What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-16 compared with 2020-08-05 · 165 added, 141 removed, 329 unchanged (48% of the section changed)

59 unchanged sentences

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.

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 second half of 2020.

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.

On August 10, 2020 the Company announced that it received a Complete Response Letter

(CRL) from the FDA regarding its NDA for PEDMARK.

Further, subsequent to the CRL the Company is pleased with the recent

constructive and collaborative Type A meeting with the FDA and plans to work closely with the third-party drug manufacturer

and the FDA to fully address the CRL and plans to resubmit the NDA for PEDMARK TM as quickly as possible.

Importantly, no clinical safety or efficacy issues were identified during the review and there is no requirement for further

clinical data.

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.

In August 2018, the Pediatric Committee

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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

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

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

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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,

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

$14,874 for the nine-months ended September 30, 2020 and a net loss of $9,165 for the nine-months ended September 30,

As of September 30, 2020, our accumulated deficit was approximately $158,902 ($144,031 at December 31, 2019).

On May 5, 2020, the Company announced

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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.

The approximate total gross proceeds from the offering was $34,100 ($31,967 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 $18,000 debt

facility comprised of two term loans.

Term Loan A consists of $12,500 to be funded upon NDA approval of PEDMARK TM in

by no later than December 31, 2020 and Term Loan B consists of $5,500 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.

On August 10, 2020, the Company received a Complete Response

Letter (CRL) from the U.S.

Food and Drug Administration (FDA) regarding its New Drug Application (NDA) for PEDMARK TM .

According to the CRL, after recent completion of a pre-approval inspection of the manufacturing facility of our drug product manufacturer,

the FDA identified deficiencies that are required to be resolved prior to the approval of PEDMARK TM .

Importantly, no

clinical safety or efficacy issues were identified during the review and there is no requirement for further clinical data.

Company plans to work closely with the third-party drug manufacturer and the FDA to fully address the CRL and plan to resubmit

the NDA for PEDMARK TM as quickly as possible.

As a result of the FDA’s CRL the anticipated product launch did

not occur as of September 30, 2020 and thus the Bridge Bank Term Loan A has not yet been funded.

The Company does not believe it

will receive FDA approval by December 31, 2020 and thus has fully impaired the deferred asset associated with Term Loan A.

the Company believes the delay in approval will mean it will not be able to meet the revenue target to fund Term Loan B.

the deferred asset associated with Term Loan B has been expensed.

The Company is currently in negotiations with Bridge Bank to

receive an extension on both Term Loan A and B.

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.

as of September 30, 2020, which totaled $33,166 will be sufficient to meet our cash requirements through the at least the

next twelve months.

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

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.

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

Our operating expenses will depend on many

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Results of Operations

Three months ended June 30, 2020 versus three months ended

June 30, 2019:

Three months ended September 30, 2020 versus three months

ended September 30, 2019:

In thousands of U.S.

June 30, 2020

June 30, 2019

September 30,

Operating expenses:

Research and development

General and administration

General and administrative

Total operating expenses

Loss from operations

Other gain/(loss)

Other (loss)/gain

Amortization expense

Interest income and other

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 .

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,

Research and development expenses increased by $573 for the

three months ended September 30, 2020 over the same period in 2019 as the Company’s activities increased after the CRL from

the FDA related to manufacturing and regulatory.

General and administrative expenses increased by $3,423 over same period in 2019

being driven mainly by the pre-commercialization efforts, non-cash equity remuneration and added headcount.

Other (loss)/gain was driven mainly by

fluctuations in its foreign currency transactions.

The Company has vendors that transact in Euros, Great British Pounds and Canadian

There was an increase of $338 in amortization expense for the three months ended September 30, 2020 over the same

period in 2019.

This increase is mainly as a result of recognizing the complete impairment of both sections of the Term Loan Agreement

on the balance sheet.

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

the loan facilities with Bridge Bank.

Amortization expense was $355 and $17 for the three months ended September 30, 2020

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.

Interest income was $48 lower for the three months ended September 30, 2020 over the same period

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

the same period in 2019.

In thousands of U.S.

June 30, 2020

June 30, 2019

September 30,

Operating expenses:

Research and development

General and administration

General and administrative

Total operating expenses

Loss from operations

Other gain/(loss)

Other (loss)/gain

Amortization expense

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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.

were down by $553 for the nine-month period ended September 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 which took

place in the first nine months of 2020.

The increase in pre-commercialization and product launch efforts are reflected in the general

and administrative cost increase of $5,736 over the prior year in the same period in 2019.

A large portion of this increase were

from sales and marketing expenses which were up approximately $4,600 over the same period in 2019 as the Company prepared for product

Salary and benefit expenses were up by approximately $600 over same period in 2019.

Items such as legal fees, consulting

fees and investor relations accounted for an increase of $500.

Other (loss)/gain increased by $5 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):

the nine-months ended September 30, 2020 over the same period in 2019.

For the nine-month period ended September 30,

2020 the Company recognized an increase of $356 in amortization expense on the deferred issuance cost associated with the loan

facilities arranged with Bridge Bank over the same period in 2019.

This increase was primarily due to the decision to fully amortize

the remaining balance of the loan facility asset after the Company decided it would not be able to meet the conditions of the

loan facility.

Presently, the Company is in negotiations with Bridge Bank to extend the dates associated with funding the facility.

Interest income was down sharply $172 over the same period in 2019, due to lower interest rates and lower average deposits.

The following table presents selected

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

dollars in thousands, except per share information):

Net (Loss)/Income for the

Basic Net (Loss)/Income per

Diluted Net (Loss)/Income per

September 30, 2018

Basic Net (Loss)/Income

Diluted Net (Loss)/Income

December 31, 2018

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June 30, 2020

September 30, 2020

Liquidity and Capital Resources

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Selected Asset and Liability Data:

June 30, 2020

September 30, 2020

December 31, 2019

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(1) [Current assets –

current liabilities]

Selected equity:

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Cash and cash equivalents were $33,166

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.

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

The increase in cash and cash equivalents between September 30,

2020 and December 31, 2019, is the result of the $34,100 (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

The decrease in other current assets between September 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.

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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.

2019 and September 30, 2020 by $19,572.

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 and six-month periods of June 30, 2020 and 2019:

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

Dollar and shares in thousands

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine-month Ended September 30,

Selected cash flow data:

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Net cash provided by investing activities

Net cash provided by/(used in) financing activities

Increase/(decrease) in cash and cash equivalents

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.

Net cash (used in)/provided by financing activities

(Decrease)/increase in cash and cash equivalents

Net cash used in operating activities

for the three and nine-months ended September 30, 2020 was $5,446 and $12,311, respectively.

This is compared to $2,235 and

$7,470 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.

and regulatory submission activities relating to the NDA.

The Company increased cash balances by $31,967 from a public financing

which it completed in May of 2020.

We continue to pursue various strategic

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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;

and technological advances;

competitive and technological advances;

the potential need to develop, acquire or license new technologies and products;

our business development

development activities;

new regulatory requirements implemented by regulatory authorities;

the timing and outcome of any regulatory review

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,

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

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

June 30, 2020

September 30, 2020

December 31, 2019

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the principal investment.

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

At September 30, 2020, we had approximately $33,166 in cash accounts ($33,147 in money market accounts,

and $19 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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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.

As our main purpose is research and development, we have chosen

to avoid investments of a trading or speculative nature.

Off-Balance Sheet Arrangements

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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 .

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.

development expenses for the three-months ended September 30, 2020 and 2019 were $1,368 and $795, respectively and for the

nine-months then ended, $3,882 and $4,435, respectively.

For the three-months ended September 30, 2020 the Company has decreased

its research and development expenses related to PEDMARK TM as the Company’s efforts have shifted to pre-commercialization

activities with some continued regulatory expenses associated with the rolling NDA submission of PEDMARK TM .

Our product candidate still requires significant,

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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.

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

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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