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LITIGATION
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6 Months Ended | ||
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Jun. 30, 2011
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| LITIGATION |
Class Action
A
putative federal securities class action complaint was filed on
March 5, 2010 in the United States District Court for the District
of Massachusetts by an alleged shareholder of Novelos, on behalf of
himself and all others who purchased or otherwise acquired Novelos
common stock in the period between December 14, 2009 and February
24, 2010, against Novelos and its President and Chief Executive
Officer, Harry S. Palmin. On October 1, 2010, the court
appointed lead plaintiffs (Boris Urman and Ramona McDonald) and
appointed lead plaintiffs’ counsel. On October 22,
2010, an amended complaint was filed. The amended
complaint claims, among other things, that Novelos violated Section
10(b) of the Securities Exchange Act of 1934, as amended, and Rule
10b-5 promulgated thereunder in connection with alleged misleading
disclosures related to the progress of the Phase 3 clinical trial
of NOV-002 for non-small cell lung cancer. On December
6, 2010, the defendants filed a motion to dismiss the complaint
with prejudice. On January 20, 2011, the plaintiffs
filed their opposition to our motion and on March 3, 2011, the
defendants filed their response to the opposition. On June 23,
2011, the motion to dismiss was granted and the case was dismissed
without prejudice. On August 5, 2011, the plaintiffs
filed a second amended complaint realleging that the defendants
violated Section 10(b) of the Exchange Act and Rule 10b-5 in
connection with alleged misleading disclosures related to the Phase
3 clinical trial for NOV-002 in non-small cell lung cancer. The
defendants’ responsive pleading is due by August 26, 2011.
The Company believes the allegations are without merit and intends
to vigorously defend against them.
BAM Dispute
On
June 28, 2010, Novelos received a letter from counsel to ZAO BAM
and ZAO BAM Research Laboratories (Russian companies, collectively
referred to as “BAM”) alleging that it modified the
chemical composition of NOV-002 without prior notice to or approval
from BAM, constituting a material breach of a technology and
assignment agreement Novelos had entered into with BAM on June 20,
2000 (the “June 2000 Agreement”). The letter
references the amendment, submitted to the FDA on August 30, 2005,
to Novelos’ investigational new drug application dated August
1999 as the basis for BAM’s claims and demands the transfer
of all intellectual property rights concerning NOV-002 to
BAM. Mark Balazovsky, a director of Novelos from June
1996 until November 2006 and a shareholder of Novelos through at
least June 25, 2010, is, to our knowledge, still the general
director and principal shareholder of ZAO BAM. On
September 24, 2010, Novelos filed a complaint in Suffolk Superior
Court seeking a declaratory judgment by the court that the June
2000 Agreement has been replaced by a subsequent agreement between
the parties dated April 1, 2005 (the “April 2005
Agreement”), that Novelos’ obligations to BAM are
governed solely by the April 2005 Agreement and that the
obligations of the June 2000 agreement have been performed and
fully satisfied. On November 29, 2010, BAM answered the
complaint, denying the material allegations, and stating its
affirmative defenses and certain counterclaims. On January 14,
2011, Novelos responded to the counterclaims, denying BAM’s
material allegations and stating its affirmative
defenses. On June 9, 2011, BAM filed an amended
counterclaim alleging additional claims related to Novelos’
acquisition of Cellectar. In that amended counterclaim,
BAM alleges that the acquisition evidences Novelos’
abandonment of the technology assigned to it by BAM constituting a
breach of the June 2000 Agreement or, if that agreement is
determined to no longer be in effect, a breach of the April 2005
Agreement and/or a breach of the implied duty of good faith and
fair dealing with respect to the April 2005
Agreement. On June 15, 2011 the Company filed its
response to their amended counterclaim. On August 5,
2011, the Company filed a motion for judgment on the pleadings as
to its declaratory judgment count and all counts of BAM’s
amended counterclaim. The motion has been opposed by BAM
and a hearing on the motion is scheduled on September 27, 2011. The
Company believes BAM’s allegations and counterclaims are
without merit and intend to defend vigorously against
them.
We
do not anticipate that these litigation contingencies will have a
material impact on the Company’s future financial position,
results of operations or cash flows.
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