Item 2. Management’s Discussion and Analysis
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .
Caution Concerning Forward-Looking Statements
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 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. Forward-looking statements can be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. As a result of many factors, including those factors set forth in Part I, Item 1A of the Annual Report under the heading “Risk Factors”, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.
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The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025, and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.
Overview
Fennec Pharmaceuticals Inc., a corporation existing under the laws of British Columbia, was originally formed under the name Adherex Technologies Inc. and subsequently changed its name on September 3, 2014. Fennec is a commercial stage specialty pharmaceutical company dedicated to preventing cisplatin-induced ototoxicity (“CIO”), a serious and often irreversible side effect of cancer treatment, with one FDA approved and European Commission approved product, PEDMARK ® in the U.S. and PEDMARQSI ® , which is the branded name for PEDMARK ® outside of the U.S. (collectively, “PEDMARK”), developed to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. The Company has four wholly owned subsidiaries: Oxiquant, Inc. and Fennec Pharmaceuticals, Inc., both Delaware corporations, Cadherin Biomedical Inc., a Canadian corporation, and Fennec Pharmaceuticals (EU) Limited, an Ireland company (“Fennec Limited”). With the exception of Fennec Pharmaceuticals, Inc., all subsidiaries are inactive. On September 20, 2022, we received approval from the FDA for PEDMARK ® (sodium thiosulfate injection). This approval makes PEDMARK ® the first and only treatment approved by the FDA in this area of significant unmet medical need. On October 17, 2022, we announced commercial availability of PEDMARK ® in the United States. Further, PEDMARQSI ® received European Commission Marketing Authorization in June 2023 and received U.K. approval in October 2023.
PEDMARK ® is currently the only FDA-approved therapy indicated to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. In clinical studies in this population, treatment with PEDMARK ® resulted in an approximate 50% relative reduction in the incidence of cisplatin-induced hearing loss compared to cisplatin alone, without evidence of materially compromised antitumor efficacy. PEDMARK ® is administered as a short intravenous infusion and has generally been associated with a mild-to-moderate and manageable safety profile consistent with its known pharmacology.
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. 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 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. To date, Fennec has not received any milestone payments. Norgine will be responsible for all commercialization activities in the licensed territories and will hold all marketing authorizations in the licensed territories.
In the United States, we sell our product through an experienced field force including Territory Managers and we utilize medical science liaisons within our medical team who help educate the medical communities and patients about CIO and our programs supporting patient access to PEDMARK ® .
Further, we have established Fennec HEARS ® , a comprehensive single source program designed to connect PEDMARK ® patients to both patient financial and product access support. The program offers assistance and resources, regardless of insurance type, that can address co-pays or lack of coverage when certain eligibility requirements are met. Fennec HEARS ® also provides access to care coordinators that can answer insurance questions about coverage for PEDMARK ® and provide tips and resources for managing treatment.
We received Orphan Drug Exclusivity for PEDMARK ® in January 2023, which provides seven years of market exclusivity from its FDA approval on September 20, 2022, until September 20, 2029. We currently have six patents listed for PEDMARK ® in the FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (“FDA Orange Book”).
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In September 2022, the United States Patent and Trademark Office (“USPTO”) issued Patent No. 11,291,728 (the “US ‘728 Patent”), in December 2022, the USPTO issued Patent No. 11,510,984 (“US ‘984 Patent”) and in April 2023, the USPTO issued Patent No. 11,671,793 (“US ‘793 Patent”) that covers PEDMARK ® pharmaceutical formulation. Further, additional issued patents included US 11,964,018 Patent (the “US ‘018 Patent) and US 11,992,530 Patent (the “US ‘530 Patent”) and US 11,998,604 Patent (the “US ‘604 Patent”) covering methods of using our PEDMARK ® product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer. The US ‘728, US ‘984, US ‘793, US ‘018, US ‘530, and US ‘604 Patents will expire in 2039. Additional patents covering PEDMARK ® formulation have been granted in Australia, Canada, the European Patent Office (EPO) (described further below), Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, and Russia, and patent applications covering PEDMARK ® are pending in Brazil, China, the European Patent Office (EPO), Hong Kong, Israel, Korea, Mexico, New Zealand, Singapore, and Thailand. Patents covering alternative sodium thiosulfate formulations have been granted in the United States (US 12,311,026 (the “US ‘026 Patent”), Canada, Korea, Mexico, and Russia, and patent applications covering alternative sodium thiosulfate formulations are pending in the United States, Australia, the EPO, Hong Kong, Indonesia, Japan, Malaysia, Mexico, and New Zealand. Applications from these patent families, where granted, valid, and enforceable, will expire in July 2039, exclusive of any patent term adjustment or extension.
On March 16, 2026, we announced that we had entered into a settlement and license agreement with Cipla Limited and Cipla USA, Inc. resolving the PEDMARK ® patent litigation pending in the United States District Court for the District of New Jersey. Under the terms of the agreement, the lawsuit will be dismissed with each party bearing its own costs, and Cipla will not enter the U.S. market with its generic sodium thiosulfate product until September 1, 2033, or earlier under certain specified circumstances. We believe this settlement, together with our existing patent and regulatory protections, provides additional visibility into the long-term exclusivity profile of PEDMARK ® in the United States.
There can be no assurance that we do not or will not infringe on patents held by third parties or that third parties in the future will not claim that we have infringed on their patents. In the event that our product or technologies infringe or violate the patent or other proprietary rights of third parties, there is a possibility we may be prevented from pursuing product development, manufacturing or commercialization of our product until the underlying patent dispute is resolved. 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.
PEDMARK ® Product Overview
PEDMARK ® has been studied by co-operative groups in two Phase 3 clinical studies of survival and reduction of ototoxicity, COG ACCL0431 and SIOPEL 6. Both studies have been completed. The COG ACCL0431 protocol enrolled childhood cancer patients typically treated with intensive cisplatin therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, medulloblastoma, and other solid tumors. SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.
In the United States, PEDMARK ® is the first and only therapy approved to mitigate the risk of ototoxicity associated with cisplatin in pediatric patients aged one month and older with localized, non-metastatic solid tumors. Further, the National Comprehensive Cancer Network (NCCN) recommended the use of PEDMARK ® to reduce the risk of cisplatin-induced ototoxicity in patients with localized, non-metastatic solid tumors (category 2A) for Adolescent and Young Adult (AYA) Oncology. As of January 2025, all medical compendia have incorporated Fennec’s clinical updates, and AHFS, the largest online platform for pharmacists, has updated its content to reflect and differentiate PEDMARK ® in accordance with its labeling.
PEDMARK ® is the first and only FDA- and EMA-approved agent designed to reduce the risk of CIO in pediatric patients with localized solid tumors. The strategic imperatives driving the execution of PEDMARK ® ’s strategy include increasing awareness of unmet patient needs and emphasizing the importance of preventing CIO among oncologists. A key goal is to establish PEDMARK ® as the standard of care (SOC) for all CIO prevention. 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
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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. Furthermore, digital materials, a digital speaker bureau to engage pediatric oncologists, audiologists, nurses, and pharmacists, along with a patient access services hub and ongoing support from advocacy groups, are all integral components of the strategy.
In the U.S. and Europe, Fennec estimates that there are approximately 11,400 pediatric patients with localized, non-metastatic solid tumors each year, of which include approximately 2,157 cisplatin-treated pediatric patients in the U.S. and 1,250 in Europe who fall within the current PEDMARK ® market. The incidence and severity of CIO depends on the cumulative dose and duration of chemotherapy. Many affected children ultimately require hearing aids or, in more severe cases, cochlear implants, which are costly, technically complex and do not fully restore normal hearing. PEDMARK ® is the first and only therapy approved in the U.S. to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. Infants and young children who experience ototoxicity during critical developmental windows are at risk for impaired speech and language development and literacy, while older children and adolescents may face long-term challenges in academic performance, social-emotional development, career potential and independent living.
In the U.S., approximately 90% of pediatric cancer patients receive care at approximately 200 key pediatric hospital centers, including institutions within the Children’s Oncology Group (COG), National Cancer Institute (NCI) and National Comprehensive Cancer Network (NCCN).
The Adolescent and Young Adult (“AYA”) oncology patient is defined as an individual between 15 and 39 years of age at the time of initial cancer diagnosis. In the U.S., Fennec estimates that there are approximately 51,282 new AYA solid tumor cases annually, of which approximately 25,536 involve cisplatin-treated patients with localized, non-metastatic solid tumors. The most common relevant tumor types include germ cell tumors, testicular cancer, thyroid cancer and breast cancer. The U.S. AYA oncology treatment landscape spans both academic and community settings, with 72 NCI-designated academic centers treating roughly 20% of AYA oncology patients, while approximately 80% are managed across approximately 3,750 community oncology centers nationwide.
CIO and Unmet Medical Need
Cisplatin is a cornerstone of modern cancer therapy for many pediatric and AYA solid tumors, with reported overall survival rates in some cisplatin-treated cancers exceeding 80%. However, cisplatin is associated with a high incidence of ototoxicity. Published data indicates that approximately 60% to 90% of cisplatin-treated patients may develop some degree of permanent, sensorineural hearing loss, with reported rates of 40% to 80% occurring in adults and 50% to 90% in children. CIO typically begins as bilateral, high-frequency hearing loss that is progressive and irreversible, occasionally accompanied by tinnitus. In some cases, it may ultimately require the use of hearing aids or cochlear implants.
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 $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 ® .
European Commission Marketing Authorization
PEDMARQSI ® (PEDMARK ® brand name in Europe) received European Commission Marketing Authorization in June 2023 and received U.K. approval in October 2023.
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As previously noted, in March 2024, 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. 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 1 month to < 18 years of age with localized, non-metastatic solid tumors.
Under the terms of the 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 on net sales of PEDMARQSI ® in the licensed territories up to the mid-twenties. To date, Fennec has not received any milestone payments. Norgine will be responsible for all commercialization activities in the licensed territories and will hold all marketing authorizations in the licensed territories.
Most recently, in 2025, Norgine launched PEDMARQSI ® in Germany and the U.K with plans to launch in several additional markets in 2026.
Japan: STS-J01 Investigator-Initiated Trial and Registration Plans
In Japan, an independent investigator-initiated clinical trial, known as STS-J01, has been evaluating PEDMARK ® for the prevention of CIO. 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 partnership with Norgine in Europe. Discussions with potential partners and regulators are ongoing.
Investigator-Initiated Studies and Lifecycle Management
In addition to our pivotal pediatric studies (SIOPEL6 and COG ACCL0431), we support a number of investigator-initiated and other clinical studies designed to further characterize the use of PEDMARK ® in additional tumor types and patient populations. 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. 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. In 2026, additional investigator-sponsored studies were initiated, including a real-world study at Tampa General Hospital Cancer Institute and a Phase I/II trial at the University of Arizona Cancer Center to evaluate PEDMARK® in AYA and adult patients receiving cisplatin-based chemotherapy. These studies are exploratory in nature, and PEDMARK ® is not currently approved for use in metastatic cancers or adult populations outside of its labeled indication. 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, which took place from 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.
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Results of Operations
Three months ended June 30, 2026 versus three months ended June 30, 2025:
Three Months Ended
Three Months Ended
In thousands of U.S. Dollars
June 30, 2026
%
June 30, 2025
%
Change
PEDMARK product sales, net
$
17,164
$
9,652
$
7,512
Other revenue
710
—
710
Total revenue
17,874
9,652
8,222
Operating expenses:
Cost of product sales
721
4
%
967
8
%
(246)
Research and development
118
1
%
107
1
%
11
Selling and marketing
10,659
66
%
4,784
39
%
5,875
General and administration
4,639
29
%
6,526
53
%
(1,887)
Total operating expense
16,137
100
%
12,384
100
%
3,753
Income/(loss) from operations
1,737
(2,732)
4,469
Unrealized foreign exchange (loss)/gain
(6)
17
(23)
Amortization expense
—
(13)
13
Unrealized loss on securities
—
(1)
1
Interest income
287
171
116
Interest expense
(3)
(594)
591
Income/(loss) before provision for income taxes
2,015
(3,152)
5,167
Provision for income taxes
42
—
42
Net income/(loss)
$
1,973
$
(3,152)
$
5,125
● 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 $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
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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
Six Months Ended
In thousands of U.S. Dollars
June 30, 2026
%
June 30, 2025
%
Change
PEDMARK product sales, net
$
32,272
$
18,403
$
13,869
Other revenue
710
—
710
Total revenue
32,982
18,403
14,579
Operating expenses:
Cost of product sales
1,291
4
%
1,340
6
%
(49)
Research and development
167
1
%
201
1
%
(34)
Selling and marketing
22,081
70
%
8,011
37
%
14,070
General and administration
7,825
25
%
12,391
56
%
(4,566)
Total operating expenses
31,364
100
%
21,943
100
%
9,421
Income/(loss) from operations
1,618
(3,540)
5,158
Unrealized foreign exchange gain/(loss)
(18)
30
(48)
Amortization expense
—
(26)
26
Unrealized loss on securities
—
(2)
2
Interest income
626
407
219
Interest expense
(10)
(1,186)
1,176
Income/(loss) before provision for income taxes
2,216
(4,317)
6,533
Provision for income taxes
42
-
42
Net income/(loss)
$
2,174
$
(4,317)
$
6,491
● 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
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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 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
As of
As of
Selected Asset and Liability Data (thousands):
June 30, 2026
December 31, 2025
Cash and equivalents
$
41,249
$
36,788
Other current assets
31,251
30,255
Current liabilities
12,394
10,518
Working capital (1)
60,106
56,525
(1) [Current assets – current liabilities]
Selected Equity:
Common stock and additional paid in capital
268,447
263,651
Accumulated deficit
(227,248)
(229,422)
Stockholders’ equity
42,442
35,472
● 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
Six Months Ended June 30,
(dollars and shares in thousands)
2026
2025
Net cash provided by/(used in) operating activities
$
2,429
$
(8,004)
Net cash provided by financing activities
2,032
75
Net cash flow
$
4,461
$
(7,929)
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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. 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; 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
Our outstanding share data as of June 30, 2026 and December 31, 2025 was as follows (in thousands):
June 30,
December 31,
Outstanding Share Type
2026
2025
Change
Common shares
35,034
34,163
871
Warrants
111
111
—
RSU and PSU Awards
217
701
(484)
Stock options
7,039
5,853
1,186
Total
42,401
40,828
1,573
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, 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.
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. Until we are cash flow positive from operations, we have chosen to avoid investments of a trading or speculative nature.
We classify fixed income investments with original maturities at the date of purchase greater than three months which mature at or less than twelve months as current. We carry investments at their fair value with unrealized gains and losses included in other comprehensive income (loss); however, we have not held any instruments that were classified as short-term investments during the periods presented in this Quarterly Report.
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Off-Balance Sheet Arrangements
Since our inception, we have not had any material off-balance sheet arrangements.
Contractual Obligations and Commitments
None, other than the lease agreements, and severance amounts described in notes to our condensed consolidated financial statements contained elsewhere in this Quarterly Report.
Critical Accounting Policies and Estimates
The preparation of our condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as related disclosures of contingent assets and liabilities. Actual results could differ from those estimates, and such differences may be material to the financial statements in future periods.
There have been no material changes to our critical accounting policies and estimates from those described in our Annual Report on Form 10-K for the year ended December 31, 2025, which include, among others, revenue recognition (including variable consideration and contract liabilities), valuation of accounts receivable and related allowances, inventory valuation, stock-based compensation, and income taxes. 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; and
● 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:
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● 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; and
● 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; or
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. GAAP. 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. GAAP. 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. GAAP; and
● 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:
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Three Months Ended
Six Months Ended
June 30,
June 30,
June 30,
June 30,
2026
2025
2026
2025
Net income
$
1,973
$
(3,152)
$
2,174
$
(4,317)
Interest income
(287)
(171)
(626)
(407)
Interest expense
3
594
10
1,186
Provision for income taxes
42
-
42
-
Depreciation and amortization
-
13
-
26
Other revenue (a)
(710)
-
(710)
-
Share based compensation expense (b)
1,774
1,494
2,764
2,292
Unrealized loss on securities
-
1
-
2
Unrealized foreign exchange gain/(loss)
6
(17)
18
(30)
Adjusted EBITDA
$
2,801
$
(1,238)
$
3,672
$
(1,248)
(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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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.