A long-running legal dispute involving pharmaceuticals distribution company PharmX Technologies (ASX: PHX) has finally come to an end, and not in favour of shareholders with the Company ordered to pay $8.1 million in damages, interest and legal costs to Fred IT Group Pty Ltd.
The Victorian Supreme Court’s Court of Appeal delivered its ruling, resulting in a loss for PharmX Technologies in a case that commenced in June 2020, centring on claims made by Corum Systems Pty Ltd against Fred IT, with counterclaims involving PharmX.
These disputes primarily revolved around the payment of distributions between the financial years 2014 and 2020. In April 2023, the Court upheld Corum Systems’ claims, awarding them a sum of $8.1 million. Fred IT subsequently filed appeals, which have now been resolved, leading to PharmX Technologies’ current obligation to repay Fred IT.
As a result of these outcomes, PharmX Technologies is now required to repay the $8.1 million to Fred IT, in addition to covering Fred IT’s costs for the trial and the Corum Systems appeal. These repayments are set against the Company’s provisions, which include a $9.8 million reserve established in anticipation of such an outcome with PharmX having held $13.1 million as of 30 June 2024.
PharmX Technologies’ CEO, Tom Culver, expressed his disappointment with the court’s decision.
“While the outcome of the legal proceedings is far from what we had hoped for, it’s important to emphasise the strength of our underlying business,” he said.
“We have prioritised building resilience with a sustainable model, which has been coupled with prudent financial management during the uncertain period of the appeals process.”
In a letter addressed to shareholders who he has only reported to for the past 8 months since taking on the CEO role, he emphasised the importance of moving forward and focusing on delivering long-term value.
“The proceedings were ongoing for some time, which afforded us the opportunity to thoroughly plan for each eventuality.
“A question I’ve received regularly in recent months has been whether there is any further legal action we could take to further appeal this outcome. There is the option to seek appeal at a higher court and together the Board and Management will determine the best course of action under advice from Counsel.
“With that said, since the start in 2019 these proceedings have required significant time and resources which we need to determine if they warrant further commitment. In any event, our aim is to move forward, prioritising growth and shareholder value with little distraction.”
As the company awaits the final orders from the Court of Appeal, which are expected to be communicated by mid-August 2024, PharmX is keen to put this chapter behind them and hope there is no further legal action arising from this precedent.
For the Half Year ended 31 December 2023, PharmX reported $3.2 million revenue and $0.3 million in net profit after tax.
Mitch Korver is a Business Writer focused on high-growth companies listed on the ASX in the small and medium cap space.
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