Fennec Pharmaceuticals Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Amounts below are U.S. dollars in thousands unless stated otherwise. Fennec is a clinical-stage biopharmaceutical company focused on PEDMARK (sodium thiosulfate) to prevent cisplatin-related hearing loss in pediatric cancer patients; it reported no product revenue.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2,416 | $1,393 |
| General and administrative expense | $2,507 | $2,442 |
| Total operating expenses / operating loss | $4,923 / $(4,923) | $3,835 / $(3,835) |
| Net loss | $(4,733) | $(3,826) |
| Basic and diluted loss per share | $(0.18) | $(0.19) |
| Net cash used in operating activities | $(3,593) | $(3,749) |
| Cash and cash equivalents at period end | $26,751 | $30,344 at Dec. 31, 2020 |
| Working capital | $24,933 | $29,070 at Dec. 31, 2020 |
Operating margins are not meaningful because the company had no revenue. R&D spending rose by $1,023, which management attributed to renewed development activity and regulatory work for the planned NDA resubmission. G&A increased by $65, mainly due to additional employees. The net loss included a $182 unrealized gain on Processa shares. The share count was 26.003 million at quarter-end; no options or warrants were exercised during the quarter.
Current liabilities were $2,892, comprising accounts payable of $2,508 and accrued liabilities of $384. The balance sheet shows no debt. The Bridge Bank facility expired December 31, 2020 without any advances; its 39,000-share warrant remains outstanding. Cash declined $3,593 during Q1; the company reported no investing or financing cash flows. Management stated available cash was expected to fund planned activities for at least the next 12 months.
Material developments, outlook and risks
- The FDA issued a Complete Response Letter in August 2020 citing deficiencies at PEDMARK’s third-party manufacturing facility, not clinical safety or efficacy issues. Fennec said it was working with the manufacturer and FDA and planned to resubmit the NDA in Q2 2021. The filing describes anticipated U.S. approval and launch as conditional; it provides no assurance of timing or outcome.
- The European marketing application for the pediatric indication had been submitted in February 2020. The filing provides no new decision or clear timing for European authorization.
- Fennec received $5,000 cash and 41,250 restricted Processa shares in January 2021 through its entitlement to 5% of consideration paid to Elion. The filing says related revenue was recognized in 2020; the Q1 fair-value increase in the shares was recorded as an unrealized gain.
- Management expects cash outflows to increase modestly as it prepares the NDA resubmission and advances commercial readiness. It warned that capital needs are uncertain and additional financing may be required; funding may not be available on acceptable terms, potentially requiring delays or reductions in activities.
- A securities class action related to statements about the manufacturing facility and FDA review was pending. The company intends to defend the case, had not recorded a liability, and said the outcome could not be predicted.
- COVID-19 had not materially affected operations to date, according to management, but could disrupt launch preparation, staffing, supplies, or asset values. Cash balances substantially exceeded FDIC-insured limits, creating potential exposure to loss of value. The company also faces regulatory, manufacturing, commercialization, and product-development risks.
Most important facts for investors to verify
- Whether the planned Q2 2021 NDA resubmission occurred and whether the FDA accepted it, including resolution of manufacturing-facility deficiencies.
- Current cash, operating cash burn, and financing runway relative to resubmission and potential launch costs.
- Regulatory progress on the European application and any material changes to anticipated timelines.
- Developments and potential financial exposure from the securities class action.
- Commercial readiness, manufacturing supply, and any changes to the company’s funding requirements or outlook.