Fennec Pharmaceuticals Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; balance sheet compared with December 31, 2018. Amounts are U.S. dollars in thousands unless otherwise stated. Fennec is a pre-revenue biopharmaceutical company developing PEDMARK, a sodium thiosulfate formulation intended to prevent platinum-induced hearing loss in children receiving cancer treatment.
Financial performance and liquidity
| Metric | Q1 2019 | Q1 2018 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $1,671 | $689 |
| General and administrative expense | $1,009 | $1,102 |
| Operating loss | $(2,680) | $(1,791) |
| Net loss | $(2,626) | $(1,568) |
| Basic and diluted loss per share | $(0.13) | $(0.09) |
| Operating cash used | $(2,479) | $(1,727) |
| Cash and cash equivalents | $20,231 | $22,781 at Dec. 31, 2018 |
| Working capital | $18,892 | $21,313 at Dec. 31, 2018 |
| Current liabilities | $1,451 | $1,637 at Dec. 31, 2018 |
| Total assets / stockholders’ equity | $20,657 / $19,206 | $22,950 / $21,313 at Dec. 31, 2018 |
There was no revenue or meaningful operating margin. Research and development spending rose by $982, mainly for PEDMARK manufacturing and regulatory work supporting the rolling NDA; G&A declined by $93. The larger net loss also reflects the absence of a $167 derivative gain recognized in Q1 2018. Cash declined by $2,550 during the quarter. The filing reports no funded term-loan balance at March 31; the announced bank facility is conditional on FDA approval.
Business developments, outlook and risks
- Fennec initiated a rolling U.S. NDA for PEDMARK in December 2018 and targeted completion in late 2019 to early 2020, with a potential first commercial launch in the second half of 2020. The filing describes these as company targets, not assured dates.
- On February 1, 2019, the company entered into a Bridge Bank agreement for up to $12.5 million, available upon PEDMARK NDA approval by September 30, 2020. The loan bears interest at the Wall Street Journal prime rate plus 1%; it provides for 18 months of interest-only payments after funding and matures October 1, 2023. The filing states cash plus the facility was expected to fund planned activities for the next 12–15 months.
- Clinical evidence cited includes SIOPEL 6 hearing loss of 33% with STS versus 63% with cisplatin alone, and COG ACCL0431 rates of 28.6% versus 56.4%. These are trial findings reported in the filing; regulatory approval and commercial success remain uncertain.
- Management warns that capital needs beyond the stated runway are uncertain and additional funding may be required. If financing is unavailable on acceptable terms, the company may delay, scale back or discontinue activities. Product development, regulatory review, manufacturing, market acceptance, competition and intellectual-property rights are material risks.
- The company recorded $255 of noncash warrant value and $71 of related legal and other costs as deferred issuance costs for the bank facility; $12 of amortization was recorded as interest expense. The facility warrants cover 39,130 shares at $6.80 per share. No material off-balance-sheet arrangements or legal proceedings were reported; management said previously disclosed risk factors had not materially changed.
- OHSU’s license terms include potential milestone payments and royalties on licensed-product sales and sublicensing. Disclosure controls were assessed as effective at the reasonable-assurance level, with no material change in internal control reported.
Important facts for investors to verify
- Progress and timing of the rolling NDA, FDA review, and any approval decision; the stated submission and launch dates are targets.
- Whether and when the conditional $12.5 million Bridge Bank facility becomes available, and its borrowing conditions and repayment obligations.
- Cash burn, projected runway, and the need and availability of additional financing.
- Clinical and regulatory interpretation of the STS data, including whether tumor-control and safety findings support the intended label.
- Commercial readiness, manufacturing costs and capacity, potential OHSU royalties and milestones, and dilution from outstanding options and warrants.