Fennec Pharma(FENC) - 2025 Q1 - Quarterly Report

PART I: FINANCIAL INFORMATION Condensed Consolidated Financial Statements The company reported a $1.17 million net loss in Q1 2025, a significant shift from $12.84 million net income in Q1 2024, primarily due to the absence of prior year's one-time licensing revenue Condensed Consolidated Balance Sheets The balance sheet shows a slight increase in total assets to $46.4 million and liabilities to $52.3 million, resulting in a minor increase in stockholders' deficit Balance Sheet Summary (in thousands USD) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $22,675 | $26,634 | | Total current assets | $42,975 | $44,124 | | Total assets | $46,403 | $44,946 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $8,371 | $6,919 | | Total liabilities | $52,283 | $50,818 | | Total stockholders' deficit | ($5,880) | ($5,872) | - Total assets increased slightly to $46.4 million from $44.9 million, while total liabilities increased to $52.3 million from $50.8 million, leading to a small increase in the total stockholders' deficit[10] Condensed Consolidated Statements of Operations The statement of operations reflects a shift to a net loss of $1.17 million in Q1 2025, primarily due to the absence of prior year's $18.0 million licensing revenue Statement of Operations Summary (in thousands USD, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | PEDMARK product sales, net | $8,751 | $7,419 | | Licensing revenue | $0 | $17,958 | | Total revenue | $8,751 | $25,377 | | Total operating expenses | $9,559 | $11,634 | | (Loss) / income from operations | ($808) | $13,743 | | Net (loss) / income | ($1,165) | $12,837 | | Diluted net (loss) / income per share | ($0.04) | $0.41 | - Net product sales of PEDMARK grew 18% YoY to $8.75 million, however, total revenue decreased significantly due to the absence of the $18.0 million in licensing revenue recognized in Q1 2024[11] - The company reported a net loss of $1.17 million, or ($0.04) per share, in Q1 2025, compared to a net income of $12.84 million, or $0.41 per diluted share, in Q1 2024[11] Condensed Consolidated Statements of Stockholders' Equity/(Deficit) The stockholders' deficit slightly increased to $5.880 million due to the net loss, partially offset by stock-based compensation and option exercises - The total stockholders' deficit slightly increased from $5.872 million at the end of 2024 to $5.880 million at March 31, 2025, primarily driven by the net loss of $1.165 million, partially offset by stock-based compensation of $0.798 million and proceeds from stock option exercises[13] Condensed Consolidated Statements of Cash Flows Cash and cash equivalents decreased by $4.0 million in Q1 2025, primarily due to $4.3 million in cash used in operating activities, a reversal from the prior year's cash inflow Cash Flow Summary (in thousands USD) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used in) / provided by operating activities | ($4,318) | $39,047 | | Net cash provided by financing activities | $359 | ($1,132) | | (Decrease) / increase in cash and cash equivalents | ($3,959) | $37,915 | | Cash and cash equivalents - End of period | $22,675 | $51,184 | - Cash used in operating activities was $4.3 million in Q1 2025, a stark contrast to the $39.0 million provided by operations in Q1 2024, which had benefited from the upfront payment from the Norgine licensing deal[16] Notes to the Condensed Consolidated Financial Statements The notes detail the company's sole product PEDMARK®, its liquidity outlook, ongoing patent litigation, and the Norgine licensing agreement - The company's sole product is PEDMARK®, approved by the FDA to reduce the risk of ototoxicity associated with cisplatin in pediatric patients[17] - Management believes current funds, including the upfront payment from Norgine, are sufficient to fund planned activities for at least the next twelve months, despite a net loss and negative operating cash flow in Q1 2025[19][30] - The company is engaged in ongoing patent infringement litigation against CIPLA, which submitted an Abbreviated New Drug Application (ANDA) for a generic version of PEDMARK®[95][97][101] - In March 2024, Fennec secured an exclusive licensing agreement with Norgine to commercialize PEDMARQSI® (PEDMARK®) in Europe, Australia, and New Zealand, receiving an upfront payment of approximately $43.2 million[29][120][121] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q1 2025 net loss to the absence of prior year's one-time licensing revenue, despite PEDMARK® sales growing 18% to $8.8 million Overview Fennec is a commercial-stage biopharmaceutical company focused on PEDMARK®, its sole FDA-approved product for cisplatin-induced ototoxicity in pediatric patients - Fennec is a commercial-stage biopharmaceutical company focused on its only product, PEDMARK®, the first and only FDA-approved treatment to reduce the risk of cisplatin-induced ototoxicity in certain pediatric patients[133] - The company received European Commission Marketing Authorization for PEDMARQSI® (the European brand name) in June 2023 and subsequently entered an exclusive licensing agreement with Norgine for commercialization in Europe, Australia, and New Zealand[134] - PEDMARK® has Orphan Drug Exclusivity in the U.S. until September 2029 and is protected by six patents listed in the FDA Orange Book, with expirations in 2039[137] Results of Operations Total revenue decreased significantly due to the absence of prior year's licensing revenue, despite PEDMARK® product sales increasing by $1.3 million Q1 2025 vs Q1 2024 Results (in thousands USD) | Line Item | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | PEDMARK product sales, net | $8,751 | $7,419 | $1,332 | | Licensing revenue | $0 | $17,958 | ($17,958) | | Total revenue | $8,751 | $25,377 | ($16,626) | | Selling and marketing | $2,947 | $5,209 | ($2,262) | | General and administration | $6,145 | $5,872 | $273 | | Total operating expense | $9,559 | $11,634 | ($2,075) | | Net (loss) / income | ($1,165) | $12,837 | ($14,002) | - The decrease in total revenue was due to the $18.0 million in licensing revenue from the Norgine transaction recognized in Q1 2024, which did not recur in Q1 2025[153] - Selling and marketing expenses decreased by $2.3 million, largely due to the elimination of European pre-commercial activities following the Norgine transaction[153] Liquidity and Capital Resources Cash and cash equivalents decreased by $4.0 million to $22.7 million in Q1 2025, primarily due to negative operating cash flow and working capital changes - Cash and cash equivalents decreased by $4.0 million during Q1 2025, from $26.6 million to $22.7 million, primarily due to seasonally higher operating expenses and timing of working capital collections[155][158] - Working capital decreased from $37.2 million at year-end 2024 to $34.6 million as of March 31, 2025[155] - Net cash used in operating activities was $4.3 million in Q1 2025, compared to $39.0 million provided by operating activities in Q1 2024, with the difference primarily resulting from the proceeds of the Norgine transaction in the prior year[156] Critical Accounting Policies and Estimates No material changes occurred in critical accounting policies, which involve significant judgments, particularly for revenue recognition from license agreements - There have been no material changes to the company's critical accounting policies, which include revenue recognition for product sales and license agreements, credit losses, and stock-based compensation[167] - Revenue recognition requires significant judgments, including identifying performance obligations, estimating variable consideration, and allocating the transaction price, particularly for license agreements with milestones and royalties[170][171] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of March 31, 2025, with no material changes during the quarter - The CEO and CFO concluded that as of March 31, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[181][182] - Management concluded that as of March 31, 2025, the company's internal controls over financial reporting were effective[183] PART II: OTHER INFORMATION Legal Proceedings The company is engaged in ongoing patent infringement litigation against CIPLA regarding a generic version of PEDMARK®, with market protection until September 2029 due to Orphan Drug Exclusivity - Fennec is in a legal dispute with CIPLA, which is seeking to market a generic version of PEDMARK® and has challenged Fennec's patents[187] - The lawsuit triggers a 30-month stay on the FDA's ability to grant final approval to CIPLA's generic product, additionally, PEDMARK® has Orphan Drug Exclusivity until September 20, 2029[188] - The litigation is ongoing, with Fennec having filed a Third Amended Complaint to focus the case on two key patents (US '018 and US '793)[191][194] Risk Factors No material changes have occurred to the risk factors previously disclosed in the company's 2024 Annual Report on Form 10-K - The company states there are no material changes from the risk factors disclosed in its 2024 Annual Report on Form 10-K[195] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - The company reported no unregistered sales of equity securities during the period[196] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - The company reported no defaults upon senior securities[197] Mine Safety Disclosures This section is not applicable to the company's operations - This item is not applicable to the company[198] Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement, and the company issued a press release announcing Q1 2025 financial results - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025[199] - A press release announcing Q1 2025 financial results was issued on May 13, 2025, and furnished as Exhibit 99.1[200] Exhibits The report includes CEO and CFO certifications as required by Sarbanes-Oxley Act sections and the Q1 2025 earnings press release - Exhibits filed with the report include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1) and the Q1 2025 earnings press release (Exhibit 99.1)[201]