Fennec Pharmaceuticals Inc. — 2020 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2020; it is not a standalone fourth-quarter filing. Fennec is a clinical-stage biopharmaceutical company focused on PEDMARK (anhydrous sodium thiosulfate), intended to reduce cisplatin-related hearing loss in children. The company had no product sales and only nominal revenue.
Financial performance and position
- Revenue: $170,000 in 2020 versus none in 2019, reported as an eniluracil royalty related to the Elion/Processa arrangement. The company also recognized cash and restricted Processa shares under the arrangement.
- Operating expenses: $18.1 million, up from $13.0 million. Research and development fell to $5.1 million from $5.6 million, while general and administrative expense rose to $13.0 million from $7.4 million, mainly reflecting pre-commercialization activity.
- Loss: Net loss was $18.1 million ($0.76 per share) versus $12.8 million ($0.64 per share) in 2019. Fourth-quarter 2020 net loss was $3.2 million, compared with $3.6 million in fourth-quarter 2019. Profit margins are not meaningful given the company’s development-stage status and immaterial revenue.
- Cash flow: Operating cash use was $15.6 million, versus $9.1 million in 2019. Financing provided $32.3 million, principally from a May 2020 share offering; cash increased by $16.7 million over the year.
- Liquidity and debt: Cash and cash equivalents were $30.3 million at year-end, compared with $13.7 million a year earlier; working capital was $29.1 million. Total liabilities were $2.3 million, all current, with no funded debt reported. The Bridge Bank facility expired December 31, 2020 without any funds advanced.
- Equity: The 2020 offering generated approximately $32.0 million net proceeds. Shares outstanding increased to 26.0 million from 19.9 million at year-end 2019.
Material changes and operating developments
- The FDA issued a Complete Response Letter (CRL) on August 10, 2020 for the PEDMARK NDA, citing deficiencies at the third-party manufacturing facility. The filing says the FDA identified no clinical safety or efficacy issues and did not require additional clinical data.
- Fennec reported that its fourth-quarter Type A meeting with the FDA was constructive and planned to resubmit the NDA in the second quarter of 2021. The company had also submitted a European marketing authorization application in February 2020.
- The completed Phase 3 studies reported reduced hearing loss with sodium thiosulfate: in SIOPEL 6, 32.7% versus 63.0% in evaluable patients; in COG ACCL0431, 28.6% versus 56.4%. These are reported trial results, not evidence of regulatory approval.
Outlook, risks, and unusual items
- Management said available resources were expected to fund planned activities for at least the next 12 months, including work toward potential NDA approval and commencement of commercialization, subject to approval. The company cautioned that additional financing may be needed and that its capital requirements are uncertain.
- Key risks include resolving the manufacturing deficiencies and passing FDA re-inspection; delays or denial of regulatory approvals; reliance on third-party manufacturers and suppliers; limited commercialization experience; financing needs and potential shareholder dilution; and uncertainty over market access, pricing, and reimbursement.
- A securities class action followed the CRL announcement. The company intends to defend the suit, says its outcome cannot be predicted, and recorded no liability at year-end because a loss was not considered probable or reasonably estimable.
- COVID-19 had not materially affected operations to date, but the company warned of potential disruption to launch preparations, third-party operations, supply chains, and financing access.
- Fennec reported a $100,000 unrealized gain on Processa shares. It also fully amortized remaining deferred loan-related costs after the CRL; the loan facility subsequently expired unfunded.
Important facts for investors to verify
- Current status of the FDA CRL, manufacturing remediation and inspection, and any NDA resubmission or review timetable.
- Cash burn and runway against the stated 12-month funding expectation, including spending required for regulatory work and commercialization.
- Whether the European application progresses and what indication and market protections may ultimately be available.
- Potential outcome, costs, and insurance coverage related to the securities litigation.
- Share dilution: 26.0 million shares outstanding at March 29, 2021, alongside outstanding options and warrants.