Item 1. Legal Proceedings
Item 1. Legal Proceedings.
Chapman v. Fennec Pharmaceuticals Inc. et al.
On September 3, 2020, plaintiff Jim Chapman filed a putative federal securities class action lawsuit against the Company, our Chief Executive Officer, Rostislav Raykov, and Chief Financial Officer, Robert Andrade, in the United States District Court for the Middle District of North Carolina, captioned Chapman v. Fennec Pharmaceuticals Inc. et al., Case No. 1:20-cv-00812. The complaint alleged that prior to our August 10, 2020 receipt of a CRL from the FDA concerning our NDA for PEDMARK™, defendants made materially false or misleading statements and failed to disclose material facts about our third-party PEDMARK™ product manufacturing facility and the impact the facility would have on regulatory approval for PEDMARK™. 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, asserted a putative class period from December 20, 2018 through August 10, 2020, made allegations similar
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to those in the original complaint, claimed the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and sought an unspecified amount of compensatory damages and attorneys’ fees and costs.
On March 3, 2021, defendants filed a motion to dismiss the amended complaint. On April 2, 2021, lead plaintiff filed an opposition to the motion to dismiss. On April 16, 2021, defendants filed a reply in support of the motion to dismiss, and on December 16, 2021, the Magistrate Judge entered an order recommending that defendants’ motion to dismiss be granted in its entirety. On January 24, 2022, lead plaintiff filed objections to the Magistrate Judge’s recommendation, and defendants filed their response on February 3, 2022. On March 2, 2022, the U.S. District Court Judge adopted the Magistrate Judge’s order and recommendation and entered an order and judgment dismissing the amended complaint with prejudice.
On March 30, 2022, lead plaintiff filed a motion for post judgment relief, seeking leave to file a second amended complaint. In his proposed second amended complaint, lead plaintiff seeks to add allegations stemming from the receipt of a second CRL following our resubmission of our NDA for PEDMARK™, which we received on November 29, 2021, among other things. On April 20, 2022, defendants filed an opposition to lead plaintiff’s motion for post judgment relief. On May 4, 2022, lead plaintiff submitted a reply in support of his motion.
We believe that this lawsuit is without merit and intend to defend it vigorously. We cannot predict the outcome of this lawsuit. Failure by us to obtain a favorable resolution of the lawsuit could have a material adverse effect on our business, results of operations, and financial condition. We have not recorded a liability as of June 30, 2022, because we believe a potential loss is not probable or reasonably estimable given the nature of the proceedings and our success so far by obtaining a dismissal with prejudice of the amended complaint.
Fisher v. Fennec Pharmaceuticals Inc. et al.
On February 9, 2022, plaintiff Jeffrey D. Fisher filed a putative federal securities class action lawsuit against the Company and our CEO and CFO in the United States District Court for the Middle District of North Carolina, captioned Fisher v. Fennec Pharmaceuticals Inc. et al., Case No. 1:22-cv-00115. The complaint asserts a putative class period from May 28, 2021 through November 28, 2021, and alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 by making materially false and misleading statements or omissions regarding the status of our third-party PEDMARK™ product manufacturing facility, including the facility’s compliance with cGMP and remediation of deficiencies outlined in the August 10, 2020 CRL, and the impact its status and compliance would have on regulatory approval for PEDMARK™ in the period leading up to the Company’s November 29, 2021 receipt of a CRL for a subsequent NDA for PEDMARK™. The complaint seeks an unspecified amount of damages and attorneys’ fees and costs.
On April 11, 2022, plaintiff Jeffrey D. Fisher filed a motion to be appointed lead plaintiff and represent the putative class, and on May 9, 2022, the court appointed him as lead plaintiff.
On June 23, 2022, the lead plaintiff filed an amended complaint. The amended complaint asserts the same putative class period from May 28, 2021 through November 28, 2021, is brought against the same defendants, makes allegations similar to those in the original complaint. On August 7, 2022, defendants filed a motion to dismiss the amended complaint.
We believe that this lawsuit is without merit and intend to defend it vigorously. We cannot predict the outcome of this lawsuit. Failure by us to obtain a favorable resolution of the lawsuit 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”),
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which relates to an anhydrous form of STS, which is the active pharmaceutical ingredient in our PEDMARK™ product. US ‘190 was issued on March 24, 2020. US ‘363 was issued on October 6, 2020.
On January 11, 2022, our licensor OHSU filed a Request for Supplemental Examination of US ‘190 requesting the consideration by the Central Re-examination Unit (“CRU”) of 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 CRU 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. On March 11, 2022, the CRU issued a substantive Office Action. We filed a preliminary response to Hope’s Request for IPR of the ‘190 Patent in February 2022, requesting that the ‘190 IPR be denied on the basis that the CRU is already reviewing the relevant issues in the Supplemental Examination Proceeding and is further advanced than PTAB in its consideration. On May 9, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘190 patent and a stayed the Supplemental Examination pending the result of the ‘190 IPR. Further, in May 2022, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘363 patent. We expect a decision in the ‘363 IPR in May 2023, which can be appealed by the losing party.
In February and April 2022, the USPTO issued Notices of Allowance to Fennec for two additional patents that cover the PEDMARK TM pharmaceutical formulation. We expect these two additional U.S. patents to issue in the second half of 2022 and will be listed in the FDA’s Orange Book on approval of PEDMARK TM . These patents will expire in 2039, unless held invalid or unenforceable by a court or final jurisdiction.
We plan to vigorously defend our intellectual property rights related to PEDMARK™. However, we are unable to predict the outcome of Hope’s IPR petitions, or the Supplemental Examination, and an invalidation of one or both of the ‘190 and ‘363 patents may have a material adverse effect on our ability to protect our rights in PEDMARK™ beyond periods of marketing exclusivity for PEDMARK TM possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”). We obtained U.S. Orphan Drug Designation for the use of PEDMARK TM in the prevention of platinum-induced ototoxicity in pediatric patients in 2004. We plan to pursue PUMA upon approval of the MAA, which would allow for 10 years of market exclusivity upon PUMA approval.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.