What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-05 compared with 2020-05-14 · 180 added, 112 removed, 290 unchanged (50% of the section changed)

Management's Discussion

and Analysis of Financial Condition and Results of Operations

Management's Discussion and

Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT

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Drug Fee Act (PDUFA) target action date of August 10, 2020 for the completion of the FDA’s review.

In March 2018, PEDMARK TM

received Breakthrough Therapy and Fast Track designations from the FDA.

Further, PEDMARK TM has received Orphan

Drug Designation in the US in this setting.

The Company is targeting potential commercial launch of PEDMARK TM in the

In March 2018,

PEDMARK TM received Breakthrough Therapy and Fast Track designations from the FDA.

Further, PEDMARK TM has

received Orphan Drug Designation in the US in this setting.

The Company is targeting potential commercial launch of PEDMARK TM

in the second half of 2020.

In August 2018, the Pediatric Committee

(PDCO) of the European Medicines Agency (EMA) accepted our pediatric investigation plan (PIP) for sodium thiosulfate (trade name

to be determined) for the condition of the prevention of platinum-induced hearing loss.

An accepted PIP is a prerequisite for

filing a Marketing Authorization Application (MAA) for any new medicinal product in Europe.

The indication targeted

by the Company’s PIP is for the prevention of platinum-induced ototoxic hearing loss for standard risk hepatoblastoma (SR-HB).

Additional tumor types of the proposed indication will be subject to the Committee for Medicinal Products for Human Use (CHMP)

assessment at the time of the MAA.

(PDCO) of the European Medicines Agency (EMA) accepted our pediatric investigation plan (PIP) for sodium thiosulfate with the trade

name Pedmarqsi for the condition of the prevention of platinum-induced hearing loss.

An accepted PIP is a prerequisite for filing

a Marketing Authorization Application (MAA) for any new medicinal product in Europe.

The indication targeted by the Company’s

PIP is for the prevention of platinum-induced ototoxic hearing loss for standard risk hepatoblastoma (SR-HB).

Additional tumor

types of the proposed indication will be subject to the Committee for Medicinal Products for Human Use (CHMP) assessment at the

time of the MAA.

No deferred clinical studies were required in the positive opinion given by PDCO.

was also advised that sodium thiosulfate (tradename to be determined) is eligible for submission of an application for a

Pediatric Use Marketing Authorization (PUMA).

Therefore, this decision allows Fennec to proceed with the submission of a PUMA

in the European Union (EU) with incentives of automatic access to the centralized procedure and up to 10 years of data and

market protection The PUMA is a dedicated marketing authorization covering the indication and appropriate formulation for medicines

developed exclusively for use in the pediatric population and provides data and market protection up to 10 years.

2020, Fennec announced that it has submitted a MAA for the prevention of otoxicity induced by cisplatin chemotherapy patients

1 month to < 18 years of age with localized, non-metastatic, solid tumors.

In October 2007, we announced that our

collaborative partner, the International Childhood Liver Tumour Strategy Group, known as SIOPEL, a multi-disciplinary group of

specialists under the umbrella of the International Society of Pediatric Oncology, had launched a randomized Phase 3 clinical trial

SIOPEL 6 to investigate whether sodium thiosulfate reduces hearing loss in standard risk hepatoblastoma (liver) cancer patients

The Company was also advised

that sodium thiosulfate (tradename to be determined) is eligible for submission of an application for a Pediatric Use Marketing

Authorization (PUMA).

Therefore, this decision allows Fennec to proceed with the submission of a PUMA in the European Union

(EU) with incentives of automatic access to the centralized procedure and up to 10 years of data and market protection The PUMA

is a dedicated marketing authorization covering the indication and appropriate formulation for medicines developed exclusively

for use in the pediatric population and provides data and market protection up to 10 years.

In February 2020, Fennec announced

that it has submitted a MAA for the prevention of otoxicity induced by cisplatin chemotherapy patients 1 month to < 18 years

of age with localized, non-metastatic, solid tumors.

In October 2007, we announced that

our collaborative partner, the International Childhood Liver Tumour Strategy Group, known as SIOPEL, a multi-disciplinary group

of specialists under the umbrella of the International Society of Pediatric Oncology, had launched a randomized Phase 3 clinical

trial SIOPEL 6 to investigate whether sodium thiosulfate reduces hearing loss in standard risk hepatoblastoma (liver) cancer patients

receiving cisplatin as a monotherapy.

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and pharmacovigilance, or safety monitoring, for the study.

SIOPEL 6 was completed in December 2014 and the final results of SIOPEL

6 were published in The New England Journal of Medicine in June 2018.

SIOPEL 6 was completed in December 2014 and the final results

of SIOPEL 6 were published in The New England Journal of Medicine in June 2018.

The primary objectives of SIOPEL 6 are:

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Sodium thiosulfate has been shown to reduce cisplatin induced hearing loss.

SIOPEL 6 is a Phase 3 randomised trial

SIOPEL 6 is a Phase 3 randomized trial

to assess the efficacy of sodium thiosulfate in reducing ototoxicity in young children treated with cisplatin (Cis) for SR-HB.

Design / Methods:

diagnosed patients with SR-HB, defined as tumour limited to PRETEXT I, II or III, no portal or hepatic vein involvement, no intra-abdominal

extrahepatic disease, AFP >100ng/ml and no metastases, were randomized to Cis or Cis+Sodium thiosulfate (STS) for 4 preoperative

and 2 postoperative courses.

Cisplatin 80mg/m2 was administered over 6 hours, STS 20g/m2 was administered intravenously over 15

minutes exactly 6 hours after stopping cisplatin.

Tumour response was assessed after 2 and 4 preoperative cycles with serum

AFP and liver imaging.

In case of progressive disease (PD), sodium thiosulfate was to be stopped and doxorubicin 60mg/m2 combined

with cisplatin.

The primary endpoint is centrally reviewed absolute hearing threshold, at the age of ≥3.5 years by

pure tone audiometry.

diagnosed patients with SR-HB, defined as tumour limited to PRETEXT I, II or III, no portal or hepatic vein involvement, no

intra-abdominal extrahepatic disease, AFP >100ng/ml and no metastases, were randomized to Cis or Cis+Sodium thiosulfate (STS)

for 4 preoperative and 2 postoperative courses.

Cisplatin 80mg/m2 was administered over 6 hours, STS 20g/m2 was administered intravenously

over 15 minutes exactly 6 hours after stopping cisplatin.

Tumour response was assessed after 2 and 4 preoperative cycles with

serum AFP and liver imaging.

In case of progressive disease (PD), sodium thiosulfate was to be stopped and doxorubicin 60mg/m2

combined with cisplatin.

The primary endpoint is centrally reviewed absolute hearing threshold, at the age of ≥3.5 years

by pure tone audiometry.

One hundred and

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germ cell tumor (32), osteosarcoma (3029), neuroblastoma (26), medulloblastoma/pnet (26), hepatoblastoma (7) or other (5).

104 subjects (64 male and 29 <5 years old) were evaluable for the primary endpoint.

Of these, 104 subjects (64 male and 29 <5 years old) were evaluable for the primary endpoint.

Subjects were randomized either to no treatment

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We generated a net loss of approximately

$3.8 million for the three-months ended March 31, 2020 and a net loss of $2.6 million for the three-months ended March 31, 2019.

As of March 31, 2020, our accumulated deficit was approximately $147.9 million ($144.0 million at December 31, 2019).

We believe that our cash and cash

equivalents as of March 31, 2020, which totaled $9.9 million, funds raised subsequent to March 31, 2020 in the public

offering which closed in May of 2020, plus the Loan Security Agreement with Bridge Bank, will be sufficient to meet our cash

requirements for at least the next twenty four months including NDA approval and anticipated first commercial launch of

Our projections of our capital requirements are subject to substantial uncertainty.

capital than we anticipated may be required thereafter.

To finance our continuing operations, we may need to raise

substantial additional funds through either the sale of additional equity, the issuance of debt, the establishment of

collaborations that provide us with funding, the out-license or sale of certain aspects of our intellectual property

portfolio or from other sources.

Given current economic conditions, we might not be able to raise the necessary

capital, or such funding may not be available on financially acceptable terms if at all.

If we cannot obtain adequate

funding in the future, we might be required to further delay, scale back or eliminate certain research and development

studies, consider business combinations or even shut down some, or all, of our operations.

$8.7 million for the six-months ended June 30, 2020 and a net loss of $7.4 million for the six-months ended June 30,

As of June 30, 2020, our accumulated deficit was approximately $152.7 million ($144.0 million at December 31, 2019).

On May 5, 2020, the Company announced

the completion of an underwritten public offering of 4.8 million common shares at a public offering price of $6.25 per share.

addition, Fennec issued an additional 0.66 million common shares in connection with the partial exercise of the underwriters’

over-allotment option.

The approximate total gross proceeds from the offering was $34.1 million ($32.0 million net of commissions,

fees and issue costs).

On June 26, 2020, Fennec announced an amendment to the Loan

and Security Agreement with Bridge Bank.

This amendment provides Fennec with an $18 million debt facility comprised of

two term loans.

Term Loan A consists of $12.5 million to be funded upon New Drug Application (NDA) approval of PEDMARK TM

Term Loan B consists of $5.5 million to be funded upon the occurrence of a revenue event in 2021.

The interest-only

period for the facility has the ability to be extended from 18 months to 24 months from the funding of Term Loan A, provided that

Term Loan B is funded, and certain conditions are met.

Under Accounting Standards Codification (“ASC”) 470-50, Modifications

and Extinguishments, the amendment was considered a modification.

As such, the Company is amortizing the loan fee and the value

of the warrant over the remainder of the loan term.

The Company intends to use the proceeds from the loans to provide working capital

for commercialization activities for PEDMARK TM upon NDA approval.

We believe that our cash and cash equivalents

as of June 30, 2020, which totaled $38.7 million, plus the Loan Security Agreement with Bridge Bank, will be sufficient to

meet our cash requirements through the at least the next twenty months including NDA approval and anticipated first commercial

launch of PEDMARK TM in the United States.

Our projections of our capital requirements are subject to substantial

More capital than we anticipated may be required thereafter.

To finance our continuing operations, we may

need to raise substantial additional funds through either the sale of additional equity, the issuance of debt, the establishment

of collaborations that provide us with funding, the out-license or sale of certain aspects of our intellectual property portfolio or

from other sources.

Given current economic conditions, we might not be able to raise the necessary capital, or such funding

may not be available on financially acceptable terms if at all.

If we cannot obtain adequate funding in the future, we might

be required to further delay, scale back or eliminate certain research and development studies, consider business combinations

or even shut down some, or all, of our operations.

Our operating expenses will depend on many

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Results of Operations

Three months ended March 31, 2020 versus three months ended

March 31, 2019:

Three months ended June 30, 2020 versus three months ended

June 30, 2019:

In thousands of U.S.

June 30, 2020

June 30, 2019

Operating expenses:

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Loss from operations

Other gain/(loss)

Amortization expense

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Research and development expenses decreased

by $278 for the three months ended March 31, 2020 over the same period in 2019 as the Company finalized preparation for regulatory

approval of PEDMARK TM .

Research and development expenses are expected to decrease further as the Company’s begins

to focus on the commercialization of PEDMARK TM .

General and administrative expenses increased by $1,433 reflecting

the Company’s pre-commercial activities and readiness for PEDMARK TM over same period in 2019.

Commercialization

readiness efforts accounted for $830 of the increase.

Payroll accounted for $300 of the increase as the Company now has five full

time employees.

There was an increase of $170 related to non-cash equity remuneration expense for employees related to vesting

of existing grants.

The remainder relates to general increases in legal, advocacy and insurance expenses.

Interest income was down significantly

over the same period in 2019, due to lower cash balances and lower interest rates on deposits.

by $848 for the three months ended June 30, 2020 over the same period in 2019 as the Company’s activities shifted from

research and development expenses to product launch readiness and pre-commercial development of PEDMARK TM .

administrative expenses increased by $880 over same period in 2019 being driven mainly by the pre-commercialization efforts and

added headcount.

Other gain/(loss) was driven mainly by

fluctuations in its foreign currency transactions and is a non-cash expense.

The Company has vendors that transact in Euros, Great

British Pounds and Canadian Dollars.

There was an increase of $23 in other gain/(loss) for the three months ended June 30,

2019 over the same period in 2019.

Amortization expense is also a non-cash expense and relates to amortization of the deferred

issuance cost of the loan facilities with Bridge Bank.

Amortization expense was $30 and $17 for the three months ended June 30,

2019 and 2019, respectively.

Interest income was $93 lower for the three months ended June 30, 2019 over the same period in

This was driven mainly by a sharp decrease in interest rates for the three months ended June 30, 2020 over the same

period in 2019 and lower average cash balances.

In thousands of U.S.

June 30, 2020

June 30, 2019

Operating expenses:

Research and development

General and administration

Total operating expenses

Loss from operations

Other gain/(loss)

Amortization expense

Interest income and other

Total research and development expenses

were down by $1,126 for the six months ended June 30, 2020 over the same period in 2019.

This decrease relates primarily to

the shift from research and development to pre-commercialization and product launch efforts for PEDMARK TM .

in pre-commercialization and product launch efforts are reflected in the general and administrative cost increase of $2,313 over

the prior year in the same period in 2019.

Sales and marketing activities increased by $3.1 million for the six-month period ended

June 30, 2020 over the same period in 2019.

The Company increased payroll expenses by $0.2 million as it added two more employees.

These increases were offset by a significant decrease in non-cash equity compensation expense.

Other (loss)/gain increased by $14 for

the six months ended June 30, 2020 over the same period in 2019.

For the six-months period ended June 30, 2020 the Company

recognized an increase of $18 in amortization expense on the deferred issuance cost associated with the loan facilities arranged

with Bridge Bank over the same period in 2019.

Interest income was down sharply ($124) over the same period in 2019, due to lower

interest rates and lower average deposits.

Quarterly Information

The following table presents selected condensed

financial data for each of the last eight quarters through March 31, 2020, as prepared under US GAAP (U.S.

financial data for each of the last eight quarters through June 30, 2020, as prepared under US GAAP (U.S.

dollars in thousands,

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Diluted Net (Loss)/Income per

June 30, 2018

September 30, 2018

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March 31, 2020

June 30, 2020

Liquidity and Capital Resources

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Selected Asset and Liability Data:

March 31, 2020

June 30, 2020

December 31, 2019

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(1) [Current assets –

current liabilities]

Selected equity:

Common stock and additional paid in capital

Accumulated deficit

Stockholders’

Cash and cash equivalents were $9,901 at

March 31, 2020 and $13,650 at December 31, 2019.

The decrease in cash and cash equivalents between March 31, 2020 and December

31, 2019, is the result of cash spent on research and development and general and administrative activities offset by $35 in interest

received on cash balances.

Cash and cash equivalents were $38,729

at June 30, 2020 and $13,650 at December 31, 2019.

The increase in cash and cash equivalents between June 30, 2020

and December 31, 2019, is the result of the $34.1 million (gross proceeds) equity financing completed in May 2020.

cash inflows were offset by expenses related to our pre-commercialization expenses of PEDMARK TM and general and administrative

The decrease in other current assets between June 30, 2020 and December 31, 2019 relates to the amortization

of pre-paid Nasdaq annual listing fees and pre-paid Director’s and Officer’s Insurance.

Current liabilities increased primarily

due to manufacturing and pre-commercialization activities associated with production and marketing of PEDMARK TM and

related regulatory expenses.

The Company also had payables balances for legal and other professional services related to the May 2020

Working capital increased between December 31,

2019 and June 30, 2020 by $24.1 million.

The increase was primarily as a result of the May 2020 financing.

inflows were offset by expenses related to our pre-commercialization activities of PEDMARK TM and general and administrative

The Company expects further increases in cash outflows as it anticipates the addition of employees and prepares for commercial

launch in the United States in the second half of 2020.

The following table illustrates a summary

of cash flow data for the three-month periods of March 31, 2020 and 2019:

of cash flow data for the three and six-month periods of June 30, 2020 and 2019:

Dollar and shares in thousands

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Selected cash flow data:

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Net cash provided by investing activities

Net cash used in financing activities

Decrease in cash and cash equivalents

Net cash provided by/(used in) financing activities

Increase/(decrease) in cash and cash equivalents

Net cash used in operating activities for

the three-months ended March 31, 2020 was $3,749.

This is compared to $2,479 during the same period in 2019.

These increases in

cash outlays relate to, regulatory submission activities relating to the rolling NDA and MAA, and the execution of the Company’s

pre-commercialization strategy.

The Company had no cash flows from investing or financing activities for the period ended March

In the same period in 2019 the Company capitalized the legal and professional fees associated with securing the Bridge

Bank loan facility.

This resulted in a $71 cash outflow being recognized in financing activities.

the three and six-months ended June 30, 2020 was $3,116 and $6,865 respectively.

This is compared to $2,756 and $5,235 during

the same periods in 2019.

These increases in cash outlays relate to the pre-commercialization activities of PEDMARK TM

and regulatory submission activities relating to the rolling NDA.

The Company increased cash balances by $32.0 million from a public

financing which it completed in May of 2020.

We continue to pursue various strategic

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and commercialization activities, if any.

Outstanding Share

The outstanding share data for our company as of March 31, 2020

Outstanding Share Information

The outstanding share data for our Company as of June 30,

2020 and December 31, 2019 was as follows (in thousands):

March 31, 2020

June 30, 2020

December 31, 2019

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the principal investment.

At March 31, 2020, we had approximately $9,901 in cash accounts ($9,519 in savings and money market accounts,

At June 30, 2020, we had approximately $38,729 in cash accounts ($38,125 in money market accounts,

and $604 in checking accounts).

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or carry ratings appropriate to the policy.

Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low

for commercial paper.

Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1

low for commercial paper.

The policy also provides for investment limits on concentrations of securities by issuer and maximum-weighted

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scientific team.

Research and development expenses

for the three months ended March 31, 2020 and 2019 were $1,393 and $1,671, respectively.

The Company has continued to decrease

its research and development expenses related to PEDMARK TM as it approaches potential regulatory approval of PEDMARK TM .

Research and development

expenses for the three-months ended June 30, 2020 and 2019 were $1,121 and $1,969, respectively and for the six-months then

ended, $2,514 and $3,640, respectively.

The Company has decreased its research and development expenses related to PEDMARK TM

as the Company’s efforts have shifted to pre-commercialization with some continued regulatory expenses associated with

the rolling NDA submission of PEDMARK TM .

Our product candidate still requires significant,

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Actual results could differ from these estimates.

Our accounting policies are consistent

with those presented in our annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended

December 31, 2019.

Our accounting policies are materially

consistent with those presented in our annual consolidated financial statements included in our Annual Report on Form 10-K

for the year ended December 31, 2019.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis