Fennec Pharmaceuticals Inc. — Q2 2019 Form 10-Q
Reporting period: Three and six months ended June 30, 2019. Financial amounts are in U.S. dollars; unless stated otherwise, amounts below are in millions. Fennec is a development-stage biopharmaceutical company focused on PEDMARK, a sodium thiosulfate formulation intended to prevent cisplatin-related hearing loss in pediatric cancer patients. It reported no revenue.
Financial results and liquidity
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $1.969 | $0.798 | $3.640 | $1.487 |
| General and administrative expense | $2.844 | $1.867 | $3.853 | $2.969 |
| Operating loss | $(4.813) | $(2.665) | $(7.493) | $(4.456) |
| Net loss | $(4.730) | $(2.587) | $(7.356) | $(4.155) |
| Net loss per share, basic and diluted | $(0.24) | $(0.14) | $(0.37) | $(0.22) |
| Cash used in operating activities | $(2.756) | $(1.570) | $(5.235) | $(3.297) |
At June 30, 2019, cash and cash equivalents were $17.475, down from $22.781 at December 31, 2018. Current assets were $17.532, current liabilities $1.353, and working capital $16.179. Total assets were $17.829 and stockholders’ equity was $16.476. The balance sheet reports no funded debt. The company had an accumulated deficit of $138.612.
Changes versus prior comparable periods
- Q2 operating expenses rose $2.148 year over year; first-half expenses rose $3.037. R&D increases were primarily tied to PEDMARK manufacturing, registration batches, and regulatory submission work.
- G&A increased, in part because shareholders approved extending the term of certain stock options. The change increased fair value by $1.438; $1.285 was expensed immediately and $0.153 is to be recognized over remaining vesting periods. Total recognized option expense was $2.000 in Q2 and $2.264 for the first half of 2019.
- First-half net loss increased by $3.201. The 2018 comparative period included a $0.167 noncash derivative gain that did not recur.
- First-half operating cash use increased by $1.938 year over year, reflecting manufacturing and regulatory activity. Cash balances fell $5.306 during the first half.
Outlook, commentary, and risks
- Fennec said its rolling PEDMARK NDA submission was underway, targeted completion in late 2019 to early 2020, and anticipated a potential first commercial launch in the second half of 2020 if approved.
- A Bridge Bank facility provides for up to $12.5 million, available upon PEDMARK NDA approval by no later than September 30, 2020. It was not reported as funded at quarter-end. The stated rate is the prime rate plus 1%; the filing cited a then-current prime rate of 5.50%. The facility has an October 1, 2023 maturity and includes an interest-only period after funding.
- Management said cash on hand and the facility were expected to support planned activities, including NDA approval and anticipated launch, for the next 12–15 months. It cautioned that capital needs are uncertain and additional financing may be needed; unavailable or unacceptable financing could require delaying, scaling back, or ending programs or operations.
- As clinical background, the company cited SIOPEL 6 results showing hearing loss in 33% of evaluable patients receiving cisplatin plus STS versus 63% receiving cisplatin alone; it reported no evidence of tumor protection in that trial. PEDMARK remained subject to regulatory review and commercialization risks.
- Other notable items: $0.029 of first-half interest expense was noncash amortization of deferred loan issuance costs; 39 thousand warrants were issued to the bank at a $6.80 exercise price. Management reported no material change to previously disclosed risk factors, no legal proceedings, and effective disclosure controls as of June 30, 2019.
Important facts for investors to verify
- Progress and timing of the rolling NDA, FDA review, and the company’s stated potential 2020 launch timeline.
- Whether and when the conditional $12.5 million loan becomes available, and the resulting interest, repayment, and liquidity obligations.
- Cash burn, manufacturing and regulatory spending, and whether current resources remain sufficient for planned activities.
- Impact of the option-term extension and ongoing stock-based compensation; at quarter-end, 2.843 million options and 39 thousand warrants were outstanding.
- Clinical and regulatory evidence supporting PEDMARK’s safety, efficacy, and proposed indication, as well as the potential need for additional financing.