the year, we are wellpositi oned for another year of outperformance in 2015.

45. Also on February 22, 2015, the Company announced that it agreed to

buy Salix for $158 per share, or approximately $14.5 billion, to add gastrointestinal

drugs to Valeants line of products.

46. On February 25, 2015, the Company filed with the SEC its annual report

on Form 10-K for the year ended December 31, 2014. The report was signed by

Pearson and Schiller, and contained Sarbanes-Oxley (SOX) certification signed by

each of them stating that the annual report did not contain any untrue statements or

omissions of material facts. The 2014 annual report repeated the financial results

found in the February 22, 2015 press release, and also stated, in part:

Our strategy is to focus our business on core geographies and

therapeutic classes that offer attractive growth opportuni ties whi le

maintaini ng our lower sell ing, general and admini strati ve cost model

and decentr ali zed operating structure. We have an established portfolioof durable products with a focus in the eye health and dermatologytherapeutic areas. We believe these products have the potential forstrong operating margins and solid growth and are particularly attractivefor a number of reasons including:

They are largely cash pay, or are reimbursed through privateinsurance, and, as a result, are less dependent on increasing governmentreimbursement pressures than other products;

They tend to have established brand names and do not relyprimarily on patent or regulatory exclusivity;



23/65

- 20 -

They tend to have the potential for line extensions and life-cyclemanagement programs; and

They tend to be smaller on an individual basis, and thereforetypically not the focus of larger pharmaceutical companies.

Another cr i tical element of our strategy is business development. Wehave completed numerous transactions over the past few years to expandour portfolio offering and geographic footprint, including, among others,the acquisitions of Bausch & Lomb Holdings Incorporated (B&L) andMedicis Pharmaceutical Corporation (Medicis). We will continue to

pursue value-added business development opportunities as they arise.

The growth of our business is fur ther augmented through our lower

r isk, output-focused r esearch and development model. This modelallows us to advance certain development programs to drive futurecommercial growth, while minimizing our research and developmentexpense. This is achieved primarily by:

focusing on innovation through our internal research anddevelopment, acquisitions, and in-licensing;

focusing on productivity through measures such as leveragingindustry overcapacity and outsourcing commodity services;

focusing on critical skills and capabilities needed to bring newtechnologies to the market;

pursuing life-cycle management programs for currently marketedproducts to increase such products value during their commercial lives;and

acquiring dossiers and registrations for branded generic products,which require limited manufacturing start-up and development activities.

47. On March 16, 2015, the Company issued a press release announcing that

Valeant and Salix agreed on amended terms to the merger agreement, and that

Valeant increased the offer price to acquire all the outstanding common stock of



24/65

- 21 -

Salix from $158.00 per share to $173.00 per share in cash, for a total value of

approximately $15.8 billion.

48. On March 17, 2015, the Company issued a press release announcing that

it would issue 7,286,432 shares at a price of $199.00 per share in its $1.45 billion

offering of common shares in connection with the Salix acquisition.

49. On March 18, 2015, the Company filed its Prospectus Supplement and

Registration Statement for its offering of $1.45 billion of common shares of Valeant

in connection with the tender offer for Salix in connection with the merger. The

Prospectus stated that shares would be offered at $199 per share for total proceeds of

$1,449,999,968. The Prospectus Supplement stated, in relevant part:



maintaining our low selling, general and administrative (SG&A)

cost structure and decentr ali zed operating model to ensur e decisions

are made close to the customer.

* * *

The growth of our business is fur ther augmented through our lower -

r isk, output-focused research and development model, which allows us

to advance certain development programs to drive future revenue

growth, whi le minimizing our research and development expense. Thisis achieved primarily by:

sourcing innovation through our internal research and

development, as well as through acquisitions and in-licensing;

focusing on productivity in order to minimize costs throughmeasures such as leveraging industry overcapacity andoutsourcing commodity services;



25/65

- 22 -

focusing on critical skills and capabilities needed to bring newtechnologies to the market;

pursuing life-cycle management programs for currently marketedproducts to increase such products value during their commerciallives; and

acquiring dossiers and registrations for branded generic products,which require limited manufacturing start-up and developmentactivities.

50. Discussing the sale of inventory, the Prospectus Supplement stated, in

part:

Even after the inventory held by wholesalers has reached desired levels,wholesalers will make estimates to determine end-user prescriptiondemand, and may not be completely effective in matching theirinventory levels to actual end-user prescription demand. In addition towholesalers, inventory is held at retail pharmacies and other non-wholesale locations over whose buying patterns we wil l have l imited

influence. Adverse changes in economic conditions and other factorsmay cause retail pharmacies to reduce their inventories of the combinedcompanys GI products, which would reduce their orders from

wholesalers and, consequently, the wholesalers orders from thecombined company, even if end-user prescription demand has notchanged. As a result, changes to inventory levels held by wholesalersmay cause the combined companys operating results to fluctuateunexpectedly if the combined companys sales to wholesalers do notmatch end-user prescription demand.

51. On April 1, 2015, the Company issued a press release announcing the

consummation of its merger with Salix.

52. On April 29, 2015, the Company issued a press release announcing its

financial results for the first quarter ended March 31, 2015, as well as increased

guidance for full year 2015. The press release stated, in relevant part:



26/65

- 23 -

2015 First Quarter Results

Total Revenue $2.2 billion; an increase of 16% over the prior yeardespite negative foreign exchange impact of $140 million

o

Excluding negative impact of foreign exchange and lastyears divestiture of the aesthetics injectable business,revenue increased 27% over the prior year

* * *

GAAP EPS $0.21; Cash EPS $2.36, an increase of 34% despitenegative foreign exchange impact of $0.12 over the prior year

o Excluding negative impact of foreign exchange and last

years divestiture of the aesthetics injectable business,Cash EPS increased 50% over the prior year

* * *

2015 Guidance

Increasing Total Revenue to $10.4 - $10.6 billion up from $9.2 -$9.3 billion

Expect Salix Revenue of ~$1.0 billion in 2015

Reflects implementation of wholesaler inventory reductionprogram; plan to reduce Salix wholesaler inventory levelsto approximately 1.5 months by year-end

Increasing Cash EPS to $10.90 - $11.20 per share up from $10.10- $10.40

Expect Same Store Sales Organic Growth of >10% for the second

through fourth quarters of 2015

53. The April 29, 2015 earnings press release quoted Pearson as stating, in

part:



27/65

- 24 -

Our fi rst quar ter resul ts demonstrate the strong performance of our

diversif ied business model as we exceeded our first quarter guidancedespite losing $140 million in revenue and $0.12 in Cash EPS to foreignexchange headwinds. The Company delivered exceptional double digitorganic growth for the third quarter in a row, driven by the strength ofmost of our business units around the world.

54. Also on April 29, 2015, the Company issued a press release announcing

that Schiller would be stepping down as CFO upon appointment of a successor. On

June 11, 2015, the Company issued a press release announcing that Rosiello was

appointed Executive Vice President and would take over the role of CFO from

Schiller on July 1, 2015. On July 14, 2015, the Company announced it entered into a

separation agreement with Schiller, effective as of June 30, 2015, regarding his

positions as Executive Vice President and CFO of the Company. The press release

stated that Schiller would continue to serve as a member of the board of directors and

as a consultant to the Company.

55. On April 30, 2015, the Company filed its quarterly report on Form 10-Q

with the SEC for the period ended June 30, 2015. The 10-Q was signed by Pearson

and Schiller and contained SOX certifications signed by each of them stating that the

report did not contain any untrue statements or omissions of material facts. The

Form 10-Q repeated the financial results announced in the April 29, 2015 press

release and made no mention of Philidor or any other specialty pharmacy affiliated

with the Company. The 10-Q also stated, in part:



28/65

- 25 -



maintaini ng our lower sell ing, general and admini strati ve cost model

and decentr ali zed operating structure. Within our chosen therapeuticclasses and geographies, we primarily focus on durable products whichhave the potential for strong operating margins and sustainable organicgrowth. Further, we have completed numerous transactions over the pastfew years to expand our portfolio offering and geographic footprint,including, among others, the Salix Acquisition and the acquisition ofBausch & Lomb Holdings Incorporated (B&L) in August 2013, andwe will continue to pursue value-added business developmentopportunities as they arise. The growth of our business is furtheraugmented through our lower risk, output-focused research and

development model, which al lows us to advance cer tain development

programs to dri ve fu ture commercial growth, whil e minimizing ourresearch and development expense. We believe this strategy will allowus to maximize both the growth rate and profitability of the Companyand to enhance shareholder value.

56. On July 23, 2015, the Company issued a press release announcing its

second quarter 2015 financial results and increasing the Companys full year 2015

guidance. The press release reported, in relevant part:

2015 Second Quarter Results

Total Revenue $2.7 billion; an increase of 34% over the prior year

Excluding negative impact of foreign exchange ($173million) and the contribution of Salix ($313 million),revenue increased 27% over the prior year

GAAP EPS Loss of $0.15; Cash EPS $2.56

Excluding negative impact of foreign exchange ($0.13) andthe negative contribution of Salix ($0.04) , Cash EPS wouldhave been $2.73, a growth rate of 43%

* * *



29/65

- 26 -

Full Year 2015 Guidance Update

Increasing 2015 Total Revenue to $10.7 - $11.1 billion up from

$10.4 - $10.6 billion

Salix revenue expected to be ~$1.2 billion

Increasing 2015 Cash EPS to $11.50 - $11.80 per share up from$10.90 - $11.20 to reflect continued business outperformance andapproval of IBS-D indication for Xifaxan

Increasing Adjusted Cash Flow from Operations to greater than$3.2 billion, up from greater than $3.1 billion

Expect Same Store Sales Organic Growth of >10% for second

half of 2015

57. The July 23, 2015 press release also quoted Pearson as stating:

We once again exceeded our guidance and delivered our fourthconsecutive quarter of greater than 15% organic growth. Our strongsecond quarter resul ts were driven by outperformance in our U.S.

businesses, strong results in certain emerging markets and outstandingstarts to both the Salix and Dendreon acquisitions. In addition, we havesigned eight new transactions so far this year and have realized severalsignificant R&D milestones, including the approval of Xifaxan for IBS-D and the NDA submissions for Vesneo and Relistor Oral. As a resul t,we feel conf ident in raising our guidance for the remainder of 2015.

58. On July 27, 2015, the Company filed its quarterly report on Form 10-Q

with the SEC for the period ended June 30, 2015. The 10-Q was signed by Pearson

and Rosiello and contained SOX certifications signed by each of them stating that the

report did not contain any untrue statements or omissions of material facts. The

Form 10-Q repeated the financial results announced in the July 23, 2015 press release



30/65

- 27 -

and made no mention of Philidor or any other specialty pharmacy affiliated with the

Company. The 10-Q also stated, in part:

Our strategy is to focus our business on core geographies and therapeuticclasses that offer attractive growth opportunities while maintaining ourlower selling, general and administrative cost model and decentralizedoperating structure. Within our chosen therapeutic classes andgeographies, we primarily focus on durable products which have the

potential for strong operating margins and sustainable organic growth.Further, we have completed numerous transactions over the past fewyears to expand our portfolio offering and geographic footprint,including, among others, the Salix Acquisition and the acquisition ofBausch & Lomb Holdings Incorporated (B&L) in August 2013 (the

B&L Acquisition), and we will continue to pursue value-addedbusiness development opportunities as they arise. The growth of ourbusiness is further augmented through our lower risk, output-focusedresearch and development model, which allows us to advance certaindevelopment programs to drive future commercial growth, whileminimizing our research and development expense. We believe thisstrategy will allow us to maximize both the growth rate and profitabilityof the Company and to enhance shareholder value.

* * *

In connection with our acquisitions, we have implemented cost-rationalization and integration initiatives to capture operating synergiesand generate cost savings across the Company. These measuresincluded:

workforce reductions across the Company and otherorganizational changes;

closing of duplicative facili ties and other site rationali zationactions company-wide, including research and development facil i ties,sales offices and corporate facilities;

leveraging research and development spend; and/or

procurement savings.



31/65

- 28 -

* * *

As is customary in the pharmaceutical industry, our gross product salesare subject to a variety of deductions in arriving at reported net productsales. Provisions for these deductions are recorded concurrently with therecognition of gross product sales revenue and include cash discountsand allowances, chargebacks, and distribution fees, which are paid todirect customers, as well as rebates and returns, which can be paid to

both direct and indirect customers. Provision balances relating toestimated amounts payable to direct customers are netted againstaccounts receivable, and balances relating to indirect customers areincluded in accrued liabilities. . . . Provisions as a percentage of grosssales increased to 32% and 33% for the second quarter and fir st hal f of

2015, respectively, compared with 27% and 26% in the second quar ter

and fi rst half of 2014. The increase was dri ven by (i) higher provisionsfor rebates, chargebacks, and returns, including managed care rebates

for Jublia and the co-pay assistance programs for launch products

including Jubli a, Onexton, and Retin-A M icro M icrosphere

0.08% (RAM 0.08%) and (ii) higher rebate percentages for sales to

the U.S. government (including Well butr in XL) par tial ly offset by

(iii) lower provisions (mainly rebates) associated with products

acquir ed in the Sali x Acquisiti on in the second quarter of 2015.

59. On September 28, 2015, the Company filed a Form 8-K with the SEC

that attached a letter from the Company (signed by Pearson) to its employees

relating to recent changes in Valeants stock price.

60. On October 5, 2015, the Company filed a Form 8-K with the SEC

purporting to correct inaccuracies about the Company that were being reported in the

media.

61. On October 19, 2015, the Company issued a press release reporting its

third quarter 2015 financial results. The press release reports [t]otal [r]evenues of

$2.8 billion; an increase of 36% over the prior year despite negative foreign exchange



32/65

- 29 -

impact of $172 million along with GAAP EPS $0.14; Cash EPS $2.74, an increase

of 30% over prior year despite the negative foreign exchange impact of $0.13 versus

the prior year. The press release also announced increased fourth quarter 2015

guidance, with total revenue increased to $3.25-$3.45 billion from $3.2-$3.4 billion

and EPS increased to $4.00-$4.20 from $3.98-$4.18. The Company also raised its

full year 2015 guidance, with total revenue increased to $11.0-$11.2 billion from

$10.7-$11.1 billion and EPS increased to $11.67-$11.87 from $11.50-$11.80. The

October 19, 2015 press release quoted Pearson as stating:

Today, we reported yet another consecutive quarter of strong financialresults that exceeded expectations. I am incredibly proud of the hardwork and effort put forth by Valeants employees around the world. Iwould also like to thank all the doctors who prescribe our products andthe patients who use them. We will be discussing our outperformance onour conference call later today, as well as addressing the most frequentlyasked questions we have been hearing from our shareholders. With ourstrong product portfolio and growth prospects, we feel very confident inour future outlook and we are reaffirming our $7.5 billion EBITDA floorfor 2016.

62. As set forth above, the Company hosted an earnings call on October 19,

2015 that, for the first time, shed light on the previously undisclosed and direct

relationship between Valeant and certain specialty pharmacies. Also on October 19,

2015, The New York Timespublished the above-mentioned articled entitled Drug

Makers Sidestep Barriers on Pricing.



33/65

- 30 -

63. On October 21, 2015, Citron published its scathing report asserting that

Valeant was akin to Enron part deux and that the Companys practices had the

distinct aroma of product being jammed into a channel.

64. The true facts, which were known by Defendants but concealed from the

investing public during the Class Period, were as follows:

(a) Defendants Class Period statements omitted disclosure of key

aspects of the Companys business, specifically the Companys relationship with a

network of specialty pharmacies utilized to boost sales of the Companys high-

priced drugs;

(b) Valeants undisclosed use of specialty pharmacies as set forth

herein left it subject to increased regulatory risks that investors were unable to

account for;

(c)

Without use of specialty pharmacies, Valeants financial

performance would have been negatively impacted;

(d) Without use of specialty pharmacies, Valeants Class Period

financial guidance would have been negatively impacted; and

(e) As a result of the foregoing, Defendants statements regarding

the Companys financial performance and expected earnings were false and

misleading and lacked a reasonable basis when made.



34/65

- 31 -

65. As a result of Defendants false statements and omissions, Valeant stock

traded at artificially inflated prices during the Class Period. After the above

revelations were revealed to the market, however, the price of Valeant stock declined

significantly as the artificial inflation was removed.

ADDITIONAL SCIENTER ALLEGATIONS

66. As alleged herein, Defendants acted with scienter in that they knew that

the public documents and statements issued or disseminated in the name of the

Company were materially false and misleading, knew that such statements or

documents would be issued or disseminated to the investing public, and knowingly

and substantially participated or acquiesced in the issuance or dissemination of such

statements or documents as primary violations of the federal securities laws. As set

forth elsewhere herein in detail, Defendants, by virtue of their receipt of information

reflecting the true facts regarding Valeant, their control over and/or receipt and/or

modification of allegedly materially misleading misstatements, and/or their

associations with the Company, which made them privy to confidential proprietary

information concerning Valeant, participated in the fraudulent scheme alleged herein.

LOSS CAUSATION/ECONOMIC LOSS

67.

During the Class Period, as detailed herein, Defendants engaged in a

scheme to deceive the market and a course of conduct that artificially inflated the

price of Valeant stock and operated as a fraud or deceit on Class Period purchasers of



35/65

- 32 -

Valeant stock by failing to disclose and misrepresenting the adverse facts detailed

herein. When Defendants prior misrepresentations and fraudulent conduct were

disclosed and became apparent to the market through a partial disclosure, the price of

Valeant stock fell precipitously as the prior artificial inflation came out. As a result

of their purchases of Valeant stock during the Class Period, Plaintiff and the other

Class members suffered economic loss, i.e., damages, under the federal securities

laws when the truth about Valeant was revealed through the several disclosures

specified herein, which removed the artificial inflation from the price of Valeant

common stock.

68. By failing to disclose to investors the adverse facts detailed herein,

Defendants presented a misleading picture of Valeants business and prospects.

Defendants false and misleading statements had the intended effect and caused

Valeant stock to trade at artificially inflated levels throughout the Class Period.

69. As a direct result of the disclosures identified herein, the price of

Valeant stock fell precipitously. This removed the artificial inflation from the price

of Valeant stock, causing real economic loss to investors who had purchased Valeant

stock at artificially inflated prices during the Class Period.

70. The price declines were a direct result of the nature and extent of

Defendants fraud being revealed to investors and the market through several partial

disclosures. The timing and magnitude of the price declines in Valeant stock negate



36/65

- 33 -

any inference that the losses suffered by Plaintiff and the other Class members were

caused by changed market conditions, macroeconomic or industry factors, or

Company-specific facts unrelated to Defendants fraudulent conduct. The economic

loss, i.e., damages, suffered by Plaintiff and the other Class members was a direct

result of Defendants fraudulent scheme to artificially inflate the price of Valeant

stock and the subsequent significant decline in the value of Valeant stock when

Defendants prior misrepresentations and other fraudulent conduct were revealed.

APPLICABILITY OF PRESUMPTION OF RELIANCE:FRAUD ON THE MARKET DOCTRINE

71. At all relevant times, the market for Valeant stock was an efficient

market for the following reasons, among others:

(a) Valeant stock met the requirements for listing and was listed and

actively traded on the NYSE, a highly efficient and automated market;

(b) As a regulated issuer, Valeant filed periodic public reports with

the SEC;

(c) Valeant regularly communicated with public investors via

established market communication mechanisms, including regular disseminations

of press releases on the national circuits of major newswire services and other wide-

ranging public disclosures, such as communications with the financial press and

other similar reporting services; and



37/65

- 34 -

(d) Valeant was followed by several securities analysts employed by

major brokerage firms who wrote reports which were distributed to the sales force

and certain customers of their respective brokerage firms. Each of these reports

was publicly available and entered the public marketplace.

72. As a result of the foregoing, the market for Valeant stock promptly

digested current information regarding Valeant from all publicly available sources

and reflected such information in the price of the stock. Under these circumstances,

all purchasers of Valeant stock during the Class Period suffered similar injury

through their purchase of Valeant stock at artificially inflated price and a presumption

of reliance applies.

NO SAFE HARBOR

73. The Safe Harbor warnings accompanying Valeants reportedly

forward-looking statements (FLS) issued during the Class Period were ineffective

to shield those statements from liability. To the extent that projected revenues and

earnings were included in the Companys financial reports prepared in accordance

with GAAP, including those filed with the SEC on Form 8-K, they are excluded from

the protection of the statutory Safe Harbor. See15 U.S.C. 78u-5(b)(2)(A).

74. Defendants are also liable for any false and misleading FLS pleaded

because, at the time each FLS was made, the speaker knew the FLS was false or

misleading and the FLS was authorized and/or approved by an executive officer of



38/65

- 35 -

Valeant who knew that the FLS was false. In addition, the FLS were contradicted by

existing, undisclosed material facts that were required to be disclosed so that the FLS

would not be misleading. Finally, most of the purported Safe Harbor warnings

were themselves misleading because they warned of risks that had already

materialized or failed to provide meaningful disclosures of the relevant risks.

COUNT I

FOR VIOLATIONS OF SECTION 10(b) OF THE 1934 ACT AND RULE

10b-5 AGAINST ALL DEFENDANTS

75.

Plaintiff incorporates 1-74 by reference.

76. During the Class Period, Defendants disseminated or approved the false

statements specified above, which they knew or deliberately disregarded were

misleading in that they contained misrepresentations and failed to disclose material

facts necessary in order to make the statements made, in light of the circumstances

under which they were made, not misleading.

77. Defendants violated Section 10(b) of the 1934 Act and Rule 10b-5 in

that they:

(a) employed devices, schemes, and artifices to defraud;

(b) made untrue statements of material facts or omitted to state

material facts necessary in order to make the statements made, in light of the

circumstances under which they were made, not misleading; or



39/65

- 36 -

(c) engaged in acts, practices, and a course of business that operated

as a fraud or deceit upon Plaintiff and others similarly situated in connection with

their purchases of Valeant stock during the Class Period.

78. In addition to the duties of full disclosure imposed on Defendants as a

result of their affirmative false and misleading statements to the public, Defendants

had a duty to promptly disseminate truthful information with respect to Valeants

operations and performance that would be material to investors in compliance with

the integrated disclosure provisions of the SEC, including with respect to the

Companys revenue and earnings trends, so that the market price of the Companys

stock would be based on truthful, complete, and accurate information. SEC

Regulations S-X (17 C.F.R. 210.01, et seq.) and S-K (17 C.F.R. 229.10, et seq.).

79. As a direct and proximate result of Defendants wrongful conduct,

Plaintiff and the Class have suffered damages in connection with their respective

purchases and sales of Valeant stock during the Class Period, because, in reliance on

the integrity of the market, they paid artificially inflated prices for Valeant stock and

experienced loses when the artificial inflation was released from Valeant stock as a

result of the partial revelations and stock price decline detailed herein. Plaintiff and

the Class would not have purchased Valeant stock at the prices they paid, or at all, if

they had been aware that the market prices had been artificially and falsely inflated

by Defendants misleading statements.



40/65

- 37 -

80. By virtue of the foregoing, Valeant and the Individual Defendants have

each violated Section 10b of the 1934 Act, and Rule 10b-5 promulgated thereunder.

COUNT II

FOR VIOLATIONS OF SECTION 20(a) OF THE 1934 ACT

AGAINST ALL DEFENDANTS

81. Plaintiff incorporates 1-74 by reference.

82. The Individual Defendants acted as controlling persons of Valeant

within the meaning of Section 20(a) of the 1934 Act. By reason of their controlling

positions with the Company, and their ownership of Valeant common stock, the

Individual Defendants had the power and authority to cause Valeant to engage in the

wrongful conduct complained of herein. Valeant controlled the Individual

Defendants and all of its employees. By reason of such conduct, the Individual

Defendants are liable pursuant to Section 20(a) of the 1934 Act.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment as follows:

A. Declaring that this action is a proper class action, designating Plaintiff as

Lead Plaintiff, and certifying Plaintiff as a Class representative under Rule 23 of the

Federal Rules of Civil Procedure and Plaintiffs counsel as Lead Counsel;

B. Awarding compensatory damages in favor of Plaintiff and the other Class

members against all Defendants, jointly and severally, for all damages sustained as a



41/65

- 38 -

result of Defendants wrongdoing, in an amount to be proven at trial, including

interest thereon;

C. Awarding Plaintiff and the Class their reasonable costs and expenses

incurred in this action, including counsel fees and expert fees; and

D. Awarding such equitable, injunctive, or other relief as deemed

appropriate by the Court.

JURY DEMAND

83.

Plaintiff demands a trial by jury.



42/65

- 39 -

DATED: October 22, 2015 COHN LIFLAND PEARLMANHERRMANN & KNOPF LLP

PETER S. PEARLMAN

/s/ Peter S. Pearlman

PETER S. PEARLMAN

Park 80 West-Plaza One250 Pehle Avenue, Suite 401Saddle Brook, NJ 07663Telephone: 201/845-9600

201/845-9423 (fax)[email protected]

ROBBINS GELLER RUDMAN &DOWD LLP

ROBERT J. ROBBINS120 East Palmetto Park Road, Suite 500Boca Raton, FL 33432Telephone: 561/750-3000561/750-3364 (fax)

[email protected]

JOHNSON & WEAVER, LLPFRANK J. JOHNSONJOHNSON & WEAVER, LLP600 West Broadway, Suite 1540San Diego, CA 92101Telephone: 619/230-0063619/255-1856 (fax)[email protected]

Attorneys for Plaintiff



43/65

- 40 -

CERTIFICATION PURSUANT TO L. CIV. R. 11.2

I certify that to the best of my knowledge, the matter in controversy is not the subject of any

other action pending in any court, or of any pending arbitration or administrative proceeding.

I certify under penalty of perjury that the foregoing is true and correct. Executed on this

22ndday of October, 2004.


/s/ Peter S. PearlmanPETER S. PEARLMAN

CERTIFICATE OF NON-ARBITRABILITY PURSUANT

TO L.CIV.R. 201.1(d)(3)

I certify, pursuant to L.Civ.R. 201.1(d)(3), that the above-captioned matter is not arbitrable

because the damages recoverable exceed the sum of $150,000 exclusive of interest and costs and any

claim for punitive damages.

I certify under penalty of perjury that the foregoing is true and correct. Executed on this

22ndday of October, 2004.


/s/ Peter S. PearlmanPETER S. PEARLMAN



44/65

CERTIFICATION OF PLAINTIFF PURSUANT

TO THE FEDERAL SECURITIES LAWS

I,Laura Potter, declare the following as to the claims asserted, or to be asserted, under the

federal securities laws:

1. I have reviewed the complaint and authorize its filing.

2. I did not acquire the securities that are the subject of this action at the direction of

plaintiffs counsel or in order to participate in any private action or any other litigation under the

federal securities laws.

3. I am willing to serve as a representative party on behalf of the class, including

testifying at deposition or trial, if necessary.

4. I made the following transactions during the Class Period in the securities that are

the subject of this action.

Acquisitions:

Date Acquired

Number of Shares

Acquired

Acquisition Price Per

Share

Sales:

Date Sold

Number of Shares

Sold

Selling Price Per

Share

5. I will not accept any payment for serving as a representative party beyond my

pro-rata share of any recovery, except reasonable costs and expenses such as lost wages and

travel expensesdirectly related to the class representation, as ordered or approved by the Court

pursuant to law.

6. I have not sought to serve or served as a representative party for a class in an

action under the federal securities laws within the past three years, except if detailed below:

ocuSign Envelope ID: E091B456-5E41-4B4E-AE69-ADA89640AFB5Case 3:15-cv-07658 Document 1-1 Filed 10/22/15 Page 1 of 3 PageID: 42Case 3:15-cv-07658-MAS-LHG Document 9-16 Filed 11/20/15 Page 44 of 65 PageID: 253


45/65

I declare under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct.

Executed this 21stday of October 2015.

__________________________________________

Laura Potter

ocuSign Envelope ID: E091B456-5E41-4B4E-AE69-ADA89640AFB5Case 3:15-cv-07658 Document 1-1 Filed 10/22/15 Page 2 of 3 PageID: 43Case 3:15-cv-07658-MAS-LHG Document 9-16 Filed 11/20/15 Page 45 of 65 PageID: 254


46/65

Statement of Ownership

.

Acquisitions:

Date Acquired

Number of Shares

Acquired

Acquisition Price Per

Share

8-10-2015 500 253.50

Sales:

Date Sold

Number of Shares

Sold

Selling Price Per

Share

10-2-2015 70 178.8506

10-21-2015 21 108.50

10-21-2015 400 108.50

10-21-2015 3 106.135

10-21-2015 6 106.49

Case 3:15-cv-07658 Document 1-1 Filed 10/22/15 Page 3 of 3 PageID: 44Case 3:15-cv-07658-MAS-LHG Document 9-16 Filed 11/20/15 Page 46 of 65 PageID: 255


47/65

- 1 -

SCHEDULE A

Plaintiff hereby adopts the following uniform definitions and rules of

construction for these requests:

1. Action refers to Potter v. Valeant Pharmaceuticals International, Inc.,

et al., Civil Action No. 3:15-cv-07658 (D.N.J.).

2. Communication or communications means any exchange of

information, words, numbers, pictures, charts, studies, or graphs by any means of

transmission, sending, or receipt of information of any kind by or through any means,

including, but not limited to, personal delivery, speech, writings, documents, language

(machine, foreign, or otherwise) of any kind, computer electronics or ESI (as defined

below), sound, radio, or video signals, telecommunication, telephone, teletype,

facsimile, mail, telegram, microfilm, microfiche, photographic film of all types, or

other media of any kind. Communication also includes, but is not limited to, all

inquiries, discussions, conversations, correspondence, negotiations, agreements,

understandings, meetings, notices, requests, responses, demands, complaints, press,

publicity, or trade releases.

3. Concerning means relating to, referring to, describing, evidencing, or

constituting.

4.

Correspondence means any letter, memorandum, note, e-mail,

facsimile, text message, instant message, Internet message board posting, BlackBerry



48/65

- 2 -

message, iMessage, or any other writing containing a communication from one person

to another.

5.

Defendants means Valeant Pharmaceuticals International, Inc., J.

Michael Pearson, Howard B. Schiller, and Robert L. Rosiello, their agents, attorneys,

advisors, accountants, and all other persons acting or purporting to act on their behalf.

6. Document is defined to be synonymous in meaning and equal in scope

to the usage of the term in Rule 34(a) of the Federal Rules of Civil Procedure,

including, but not limited to, the original and all non-identical copies (whether such

non-identical copies differ from the original by reason of any notation made thereon

or otherwise) such as correspondence, memoranda, notes, diaries, statistics, letters,

minutes, contracts, reports, studies, checks, statements, receipts, returns, summaries,

pamphlets, books, prospectuses, certificates, drawings, plans, inter- and intra-office

communications or other notations, in any form, including notations made of

conversations, telephone calls, meetings, or other communications, bulletins, printed

matter (including newspapers, magazines, and other publications, articles, and

clippings therefrom), press releases, computer printouts, facsimiles, emails, invoices,

ledgers, and worksheets, as well as all other drafts, redlines (whether proposed,

accepted, or rejected), inserted comments, results of document comparisons,

alterations, modifications, changes, and amendments of any of the foregoing, graphic

or aural records or representations of any kind (including, but not limited to,



49/65

- 3 -

photographs, charts, graphs, microfiche, microfilm, videotape, and film and audio

recordings), mechanical or electrical records or representations of any kind (including,

but not limited to, tapes, cassettes, discs, and recordings), or electronic files or

transcriptions thereof. Document includes the term electronically stored

information or ESI, as defined below.

7. Electronically Stored Information or ESI is defined to include any

original and any non-identical copies (whether non-identical because of notes made on

copies or attached comments, annotations, marks, transmissions, notations, or

highlighting of any kind) of information stored in electronic format, including

computer files, magnetic, digital, or other programs, programming notes, or

instructions, activity listings of electronic mail receipts or transmittals, output

resulting from the use of any software program, including word processing

documents, accounting files, payroll data, spreadsheets, database files, charts, graphs,

and outlines, electronic mail or email, operating systems, source code of all types,

programming languages, peripheral devices, external drives, PDF files, PST files,

batch files, ASCII files, or any electronic files or file fragments, regardless of the

media on which they reside and regardless of whether such electronic data consists of

an active file, back-up file, deleted file, or file fragment. Electronically Stored

Information or ESI also includes, but is not limited to, any items stored on

computer memory or memories, hard disks, floppy disks, zip drives, CD-ROM discs,



50/65

- 4 -

BlackBerry, iPhone, or other handheld devices, instant messenger programs, back-up

and/or magnetic tapes of any type or kind, microfiche, and/or computer chips.

8.

Employee means any person who at any time acted or purported to act

on behalf of an entity, or another person or persons, including, but not limited to, all

present and former officers, directors, executives, partners, principals, managers, staff

personnel, accountants, agents, representatives, in-house attorneys, independent

contractors, advisors, and consultants of such entity, person, or persons.

9.

Meeting means the contemporaneous presence of any natural persons

for any purpose, whether or not such presence was by chance or prearranged, and

whether or not the meeting was formal or informal or occurred in connection with

some other activity, and includes telephone or video conferences when, whichever the

means employed, participants can hear or otherwise communicate with each other.

10.

Person or persons means natural persons, proprietorships,

corporations, partnerships, trusts, joint ventures, groups, associations, organizations,

governmental agencies, and other agencies.

11. Philidor or You or Your means Philidor Rx Services, LLC and its

subsidiaries, divisions, affiliated persons, predecessors, successors, and all present and

former directors, officers, members, analysts, employees, investment bankers,

representatives, agents, intermediaries, and all other persons acting on its behalf.



51/65

- 5 -

12. Refer, relate, referring, or relating means all documents which

comprise, explicitly or implicitly refer to, were reviewed in conjunction with, or were

created, generated, or maintained as a result of the subject matter of the request,

including, but not limited to, all documents which reflect, record, memorialize,

embody, discuss, evaluate, consider, review, or report on the subject matter of the

request.

13.

You or your refers to the party responding to this request and

includes every one of that partys affiliated persons, predecessors, successors, and all

present and former directors, officers, analysts, employees, investment bankers,

representatives, agents, intermediaries, and all other persons acting on its behalf,

including attorneys.

14. Valeant means Valeant Pharmaceuticals International, Inc., and any of

its present and former divisions, segments, subsidiaries, parents, affiliates,

predecessors, successors, and assignees; its present and former officers, directors,

partners, employees, agents, consultants, accountants, and lawyers; and all other

persons who are acting or who have acted on behalf of or who are or have been

subject to the direction or control of Valeant.

15.

The connectives and and or shall be construed either disjunctively or

conjunctively as necessary to bring within the scope of the request all other responses

that might otherwise be construed to be outside of its scope.



52/65

- 6 -

16. The use of the s

Documents

Discovery Letter to Andy Davenport