Fennec Pharmaceuticals Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; unaudited. Financial amounts are in U.S. dollars, in thousands, except per-share data. Fennec is a development-stage biopharmaceutical company focused on PEDMARK (sodium thiosulfate) to prevent cisplatin-related hearing loss in children. The company reported no revenue.
Key financial metrics
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $795 | $1,798 | $4,435 | $3,285 |
| General and administrative expense | $1,068 | $1,050 | $4,921 | $4,019 |
| Operating loss | $(1,863) | $(2,848) | $(9,356) | $(7,304) |
| Net loss | $(1,809) | $(2,749) | $(9,165) | $(6,904) |
| Basic and diluted loss per share | $(0.09) | $(0.14) | $(0.46) | $(0.37) |
| Net cash used in operating activities | $(2,235) | $(1,599) | $(7,470) | $(4,896) |
Liquidity and capital structure: At September 30, 2019, cash and cash equivalents were $15,240, down from $22,781 at December 31, 2018. Current assets were $15,627, current liabilities $905, and working capital $14,722. Stockholders’ equity was $15,002; accumulated deficit was $140,421. No funded debt is shown on the balance sheet. A $12.5 million Bridge Bank facility is conditional on PEDMARK NDA approval by September 30, 2020 and is not presented as cash or funded borrowing. It carries a floating rate described as prime plus 1% and matures October 1, 2023.
No meaningful operating margin is available because the company had no revenue. The filing does not provide a clear standalone gross-margin measure.
Material changes versus comparable periods
- Q3 operating expenses declined $985 year over year, primarily because R&D fell $1,003 after significant regulatory-preparation activities were completed in the first half of 2019. Q3 net loss narrowed by $940.
- For the first nine months, operating expenses increased $2,052 and net loss increased $2,261 year over year. R&D rose $1,150, mainly for manufacturing and registration-batch preparation; G&A rose $902, including higher stock-based compensation, professional fees, and employee compensation.
- Cash used in operations increased to $7,470 for the nine months from $4,896 a year earlier, reflecting PEDMARK manufacturing and rolling NDA activities. Cash declined $7,541 over the nine-month period.
- G&A included increased non-cash option expense. A June 2019 extension of certain option terms increased their fair value by $1,438; $1,285 was recognized immediately for fully vested options, with the balance to be expensed over vesting periods.
- Weighted-average shares were 19.896 million for the nine-month 2019 period versus 18.648 million a year earlier. At September 30, 3.018 million options and 39,000 warrants were outstanding; potential shares were excluded from diluted loss per share as anti-dilutive.
Outlook, risks, and other notable items
- Management targeted completion of the rolling NDA submission in early 2020 and, if approved, a potential first commercial launch in the second half of 2020. PEDMARK had FDA Breakthrough Therapy, Fast Track, and U.S. Orphan Drug designations. The company also reported an accepted European pediatric investigation plan.
- Management said cash on hand plus the conditional Bridge Bank facility was expected to fund planned activities, including NDA approval and anticipated launch preparation, for the next 12–15 months. The filing cautions that capital needs are uncertain and additional funding may be required; financing may not be available on acceptable terms. Failure to obtain funding could require delaying, reducing, or ending programs or operations.
- The company remains pre-revenue and dependent on successful regulatory review, manufacturing, commercialization, and access to further capital. Product development carries risks including regulatory delay or rejection, safety or efficacy concerns, manufacturing or market-acceptance challenges, and competing or blocking intellectual property.
- Reported Phase 3 study results cited by the company showed reduced hearing loss with sodium thiosulfate: in SIOPEL 6, 33% versus 63% in the evaluable hearing-loss comparison, with no reported evidence of tumor protection; in COG ACCL0431, 28.6% versus 56.4%. Regulatory approval and commercial success remain uncertain.
- Commitments include potential OHSU license milestones and royalties, executive severance obligations, and a cancellable office lease with monthly payments of $200. The filing reported no legal proceedings and no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Whether and when the PEDMARK NDA is completed, accepted, and approved, and whether the stated early-2020 filing and second-half-2020 launch targets are met.
- Whether the $12.5 million Bridge Bank facility becomes available; it depends on NDA approval by September 30, 2020 and has not been recorded as funded debt in this balance sheet.
- Cash runway and financing needs, given $15.2 million cash, $7.5 million operating cash use over nine months, and management’s 12–15-month funding estimate.
- Manufacturing and registration-batch readiness, clinical and regulatory interpretation of the cited study results, and the scope of any eventual approved indication.
- Future stock-based compensation and potential dilution from outstanding options and warrants, including the impact of the option-term extensions.