Valeant Pharmaceuticals Intl Inc (NYSE:VRX) stock was under pressure last week amid reports that mutual fund company Lord Abbett & Co. has filed a securities fraud lawsuit against Valeant, alleging that it bought VRX’s debt securities at artificially inflated price based on misleading information provided by Valeant.

Valeant’s Legal Woes Mount

The lawsuit Lord Abbett filed in federal court in New Jersey — location of Valeant’s U.S. headquarter — seeks damages of $80 billion in investor losses and under the New Jersey’s racketeer influenced and corrupt organizations (RICO) laws.

This lawsuit introduces another major uncertainty for shares of the embattled drug giant, which is already mired in numerous RICO-related legal battles related to allegations that VRX used deceptive business practices, including price-gouging on some of its key drugs.

But those suits pale in comparison to the $80 billion Lord Abbett is seeking.

There have been tons of reason to be skeptical about Valeant Pharmaceuticals’ future and, in particular, the company’s ability to pay its massive debt pile of $28.5 billion, while it has just $1.5 billion in cash. I’ve been willing to look at VRX from a glass-half-full perspective, appreciating the fact that the company, which has delivered consecutive “less bad” quarters, can continue to sell off non-core assets to pay down debt.

This recent suit by Lord Abbett, however, changes things. According to its most recent filing, VRX had earmarked $162 million available to cover what the company termed “probable and estimable” legal liabilities, settlements and other matters. This cash total is obviously not enough to cover the ongoing lawsuits, which includes Justice Department and regulatory investigations, much less the $80 billion RICO claim filed by Lord Abbett.

And if this recent lawsuit invites other investors to file similar claims, the impact it can have on Valeant’s earnings not only can impede Valeant’s ability to accelerate its debt payments, but also potentially accelerate possible default to VRX stock’s creditors, which could hurt its credit rating.

Two Steps Forward, One Step Back

This recent news comes as VRX stock has made noticeable operational improvements, including delivering its first profit in six quarters earlier this year. The company has reversed its strategy, which since its founding almost three decades ago, was to become a pharmaceutical powerhouse by picking off smaller or failing drug companies. Valeant — thanks to numerous divestments — had begun to look learner.

Committed to reducing its debt burden by $5 billion by January 2018, Valeant has scaled back k operations and has completed three assets sales year alone — more recently selling its iNova Pharmaceuticals business to funds owned by Pacific Equity Partners and The Carlyle Group for $930 million in cash.

That deal follows Valeant’s sale of Dendreon to Sanpower earlier this year for $820 million in cash. Valeant also announced the sale of three skin related brands to L’Oreal SA (ADR) (OTCPK:LRLCY), which fetched just $168 million.

Unfortunately, the company’s past transgressions — in particular, its aggressive sales practices through now-defunct drug mail-order company Philidor — continue to haunt VRX stock. Allegations remains that both companies conspired to included steer customers to buy Valeant-branded drugs at high prices, instead of comparable generic alternatives.

As it stands, VRX still has tons of deficits to overcome, and clearing its name is tops on the list. And Lord Abbett’s new lawsuit, in addition to being a costly one for Valeant to fight, opens wounds that were on the verge of healing.

Bottom Line for VRX Stock

While it’s encouraging that VRX stock has trimmed its debt by $4.8 billion since Q1 2016, Valeant  has had no leeway to to the extent where it can invest to grow for the future. And this lack of investments would invite competitors to encroach on its territory.

Combined with the increased litigation costs, which may now pressure the bottom line, I can no longer recommend VRX stock until there is a clearer picture of how this recent case can impact the company’s ability to pay down debt.

As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.