Fennec Pharmaceuticals Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Financial amounts are in U.S. dollars and, unless stated otherwise, in thousands. Fennec is a clinical-stage biopharmaceutical company developing PEDMARK, a sodium thiosulfate formulation intended to prevent platinum-induced hearing loss in pediatric cancer patients. It reported no product revenue.
Financial results and liquidity
- Revenue: $0 in both Q1 2020 and Q1 2019. Gross margin is not applicable.
- Operating expenses: $3,835, up $1,155 (43%) from $2,680. Research and development was $1,393, down $278; general and administrative expense was $2,442, up $1,433.
- Net loss: $3,826, versus $2,626 in Q1 2019. Basic and diluted loss per share was $0.19, versus $0.13.
- Cash flow: Operating cash use was $3,749, compared with $2,479 in Q1 2019. There were no investing or financing cash flows in Q1 2020.
- Cash and liquidity: Cash and cash equivalents were $9,901 at March 31, down from $13,650 at December 31, 2019. Working capital was $8,216, versus $11,613; current assets were $10,123 and current liabilities $1,907.
- Balance sheet: Total assets were $10,368; stockholders’ equity was $8,461. Accumulated deficit was $147,857. The balance sheet lists no funded debt; the company had a conditional $12.5 million loan facility with Bridge Bank.
Changes versus prior year
- Net loss increased by $1,200 and operating cash use increased by $1,270 year over year.
- R&D expense decreased 17%, as the company said it was completing regulatory preparations. G&A expense more than doubled, reflecting pre-commercialization readiness, including $830 of commercialization-related costs, $300 of payroll increases, and $170 of higher non-cash employee equity compensation.
- Cash declined by $3,749 during the quarter. The company attributed lower interest income to reduced cash balances and lower deposit rates.
Outlook, developments and risks
- After quarter-end, the FDA accepted the PEDMARK NDA and granted Priority Review; the stated PDUFA target action date was August 10, 2020. The company targeted a potential U.S. launch in the second half of 2020, subject to regulatory approval.
- The company reported submitting a European marketing authorization application in February 2020. Its pediatric investigation plan had previously been accepted by the EMA.
- In May 2020, the company completed an underwritten public offering for $30.0 million gross proceeds; exercise of the overallotment option added approximately $4.2 million gross. Management said cash, offering proceeds and the Bridge Bank facility were expected to fund planned activities for at least 24 months. The filing does not provide the offering’s net proceeds.
- The Bridge Bank facility was to become available upon PEDMARK NDA approval by September 30, 2020. It carries a floating rate described as prime plus 1%, with interest-only payments for the first 18 months after funding and maturity on October 1, 2023. Availability was conditional; the facility was not cash on hand at March 31.
- Management said COVID-19 had not materially affected operations as of the filing, but warned it could disrupt regulatory review, suppliers, third-party operations, development and commercialization, and access to capital.
- The company described substantial uncertainty in future capital needs and warned that inadequate funding could require delaying or scaling back development, pursuing transactions, or discontinuing operations. It reported an accumulated deficit and negative operating cash flows but stated that available and expected funding was sufficient for at least 24 months.
- Clinical data cited by the company showed reduced hearing loss with sodium thiosulfate in the SIOPEL 6 and COG ACCL0431 studies. Approval, commercial uptake, manufacturing, reimbursement, competition, and the potential impact on cancer outcomes remain material risks.
Investor facts to verify
- FDA review outcome and timing relative to the August 10, 2020 target date, and whether any regulatory requirements affected launch plans.
- Net proceeds, fees and share dilution from the May public offering; the filing reports 19.896 million shares outstanding at March 31, while the cover reports 25.356 million at May 13.
- Whether the Bridge Bank loan became available, its drawdown and repayment terms, and the conditions attached to funding.
- Cash burn and runway against commercialization, regulatory and launch costs; management’s 24-month estimate depends partly on subsequent financing and conditional debt availability.
- Potential COVID-19 effects on regulatory review, supply chain, third-party execution and commercialization, and any developments in OHSU license royalties or milestones.