By: Tomas Ronolski - AllPennyStocks.com News

Wednesday, August 21, 2013

Lawsuits are day-to-day happenings in the public domain as companies fight to protect their intellectual property or enforce contracts. The wheels may turn slow and litigation costs may run high, but they can pay-off handsomely if a judgment is laid down in favor of the plaintiff. More than a year ago, we published an article on SmartMetric Inc. (OTCBB:SMME) and its patent battle with some of the biggest in the world of finance, including Visa (NYSE:V) and MasterCard (NYSE:MA). That was and is still in the courts, but shares of SMME have climbed about 50 percent from last June to now. Also, we still have a close eye on Zecotek Photonics Inc. (TSX-Venture:ZMS) as it continues its legal battle with St. Gobain. Based upon St. Gobain’s loss in court on a similar matter with Siemens AG (NYSE:SI), the potential payout to Zecotek could move into the hundreds of millions of dollars. Shares of Zecotek have doubled in the past four months and the once-illiquid stock is churning decent volume each day. On Wednesday, Nuvo Research Inc. (TSX:NRI), a biotechnology company based in our headquartered city of Mississauga, Ontario, said it has initiated legal action against Mallinckrodt Inc. by filing a complaint in the United States District Court for the Southern District of New York. Nuvo is focused on developing WF10, an immune modulating drug candidate that has delivered positive phase 2 research for allergic rhinitis, as well as its portfolio of three approved topical products for pain management.

The approved products are Pennsaid for knee osteoarthritis (sold in the U.S., Canada and Europe), Pliaglis for dermatological and cosmetic procedures (launched in U.S. and Europe in 2013) and Synera for needle insertion pain (promoted in the U.S. by Nuvo and licensed to Eurocept for the E.U., China and Russia). Marketing partners across the complete portfolio include large pharma companies such as Paladin Labs (TSX:PLB) and Galderma Pharma SA.

The company also has Pennsaid 2%, a stronger product than Pennsaid and the first twice-a-day dosing topical non-steroidal anti-inflammatory drug in the U.S. Nuvo has completed a pharmacokinetic study as requested by the U.S. FDA in a Complete Response Letter in March. The new PK data has been submitted to the FDA with a PDUFA date expected in early February 2014.

The complaint against Mallinckrodt asserts a breach of contract by Mallinckrodt pertaining to a licensing agreement in which Nuvo licensed rights to Mallinckrodt to market and sell Pennsaid and Pennsaid 2% (a twice-daily version) in the United States.

Nuvo is claiming multiple breaches in fact. The company says that Mallinckrodt willfully failed to conduct specific clinical research that was critical to regulatory approval of Pennsaid 2% to receive marketing clearance throughout the world. Nuvo alleges that Mallinckrodt made substantial errors in certain clinical studies, failed to apply requisite efforts to commercialize Pennsaid in the U.S. and has refused to make full milestone payments to Nuvo spelled-out in the license agreement.

Nuvo says that it is seeking damages no less than $100 million and rights to terminate its license agreement with Mallinckrodt, effectively returning marketing and sales rights back to Nuvo.

In 2012, Nuvo reported $24.7 million in revenue, up 48 percent from $16.7 million in 2011. Net loss from operations narrowed from $9.3 million in 2011 to $3.9 million last year. In the first quarter this year, sales slumped to $2.3 million, compared to $6.2 million in Q1 2012.

Expressing his disappointment in having to go the legal route, John London, Nuvo's President and Co-CEO, commented in a statement today, "Our board has not taken this decision lightly. However, given what we believe are clear material breaches of the License Agreement and Mallinckrodt's refusal to consider appropriate and fair compensation to Nuvo, we have proceeded with legal action to protect the interests of Nuvo and its shareholders."

Shares of NRI have underperformed in 2013, lagging behind the S&P/TSX Composite Index, the S&P/TSX Small Cap Index and even the TSX-Venture Index as a series of setbacks have hamstringed expected product launches and market penetration. Shares have hit a double bottom in the past two months, holding support around $1.30. Shares made a sharp move upward on Monday that has carried through, including pushing on a resistance point around $1.85 in Wednesday trading. The chart is looking like its ready to make a turn from a long-term downtrend and investors will be watching to see if the lawsuit and the approaching PDUFA date is what the stock needs for a catalyst to continue to climb. Proper due diligence is, as always, encouraged.

Copyright © 2013 AllPennyStocks.com. All rights reserved. Republication or redistribution of AllPennyStocks.com's content is expressly prohibited without the prior written consent of AllPennyStocks.com. AllPennyStocks.com shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.