Item 2. Management’s Discussion and Analysis
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENT
The discussion below contains forward-looking
statements regarding our financial condition and our results of operations that are based upon our annual consolidated financial
statements, which have been prepared in accordance with generally accepted accounting principles within the United States, or U.S.
GAAP, and applicable U.S. Securities and Exchange Commission, or SEC, regulations for financial information. The preparation
of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets,
liabilities, income and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on
an ongoing basis. Our estimates are based on historical experience and on various other assumptions that we believe to be
reasonable.
Overview
Lead Product
Candidate PEDMARK TM
The following
is our only lead product candidate in the clinical stage of development:
· PEDMARK TM (a unique formulation of sodium thiosulfate ) – PEDMARK has announced
results of two Phase 3 clinical trials for the prevention of cisplatin induced hearing loss, or ototoxicity in children including
the pivotal Phase 3 study SIOPEL 6 , “A Multicentre Open Label Randomised Phase 3 Trial of the Efficacy of Sodium Thiosulfate
in Reducing Ototoxicity in Patients Receiving Cisplatin Chemotherapy for Standard Risk Hepatoblastoma,” and the proof of
concept Phase 3 study “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced
Ototoxicity in Children”. COG ACCL0431 final results were published in the Lancet Oncology in 2016. SIOPEL 6 final results
were published in the New England Journal of Medicine in June 2018.
We continue to focus the Company’s
resources on the development of PEDMARK TM .
We have licensed from OHSU intellectual
property rights for the use of PEDMARK TM as a chemoprotectant, and are developing PEDMARK TM as a protectant
against the hearing loss often caused by platinum-based anti-cancer agents in children. Preclinical and clinical studies conducted
by OHSU and others have indicated that PEDMARK TM can effectively reduce the incidence of hearing loss caused by platinum-based
anti-cancer agents.
Hearing loss among children receiving platinum-based
chemotherapy is frequent, permanent and often severely disabling. The incidence of hearing loss in these children depends upon
the dose and duration of chemotherapy, and many of these children require lifelong hearing aids. There is currently no established
preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear (inner ear) implants
have been shown to provide some benefit. In addition, adults undergoing chemotherapy for several common malignancies, including
ovarian cancer, testicular cancer, and particularly head and neck cancer and brain cancer, often receive intensive platinum-based
therapy and may experience severe, irreversible hearing loss, particularly in the high frequencies.
The Company estimates in the U.S. and Europe that
over 10,000 children with solid tumors are treated with platinum agents. The vast majority of these newly diagnosed tumors
are localized and classified as low to intermediate risk in nature. These localized cancers may have overall survival rates of
greater than 80%, further emphasizing the importance of quality of life after treatment. The incidence of hearing loss in these
children depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids. There is
currently no established preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear
(inner ear) implants have been shown to provide some benefit. Infants and young children at critical stages of development lack
speech language development and literacy, and older children and adolescents lack speech language development and literacy, and
older children and adolescents lack social-emotional development and educational achievement.
We initiated our rolling New Drug Application
(NDA) for PEDMARK TM for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to < 18
years of age with localized, non-metastatic, solid tumors in December 2018. Fennec announced that it has submitted full completion
of the NDA in February 2020. On April 13, 2020 Fennec announced that the U.S. Food and Drug Administration (“FDA”)
had accepted for filing and granted Priority Review for Fennec’s New Drug Application for PEDMARK.The FDA set a Prescription
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 U.S. in the second half of 2020.
15
In August 2018, the Pediatric Committee
(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. 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.
SIOPEL 6
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.
The study was initiated in October 2007
initially in the United Kingdom and completed enrollment at the end of 2014. 52 sites from 11 countries, enrolled 109 evaluable
patients. Under the terms of our agreement, SIOPEL conducts and funds all clinical activities and Fennec provides drug, drug distribution
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.
The primary objectives of SIOPEL 6 are:
· To assess the efficacy of sodium thiosulfate to reduce the hearing impairment caused by cisplatin
· To carefully monitor any potential impact of sodium thiosulfate on response to cisplatin and survival
SIOPEL 6 - Results
Background
/ Objectives:
Background: Bilateral
high-frequency hearing loss is a serious permanent side-effect of cisplatin therapy; particularly debilitating when occurring in
young children. Sodium thiosulfate has been shown to reduce cisplatin induced hearing loss. 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:
Methods: Newly
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.
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Results:
One hundred and
nine randomized patients (52 Cisplatin only ("Cis") and 57 Cis+STS) are evaluable. The combination of Cis+STS was generally
well tolerated. With a follow up time of 52 months for the patients the three-year Event Free Survival ("EFS") for Cis
is 78.8% Cisplatin and 82.1% for the Cis + STS. The three-year Overall Survival ("OS") is 92.3% for Cis and 98.2% for
Cis + STS. Treatment failure defined as Progressive Disease ("PD") at 4 cycles was equivalent in both arms. Among the
first 101 evaluable patients, hearing loss occurred in 29/46=63.0% under Cis and in 18/55=33.0% under Cis +STS, corresponding to
a relative risk of 0.52(P=0.002).
Conclusions:
This randomized
Phase 3 trial in SR-HB of cisplatin versus cisplatin plus sodium thiosulfate shows that the addition of sodium thiosulfate significantly
reduces the incidence of cisplatin-induced hearing loss without any evidence of tumor protection.
COG ACCL0431
In March 2008, we announced the activation
of a Phase 3 trial with sodium thiosulfate to prevent hearing loss in children receiving cisplatin-based chemotherapy in collaboration
with the Children’s Oncology Group (“COG ACCL0431”). The goal of this Phase 3 study was to evaluate in a multi-centered,
randomized trial whether sodium thiosulfate is an effective and safe means of preventing hearing loss in children receiving cisplatin-based
chemotherapy for newly diagnosed germ cell, liver (hepatoblastoma), brain (medulloblastoma), nerve tissue (neuroblastoma) or bone
(osteosarcoma) cancers. Eligible children, one to eighteen years of age, who were to receive cisplatin according to their disease-specific
regimen and, upon enrollment in this study, were randomized to receive sodium thiosulfate or not. Efficacy of sodium thiosulfate
was determined through comparison of hearing sensitivity at follow-up relative to baseline measurements using standard audiometric
techniques. The Children’s Oncology Group is responsible for funding the clinical activities for the study and we are responsible
for providing the drug, drug distribution and pharmacovigilance, or safety monitoring, for the study. The trial completed enrollment
of 131 pediatric patients in the first quarter of 2012. The final results of COG ACCL0431 were published in Lancet Oncology
in December 2016.
COG ACCL0431 - Results
COG Study ACCL0431, “A Randomized
Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children,” finished enrollment
of 131 patients of which 126 were eligible patients in Q1 2012. The patients had been previously diagnosed with childhood cancers.
The primary endpoint was to evaluate the
efficacy of sodium thiosulfate for prevention of hearing loss in children receiving cisplatin chemotherapy (hypothesis: 50% relative
reduction in hearing loss).
Secondary endpoints included:
· Compare change in mean hearing thresholds
· Compare incidence of other Grade 3/4 toxicities (renal and hematological)
· Monitor Event Free Survival (EFS) and Overall Survival (OS) in two groups
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126 eligible subjects were enrolled with
germ cell tumor (32), osteosarcoma (3029), neuroblastoma (26), medulloblastoma/pnet (26), hepatoblastoma (7) or other (5).
Of these, 104 subjects (64 male and 29 <5 years old) were evaluable for the primary endpoint.
Subjects were randomized either to no treatment
(control) or treatment with sodium thiosulfate 16 grams/m2 IV over 15 minutes, 6 hours after each cisplatin dose. Hearing was measured
using standard audiometry for age and data were reviewed centrally using American Speech-Language-Hearing Association criteria.
The proportion of subjects with hearing
loss assessed at 4 weeks post the final cisplatin dose (primary endpoint).
· The proportion of hearing loss for sodium thiosulfate vs. Control was 28.6% (14/49) vs. 56.4% (31/55),
respectively (p=0.004).
· In a predefined subgroup of patients less than 5 years old with 29 eligible subjects: sodium thiosulfate
vs. Control was 21.4% (3/14) vs. 73.3% (11/15), respectively (p=0.005)
Conclusions:
· Sodium thiosulfate protects against cisplatin-induced hearing loss in children across a heterogeneous
range of tumor types with even stronger efficacy in the protocol predefined subgroup of patients under five years old and is not
associated with serious adverse events attributed to its use.
· Further potential clinical use will be informed by the final results of SIOPEL 6 study.
Capital Funding
We have not received and do not expect
to have significant revenues from our product candidate until we are either able to sell our product candidate after obtaining
applicable regulatory approvals or we establish collaborations that provide us with up-front payments, licensing fees, milestone
payments, royalties or other revenue.
We generated a net loss of approximately
$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,
2019. 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. In
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
in the U.S. 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
uncertainty. 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.
18
Our operating expenses will depend on many
factors, including the progress of our drug development efforts and efficiency of our operations and current resources. Our research
and development expenses, which include expenses associated with our clinical trials, drug manufacturing to support clinical programs,
salaries for research and development personnel, stock-based compensation, consulting fees, sponsored research costs, toxicology
studies, license fees, milestone payments, and other fees and costs related to the development of our product candidate, will depend
on the availability of financial resources, the results of our clinical trials and any directives from regulatory agencies, which
are difficult to predict. Our general and administration expenses include expenses associated with the compensation of employees,
stock-based compensation, professional fees, consulting fees, insurance and other administrative matters associated in support
of our drug development programs.
Results of Operations
Three months ended June 30, 2020 versus three months ended
June 30, 2019:
Three Months
Three Months
Ended
Ended
In thousands of U.S. Dollars
June 30, 2020
%
June 30, 2019
%
Change
Operating expenses:
Research and development
$ 1,121
23 %
$ 1,969
41 %
$ (848 )
General and administration
3,724
77 %
2,844
59 %
880
Total operating expenses
4,845
100 %
4,813
100 %
32
Loss from operations
(4,845 )
(4,813 )
(32 )
Other gain/(loss)
13
(10 )
23
Amortization expense
(30 )
(17 )
(13 )
Interest income and other
17
110
(93 )
Net loss
$ (4,845 )
$ (4,730 )
$ (115 )
Research and development expenses decreased
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 . General and
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
2019. 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.
Six Months
Six Months
Ended
Ended
In thousands of U.S. Dollars
June 30, 2020
%
June 30, 2019
%
Change
Operating expenses:
Research and development
$ 2,514
29 %
$ 3,640
49 %
$ (1,126 )
General and administration
6,166
71 %
3,853
51 %
2,313
Total operating expenses
8,680
100 %
7,493
100 %
1,187
Loss from operations
(8,680 )
(7,493 )
(1,187 )
Other gain/(loss)
4
(10 )
14
Amortization expense
(47 )
(29 )
(18 )
Interest income and other
52
176
(124 )
Net loss
$ (8,671 )
$ (7,356 )
$ (1,315 )
19
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 . The increase
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 June 30, 2020, as prepared under US GAAP (U.S. dollars in thousands,
except per share information):
Period
Net (Loss)/Income for the
Period
Basic Net (Loss)/Income per
Common Share
Diluted Net (Loss)/Income per
Common Share
September 30, 2018
(2,749 )
(0.14 )
(0.14 )
December 31, 2018
(2,984 )
(0.15 )
(0.15 )
March 31, 2019
(2,626 )
(0.13 )
(0.13 )
June 30, 2019
(4,730 )
(0.24 )
(0.24 )
September 30, 2019
(1,809 )
(0.09 )
(0.09 )
December 31, 2019
(3,610 )
(0.18 )
(0.18 )
March 31, 2020
(3,826 )
(0.19 )
(0.19 )
June 30, 2020
(4,845 )
(0.21 )
(0.21 )
Liquidity and Capital Resources
U.S. Dollars in thousands
Selected Asset and Liability Data:
June 30, 2020
December 31, 2019
Cash and cash equivalents
$ 38,729
$ 13,650
Other current assets
170
234
Current liabilities
3,190
2,271
Working capital (1)
35,709
11,613
(1) [Current assets – current
liabilities]
Selected equity:
Common stock
187,585
154,663
Accumulated deficit
(152,702 )
(144,031 )
Stockholders’ equity
36,126
11,875
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. These
cash inflows were offset by expenses related to our pre-commercialization expenses of PEDMARK TM and general and administrative
expenses. 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.
20
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
financing.
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. These cash
inflows were offset by expenses related to our pre-commercialization activities of PEDMARK TM and general and administrative
expenses. 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 and six-month periods of June 30, 2020 and 2019:
Dollar and shares in thousands
Three Months Ended June 30,
Six Months Ended June 30,
Selected cash flow data:
2020
2019
2020
2019
Net cash used in operating activities
$
(3,116
)
$
(2,756
)
$
(6,865
)
$
(5,235
)
Net cash provided by investing activities
-
-
-
-
Net cash provided by/(used in) financing activities
31, 944
-
31,944
(71
)
Increase/(decrease) in cash and cash equivalents
$
28,828
$
(2,756
)
$
25,079
$
(5,306
)
Net cash used in operating activities for
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
alternatives including collaborations with other pharmaceutical and biotechnology companies. Our projections of further capital
requirements are subject to substantial uncertainty. Our working capital requirements may fluctuate in future periods depending
upon numerous factors, including: our ability to obtain additional financial resources; our ability to enter into collaborations
that provide us with up-front payments, milestones or other payments; results of our research and development activities; progress
or lack of progress in our preclinical studies or clinical trials; unfavorable toxicology in our clinical programs, our drug substance
requirements to support clinical programs; change in the focus, direction, or costs of our research and development programs; headcount
expense; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our patent claims; competitive
and technological advances; the potential need to develop, acquire or license new technologies and products; our business development
activities; new regulatory requirements implemented by regulatory authorities; the timing and outcome of any regulatory review
process; and commercialization activities, if any.
Outstanding Share Information
The outstanding share data for our Company as of June 30,
2020 and December 31, 2019 was as follows (in thousands):
June 30, 2020
December 31, 2019
Change
Common shares
25,356
19,896
5,460
Warrants
39
39
-
Stock options
3,563
3,088
475
Total
28,958
23,023
5,935
21
Financial Instruments
We invest excess cash and cash equivalents
in high credit quality investments held by financial institutions in accordance with our investment policy designed to protect
the principal investment. At June 30, 2020, we had approximately $38,729 in cash accounts ($38,125 in money market accounts,
and $604 in checking accounts). We have not experienced any loss or write down of our money market investments since inception.
Our investment policy is to manage investments
to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment.
Investments may be made in U.S. or Canadian obligations and bank securities, commercial paper of U.S. or Canadian industrial companies,
utilities, financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed
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. The policy also provides for investment limits on concentrations of securities by issuer and maximum-weighted
average time to maturity of twelve months. This policy applies to all of our financial resources.
The policy risks are primarily the opportunity
cost of the conservative nature of the allowable investments. As our main purpose is research and development, we have chosen to
avoid investments of a trading or speculative nature.
Off-Balance Sheet Arrangements
Since our inception, we have not had any
material off-balance sheet arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts.
As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in
such activities.
Research and Development
Our research and development efforts have
been focused on the development of PEDMARK TM since 2013.
We have established relationships with
contract research organizations, universities and other institutions, which we utilize to perform many of the day-to-day activities
associated with our drug development. Where possible, we have sought to include leading scientific investigators and advisors to
enhance our internal capabilities. Research and development issues are reviewed internally by our executive management and supporting
scientific team.
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,
time-consuming and costly research and development, testing and regulatory clearances. In developing our product candidate, we
are subject to risks of failure that are inherent in the development of products based on innovative technologies. For example,
it is possible that our product candidate will be ineffective or toxic or will otherwise fail to receive the necessary regulatory
clearances. There is a risk that our product candidate will be uneconomical to manufacture or market or will not achieve market
acceptance. There is also a risk that third parties may hold proprietary rights that preclude us from marketing our product candidate
or that others will market a superior or equivalent product. As a result of these factors, we are unable to accurately estimate
the nature, timing and future costs necessary to complete the development of this product candidate. In addition, we are unable
to reasonably estimate the period when material net cash inflows could commence from the sale, licensing or commercialization of
such product candidate, if ever.
Critical Accounting Policies and Estimates
The preparation of financial statements
in conformity with US GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. These estimates are based on assumptions and judgments that may be affected by commercial,
economic and other factors. Actual results could differ from these estimates.
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.
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