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. 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.
16
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
(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 ototoxicity 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.
17
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.
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.
18
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
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
$14,874 for the nine-months ended September 30, 2020 and a net loss of $9,165 for the nine-months ended September 30,
2019. 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
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 $34,100 ($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
the U.S. 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.
19
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. The
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. Furthermore,
the Company believes the delay in approval will mean it will not be able to meet the revenue target to fund Term Loan B. As such,
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 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. 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
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.
20
Results of Operations
Three months ended September 30, 2020 versus three months
ended September 30, 2019:
Three Months
Three Months
Ended
Ended
In thousands of U.S. Dollars
September 30,
2020
%
September 30,
2019
%
Change
Operating expenses:
Research and development
$ 1,368
23 %
$ 795
43 %
$ 573
General and administrative
4,491
77 %
1,068
57 %
3,423
Total operating expenses
5,859
100 %
1,863
100 %
3,996
Loss from operations
(5,859 )
(1,863 )
(3,996 )
Other (loss)/gain
(8 )
1
(9 )
Amortization expense
(355 )
(17 )
(338 )
Interest income and other
22
70
(48 )
Net loss
$ (6,200 )
$ (1,809 )
$ (4,391 )
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
Dollars. 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 $48 lower for the three months ended September 30, 2020 over the same period
in 2019. 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.
21
Nine Months
Nine Months
Ended
Ended
In thousands of U.S. Dollars
September 30,
2020
%
September 30,
2019
%
Change
Operating expenses:
Research and development
$ 3,882
27 %
$ 4,435
47 %
$ (553 )
General and administrative
10,657
73 %
4,921
53 %
5,736
Total operating expenses
14,539
100 %
9,356
100 %
5,183
Loss from operations
(14,539 )
(9,356 )
(5,183 )
Other (loss)/gain
(4 )
(9 )
5
Amortization expense
(402 )
(46 )
(356 )
Interest income and other
74
246
(172 )
Net loss
$ (14,871 )
$ (9,165 )
$ (5,706 )
Total research and development expenses
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
launch. 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 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.
Quarterly
Information
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):
Period
Net (Loss)/Income for the
Period
Basic Net (Loss)/Income
per
Common Share
Diluted Net (Loss)/Income
per
Common Share
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
)
September 30, 2020
(6,200
)
(0.24
)
(0.24
)
22
Liquidity and Capital Resources
U.S. Dollars in thousands
Selected Asset and Liability Data:
September 30, 2020
December 31, 2019
Cash and cash equivalents
$
33,166
$
13,650
Other current assets
904
234
Current liabilities
2,885
2,271
Working capital (1)
31,185
11,613
(1) [Current assets – current liabilities]
Selected equity:
Common stock
188,844
154,663
Accumulated deficit
(158,902
)
(144,031
)
Stockholders’ equity
31,185
11,875
Cash and cash equivalents were $33,166
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. 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 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.
Current liabilities increased primarily
due to manufacturing and pre-commercialization activities associated with production and marketing of PEDMARK TM and
related regulatory expenses.
Working capital increased between December 31,
2019 and September 30, 2020 by $19,572. 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 following table illustrates a summary
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 September 30,
Nine-month Ended September 30,
Selected cash flow data:
2020
2019
2020
2019
Net cash used in operating activities
$
(5,446
)
$
(2,235
)
$
(12,311
)
$
(7,470
)
Net cash provided by investing activities
-
-
-
-
Net cash (used in)/provided by financing activities
(117
)
-
31,827
(71
)
(Decrease)/increase in cash and cash equivalents
$
(5,563
)
$
(2,235
)
$
19,516
$
(7,541
)
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 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
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.
23
Outstanding Share Information
The outstanding share data for our Company as of September 30,
2020 and December 31, 2019 was as follows (in thousands):
September 30, 2020
December 31, 2019
Change
Common shares
25,810
19,896
5,914
Warrants
39
39
-
Stock options
3,095
3,088
7
Total
28,944
23,023
5,921
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 September 30, 2020, we had approximately $33,166 in cash accounts ($33,147 in money market accounts,
and $19 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 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 .
24
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.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.