PART I: FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The company's unaudited financial statements show no revenue, significant net losses, and increased long-term debt [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (U.S. Dollars in thousands) | Item | September 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $29,752 | $21,100 | | Total current assets | $30,153 | $22,387 | | Total assets | $30,417 | $22,414 | | Total current liabilities | $2,927 | $1,654 | | Long-term debt (net of discount) | $24,688 | $4,988 | | Total liabilities | $27,615 | $6,642 | | Total stockholders' equity | $2,802 | $15,772 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (U.S. Dollars in thousands) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $— | $— | $— | $— | | Research and development | $846 | $1,242 | $3,414 | $4,458 | | General and administrative | $7,053 | $2,931 | $13,040 | $8,558 | | Loss from operations | $(7,899) | $(4,173) | $(16,454) | $(13,016) | | Net loss | $(8,089) | $(4,185) | $(16,857) | $(12,919) | | Basic net loss per common share | $(0.31) | $(0.16) | $(0.65) | $(0.50) | | Diluted net loss per common share | $(0.31) | $(0.16) | $(0.65) | $(0.50) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (U.S. Dollars in thousands) | Item | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net loss | $(16,857) | $(12,919) | | Net cash used in operating activities | $(11,256) | $(10,977) | | Net cash provided by financing activities | $19,908 | $4,968 | | Increase/(decrease) in cash and cash equivalents | $8,652 | $(6,009) | | Cash and cash equivalents - End of period | $29,752 | $24,335 | | Warrants issued for long-term debt (non-cash) | $441 | $— | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity (U.S. Dollars in thousands) | Item | December 31, 2021 | September 30, 2022 | | :--- | :--- | :--- | | Common Shares Outstanding | 26,014 | 26,238 | | Common Stock Amount | $140,801 | $141,309 | | Additional Paid-in Capital | $53,214 | $56,593 | | Accumulated Deficit | $(179,486) | $(196,343) | | Accumulated Other Comprehensive Income | $1,243 | $1,243 | | Total Stockholders' Equity | $15,772 | $2,802 | [Notes to the Unaudited Interim Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Condensed%20Financial%20Statements) [1. Nature of Business and Going Concern](index=9&type=section&id=1.%20Nature%20of%20Business%20and%20Going%20Concern) - Fennec Pharmaceuticals Inc. is a commercial-stage biopharmaceutical company focused on PEDMARK® (sodium thiosulfate injection) for the prevention of platinum-induced ototoxicity in pediatric cancer patients[23](index=23&type=chunk) Financial Performance (U.S. Dollars in thousands) | Metric | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Loss from operations | $7,899 | $16,454 | | Accumulated deficit (as of Sep 30, 2022) | N/A | $196,343 | | Negative cash flows from operating activities (9 months ended Sep 30, 2022) | N/A | $11,256 | - The Company entered into a Securities Purchase Agreement (SPA) for up to **$45,000** in senior secured floating rate convertible notes, with an initial tranche of **$5,000** closed on August 19, 2022, and a second tranche of **$20,000** closed on September 23, 2022, following FDA approval of PEDMARK®[26](index=26&type=chunk)[27](index=27&type=chunk) - The Company believes current funds, along with the funds from the Note Financing, provide **sufficient funding** for planned activities, including the commencement of commercialization efforts for PEDMARK®, for at least the **next twelve months**[30](index=30&type=chunk) [2. Significant Accounting Policies](index=11&type=section&id=2.%20Significant%20Accounting%20Policies) - The unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP and rely on management estimates, particularly for valuing equity instruments and warrants[33](index=33&type=chunk)[35](index=35&type=chunk) - No new accounting pronouncements were adopted during the quarter ended September 30, 2022[36](index=36&type=chunk) Cash and Cash Equivalents (U.S. Dollars in thousands) | Date | Amount | | :--- | :--- | | September 30, 2022 | $29,752 | | December 31, 2021 | $21,100 | - The Company will begin capitalizing inventory costs associated with PEDMARK® during the fourth quarter of 2022, following FDA approval on September 20, 2022, and will begin recognizing product revenues after the initial product launch in October 2022[39](index=39&type=chunk)[43](index=43&type=chunk) [3. Loss Per Share](index=13&type=section&id=3.%20Loss%20Per%20Share) Net Loss Per Share (Basic and Diluted, U.S. Dollars) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended September 30 | $(0.31) | $(0.16) | | Nine Months Ended September 30 | $(0.65) | $(0.50) | Anti-Dilutive Securities Excluded from EPS Calculation (thousands) | Item | Three Months Ended 2022 | September 30, 2021 | Nine Months Ended 2022 | September 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Options to purchase common shares | 4,466 | 3,653 | 4,466 | 3,653 | | Warrants to purchase common shares | 150 | 39 | 150 | 39 | [4. Stockholders' Equity](index=14&type=section&id=4.%20Stockholders'%20Equity) - The Company's authorized capital stock consists of an unlimited number of common shares, no par value[47](index=47&type=chunk) - During the three and nine months ended September 30, 2022, the Company issued **111 warrants** at a strike price of **$8.11**, capitalizing **$441** in non-cash expense and **$175** in cash expense associated with the Securities Purchase Agreement (SPA)[48](index=48&type=chunk) Total Option Expense Recognized (U.S. Dollars in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended September 30 | $1,887 | $917 | | Nine Months Ended September 30 | $3,363 | $2,839 | - As of September 30, 2022, **4,466 U.S. denominated options** were outstanding, with **3,448 fully vested** and exercisable[53](index=53&type=chunk) - As of September 30, 2022, **103 Restricted Share Units (RSUs)** were outstanding[57](index=57&type=chunk)[58](index=58&type=chunk) [5. Fair Value Measurements](index=17&type=section&id=5.%20Fair%20Value%20Measurements) - The Company classifies financial assets and liabilities into a three-level hierarchy based on the observability of inputs used in valuation[59](index=59&type=chunk) Fair Value Measurements (U.S. Dollars in thousands) as of September 30, 2022 | Asset | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $438 | $29,314 | $— | $29,752 | | Processa common shares | $— | $114 | $— | $114 | - Valuation of Processa Pharmaceuticals, Inc. common shares at September 30, 2022, included liquidity discounts of **0%**, **0%**, and **15%** applied to different share tranches[63](index=63&type=chunk) [6. Commitments and Contingencies](index=18&type=section&id=6.%20Commitments%20and%20Contingencies) - Fennec has an exclusive license agreement with Oregon Health & Science University (OHSU) for intellectual property related to PEDMARK®, including milestone payments and royalties on net sales[64](index=64&type=chunk)[65](index=65&type=chunk) - The Company is vigorously defending two federal securities class action lawsuits, both of which had amended complaints **dismissed with prejudice**, and has not recorded a liability as of September 30, 2022[72](index=72&type=chunk)[77](index=77&type=chunk)[150](index=150&type=chunk)[156](index=156&type=chunk) - Hope Medical Enterprises, Inc. filed two inter partes review (IPR) petitions challenging Fennec's patents for PEDMARK®, with decisions expected in **May 2023**[79](index=79&type=chunk)[80](index=80&type=chunk) - The USPTO issued U.S. Patent No. 11,291,728 covering the PEDMARK® pharmaceutical formulation on April 5, 2022, and two additional formulation patent applications received Notices of Allowance on September 14, 2022, all expiring in **2039**[81](index=81&type=chunk) - PEDMARK® has U.S. Orphan Drug Designation, and the Company plans to pursue a Pediatric Use Marketing Authorization (PUMA) in Europe for **10 years of market exclusivity**[82](index=82&type=chunk) [7. Term Loans](index=24&type=section&id=7.%20Term%20Loans) - On August 1, 2022, the Company entered into a Securities Purchase Agreement (SPA) for up to **$45,000** in senior secured floating rate convertible notes[89](index=89&type=chunk) - The Company closed on an initial tranche of **$5,000** on August 19, 2022, and a second tranche of **$20,000** on September 23, 2022, with an additional **$20,000** available for draw before December 31, 2023[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The notes bear cash interest at **prime plus 4.5%** per annum (**10.75%** as of September 30, 2022) and Payment-in-Kind (PIK) interest at **prime plus 3.5%** per annum (**9.75%** as of September 30, 2022), and are convertible into common shares[94](index=94&type=chunk)[95](index=95&type=chunk) Aggregate Annual Payments Due on SPA (U.S. Dollars in thousands) as of September 30, 2022 | Years Ending December 31, | Amount | | :--- | :--- | | 2022 | $— | | 2023 | $— | | 2024 | $— | | 2025 | $— | | 2026 | $— | | 2027 | $25,000 | | Total future payments | $25,000 | | Less: unamortized debt discount | $(312) | | Total term loan, net of debt discount | $24,688 | [8. Subsequent Events](index=26&type=section&id=8.%20Subsequent%20Events) - On October 17, 2022, the Company announced the U.S. commercial launch and availability of PEDMARK® for pediatric patients[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the commercial launch of PEDMARK®, financial results showing net losses, and the strategic shift to commercialization [Overview](index=27&type=section&id=Overview) - Fennec Pharmaceuticals Inc. is a commercial-stage biopharmaceutical company focused on PEDMARK®, which received **FDA approval** on September 20, 2022[102](index=102&type=chunk) - PEDMARK® became commercially available in the United States on **October 17, 2022**, supported by a field force and the Fennec HEARS™ patient access program[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) - The Company holds two patents listed for PEDMARK® in the FDA's Orange Book expiring in **2038** and **2039**, with two additional patents expected to issue soon, also expiring in **2039**[105](index=105&type=chunk) - In Europe, the company's product is eligible for a Pediatric Use Marketing Authorization (PUMA) with up to **10 years of data and market protection**[109](index=109&type=chunk) [Capital Funding](index=29&type=section&id=Capital%20Funding) - As of September 30, 2022, the Company had not received revenues from PEDMARK® sales and reported a net loss of approximately **$16.9 million** for the nine months ended, with an accumulated deficit of approximately **$196.3 million**[110](index=110&type=chunk)[111](index=111&type=chunk) - The Company's cash and cash equivalents totaled **$29.8 million** as of September 30, 2022, and with an additional **$20 million** available from Petrichor Financing, it believes it has **sufficient funding for at least the next twelve months**[112](index=112&type=chunk) - Projections of capital requirements are subject to **substantial uncertainty**, and the Company may need to raise additional funds[112](index=112&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) [Three months ended September 30, 2022 versus three months ended September 30, 2021](index=31&type=section&id=Three%20months%20ended%20September%2030,%202022%20versus%20three%20months%20ended%20September%2030,%202021) Operating Expenses (U.S. Dollars in thousands) | Expense Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $846 | $1,242 | $(396) | | General and administrative | $7,053 | $2,931 | $4,122 | | Total operating expense | $7,899 | $4,173 | $3,726 | | Net loss | $(8,089) | $(4,185) | $(3,904) | - The increase in General and Administrative expenses was driven by a **$970 thousand** increase in non-cash equity compensation, a **$1,212 thousand** increase in salaries due to increased headcount, and a **$620 thousand** increase in sales and marketing activities[116](index=116&type=chunk) - Interest expense increased by **$64 thousand** due to new debt facilities, while interest income increased by **$11 thousand** due to higher cash balances and interest rates[117](index=117&type=chunk) [Nine months ended September 30, 2022 versus nine months ended September 30, 2021](index=32&type=section&id=Nine%20months%20ended%20September%2030,%202022%20versus%20nine%20months%20ended%20September%2030,%202021) Operating Expenses (U.S. Dollars in thousands) | Expense Category | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $3,414 | $4,458 | $(1,044) | | General and administrative | $13,040 | $8,558 | $4,482 | | Total operating expenses | $16,454 | $13,016 | $3,438 | | Net loss | $(16,857) | $(12,919) | $(3,938) | - The decrease in Research and Development expenses was mainly due to a **decline in manufacturing activities** and regulatory expenses[120](index=120&type=chunk) - The increase in General and Administrative expenses was primarily related to **legal expenses**, non-cash equity compensation, and higher wages from increased headcount[120](index=120&type=chunk) - Unrealized loss on securities was **$126 thousand** in 2022, contrasting with a **$137 thousand** gain in 2021[120](index=120&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) Selected Asset and Liability Data (U.S. Dollars in thousands) | Item | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and equivalents | $29,752 | $21,100 | | Other current assets | $401 | $1,287 | | Current liabilities | $2,927 | $1,654 | | Working capital | $27,226 | $20,733 | - Working capital increased by **$6,493 thousand** between December 31, 2021, and September 30, 2022, primarily due to a net cash inflow from Petrichor notes and option exercises, offset by operating expenditures[124](index=124&type=chunk) Selected Cash Flow Data (U.S. Dollars in thousands) | Item | Nine Months Ended 2022 | September 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,256) | $(10,977) | | Net cash provided by investing activities | $— | $— | | Net cash provided by financing activities | $19,908 | $4,968 | | Net cash flow | $8,652 | $(6,009) | - The Company expects **increases in cash outflows** related to commercialization activities and continues to pursue strategic alternatives for additional funding[124](index=124&type=chunk)[126](index=126&type=chunk) [Financial Instruments](index=34&type=section&id=Financial%20Instruments) - The Company invests excess cash in high credit quality investments, primarily money market accounts (**$29,314 thousand** as of September 30, 2022), to protect principal[127](index=127&type=chunk)[129](index=129&type=chunk) - The investment policy requires securities to have a minimum Dun & Bradstreet rating of **A for bonds** or **R1 low for commercial paper** and a maximum-weighted average time to maturity of **twelve months**[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk) - The Company has not had any material off-balance sheet arrangements and does not engage in trading activities involving non-exchange traded contracts[132](index=132&type=chunk) [Research and Development](index=36&type=section&id=Research%20and%20Development) - Research and development efforts have been focused on PEDMARK® since 2013[133](index=133&type=chunk) Research and Development Expenses (U.S. Dollars in thousands) | Period | 2022 | 2021 | | :--- | :--- | :--- | | Three Months Ended September 30 | $846 | $1,242 | | Nine Months Ended September 30 | $3,414 | $4,458 | - R&D expenses decreased as the Company's efforts **shifted to commercial readiness activities** for PEDMARK®[135](index=135&type=chunk) - The development of PEDMARK® is subject to inherent risks of failure, and the Company is unable to accurately estimate future costs or timing[136](index=136&type=chunk) [Critical Accounting Policies and Use of Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) - There have been **no material changes** to the Company's critical accounting policies and use of estimates during the nine months ended September 30, 2022[137](index=137&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from money market investments, variable interest rates, and foreign currency fluctuations [Money Market Investments](index=36&type=section&id=Money%20Market%20Investments) - The Company maintains an investment portfolio of U.S. or Canadian obligations and bank securities, with **$29,314 thousand** in money market investments as of September 30, 2022[138](index=138&type=chunk)[141](index=141&type=chunk) - The investment policy requires securities to have a minimum Dun & Bradstreet rating of **A for bonds** or **R1 low for commercial paper** and a maximum-weighted average time to maturity of **twelve months**[138](index=138&type=chunk)[139](index=139&type=chunk) - Amounts held in money market accounts are substantially above the **$250,000** amount insured by the FDIC and may lose value[141](index=141&type=chunk) [Variable Interest Rate Risk](index=38&type=section&id=Variable%20Interest%20Rate%20Risk) - The Company is subject to interest rate fluctuation exposure through its borrowings under the SPA (**prime plus 4.5%** cash interest, **prime plus 3.5%** PIK interest) and its investment in money market accounts[142](index=142&type=chunk) - Increases in interest rates may adversely affect the Company's ability to meet its obligations[142](index=142&type=chunk) [Foreign Currency Exposure](index=38&type=section&id=Foreign%20Currency%20Exposure) - The Company is subject to foreign currency risks from purchasing goods and services denominated in Euro, Great British Pounds, and Canadian dollars[143](index=143&type=chunk) - To date, the Company has not employed derivative instruments but holds Canadian dollars for vendor payments and other corporate obligations[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and reports no material changes in internal financial reporting controls [Evaluation of Disclosure Controls and Procedures](index=38&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - As of September 30, 2022, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were **effective** at the reasonable assurance level[144](index=144&type=chunk) [Changes in Internal Control over Financial Reporting](index=38&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There have been **no changes** in internal control over financial reporting during the period that materially affected, or are reasonably likely to materially affect, the Company's internal control[145](index=145&type=chunk) PART II: OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company details ongoing legal challenges, including two dismissed securities class action lawsuits and two patent review petitions [Chapman v. Fennec Pharmaceuticals Inc. et al.](index=38&type=section&id=Chapman%20v.%20Fennec%20Pharmaceuticals%20Inc.%20et%20al.) - A federal securities class action lawsuit alleging false or misleading statements regarding PEDMARK® was **dismissed with prejudice** on March 2, 2022[147](index=147&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - The lead plaintiff filed a motion for post-judgment relief to file a second amended complaint, which the defendants are opposing[151](index=151&type=chunk) - The Company believes this lawsuit is **without merit** and intends to defend it vigorously; no liability has been recorded[152](index=152&type=chunk) [Fisher v. Fennec Pharmaceuticals Inc. et al.](index=40&type=section&id=Fisher%20v.%20Fennec%20Pharmaceuticals%20Inc.%20et%20al.) - A federal securities class action lawsuit, similar to Chapman, was **dismissed with prejudice** on October 12, 2022[153](index=153&type=chunk)[156](index=156&type=chunk) - The lead plaintiff has until November 14, 2022, to file a notice of appeal[157](index=157&type=chunk) - The Company believes this lawsuit is **without merit** and intends to defend it vigorously; no liability has been recorded[158](index=158&type=chunk) [Hope Medical Enterprises, Inc.](index=42&type=section&id=Hope%20Medical%20Enterprises,%20Inc.) - Hope Medical Enterprises filed two inter partes review (IPR) petitions challenging Fennec's patents for PEDMARK®, with decisions expected in **May 2023**[159](index=159&type=chunk)[160](index=160&type=chunk) - The USPTO issued U.S. Patent No. 11,291,728 covering the PEDMARK® pharmaceutical formulation on April 5, 2022, and two additional formulation patent applications received Notices of Allowance, all expiring in **2039**[161](index=161&type=chunk) - The Company plans to **vigorously defend its intellectual property rights**, but an invalidation of its patents could materially affect its ability to protect PEDMARK®[163](index=163&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - The Company's detailed risk factors are discussed in Part I, Item 1A of its Annual Report on Form 10-K for the fiscal year ended December 31, 2021[164](index=164&type=chunk) - The Company is not aware of any **material changes** from the risk factors previously disclosed[165](index=165&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[168](index=168&type=chunk) [Item 3. Defaults Upon Senior Securities](index=44&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[169](index=169&type=chunk) [Item 4. Mine Safety Disclosures](index=44&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[171](index=171&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) A press release announcing Q3 2022 financial results was issued on November 11, 2022 - On November 11, 2022, the Company issued a press release announcing its financial results for the quarter ended September 30, 2022, furnished as Exhibit 99.1[173](index=173&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and XBRL documents List of Exhibits | Exhibit No. | Description | | :--- | :--- | | 31.1 | Certification of Chief Executive Officer (Section 302) | | 31.2 | Certification of Chief Financial Officer (Section 302) | | 32.1 | Certification of CEO and CFO (Section 906) | | 99.1 | Press Release for Quarter Ended September 30, 2022 | | 101.INS* | Inline XBRL Instance Document | | 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File | [Signatures](index=46&type=section&id=Signatures) The report is duly signed by the company's Chief Executive Officer and Chief Financial Officer - The report was signed by Rostislav Raykov, Chief Executive Officer, and Robert Andrade, Chief Financial Officer, on November 14, 2022[178](index=178&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____ to ____ Commission File Number: 001-32295 FENNEC PHARMACEUTICALS INC. (Exact Name of Registrant as Specified in Its Charter) | --- | --- ...

Company Overview - Fennec Pharmaceuticals is focused on developing PEDMARK™ to prevent cisplatin-induced ototoxicity in children aged 1 month to ≤ 18 years with localized, non-metastatic solid tumors[3] - The FDA assigned a PDUFA target action date of September 23, 2022, for PEDMARK™[3] - Fennec has patent protection in the U S until 2038 for the method of use for children <5 years of age and until 2039 for the unique anhydrous form of the active ingredient[4] - As of March 31, 2022, Fennec had USD $18 3 million in cash and cash equivalents and USD $5 million in debt[12] - In 2021, Fennec's cash burn was USD $14 2 million[12] PEDMARK™ Clinical Data - COG ACCL0431 study showed a 48% reduction in the risk of hearing loss with STS[48] - SIOPEL 6 study demonstrated a 48% decrease in the risk of hearing loss with STS[58] - In the SIOPEL 6 study, 63% of patients in the Cisplatin alone group experienced any grade hearing loss compared to 33% in the STS group[59] Market Opportunity - Approximately 70% of pediatric solid tumor cases in both the U S and European markets are localized, non-metastatic, representing 3,554 cases in the U S and 4,215 cases in Europe[23] - Cisplatin is a standard of care chemotherapy drug used to treat various childhood cancers[24, 25] - Up to 60% to 90% of children develop irreversible ototoxicity as a result of cisplatin treatment[31] - Among 226 survivors of non-CNS tumors, 39% had severe hearing loss, and 20% of these patients had hearing aids or cochlear implants[35]

FENNEC PHARMA ● March 2022 | Corporate Presentation www.fennecpharma.com Safe Harbor Statement During the course of this presentation, we will make statements that constitute forward-looking statements. These statements may include operating expense projections, the initiation, timing and results of pending or future clinical trials, the actions or potential action of the U.S. Food and Drug Administration (FDA), the status and timing of ongoing research, corporate partnering activities and other factors aff ...

PART I [Business](index=4&type=section&id=Item%201.%20Business) Fennec Pharmaceuticals develops PEDMARK™ to prevent cisplatin-induced hearing loss in children, with FDA approval pending due to manufacturing issues and patent challenges - **PEDMARK™** is the company's sole clinical-stage product, focused on preventing cisplatin-induced hearing loss in children, with all resources dedicated to its development[10](index=10&type=chunk)[11](index=11&type=chunk) - **PEDMARK™** holds Breakthrough Therapy, Fast Track, and Orphan Drug designations from the FDA, underscoring its potential for unmet medical needs[15](index=15&type=chunk) - The FDA issued two **Complete Response Letters (CRLs)** in August 2020 and November 2021, citing deficiencies at a third-party manufacturing facility, with NDA resubmission planned for Q1 2022[16](index=16&type=chunk)[17](index=17&type=chunk)[19](index=19&type=chunk) - A **Marketing Authorization Application (MAA)** was submitted in Europe in February 2020, with **PEDMARK™** eligible for a Pediatric Use Marketing Authorization (PUMA) offering up to **10 years of market protection**[20](index=20&type=chunk) Key Phase 3 Clinical Trial Results | Trial | Patient Population | Key Finding | Relative Risk Reduction | | :--- | :--- | :--- | :--- | | **SIOPEL 6** | Standard Risk Hepatoblastoma | Hearing loss occurred in 32.7% of the PEDMARK™ group vs. 63.0% in the cisplatin-only group. | 48% (Relative Risk of 0.52) | | **COG ACCL0431** | Various Childhood Cancers | Hearing loss occurred in 28.6% of the PEDMARK™ group vs. 56.4% in the control group. | 50% | - The company's intellectual property is under challenge, with Hope Medical Enterprises, Inc. filing two petitions in October 2021 to invalidate key U.S. patents **US '190 and US '363** related to **PEDMARK™**[46](index=46&type=chunk) Research and Development Expenses | Fiscal Year | R&D Expense (USD Million) | | :--- | :--- | | 2021 | $5.0 | | 2020 | $5.1 | [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) Significant risks include historical losses, sole product dependence, regulatory approval uncertainty from manufacturing issues, patent invalidation, and financial needs - **Business Risks:** The company has a history of significant operating losses, with an accumulated deficit of approximately **$179.5 million** as of December 31, 2021, and no product sales revenue[117](index=117&type=chunk)[142](index=142&type=chunk) - **Regulatory & Manufacturing Risks:** **PEDMARK™** NDA received CRLs in August 2020 and November 2021 due to third-party manufacturing facility deficiencies, highlighting critical reliance on external parties[123](index=123&type=chunk)[130](index=130&type=chunk)[190](index=190&type=chunk) - **Intellectual Property Risks:** The company is defending key **PEDMARK™** patents against invalidation petitions, where an adverse outcome could significantly harm its competitive position beyond Orphan Drug Designation exclusivity[134](index=134&type=chunk)[298](index=298&type=chunk)[301](index=301&type=chunk) - **Financial Risks:** Additional financing may be required for **PEDMARK™** commercialization, with Bridge Bank debt facility covenants tied to NDA resubmission and approval deadlines posing default risks[118](index=118&type=chunk)[404](index=404&type=chunk) - **Litigation Risks:** The company faces two putative securities class action lawsuits following FDA CRL announcements, potentially incurring significant defense costs and time[119](index=119&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) - **Shareholder Risks:** Principal shareholders own approximately **40.28%** of common shares, exerting significant influence, while stock price volatility and potential PFIC classification pose adverse U.S. tax consequences for investors[139](index=139&type=chunk)[140](index=140&type=chunk)[384](index=384&type=chunk) [Unresolved Staff Comments](index=103&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[405](index=405&type=chunk) [Properties](index=103&type=section&id=Item%202.%20Properties) The company leases small office spaces in Research Triangle Park, NC, and Hoboken, NJ, under operating leases with modest monthly payments - The company leases a small office space in Research Triangle Park, NC for **$400 per month**, terminable with 30 days' notice[406](index=406&type=chunk)[407](index=407&type=chunk) - An Office Service Agreement for Hoboken, NJ office space has a monthly rent of **$1,150**, renewing for successive six-month periods[408](index=408&type=chunk) [Legal Proceedings](index=105&type=section&id=Item%203.%20Legal%20Proceedings) Fennec is involved in securities class action lawsuits following FDA CRLs and patent invalidation petitions from Hope Medical Enterprises, Inc., which the company intends to vigorously defend - **Chapman et al.:** A securities class action lawsuit filed in September 2020 after the first CRL, with a Magistrate Judge recommending the company's motion to dismiss be granted[409](index=409&type=chunk) - **Jeffrey D. Fisher:** A securities class action lawsuit filed in February 2022 following the second CRL, with allegations similar to the Chapman suit[411](index=411&type=chunk) - **Hope Medical Enterprises, Inc.:** Filed two IPR petitions in October 2021 to invalidate U.S. Patent Nos. **10,596,190** and **10,792,363**, central to **PEDMARK™**[413](index=413&type=chunk)[414](index=414&type=chunk)[417](index=417&type=chunk) [Mine Safety Disclosures](index=107&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[419](index=419&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer's Purchases of Equity Securities](index=107&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer's%20Purchases%20of%20Equity%20Securities) The company's common shares are dual-listed on Nasdaq and TSX, with no dividends paid, and significant discussion on U.S. and Canadian tax implications, including PFIC risk - The company's common shares are dual-listed on the **Nasdaq Capital Market (FENC)** and the **Toronto Stock Exchange (FRX)**[420](index=420&type=chunk) 2021 Stock Price Range (Nasdaq - USD) | Quarter Ended | High ($) | Low ($) | | :--- | :--- | :--- | | Dec 31, 2021 | 10.01 | 3.89 | | Sep 30, 2021 | 9.62 | 6.21 | | Jun 30, 2021 | 7.85 | 5.96 | | Mar 31, 2021 | 8.68 | 6.21 | - The company has never declared or paid cash dividends and does not plan to in the foreseeable future[424](index=424&type=chunk) - There is a risk of the company being classified as a **Passive Foreign Investment Company (PFIC)**, potentially leading to adverse U.S. federal income tax consequences for U.S. investors[395](index=395&type=chunk)[456](index=456&type=chunk) [Selected Financial Data](index=121&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable as the company is a smaller reporting company - Not applicable[468](index=468&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=121&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fennec reported a **net loss of $17.3 million** in FY2021, an improvement from $18.1 million in FY2020, driven by lower G&A expenses, with cash and equivalents at **$21.1 million** deemed sufficient for the next 12 months Fiscal Year 2021 vs. 2020 Results of Operations (in thousands USD) | Metric | FY 2021 | FY 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $0 | $170 | ($170) | | Research & Development | $4,981 | $5,105 | ($124) | | General & Administration | $12,242 | $12,950 | ($708) | | **Net Loss** | **($17,346)** | **($18,109)** | **$763** | - The decrease in G&A expenses in FY2021 was due to the completion of pre-commercialization activities in FY2020, partially offset by increased legal, payroll, and non-cash equity compensation expenses in 2021[492](index=492&type=chunk) Selected Cash Flow Data (in thousands USD) | Metric | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | ($14,222) | ($15,595) | | Net cash provided by financing activities | $4,978 | $32,289 | | **Net cash flow** | **($9,244)** | **$16,694** | - Cash and cash equivalents were **$21.1 million** as of December 31, 2021, down from **$30.3 million** in 2020, deemed sufficient for at least the next 12 months[501](index=501&type=chunk)[509](index=509&type=chunk) - In June 2021, the company amended its debt facility with Bridge Bank, accessing **$5 million** of a **$20 million** facility across three term loans[486](index=486&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=136&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk primarily relates to cash and cash equivalents and foreign currency exposure, with a conservative investment policy and no current hedging for Canadian dollar transactions - The company held **$21.0 million** in money market and savings accounts as of December 31, 2021, significantly exceeding the **$250,000 FDIC insurance limit**[524](index=524&type=chunk) - The investment policy is conservative, prioritizing principal preservation, liquidity, and return, while avoiding speculative investments[525](index=525&type=chunk) - The company faces foreign currency risk from Canadian dollar transactions but does not currently use hedging instruments[526](index=526&type=chunk) [Financial Statements and Supplementary Data](index=136&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the company's audited consolidated financial statements for FY2021 and FY2020, with the auditor identifying the fair value of stock options as a critical audit matter - The financial statements for FY2021 and FY2020 are included, along with the independent auditor's report from Haskell & White LLP[527](index=527&type=chunk)[603](index=603&type=chunk) - The auditor's report identifies the **Fair Value of Stock Options** as a Critical Audit Matter, emphasizing subjective judgments for estimates like expected volatility and award life in the Black-Scholes model[607](index=607&type=chunk)[609](index=609&type=chunk) Consolidated Balance Sheet Highlights (in thousands USD) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,100 | $30,344 | | Total Assets | $22,414 | $31,417 | | Total Liabilities | $6,642 | $2,347 | | Total Shareholders' Equity | $15,772 | $29,070 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=136&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None reported[528](index=528&type=chunk) [Controls and Procedures](index=136&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[529](index=529&type=chunk) - Management assessed and concluded internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[533](index=533&type=chunk) - No material changes to internal control over financial reporting occurred during the last fiscal quarter[534](index=534&type=chunk) [Other Information](index=138&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[537](index=537&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=140&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[540](index=540&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=140&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's executive officers and board of directors, including their independence, committee memberships, and the adopted Code of Business Conduct and Ethics - Executive leadership includes **Rostislav Raykov** as CEO and **Robert Andrade** as CFO[541](index=541&type=chunk)[543](index=543&type=chunk)[544](index=544&type=chunk) - The Board of Directors includes an Audit, Compensation, and Governance Committee, with detailed memberships for each director[541](index=541&type=chunk) - A majority of the Board's directors are independent under Nasdaq and Canadian securities standards[586](index=586&type=chunk) - The company has adopted a Code of Business Conduct and Ethics applicable to all officers, directors, and employees[557](index=557&type=chunk) [Executive Compensation](index=146&type=section&id=Item%2011.%20Executive%20Compensation) This section details compensation for Named Executive Officers and directors for FY2021 and FY2020, including salaries, option awards, and severance provisions 2021 Named Executive Officer Compensation | Name and Principal Position | Salary ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Rostislav Raykov, CEO | 468,452 | 2,951,923 | 3,420,375 | | Robert Andrade, CFO | 339,409 | 1,006,364 | 1,498,773 | | Shubh Goel, CCO | 376,505 | 1,006,364 | 1,535,869 | - Executive employment agreements include severance provisions: **12 months of salary for the CEO** and **6 months for the CFO** if terminated without cause[562](index=562&type=chunk)[563](index=563&type=chunk) - An incentive plan allocates **1% of a change in control transaction value (up to $2 million)** to key personnel, with **50%** designated for the CEO[571](index=571&type=chunk) - Non-executive director compensation for 2021 totaled **$993,974**, comprising **$242,500 in cash fees** and **$751,474 in option awards**[575](index=575&type=chunk)[576](index=576&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=153&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section discloses beneficial ownership as of February 25, 2022, with three entities owning over 5% (collectively 40.28%) and officers/directors owning 9.40% Security Ownership of >5% Beneficial Owners (as of Feb 25, 2022) | Shareholder | % Ownership | | :--- | :--- | | Southpoint Capital Advisors, LP | 15.67% | | Essetifin SpA | 15.35% | | Sonic Fund II, LP | 9.25% | - All officers and directors as a group beneficially owned **9.40%** of the company's common shares as of February 25, 2022[580](index=580&type=chunk) - As of December 31, 2021, approximately **4.3 million** securities were issuable upon option exercise, with an additional **2.2 million** available for future issuance under equity compensation plans[583](index=583&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=155&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20independence) The company reported no related party transactions in FY2021, maintains indemnification agreements and D&O insurance, and confirms a majority of independent directors - There were no reportable related party transactions in fiscal year 2021[584](index=584&type=chunk) - The Board of Directors comprises a majority of independent directors, with CEO **Rostislav Raykov** as the sole non-independent member[586](index=586&type=chunk) [Principal Accounting Fees and Services](index=156&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section details fees paid to the independent auditor, Haskell & White LLP, for FY2021 and FY2020, with all services pre-approved by the Audit Committee Principal Accountant Fees (in USD) | Fee Category | Fiscal Year 2021 | Fiscal Year 2020 | | :--- | :--- | :--- | | Audit Fees | $73,100 | $51,600 | | Audit-Related Fees | $15,500 | $40,000 | | Tax Fees | $0 | $0 | | All Other Fees | $0 | $0 | | **Total** | **$88,600** | **$91,600** | - All services performed by the independent auditor were pre-approved by the Audit Committee[589](index=589&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=157&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including key employment and loan agreements - This item lists all financial statements, schedules, and exhibits filed with the Form 10-K[591](index=591&type=chunk) - Key exhibits include executive officer employment agreements, the stock option plan, and amendments to the Loan and Security Agreement with Western Alliance Bank[592](index=592&type=chunk) [Form 10-K Summary](index=160&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates that no Form 10-K summary is provided - None provided[594](index=594&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____ to ____ Commission File Number: 001-32295 FENNEC PHARMACEUTICALS INC. (Exact Name of Registrant as Specified in Its Charter) | --- | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from____ to ____ Commission File Number: 001-32295 FENNEC PHARMACEUTICALS INC. (Exact Name of Registrant as Specified in Its Charter) | --- | --- ...

FENNEC PHARMA ● June 2021 | Corporate Presentation www.fennecpharma.com Safe Harbor Statement During the course of this presentation, we will make statements that constitute forward-looking statements. These statements may include operating expense projections, the initiation, timing and results of pending or future clinical trials, the actions or potential action of the U.S. Food and Drug Administration (FDA), the status and timing of ongoing research, corporate partnering activities and other factors affe ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 British Columbia, Canada (State or Other Jurisdiction of Incorporation or Organization 20-0442384 (I.R.S. Employer Identification No.) PO Box 13628, 68 TW Alexander Drive Research Triangle Park, North Carolina (Address of Principal Executive Offices) 27709 (Zip Code) Title of each class Trading Symbol(s) Name of each exchange on which registered Common Shares, no par value FENC Nasdaq Capital Market Emerging growth company ¨ FORM 10-Q ( ...

FENNEC PHARMA ● August 2020 | Corporate Presentation www.fennecpharma.com Safe Harbor Statement During the course of this presentation, we will make statements that constitute forward-looking statements. These statements may include operating expense projections, the initiation, timing and results of pending or future clinical trials, the actions or potential action of the U.S. Food and Drug Administration (FDA), the status and timing of ongoing research, corporate partnering activities and other factors af ...