Fennec Pharmaceuticals Inc. — Q2 2018 Form 10-Q
Reporting period: Three and six months ended June 30, 2018. Amounts are in U.S. dollars, in thousands, except per-share data. Fennec is a development-stage biopharmaceutical company focused on PEDMARK, a sodium thiosulfate formulation intended to prevent cisplatin-related hearing loss in children. It reported no revenue.
Financial performance and position
- Q2: R&D expense was $798 (2017: $333); general and administrative expense was $1,867 (2017: $1,146); operating loss was $2,665 (2017: $1,479); and net loss was $2,587 (2017: $1,598). Basic and diluted loss per share was $0.14 (2017: $0.11).
- First half: R&D expense was $1,487 (2017: $558); G&A expense was $2,969 (2017: $1,692); operating loss was $4,456 (2017: $2,250); and net loss was $4,155 (2017: $2,404). Basic and diluted loss per share was $0.22 (2017: $0.17).
- Cash flow: Operating cash use was $1,570 in Q2 and $3,297 for the first half, versus $688 and $1,363 in the comparable 2017 periods. First-half financing provided $677, mainly from option and warrant exercises; cash decreased $2,620.
- Liquidity: Cash and cash equivalents were $25,640 at June 30, 2018, down from $28,260 at December 31, 2017. Working capital was $24,857. Current liabilities totaled $847; the balance sheet reports no debt. The company held $19,608 in money-market investments.
- Equity and dilution: Accumulated deficit was $125,523 and stockholders’ equity was $24,857. There were 18.794 million common shares outstanding at quarter-end and 1.020 million warrants outstanding.
Margins are not meaningful because the company had no revenue. The filing attributes higher R&D spending mainly to PEDMARK manufacturing and preparation of registration batches. Higher G&A reflected, among other items, increased stock-based compensation, legal and consulting costs, personnel, director payments, and investor relations. Q2 employee and contractor stock-option expense totaled $1,290.
Business developments, outlook, and risks
- The filing reports positive results from the Phase 3 SIOPEL 6 study: hearing loss occurred in 33% of evaluable patients receiving cisplatin plus sodium thiosulfate versus 63% receiving cisplatin alone; the company reported no evidence of tumor protection. Results from the COG ACCL0431 study also showed lower hearing-loss incidence with sodium thiosulfate.
- PEDMARK received FDA Breakthrough Therapy and Fast Track designations in March 2018. Management said it planned to commence regulatory submissions in 2018, based on SIOPEL 6 and COG ACCL0431 data. The filing does not report an approval or a more specific submission timetable.
- Management estimated June 30 cash would fund operations for approximately 12–15 months, while warning that capital projections are uncertain and additional funding may be needed. Future funding could involve equity, debt, collaborations, or licensing; unavailable or unfavorable financing could force delays, reductions, or cessation of programs.
- The company disclosed two material weaknesses in internal control over financial reporting: deficiencies in the control environment, including segregation and monitoring, and insufficient technical accounting expertise for unusual transactions. Management said these weaknesses had not caused a material misstatement, but disclosure controls were not effective.
- The company reported no material change to previously disclosed risk factors, no legal proceedings, and no material off-balance-sheet arrangements. OHSU license terms include potential milestone payments and royalties; executive severance obligations and a terminable operating lease are also disclosed.
Key facts for investors to verify
- Regulatory submission progress and timing for PEDMARK, and the evidence and requirements supporting any application.
- Whether cash runway remains consistent with management’s 12–15-month estimate and what financing options may be required.
- Progress in remediating the two material weaknesses and whether disclosure controls become effective.
- The filing’s six-month operating-loss figures are inconsistent: the financial statements report $4,456, while the going-concern note states $4,665. Verify the correct amount.