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
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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, asserts a putative class period from December 20, 2018 through August 10, 2020, makes allegations similar to those in the original complaint, claims the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and seeks 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. Defendants filed an opposition to plaintiff’s motion for post judgment relief on April 20, 2022. On May 4, 2022, lead plaintiff submitted a reply in support of his motion. On September 27, 2022, defendants filed a request for judicial notice regarding the FDA’s press release announcing that it has approved PEDMARK ® . On October 18, 2022, lead plaintiff filed his opposition to request for judicial notice. On October 21, 2022, defendants filed a reply in support of the request for judicial notice.
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 September 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, the facility’s compliance with cGMP, 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, 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 and makes allegations similar to those in the original complaint. On August 5, 2022, defendants filed a motion to dismiss the amended complaint. On August 26, 2022, lead plaintiff filed an opposition to the motion to dismiss. On September 9, 2022, defendants filed a reply in support of the motion to dismiss.
On September 27, 2022, defendants filed a request for judicial notice regarding the FDA’s press release announcing that it approved PEDMARK ® On September 30, 2022, lead plaintiff filed an opposition to the request for judicial notice. On October 6, 2022, defendants filed a reply in support of the request for judicial notice. On October 12, 2022, the U.S. District Court Judge issued a memorandum opinion and order dismissing the amended complaint in its entirety and with
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prejudice, and on October 14, 2022, entered judgment. Lead plaintiff has until November 14, 2022 to file a notice of appeal.
We believe that the 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 September 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.
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 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. US ‘190 was issued on March 24, 2020. US ‘363 was issued on October 6, 2020.
On January 11, 2022, 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 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. On August 12, 2022, we filed a Motion to Amend the single claim of the ‘190 Patent in the IPR to focus on the treatment of medulloblastoma. We expect a decision in the ‘190 IPR in May 2023, which can be appealed by the losing party. Further, in May 2022, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘363 patent. During the ‘363 IPR, we disclaimed the patent claims directed to the anhydrous morphic form of STS and continued with claims directed to its method of manufacture. We expect a decision in the ‘363 IPR in May 2023, which can be appealed by the losing party.
On April 5, 2022, the USPTO issued U.S. Patent No. 11,291,728 (‘728) that covers the PEDMARK pharmaceutical formulation. On September 14, 2022, the USPTO issued Notices of Allowance to us for two additional patent applications that cover the PEDMARK pharmaceutical formulation. We expect these two additional U.S. patents to issue in Q4 of 2022 or Q1 of 2023. These patents will expire in 2039, unless held invalid or unenforceable by a court of final jurisdiction.
On approval of PEDMARK, we listed the ‘728 and the ‘190 patents in the FDA Orange Book. We plan to update the Orange Book with additional patents granted by the USPTO on issuance. We obtained U.S. Orphan Drug Designation for the use of PEDMARK 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.
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. While we now have, or will shortly receive, additional U.S. patents that cover PEDMARK™ over the IPR challenged patents, an invalidation of our patents covering PEDMARK could have a material adverse effect on our ability to protect our rights in PEDMARK beyond periods of marketing exclusivity for PEDMARK possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”).
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.