FENNEC PHARMACEUTICALS INC. 10-Q

Item 1. Legal Proceedings. Chapman v. Fennec Pharmaceuticals Inc. On September 2, 2020, a putative class action lawsuit, Chapman v. Fennec Pharmaceuticals Inc., was filed against us, our Chief Executive Officer, Rostislav Raykov, and our Chief Financial Officer, Robert Andrade, in the United States District Court for the Middle District of North Carolina. The complaint alleged that prior to our August 10, 2020 receipt of a CRL from the FDA concerning our NDA for PEDMARK TM , we made materially false or misleading statements and failed to disclose material facts about the status of our PEDMARK TM manufacturing facility, its compliance with current good manufacturing practices, and the impact its status and compliance would have on regulatory approval for PEDMARK TM . On December 3, 2020, the court appointed a lead plaintiff to represent the putative class. On February 1, 2021, the lead plaintiff filed an amended complaint. The amended complaint added members of our board of directors as defendants, asserts a putative class period from December 10, 2018 through August 10, 2020, makes allegations similar to those in the original complaint, and claims the defendants violated Section 10(b) of the Securities Exchange Act of 1934. On March 3, 2021, we and the other defendants filed a motion to dismiss the amended complaint. On April 2, 2021, plaintiffs filed an opposition to the motion. On April 16, 2021, we and the other defendants filed a reply brief in support of the motion. The court has not scheduled argument or issued an order on the motion. We believe that the suit is without merit and intend to defend it vigorously. We cannot predict the outcome of this suit. Failure by us to obtain a favorable resolution of the suit could have a material adverse effect on our business, results of operations and financial condition. We have not recorded a liability as of September 30, 2021, because we believe a potential loss is not probable or reasonably estimable given the preliminary nature of the proceedings. Hope Medical Enterprises, Inc. On October 29, 2021, Hope Medical Enterprises, Inc. (Hope) filed two (2) petitions for inter partes review (IPR) with the Patent Trial and Appeal Board (PTAB) of the U.S. Patent and Trademark Office. In its petitions, Hope seeks to invalidate U.S. Patent No. 10,596,190 (US ‘190), which relates to a method of using our PEDMARK™ product, and U.S. Patent No. 10,792,363 (US ’363), which relates to an anhydrous form of sodium thiosulfate (STS), which is the active pharmaceutical ingredient in our PEDMARK™ product. The US ‘190 was issued on March 24, 2020. The US ‘363 was issued on October 6, 2020. We will have an initial deadline in February 2022, to file preliminary responses to the petitions, if we choose to file responses, and thereafter, the PTAB has three (3) months to decide whether to institute IPR proceedings. If the PTAB institutes one or both reviews, the final written decision(s) will be due about one (1) year after the PTAB’s decision to institute IPR proceedings, and following additional submissions by the parties. Any appeals of a PTAB decision would delay any final outcome. Fennec plans to vigorously defend our intellectual property rights related to PEDMARK™.