What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-10 · 69 added, 101 removed, 190 unchanged (47% of the section changed)

9 unchanged sentences

Our only product candidate in the clinical stage of development is:

● PEDMARK TM (a unique formulation of sodium thiosulfate (STS)) for the prevention of ototoxicity induced by cisplatin chemotherapy in patients one month to <18 years of age with localized, non-metastatic, solid tumors.

PEDMARK TM (a unique formulation of sodium thiosulfate (“STS”)).

We have 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 in collaboration with the Children’s Oncology Group (“COG ACCL0431”) “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children”.

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We continue to focus our resources on the development of PEDMARK TM .

We have licensed from Oregon Health and Science University (“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.

We have licensed from Oregon Health & Science University (“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.

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and Europe, it is estimated that, annually, over 10,000 children may receive platinum-based chemotherapy.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids.

The incidence of ototoxicity depends upon the dose and duration of chemotherapy.

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 that suffer ototoxicity at critical stages of development lack speech language development and literacy, and older children and adolescents lack social-emotional development and educational achievement.

Infants and young children that suffer ototoxicity at critical stages

of development lack speech language development and literacy, and older children and adolescents lack social-emotional development and educational achievement.

In March 2018, PEDMARK TM received Breakthrough Therapy and Fast Track designations from the U.S.

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We announced that we had submitted full completion of the NDA in February 2020.

On April 13, 2020, we announced that the FDA had accepted for filing and granted Priority Review for our NDA.

The FDA set a Prescription Drug Fee Act (“PDUFA”) target action date of August 10, 2020 for the completion of the FDA’s review.

The FDA set a Prescription Drug User Fee Act (“PDUFA”) target action date of August 10, 2020 for the completion of the FDA’s review.

On August 10, 2020, we announced that we received a Complete Response Letter (“CRL”) from the FDA regarding our NDA for PEDMARK TM , which identified deficiencies in the third-party manufacturing facility that manufactures PEDMARK TM on our behalf.

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

In the fourth quarter of 2020, we engaged in a Type A meeting with the FDA concerning the CRL that we believe was constructive and collaborative.

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

In May 2021, we announced the resubmission of our NDA for PEDMARK TM and in June 2021 we further announced that the FDA accepted for filing the resubmission of our NDA and set a PDUFA target action date of November 27, 2021.

On November 29, 2021, we announced that we received a CRL from the FDA regarding our NDA for PEDMARK TM , which identified deficiencies in the third-party manufacturing facility that manufactures PEDMARK TM on our behalf.

In March 2022, we announced the resubmission of our NDA for PEDMARK TM , and in April 2022, we further announced that the FDA accepted for filing the resubmission of our NDA and set a PDUFA target action date of September 23, 2022.

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”).

The indication targeted by our PIP is for the prevention of platinum-induced ototoxic hearing loss for standard risk hepatoblastoma (“SR-HB”).

Additional tumor types of the proposed indication will be subject to the Committee for Medicinal Products for Human Use (“CHMP”) assessment at the time of the MAA.

No deferred clinical studies were required in the positive opinion given by PDCO.

The Company was also advised that sodium thiosulfate (tradename to be determined) is eligible for submission of an application for a Pediatric Use Marketing Authorization (“PUMA”).

Therefore, this decision allows Fennec to proceed with the submission of a PUMA in the European Union (“EU”) with incentives of automatic access to the centralized procedure and up to 10 years of data and market protection The PUMA is a dedicated marketing authorization covering the indication and appropriate formulation for medicines developed exclusively for use in the pediatric population and provides data and market protection up to 10 years.

In February 2020, Fennec announced that it has submitted a MAA for the prevention of otoxicity induced by cisplatin chemotherapy patients 1 month to < 18 years of age with localized, non-metastatic, solid tumors.

We were also advised that sodium thiosulfate (tradename to be determined) is eligible for submission of an application for a Pediatric Use Marketing Authorization (“PUMA”).

A 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.

Therefore, this decision allows us 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.

In February 2020, we announced that we had 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.

The EMA continues its review of our MAA.

Clinical Studies

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● To assess the efficacy of STS to reduce the hearing impairment caused by cisplatin.

● To carefully monitor any potential impact of sodium thiosulfate on response to cisplatin and survival.

● To carefully monitor any potential impact of STS on response to cisplatin and survival.

SIOPEL 6 - Results

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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 $12.9 million for the nine months ended September 30, 2021, and a net loss of $14.9 million for the nine months ended September 30, 2020.

As of September 30, 2021, our accumulated deficit was approximately $175.1 million ($162.1 million at December 31, 2020).

We believe that our cash and cash equivalents as of September 30, 2021, which totaled $24.3 million, plus the Bridge Bank Loan and Security Agreement, will be sufficient to meet our cash requirements through at least the next twelve months, including anticipated NDA approval and, if approved, the first commercial launch of PEDMARK TM in the United States.

We generated a net loss of approximately $3.7 million for the three months ended March 31, 2022, and a net loss of $4.7 million for the three months ended March 31, 2021.

As of March 31, 2022, our accumulated deficit was approximately $183.2 million ($179.5 million at December 31, 2021).

We believe that our cash and cash equivalents as of March 31, 2022, which totaled $18.3 million, plus the Bridge Bank Loan and Security Agreement, will be sufficient to meet our cash requirements through at least the next twelve months, including anticipated NDA approval and, if approved, the first commercial launch of PEDMARK TM in the United States.

Our projections of our capital requirements are subject to substantial uncertainty, and more capital than we currently anticipate may be required thereafter.

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Our research and development expenses, which include expenses associated with our clinical trials, drug manufacturing to support clinical programs, 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.

Our general and administration expenses include

expenses associated with the compensation of employees, stock-based compensation, professional fees, consulting fees, insurance and other administrative matters associated in support of our drug development programs.

Results of Operations

Three months ended September 30, 2021 versus three months ended September 30, 2020:

Three months ended March 31, 2022 versus three months ended March 31, 2021:

Three Months Ended

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In thousands of U.S.

September 30, 2021

September 30, 2020

Operating expenses:

Research and development

General and administration

Total operating expense

Loss from operations

Unrealized gain on securities

Amortization expense

Interest income and other, net

Research and development expenses decreased by $126 for the three months ended September 30, 2021 compared to the same period in 2020 as the Company’s development activities shifted back to product launch readiness and pre-commercial development of PEDMARK TM .

General and administrative expenses decreased by $1,560 compared to same period in 2020 due to the timing to NDA approval of the comparative periods.

The three months ended September 30, 2020 was the

same quarter as the initial NDA approval and the three months ended September 30, 2021 is one quarter prior to our current potential NDA approval.

The reduction in general and administrative expenses was slightly offset by higher expenses associated with additional employees.

The Company holds shares of Processa (NASDAQ:

PCSA), which are marked to market each balance sheet date and unrealized gains or losses are recognized at that time.

The unrealized gain on those shares for the three months ended on September 30, 2021, was $39.

Other losses were driven mainly by interest expense and unrealized losses related to the Company’s foreign currency transactions.

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

There was an increase of $48 in other losses for the three months ended September 30, 2021, compared to the same period in 2020.

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 decreased by $347 for the three months ended September 30, 2021 compared to the same period in 2020.

In 2021, the Company is amortizing the capitalized costs associated with the renegotiated Bridge Bank loan facility.

During the same period in 2020, the Company wrote off the remaining capitalized cost associated with the former facility after it received the CRL from the FDA in August 2020.

Interest income was $9 lower for the three months ended September 30, 2021, compared to the same period in 2020.

This was driven by lower average cash balance for the three months ended September 30, 2021 compared to the same period in 2020.

Nine months ended September 30, 2021 versus nine months ended September 30, 2020:

Nine Months Ended

In thousands of U.S.

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Operating expenses:

3 unchanged sentences

Loss from operations

Unrealized gain on securities

Unrealized (loss)/gain on securities

Amortization expense

Interest income

Research and development expenses increased by $576 for the nine months ended September 30, 2021, compared to the same period in 2020.

The Company’s research and development activities for the first nine months of 2021 increased as the Company prepared for the NDA resubmission.

General and administrative expenses decreased by $2,099 over same period in 2020 as expenses associated with pre-commercialization activities decreased on a year over year basis.

This relates to the planned timing and the fact that many pre-commercialization activities were performed in 2020.

Research and development expenses decreased by $979 for the three months ended March 31, 2022, compared to the same period in 2021.

The Company’s research and development activities for the first three months of 2022 decreased as the Company’s efforts on a year over year basis were less focused on development and shifted towards pre-commercialization activities.

General and administrative expenses decreased by $398 over same period in 2021 as select expenses associated with pre-commercialization activities were previously done in 2021.

The Company holds shares of Processa (NASDAQ:

PCSA) which are marked to market each balance sheet date and unrealized gains or losses are recognized at that time.

The unrealized gain on those shares for the nine months ended on September 30, 2021 was $137.

The unrealized loss on those shares for the three months ended March 31, 2022 was $91.

Other losses were driven mainly by interest expense and unrealized losses related to the Company’s foreign currency transactions.

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

There was an increase of $69 in other losses for the nine months ended September 30, 2021, compared to the same period in 2020.

There was an increase of $52 in other losses for the three months ended March 31, 2022, compared to the same period in 2021.

Amortization expense is also a non-cash expense and relates to amortization of the deferred issuance cost of the loan facilities with Bridge Bank.

Amortization expense decreased by $394 for the nine months ended September 30, 2021 compared to the same period in 2020.

Amortization expense increased by $7 for the three months ended March 31, 2022 compared to the same period in 2021.

In 2022, the Company is amortizing the capitalized costs associated with the renegotiated Bridge Bank loan facility.

During the same period in 2020, the Company wrote off the remaining capitalized cost associated with the former facility after it received the CRL from the FDA in August 2020.

Interest income was $33 lower for the nine months ended September 30, 2021, compared to the same period in 2020.

This was driven mainly by a sharp decrease in interest rates and lower average cash balance for the nine months ended September 30, 2021 compared to the same period in 2020.

During the same period in 2020, the Company had written off the remaining capitalized cost associated with the former facility after it received the CRL from the FDA in August 2020.

Interest income was $7 lower for the three months ended March 31, 2022, compared to the same period in 2021.

This was driven mainly by lower average cash balances for the three months ended March 31, 2022 compared to the same period in 2021.

Quarterly Information

The following table presents selected condensed financial data for each of the last eight quarters through September 30, 2021, as prepared under U.S.

The following table presents selected condensed financial data for each of the last eight quarters through March 31, 2022, as prepared under U.S.

dollars in thousands, except per share information):

Net (Loss)/Income for the

Basic Net (Loss)/Income per

Diluted Net (Loss)/Income per

December 31, 2019

March 31, 2020

Net Loss for the

Basic Net Loss per

Diluted Net Loss per

June 30, 2020

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September 30, 2021

December 31, 2021

March 31, 2022

Liquidity and Capital Resources

Selected Asset and Liability Data (thousands):

September 30, 2021

March 31, 2022

December 31, 2021

8 unchanged sentences

Shareholders’ equity

Cash and cash equivalents were $24,335 at September 30, 2021 and $30,344 at December 31, 2020.

The decrease in cash and cash equivalents between September 30, 2021, and December 31, 2020 is the result of expenses related to the development and preparation of the NDA resubmission of PEDMARK TM and general and administrative expenses, which was offset by a draw of $5,000 from the Bridge Bank Loan and Security Agreement.

There was an increase of $571 in other current assets between September 30, 2021 and December 31, 2020.

This is a result of a $242 increase in deferred charges related to the financing of the director and officer’s insurance policy, a $137 increase in the value of Processa shares and an increase in prepaid expenses of $192.

Current liabilities decreased primarily due to the reduction in manufacturing and regulatory expenses associated with the PEDMARK TM NDA resubmission.

Working capital decreased between December 31, 2020 and September 30, 2021 by $5,105.

The decrease relates to cash expenditures for operating activities for the nine months ended September 30, 2021, offset by the $5,000 draw from the Bridge Bank Loan and Security Agreement.

Cash and cash equivalents were $18,259 at March 31, 2022 and $21,100 at December 31, 2021.

The decrease in cash and cash equivalents between March 31, 2022 and December 31, 2021 is the result of expenses related to the development and preparation of the NDA resubmission of PEDMARK TM and general and administrative expenses, which was offset by minimal cash inflows of $15 from various option exercises.

There was a decrease of $418 in other current assets between March 31, 2022 and December 31, 2021.

This is a result of a $249 decrease in deferred charges related to the financing of our director and officer’s insurance policy, a $91 decrease in the value of Processa shares and an decrease in prepaid expenses of $78.

Current liabilities increased primarily due to timing of select manufacturing and regulatory expenses associated with the PEDMARK TM NDA resubmission.

Working capital decreased between December 31, 2021 and March 31, 2022 by $3,741.

The decrease relates to cash expenditures for operating activities for the three months ended March 31, 2022, the recognition of $500 reclassification of long-term debt to current liability, offset by the $15 cash inflow from option exercises.

The Company expects increases in cash outflows related to pre-commercialization and commercialization activities in the coming quarters upon potential NDA approval.

The following table illustrates a summary of cash flow data for the three and nine-month periods of September 30, 2021 and 2020:

The following table illustrates a summary of cash flow data for the three-month periods of March 31, 2022 and 2021:

Selected Cash Flow Data

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars and shares in thousands)

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Net cash provided by investing activities

Net cash (used in)/provided by financing activities

Net cash provided by financing activities

Net cash flow

Net cash used in operating activities for the three and nine months ended September 30, 2021 primarily reflected a net loss of $4,185 and $12,919, respectively.

These three- and nine-month losses were adjusted for the add back of non-cash items consisting of $917 and $2,839, respectively, in stock-based compensation expense, with unrealized gains on securities of $39 and $137 added back for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2021, there was a net change in prepaid and other assets of $824 and $434, respectively;

coupled with a net increase in current liabilities of $1,166 for the three months ended September 30, 2021, and a net decrease of $333 for the nine months ended September 30, 2021.

Three- and nine-month cash flows from operating activities were negative $2,958 and $10,977, respectively, for the period ended September 30, 2021.

Net cash provided by financing activities for the three and nine months ended September 30, 2021 was $0 and $4,968, respectively.

Financing activities consisted of $5,000 gross proceeds from the Bridge Bank Loan Security Agreement, $24 from the exercise of options, netted against $56 in capitalized deferred loan costs.

Net cash flows from the three and nine month period ended September 30, 2021 were negative $2,958 and $6,009, respectively.

Net cash used in operating activities for the three months ended March 31, 2022 primarily reflected a net loss of $3,696.

The three month loss was adjusted for the add back of non-cash items consisting of $433 in stock-based compensation expense, with unrealized loss on securities of $91 and amortization expense of $7 for the three months ended March 31, 2022.

For the three months ended March 31, 2022, there was a net change in prepaid and other assets of $326;

coupled with a net decrease in current liabilities of $18 for the three months ended March 31, 2022.

Three month cash flows from operating activities were $2,856 and $3,593, respectively, for the periods ended March 31, 2022 and 2021.

Net cash provided by financing activities for the three months ended March 31, 2022 was $15.

There was no financing activity cash flows for the same period in 2021.

Net cash flows from the three month-periods ended March 31, 2022 and 2021, were negative $2,841 and $3,593, respectively.

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

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Outstanding Share Information

Our outstanding share data as of September 30, 2021 and December 31, 2020 was as follows (in thousands):

September 30,

Our outstanding share data as of March 31, 2022 and December 31, 2021 was as follows (in thousands):

Outstanding Share Type

3 unchanged sentences

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, 2021, we had approximately $428 in our cash accounts and $23,907 in savings and money market accounts.

At March 31, 2022, we had approximately $131 in our cash accounts and $18,128 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.

2 unchanged sentences

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.

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.

3 unchanged sentences

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.

6 unchanged sentences

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, 2021, and 2020 were $1,242 and $1,368, respectively, and for the nine-months ended September 30, 2021, and 2020 were $4,458 and $3,882 , respectively.

We have decreased our research and development expenses related to PEDMARK TM as our efforts have shifted to pre-commercialization activities after the NDA resubmission in May 2021.

Research and development expenses for the three months ended March 31, 2022 was $1,437.

For the same period in 2021 research and development expense was $2,416.

We have decreased our research and development expenses related to PEDMARK TM as our efforts have shifted to pre-commercialization activities after the NDA resubmission in March 2022.

Our product candidate still requires significant, time-consuming and costly research and development, testing and regulatory clearances.

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In addition, we are unable to reasonably estimate the period when material net cash inflows could commence from the sale, licensing or commercialization of such product candidate, if ever.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with U.S.

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, 2020.

Critical Accounting Policies and Use of Estimates

A summary of our critical accounting policies and use of estimates are presented in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (filed February 28, 2022).

There have been no material changes to our critical accounting policies and use of estimates during the three months ended March 31, 2022.

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