What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-13 compared with 2026-05-14 · 153 added, 50 removed, 189 unchanged (52% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on March 27, 2026 (the “Annual Report”) and our unaudited interim condensed consolidated financial statements and related notes appearing in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to the Company’s plans and strategy for its business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.

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In March 2024, we announced that we entered into an agreement with Norgine, a leading European specialist pharmaceutical company.

This is an exclusive licensing agreement under which Norgine will commercialize

PEDMARQSI ® in Europe, Australia and New Zealand.

This is an exclusive licensing agreement under which Norgine will commercialize PEDMARQSI ® in Europe, Australia and New Zealand.

PEDMARQSI ® is the first and only approved therapy in the EU and U.K.

for the prevention of ototoxicity (hearing loss) induced by cisplatin chemotherapy in patients one month to eighteen years of age with localized, non-metastatic solid tumors.

During 2025, Norgine made PEDMARQSI ® commercially available and expects additional launches to occur in 2026 and beyond.

During 2025, Norgine made PEDMARQSI ® commercially available in the U.K.

and Germany and expects additional launches to occur in 2026 and beyond.

Under the terms of the Norgine licensing agreement, Fennec received approximately $43 million in upfront consideration and may receive up to approximately $230 million in additional commercial and regulatory milestone payments and double-digit tiered royalties (up to the mid-twenties) on net sales of PEDMARQSI ® in the licensed territories.

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For example, there may be patents or patent applications held by others that contain claims that our product or operations might be determined to infringe or that may be broader than we believe them to be.

Given the complexities and

uncertainties of patent laws, there can be no assurance as to the impact that future patent claims against us may have on our business, financial condition, results of operations, or prospects.

Given the complexities and uncertainties of patent laws, there can be no assurance as to the impact that future patent claims against us may have on our business, financial condition, results of operations, or prospects.

PEDMARK ® Product Overview

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Additionally, efforts focus on expanding adoption beyond oncologists by ensuring healthcare providers (HCPs) gain confidence in and have positive experiences with PEDMARK ® .

Ensuring seamless access for advocacy groups, payers, and providers is also a priority, along with activating patients and caregivers through disease education to drive demand for PEDMARK ® .

Ensuring seamless access for advocacy groups, payers, and providers is also a priority, along with

activating patients and caregivers through disease education to drive demand for PEDMARK ® .

Key activities supporting these objectives include an expanded sales team with a strong track record in both academic and community settings, partnerships with group purchasing organizations, and specialty pharmacy offerings such as home infusions, white bag delivery, and direct billing.

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Published literature has linked treatment-related hearing loss to impairments in speech and language development, reduced academic performance, challenges in social-emotional development, and enduring impacts on educational attainment, vocational opportunities, and independent living.

Additionally, published research indicates that severe to profound early-onset hearing loss can impose a substantial lifetime economic burden, with per-individual costs estimated at approximately $489 and potentially exceeding $1,000 on an undiscounted basis, primarily due to lost productivity, educational expenses, and medical costs.

Additionally, published research indicates that severe to profound early-onset hearing loss can impose a substantial lifetime economic burden, with per-individual costs estimated at approximately $0.5 million and potentially exceeding $1.0 million on an undiscounted basis, primarily due to lost productivity, educational expenses, and medical costs.

These figures are derived from published literature regarding the disease burden of hearing loss and do not represent demonstrated health-economic outcomes specifically attributable to PEDMARK ® .

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In December 2025, we announced positive topline results from this trial that demonstrated use of PEDMARK ® was associated with a significant reduction in the incidence of hearing loss compared to historically reported rates in patients receiving cisplatin alone, with no evidence of reduced antitumor activity and an approximate 95% clinical response rate.

Based on these results, we are pursuing a regulatory registration strategy for PEDMARK ® in Japan and are evaluating partnering or licensing opportunities in that market, similar to our model with Norgine in Europe.

Discussions with potential partners and regulators are ongoing.

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For example, City of Hope, a U.S.

cancer research and treatment organization, is conducting an investigator-

initiated clinical trial evaluating PEDMARK ® in adult men with stage II–III metastatic testicular germ cell tumors receiving cisplatin-based chemotherapy.

cancer research and treatment organization, is conducting an investigator-initiated clinical trial evaluating PEDMARK ® in adult men with stage II–III metastatic testicular germ cell tumors receiving cisplatin-based chemotherapy.

We also engage in medical affairs activities and data-generation initiatives to expand the clinical evidence base for PEDMARK ® , including in AYA and adult populations.

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Any potential label expansion will require additional clinical data and regulatory approvals.

Further, in April 2026, we announced that four abstracts evaluating PEDMARK ® (sodium thiosulfate injection) were accepted as part of the 2026 American Society of Clinical Oncology (ASCO) Annual Meeting program, taking place May 29-June 2, 2026 in Chicago, IL.

These four independently led studies build upon the established safety and efficacy of PEDMARK ® – currently approved for pediatric patients one month of age and older with localized, non-metastatic solid tumors, and recognized by the National Comprehensive Cancer Network with a 2A recommendation for use in adolescent and young adult patients – and help to expand understanding of the clinical utility of PEDMARK ® in Adolescent and Young Adult (AYA) and adult populations, where significant unmet need remains.

Results of Operations

Three months ended March 31, 2026 versus three months ended March 31, 2025:

Three months ended June 30, 2026 versus three months ended June 30, 2025:

Three Months Ended

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In thousands of U.S.

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

PEDMARK product sales, net

Other revenue

Total revenue

Operating expenses:

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Total operating expense

Loss from operations

Unrealized loss on securities

Income/(loss) from operations

Unrealized foreign exchange (loss)/gain

Amortization expense

Interest expense

Unrealized foreign exchange loss

Unrealized loss on securities

Interest income

Interest expense

Income/(loss) before provision for income taxes

Provision for income taxes

Net income/(loss)

● The Company recorded net product sales of $15,108 in the first quarter of 2026 compared to $8,751 in 2025 as the Company increased market penetration and access for PEDMARK.

● Research and development expense decreased by $45 for the three-month period ended March 31, 2026, as compared to the same period in 2025.

Our research and development activities for this period consisted of costs associated with investigator initiated clinical trials and the global named patient program.

● The Company recorded net product sales of $17,164 in the second quarter of 2026 compared to $9,652 in the comparable period in 2025 as the Company increased market penetration and access for PEDMARK ® and as the Company expanded its focus to the adolescent and young adult (AYA) population.

Further, the Company recorded $710 in other revenue related to the Norgine transaction in the three months ended June 30, 2026 compared to $0 in the comparable period in 2025.

● Cost of product sales decreased by $246 for the second quarter of 2026 compared to the comparable period in 2025.

The improvement was primarily driven by greater efficiencies in manufacturing and inventory management.

● Research and development expense increased by $11 for the three-month period ended June 30, 2026, as compared to the same period in 2025.

Our research and development activities for this period consisted of costs associated with investigator-initiated trials.

● Selling and marketing expenses include distribution costs, logistics, shipping and insurance, advertising, wages commissions and out-of-pocket expenses.

We recorded $11,422 in selling and marketing expenses for the three-month period ended March 31, 2026, as compared to $3,227 for 2025.

The increase is largely related to the higher commercial headcount and related expenses to support the expansion of our sales organization to enhance coverage of the U.S.

market as well as higher commercial headcount .

● There was a $2,679 decrease in general and administrative expenses for the three-month period ended March 31, 2026 compared to 2025.

The decrease was primarily due to lower legal and professional fees as litigation activities concluded.

● Amortization expense decreased $13 for the three-month period ended March 31, 2026 as compared to the same period in 2025 reflecting completion of deferred financing costs related to Petrichor note.

● Interest expense decreased by $585 for the three-month period ended March 31, 2026 compared to the same period in 2025.

We recorded $10,659 in selling and marketing expenses for the three-month period ended June 30, 2026, as compared to $4,784 for the same period in 2025.

The increase is largely related to the higher commercial headcount expenses to support the expansion of our sales organization to enhance coverage of the U.S.

market and additional marketing and awareness initiatives in 2026 .

● There was a $1,887 decrease in general and administrative expenses for the three-month period ended June 30, 2026 compared to the same period in 2025.

The decrease was primarily due to lower legal and professional fees as patent litigation activities related to CIPLA concluded and the reallocation of certain employee-related and

equity-based compensation costs to selling and marketing expenses beginning in the first quarter of 2026 from general and administrative expenses.

● Interest expense decreased by $591 for the three-month period ended June 30, 2026 compared to the same period in 2025.

The decrease was primarily due to full repayment of the Petrichor convertible notes in the fourth quarter of 2025, which eliminated related interest in 2026.

● Interest income increased in the three-month period ended June 30, 2026 as compared to the same period in 2025 by $116, driven by higher average cash balances on money market investments.

Six months ended June 30, 2026, versus six months ended June 30, 2025:

Six Months Ended

In thousands of U.S.

June 30, 2026

June 30, 2025

PEDMARK product sales, net

Other revenue

Total revenue

Operating expenses:

Cost of product sales

Research and development

Selling and marketing

General and administration

Total operating expenses

Income/(loss) from operations

Unrealized foreign exchange gain/(loss)

Amortization expense

Unrealized loss on securities

Interest income

Interest expense

Income/(loss) before provision for income taxes

Provision for income taxes

Net income/(loss)

● The Company recorded net product sales of $32,272 in the first two quarters of 2026 compared to $18,403 in the comparable period in 2025 as the Company increased market penetration and access for PEDMARK ® and as the Company expanded its focus to the adolescent and young adult (AYA) population.

For the six months ended June 30, 2026 the Company recorded $710 in other revenue related to the Norgine transaction compared to $0 in the comparable period.

● Cost of product sales decreased by $49 for the first two quarters of 2026 compared to the comparable period in 2025.

The improvement was primarily driven by greater efficiencies in manufacturing and inventory management.

● Research and development expense decreased by $34 for the six-month period ended June 30, 2026, as compared to the same period in 2025.

Our research and development activities for this period consisted of costs associated with investigator initiated clinical trials.

● We recorded $22,081 in selling and marketing expenses for the six-month period ended June 30, 2026, as compared to $8,011 for the same product in 2025.

The increase is largely related to the higher commercial

headcount to support the expansion of our sales organization to enhance coverage of the U.S.

market as well as increased marketing and awareness activities in 2026 .

● There was a $4,566 decrease in general and administrative expenses for the six-month period ended June 30, 2026 compared to the same period in 2025.

The decrease was primarily due to lower legal and professional fees as patent litigation activities with CIPLA concluded and the reallocation of certain employee-related and equity-based compensation costs to selling and marketing expenses beginning in the first quarter of 2026 from general and administrative expenses .

● Interest expense decreased by $1,176 for the six-month period ended June 30, 2026 compared to the same period in 2025.

The decrease was primarily due to full repayment of the Petrichor convertible notes in the fourth quarter of 2025, which eliminated related interest and accretion in 2026.

● Interest income increased in the three-month period ended March 31, 2026 as compared to the same period in 2025 by $103, driven by higher average cash balances on money market investments.

● Interest income increased in the six-month period ended June 30, 2026, as compared to the same period in 2025 by $219, driven by higher average cash balances on money market investments.

Liquidity and Capital Resources

Selected Asset and Liability Data (thousands):

March 31, 2026

June 30, 2026

December 31, 2025

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Stockholders’ equity

● There was a $3,391 net increase in cash and cash equivalents between March 31, 2026, and December 31, 2025.

The increase was primarily driven by net cash provided by operating activities reflecting profitable operations and favorable working capital movements, and including the timing of working capital collections.

● The decrease in other current assets of $3,554 between March 31, 2026, and December 31, 2025, primarily due to a decrease in accounts receivable as the Company collected outstanding balances, partially offset by modest increases in prepaid expenses and other current assets.

● Current liabilities at March 31, 2026 decreased $932 compared to December 31, 2025 mainly reflecting lower accrued liabilities as prior-year accruals were settled.

● Working capital increased by $769 between March 31, 2026, and December 31, 2025 driven by higher cash balance and reduction in current liabilities noted above.

The following table illustrates a summary of cash flows data for the three-month periods of March 31, 2026 and 2025:

● There was a $4,461 net increase in cash and cash equivalents between June 30, 2026, and December 31, 2025.

The increase was primarily driven by net cash provided by operating activities reflecting profitable operations and favorable working capital movements, option exercises, and including the timing of accounts receivable collections.

● The increase in other current assets of $996 between June 30, 2026, and December 31, 2025, primarily relates to an increase in inventory.

● Current liabilities at June 30, 2026, increased $1,876 compared to December 31, 2025 reflecting an increase in current portion of contract liability offset by a decrease in accrued expenses.

● Working capital increased by $3,581 between June 30, 2026, and December 31, 2025 driven by higher cash balance.

The following table illustrates a summary of cash flows data for the six-month periods of June 30, 2026 and 2025:

Selected Cash Flow Data

Three Months Ended

Six Months Ended June 30,

(dollars and shares in thousands)

March 31, 2026

March 31, 2025

Net cash provided by/(used in) by operating activities

Net cash provided by investing activities

Net cash provided by/(used in) operating activities

Net cash provided by financing activities

Net cash flow

The net cash provided by operating activities for the three-month period ended March 31, 2026 was approximately $2,379 as compared to $4,318 net cash used in operating activities during the same period in 2025.

The year-over-year improvement was primarily driven by the shift from a net loss of $1,165 to net income of $201 and a favorable swing in working capital, including a significant decrease in accounts receivable in 2026 versus a build-up of receivables in 2025.

Net cash provided by financing activities was $1,012 in 2026 versus $359 in 2025, driven mainly by higher proceeds from stock option exercises.

The net cash provided operating activities for the six-month period ended June 30, 2026 was approximately $2,429 as compared to $8,004 net cash used in operating activities during the same period in 2025.

The year-over-year improvement was primarily driven by the shift from a net loss of $4,317 to net income of $2,174 and a favorable swing in working capital, including a significant decrease in accounts receivable in 2026.

Net cash provided by financing activities was $2,032 in 2026 versus $75 in 2025, driven by increased cashflow from operations and proceeds from stock option exercises.

We continue to pursue various strategic alternatives including collaborations with other pharmaceutical and biotechnology companies.

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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;

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;

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Outstanding Share Information

Our outstanding share data as of March 31, 2026 and December 31, 2025 was as follows (in thousands):

Our outstanding share data as of June 30, 2026 and December 31, 2025 was as follows (in thousands):

Outstanding Share Type

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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.

As of March 31, 2026, we had approximately $3,553 in our cash accounts and $36,626 in savings and money market accounts.

At June 30, 2026, we had approximately $2,544 in our cash accounts and $38,705 in savings and money market accounts.

While we have never experienced any loss or write down of our money market investments since our inception, the amounts we hold in money market accounts are substantially above the $250 amount insured by the FDIC and may lose value.

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A detailed description of these policies is included in Note 2, “Significant Accounting Policies,” to our audited consolidated financial statements in that Form 10-K and in Note 2 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Non-GAAP Measures

Adjusted EBITDA

To supplement our condensed consolidated financial statements presented in accordance with U.S.

GAAP, the Company provides the computation of Adjusted EBITDA attributable to the Company, which is defined as net income adjusted for the following items:

interest expense, depreciation expense, amortization of intangible assets, income tax expense, share-based compensation expense, other revenue, certain other specific provisions, and unrealized foreign exchange gains and/or losses.

The adjustments to net income in computing Adjusted EBITDA are set forth in the reconciliation table below.

We view Adjusted EBITDA as a key measure of our performance.

We present Adjusted EBITDA because it assists us in comparing our performance across reporting periods on a consistent basis as it excludes certain items that we do not believe are indicative of our core operating performance.

Our management uses Adjusted EBITDA:

● for planning purposes, including the preparation of our annual operating budget and developing and refining our internal projections for future periods;

● to allocate resources to enhance the financial performance of our business;

● as a target for the determination of the bonus component of compensation for our senior executives;

● to evaluate the effectiveness of our business strategies and as a tool in evaluating our performance against our budget for each period;

● in communications with our Board of Directors and investors concerning our financial performance.

We believe Adjusted EBITDA is used by securities analysts, investors and other parties interested in the evaluation of the Company.

Management believes the disclosure of Adjusted EBITDA offers an additional financial metric that, when coupled with results prepared in accordance with U.S.

generally accepted accounting principles (U.S.

GAAP) and the reconciliation to U.S.

GAAP results, provides a more complete understanding of our results of operations and the factors and trends affecting our business.

We believe Adjusted EBITDA is useful to investors for the following reasons:

● Adjusted EBITDA and similar non-GAAP measures are widely used by investors to measure a company's operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, tax jurisdictions, capital structures and the methods by which assets were acquired;

● investors can use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of our Company, including our ability to service our debt and other cash needs;

● by comparing our Adjusted EBITDA in different historical periods, our investors can evaluate our operating performance excluding the impact of items described below.

The adjustments included in the reconciliation table listed below are presented to illustrate the operating performance of our business in a manner consistent with the presentation used by our management.

These adjustments eliminate the impact of a number of items that:

● we do not consider indicative of our ongoing operating performance, such as interest income, unrealized loss on securities;

● we believe to be akin to, or associated with, interest expense, such as revolving credit facility commitment fees and letter of credit fees;

● are non-cash in nature, such as share-based compensation;

Adjusted EBITDA does not represent, and should not be a substitute for, net income or cash flows from operations as determined in accordance with U.S.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under U.S.

Some of the limitations are:

● Adjusted EBITDA does not reflect our capital expenditures, or future requirements for capital expenditures or contractual commitments;

● Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

● Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

● although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

● several of the adjustments that we use in calculating Adjusted EBITDA, such as non-cash write-downs and other charges, while not involving cash expense, do have a negative impact on the value of our assets as reflected in our consolidated balance sheet prepared in accordance with U.S.

● other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Furthermore, as noted above, one of our uses of Adjusted EBITDA is as a target for determining elements of compensation for our senior executives.

At the same time, some or all of these senior executives have responsibility for monitoring our financial results, generally including the adjustments in calculating Adjusted EBITDA (subject ultimately to review by our Board in the context of the Board's review of our financial statements).

While many of the adjustments, involve mathematical application of items reflected in our financial statements, others involve a degree of judgment and discretion.

While we believe all of these adjustments are appropriate, and while the calculations are subject to review by our Board in the context of the Board's review of our financial statements, this discretion may be viewed as an additional limitation on the use of Adjusted EBITDA as an analytical tool.

Because of these limitations, Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business.

We compensate for these limitations by relying primarily on our U.S.

GAAP results and using Adjusted EBITDA only supplementally.

The following table presents a reconciliation of net income to Adjusted EBITDA:

Three Months Ended

Six Months Ended

Interest income

Interest expense

Provision for income taxes

Depreciation and amortization

Other revenue (a)

Share based compensation expense (b)

Unrealized loss on securities

Unrealized foreign exchange gain/(loss)

Adjusted EBITDA

(a) Represents the portion of GAAP revenue related to “material rights” under the Company’s PEDMARK ® license with Norgine that is non-cash in the current period and was previously recorded as deferred licensing revenue.

Under ASC 606, a portion of the upfront consideration received under this agreement was allocated to a material right and recorded as deferred revenue (contract liability), which is subsequently recognized as revenue as PEDMARK ® units are shipped to Norgine and the related material right is satisfied.

These amounts are included in GAAP revenue in the periods presented, and the Company continues to apply GAAP recognition and measurement for all revenue, including this component.

The adjustment is intended solely to remove this non-cash amortization of previously deferred licensing revenue from Adjusted EBITDA, as management believes excluding this item provides a more comparable view of period-over-period cash operating performance from the Company’s commercial activities.

(b) Represents share-based compensation expense to account for stock options, restricted stock, and other stock awards over their respective vesting periods.

Quantitative and Qualitative Disclosures about Market Risk

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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