FENNEC PHARMACEUTICALS INC. 10-K

Item 3. Legal Proceedings Chapman et al. 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, the facility’s compliance with cGMP, 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 Exchange Act. 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. On December 16, 2021, the Magistrate Judge on the motion entered an order recommending that our motion to dismiss be compliant. Plaintiffs filed objections to the Magistrate Judge’s recommendation on January 24, 2022, and Defendants filed their response on February 3, 2022. The parties are currently awaiting a decision from the U.S. District Court Judge as to whether it will accept the Magistrate Judge’s recommendation. 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 December 31, 2021, because we believe a potential loss is not probable or reasonably estimable given the preliminary nature of the proceedings. Jeffrey D. Fisher On February 9, 2022, plaintiff Jeffrey D. Fisher filed a putative federal securities class action against the Company and its CEO and CFO in the United States District Court for the Middle District of North Carolina, captioned Fisher v. Fennec Pharmaceuticals et al. , Case No. 1:22-cv-115 (M.D.N.C.). The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Exchange Act by making materially false and misleading statements or omissions regarding the status of its PEDMARK TM manufacturing facility, the facility’s compliance with cGMP, and the impact its status and compliance would have on regulatory approval for PEDMARK TM in the period leading up to the Company’s November 29, 2021 receipt of a Complete Response Letter for a subsequent NDA for PEDMARK TM . The complaint seeks an unspecified amount of compensatory damages and other relief on behalf of persons who purchased the Company’s common stock from May 28, 2021 and November 26, 2021. ​ 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. ​ Hope Medical Enterprises, Inc. On October 29, 2021, Hope Medical Enterprises, Inc. (“Hope”) filed two petitions for inter partes review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO. In its petitions, Hope seeks to invalidate our U.S. Patent No. 10,596,190 (“US ‘190”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using our PEDMARK™ product, and our U.S. Patent No. 10,792,363 (“US ’363”), which relates to an anhydrous form of STS, which is the active pharmaceutical ingredient in our PEDMARK™ product. 53 Table of Contents US ‘190 was issued on March 24, 2020. US ‘363 was issued on October 6, 2020. We filed preliminary responses to the petitions in February 2022, and thereafter, the PTAB has three 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 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. We plan to vigorously defend our intellectual property rights related to PEDMARK™. However, we are unable to predict the outcome of these petitions, and an invalidation of one or both of these patents may have a material adverse effect on our ability to protect our rights in PEDMARK™ beyond the market exclusivity granted upon approval in the U.S. under Orphan Drug Designation and in the EU under PUMA. On January 11, 2022, our licensor OHSU filed a Request for Supplemental Examination of US ‘190 requesting the consideration by the USPTO of certain prior art references, including references cited by Hope in its Petition for IPR that are relevant to the granted claim of the patent. On January 28, 2022, the USPTO found that the cited references constitute a substantial new question of patentability and ordered an ex parte reexamination of the single US ‘190 claim of pursuant to 35 U.S.C. § 257. We are unable to predict the outcome of the ex parte reexamination. If the USPTO does not uphold the ‘190 claim as granted or in amended form, our ability to protect our PEDMARK TM product beyond the market exclusivity granted upon approval in the U.S. under Orphan Drug Designation and in the EU under PUMA may be adversely affected. ​ Item 4. Mine Safety Disclosures Not applicable. ​ PART II