What changed in this filing

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Item 1. Financial Statements

2023-08-07 compared with 2023-05-12 · 156 added, 175 removed, 462 unchanged (42% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

March 31, 2022

June 30, 2023

Current assets

5 unchanged sentences

Non-current assets

Deferred issuance cost, net of amortization

Deferred issuance costs, net of amortization

Total non-current assets

17 unchanged sentences

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

Total liabilities and holders’ deficit

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

PEDMARK product sales, net

20 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2023 and 2022

Three and Six Months Ended June 30, 2023, and 2022

dollars and shares in thousands)

6 unchanged sentences

Balance at March 31, 2023

Stock-based compensation - employees

Stock option exercise

Restricted stock release

Balance at June 30, 2023

Comprehensive

4 unchanged sentences

Stock option exercise

Restricted stock release

Balance at March 31, 2022

Stock-based compensation - employees

Stock-based compensation - consultants

Stock option exercise

Restricted stock release

Balance at June 30, 2022

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

Dollars in thousands)

Three Months Ended

Six Months Ended

Cash flows (used in) provided by:

10 unchanged sentences

Accounts payable

Accrued liabilities

Accrued liabilities and PIK interest

Net cash used in operating activities

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Cash and cash equivalents - End of period

Non-cash investing and financing activities:

Supplemental disclosures of cash flow information:

Non-cash investing and financing activities:

Non-cash financing (PIK Interest)

Financed insurance policy

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statement.

Fennec Pharmaceuticals Inc.

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and subsequently changed its name on September 3, 2014.

Fennec is a biopharmaceutical company with one U.S.

Food and Drug Administration (“FDA”) approved product 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.

Fennec is a commercial stage specialty pharmaceutical company with one U.S.

Food and Drug Administration (“FDA”) approved and European Commission approved product , 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:

1 unchanged sentence

(“Oxiquant”) and Fennec Pharmaceuticals, Inc., both Delaware corporations, Cadherin Biomedical Inc.

(“CBI”), a Canadian corporation and Fennec Pharmaceuticals (EU) Limited (“Fennec Limited”), an Ireland company, collectively referred to herein as the “Company.” With the exception of Fennec Pharmaceuticals, Inc., all subsidiaries are inactive.

all subsidiaries are inactive.

These unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) that are applicable to a going concern which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.

During the three months ended March 31, 2023, the Company incurred a net loss from operations of $ 5,270 .

At March 31, 2023, it had an accumulated deficit of $ 209,252 and had experienced negative cash flows from operating activities in the amount of $ 5,577 for the period ended March 31, 2023.

During the three and six months ended June 30, 2023, the Company incurred a loss from operations of $ 4,666 and $ 9,936 , respectively.

At June 30, 2023, it had an accumulated deficit of $ 214,696 and had experienced negative cash flows from operating activities during the six months ended June 30, 2023, in the amount of $ 9,523 .

On August 1, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Petrichor Opportunities Fund I LP (the “Investor”) in connection with the issuance of up to $ 45,000 of senior secured floating rate convertible notes (the “Notes”), issuable in multiple tranches (the “Note Financing”).

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The Company elected to have all the commitment fee of the Notes payable in warrants.

The Company believes current funds, which include funds from the First Closing Note and the Second Closing Note, provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts of PEDMARK ® outside the United States for at least the next twelve months.

The Company believes current funds, which include funds from the First Closing Note and the Second Closing Note, provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts of PEDMARK ® in the United States and preparation for commercialization of PEDMARK outside of the United States for at least the next twelve months.

Fennec Pharmaceuticals Inc.

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Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S.

GAAP and are the responsibility of the Company’s management.

These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by U.S.

GAAP for annual financial statements.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with US GAAP and are the responsibility of the Company’s management.

These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by US GAAP for annual financial statements.

Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes filed with the Securities and Exchange Commission (“SEC”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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All amounts presented are in thousands except for per share amounts.

The results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of results to be expected for the full fiscal year.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period.

Significant estimates include product sales, discounts and allowance against trade receivables, measurement of stock-based compensation and estimates of the Company’s capital requirement over the next twelve months from the date of issuance of the consolidated financial statements.

Significant estimates include product sales discounts and allowances, allowance against trade receivables, measurement of stock-based compensation and estimates of the Company’s capital requirement over the next twelve months from the date of issuance of the consolidated financial statements.

Actual results could differ from those estimates.

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The Company views its operations and manages its business in one operating segment principally in the United States.

As of March 31, 2023, the Company held approximately CAD$1,392 ($1,029 as expressed in $USD), located in Canadian banks outside of the United States.

As of June 30, 2023, the Company has no assets located outside of the United States.

Stock-Based Compensation

19 unchanged sentences

New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment methodology in current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables.

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” This ASU replaces the incurred loss impairment methodology in current US GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables.

In addition, new disclosures are required.

The ASU, as subsequently amended, is effective for the Company for fiscal years beginning after December 15, 2022, as the Company is a smaller reporting company.

The ASU, as subsequently amended, is effective for the Company for fiscal years beginning after December 15, 2022, as the Company is a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K.

We adopted ASU 2016-13 on January 1, 2023.

Based on the composition of the Company’s accounts receivable, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of March 31, 2023, using its expected credit loss evaluation process, resulted in no adjustments to the provision for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

Specifically, the Company’s estimate of expected credit losses as of June 30, 2023, using its expected credit loss evaluation process, resulted in no adjustments to the provision for credit losses and no cumulative effect adjustment to accumulated deficit on the adoption date of the standard.

Revenue Recognition

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PEDMARK ® is the Company’s first commercial product.

The Company sells its product principally through the following specialty distributors:

The Company sells its product through the following specialty distributors:

Amerisource Specialty Distribution (“ASD”), McKesson Plasma and Biologics, McKesson Specialty, and Cardinal Health Specialty (collectively the “Customers” and each a “Customer”).

Further, the Company sells directly to other customers directly without the use of specialty distributors.

Further, the Company sells directly to other customers without the use of specialty distributors.

These Customers subsequently resell the Company’s products to health care providers and patients.

In addition to distribution agreements with Customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately- negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products.

Revenues from product sales are recognized when the Customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the Customer.

In addition to distribution agreements with Customers, the Company enters arrangements with health care providers and payors that provide for government-mandated and/or privately- negotiated rebates, chargebacks, and discounts with respect to the purchase of the Company’s products.

Revenues from product sales are recognized when the Customer obtains control of the Company’s

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

product, which occurs at a point in time, typically upon delivery to the Customer.

The amount of revenue recognized is net of these discounts in an amount equal to the cash expected to be collected.

Product Sales Discounts and Allowances

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Other Customer Credits:

The Company pays fees to its Customers for account management, data management and other administrative services.

To the extent the services received are distinct from the sale of products to its Customers, the Company classifies these payments in selling and marketing, and general and administrative expenses in its Consolidated Statements of Operations.

The following table summarizes net product revenues for PEDMARK ® in the United States earned in the three months ended March 31, 2023 and 2022, respectively:

The Company pays fees to certain of its Customers for account management, data management and other administrative services.

To the extent the services received are distinct from the sale of products to its Customers, the Company classifies these payments in selling and marketing, general and administrative expenses in its Consolidated Statements of Operations.

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

The following table summarizes net product revenues for PEDMARK ® in the United States and abroad earned during the three and six months ended June 30, 2023 and 2022, respectively:

Three Months Ended

Six Months Ended

Product revenues:

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Net product revenues

The following table summarizes the percentage of total product revenues for PEDMARK ® in the United States by Customers who individually accounted for 10 % or more of total product revenues earned in the three months ended March 31, 2023, and 2022, respectively:

The following table summarizes the percentage of total product revenues for PEDMARK ® in the United States and abroad by Customers who individually accounted for 10 % or more of total product revenues earned in the three and six months ended June 30, 2023, and 2022, respectively:

Three Months Ended

Six Months Ended

Specialty Distributors

Cardinal Health Specialty

Subtotal-Specialty Distributors

Direct Customers

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK ® (which constitute variable consideration) for the three months ended March 31, 2023, was as follows:

Direct Customers and those less than 10%

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK ® (which constitute variable consideration) for the six months ended June 30, 2023, was as follows:

Rebates, Customer

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Balance at March 31, 2023

The allowances for chargebacks, fees due to Customers, rebates and discounts for prompt payment are recorded as a contra-asset to accounts receivable, while Medicaid rebates and return allowances are in accrued liabilities in the accompanying Consolidated Balance Sheets.

Trade Receivables

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at June 30, 2023

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

Trade Receivables

The Company records gross trade receivables at the time of product sale to its Customers.

4 unchanged sentences

To the extent that any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such a customer.

The Customers are specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low.

The Company did not have a material allowance for doubtful accounts as of March 31, 2023.

The Customers are mainly specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low.

It is the policy of the Company to reserve 1% of its net sales to non-specialty distributors, as such the Company had an immaterial balance in allowance for doubtful accounts as of June 30, 2023.

Cost of Products Sold

Cost of products sold is related to the Company's product revenues for PEDMARK ® and consists primarily of product production costs associated with finished goods inventory and royalties ( 1 % of net sales) the Company is required to pay to Oregon Health & Science University (“OHSU”) on all net sales of PEDMARK ® once it achieves positive earnings before interest, taxes, depreciation and amortization.

The cost of products sold also consists of shipping and other third party logistics and distribution costs for the Company’s product.

2 unchanged sentences

After FDA approval in September 2022, the Company had various lots of PEDMARK ® in various stages of production in connection with the fourth quarter product launch.

As of March 31, 2023, the Company capitalized approximately $ 0.9 million of costs as inventory on the Condensed Consolidated Balance Sheet.

Of the items capitalized, $ 0.4 million was capitalized as work in process, $ 0.6 million was capitalized into finished goods, with $ 0.1 million of that being reclassified to cost of products sold.

As of June 30, 2023, the Company capitalized approximately $ 1.4 million of costs as inventory on the Condensed Consolidated Balance Sheet.

Of the items capitalized, $ 0.1 million was capitalized as raw materials, $ 0.6 million was capitalized as work in process, $ 0.7 million was capitalized into finished goods, with $ 0.2 million of that being reclassified to cost of products sold.

Cash and Cash Equivalents

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The Company places its cash and cash equivalents in investments held by highly rated financial institutions in accordance with its investment policy designed to protect the principal investment.

At March 31, 2023, the Company had $ 18,390 in cash, savings and money market accounts ($ 23,774 at December 31, 2022).

At March 31, 2023, the Company held $ 5,686 in cash of which $ 1,029 (as presented in U.S.

At June 30, 2023, the Company had $ 14,958 in cash, savings and money market accounts ($ 23,774 at December 31, 2022).

At June 30, 2023, the Company held $ 3,501 in cash of which $ 507 (as presented in U.S.

dollars) was in Canadian dollars ($ 34 at December 31, 2022 as presented in U.S.

At March 31, 2023, the Company held $ 12,704 in money market investments.

At June 30, 2023, the Company held $ 11,457 in money market investments.

Money market investments typically have minimal risks.

1 unchanged sentence

Financial Instruments

Financial instruments recognized on the balance sheets at March 31, 2023 and December 31, 2022 consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and term loans, the carrying values of which approximate fair value due to their relatively short time to maturity or interest rates that approximate market interest rates.

Financial instruments recognized on the balance sheets at June 30, 2023 and December 31, 2022 consist of cash and cash equivalents, accounts receivable, accounts payable and term loans, the carrying values of which approximate fair value due to their relatively short time to maturity or interest rates that approximate market interest rates.

The Company does not hold or issue financial instruments for trading.

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

The Company’s 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, when made, are made in U.S.

or Canadian bank securities, commercial paper of U.S.

or Canadian industrial companies, utilities, financial institutions and consumer

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

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.

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 risks are primarily the opportunity cost of the conservative nature of the allowable investments.

Until the company is cash flow positive from operations, we have chosen to avoid investments of a trading or speculative nature.

Common Shares and Warrants

The Company has 0.2 million warrants with a weighted average strike price of $ 7.79 outstanding to purchase common shares that have a weighted average life of 4.80 years.

Until the company is cash flow positive from operations, the Company has chosen to avoid investments of a trading or speculative nature.

Research and Development Costs and Investment Tax Credits

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This policy also limits the amount of credit exposure to any one issue or type of instrument.

The Company’s trade receivables, include amounts billed to Customers for product sales of PEDMARK ® .

The Customers are a limited group of specialty distributors with significant financial resources, and accordingly, the Company considers the risk of potential credit losses to be low.

The Company’s trade receivables:

include amounts billed to Customers for product sales of PEDMARK ® .

The Customers are a limited group of specialty distributors and select customers abroad, with substantial financial resources, and accordingly, the Company considers the risk of potential credit losses to be low.

The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates.

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Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized.

As of March 31, 2023, we maintained a full valuation allowance against our deferred tax assets.

As of June 30, 2023, we maintained a full valuation allowance against our deferred tax assets.

The provisions of the Financial Accounting Standards Board (“FASB”) ASC 740-10, Uncertainty in Income Taxes, address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.

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Diluted net loss per share is computed using the same method, except the weighted average number of common shares outstanding includes convertible debentures, stock options and warrants, if dilutive, as determined using the if-converted method and treasury methods.

Accordingly, warrants to purchase 0.2 million of our common shares and options to purchase 5.0 million of our common shares at March 31, 2023, were not included in loss per share.

Accordingly, warrants to purchase 0.2 million of our common shares and options to purchase 4.9 million of our common shares at June 30, 2023, were not included in loss per share.

Such instruments would have an antidilutive effect.

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Dilutive common share equivalents consist of the incremental common shares issuable upon exercise of stock options and warrants.

The following table sets forth the computation of basic and diluted net loss per share:

Three Months Ended March 31,

Weighted-average common shares, basic

Dilutive effect of stock options

Dilutive effect of warrants

Incremental dilutive shares

Weighted-average common shares, diluted

Net loss per share, basic and diluted

The following outstanding options and warrants were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:

Three Months Ended March 31,

Six Months Ended June 30,

Options to purchase common shares

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The Company’s authorized capital stock consists of an unlimited number of common shares, no par value per share.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Warrants to Purchase Common Stock

During the three months ended March 31, 2023 and 2022, there were no warrants issued or exercised.

Outstanding warrants have a weighted average life of 4.80 years on March 31, 2023.

The following tables detail the Company’s warrant activity for the three months ended March 31, 2023 and 2022, respectively:

Common Shares

Issuable Upon Exercise

of Outstanding

Weighted-Average

Investor Warrants

Exercise Price

Outstanding December 31, 2022

Outstanding March 31, 2023

Common Shares

Issuable Upon Exercise

of Outstanding

Weighted-Average

Investor Warrants

Exercise Price

Outstanding December 31, 2021

Outstanding March 31, 2022

During the three and six months ended June 30, 2023 and 2022, there were no warrants issued or exercised .

Outstanding warrants have a weighted average life of 4.56 years, and a weighted average strike price of $ 7.79 , on June 30, 2023.

Equity Incentive Plan

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All options vest within three years or less and are exercisable for a period of ten years from the date of grant.

The Plan allows the issuance of Canadian and U.S.

The Plan allows

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

the issuance of Canadian and U.S.

dollar grants.

The table below outlines recognized contractor and employee expense from equity awards for the three month period ended March 31, 2023 and 2022.

Three Months Ended March 31,

The table below outlines recognized contractor and employee expense from equity awards for the three and six month periods ended June 30, 2023 and 2022.

Three Months Ended

Six Months Ended

Contractor options expense recognized

1 unchanged sentence

Total option expense recognized

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Stock Option Activity

The following is a summary of option activity for the three months ended March 31, 2023, and 2022 for stock options denominated in U.S.

The following is a summary of option activity for the three and six months ended June 30, 2023 for stock options denominated in U.S.

Since August of 2020, there have been no Canadian denominated options outstanding.

1 unchanged sentence

Options (thousands)

Exercise Price

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Weighted-Average

Options (thousands)

Exercise Price

Exercise Price $USD

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Outstanding at June 30, 2023

Of the 4,887 U.S.

denominated options granted and outstanding at March 31, 2023, 3,546 are fully vested and exercisable.

denominated options granted and outstanding at June 30, 2023, 3,870 are fully vested and exercisable.

The value of options issued was estimated using the Black-Scholes option pricing model using the assumptions in the table below.

The expected volatility was determined using historical volatility of our stock based on the expected term of the award.

Valuation Assumptions

Black-Scholes Model Assumptions

March 31, 2023

June 30, 2023

Expected dividend

5 unchanged sentences

Restricted Share Units Activity

The Plan allows for the issuance of restricted share units (“RSUs”).

The following is a summary of RSU activity for the three months ended March 31, 2023, and March 31, 2022, for RSUs denominated in U.S.

As of March 31, 2023,

The Plan allows for the issuance of restricted share units (“RSU’s”).

The following is a summary of RSU activity for the three and six months ended June 30, 2023.

During the three and six months ended June 30, 2023, there were 1 and 4 RSU’s

Fennec Pharmaceuticals Inc.

1 unchanged sentence

dollars and shares in thousands, except per share information)

there were 298 RSUs which remained unvested.

During the quarter ended March 31, 2023, there were 264 RSUs awarded to employees.

All RSUs vest over three years .

Number of Restricted

released from restriction, respectively.

During the three and six months ended June 30, 2023, there were 0 and 17 RSU’s forfeited by departing employees.

RSU’s vesting vary from one to three years .

Restricted Share

RSUs Current Year

Share Units (thousands)

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Number of Restricted

RSUs Past Year

Share Units (thousands)

Units (thousands)

Outstanding at December 31, 2022

Outstanding at March 31, 2023

The value of RSUs issued was estimated using the share price on the date of the award multiplied by the number of shares granted.

Outstanding at June 30, 2023

The value of RSU’s issued was estimated using the share price on the date of the award multiplied by the number of shares granted.

Fair Value Measurements

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This Topic applies to certain assets and liabilities that are being measured and reported on a fair value basis.

The Fair Value Measurements Topic defines fair value, establishes a framework for measuring fair value in accordance with U.S.

GAAP, and expands disclosure about fair value measurements.

The Fair Value Measurements Topic defines fair value, establishes a framework for measuring fair value in accordance with US GAAP, and expands disclosure about fair value measurements.

This Topic enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values.

3 unchanged sentences

Unobservable inputs that are not corroborated by market data.

Fair Value Measurement at March 31, 2023 and December 31, 2022

Fair Value Measurement at June 30, 2023 and December 31, 2022

(in thousands)

6 unchanged sentences

Processa common shares

The Company held approximately $ 5,686 in cash as of March 31, 2023, of which approximately $ 1,029 was in Canadian funds (translated into U.S.

The Company held approximately $ 3,501 in cash as of June 30, 2023, of which approximately $ 507 was in Canadian funds (translated into U.S.

As of December 31, 2022, the Company held approximately $ 307 in cash of which approximately $ 33 was in Canadian funds (translated into U.S.

The Company holds 51 unrestricted common shares of Processa (NASDAQ:PCSA), which it received as part of a royalty arrangement in 2020 .

The Company holds 51 unrestricted common shares of Processa Pharmaceuticals, Inc.

(NASDAQ:PCSA), which it received as part of a royalty arrangement in 2020.

Fennec Pharmaceuticals Inc.

3 unchanged sentences

Oregon Health & Science University Agreement

On February 20, 2013, Fennec entered into an exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK ® , and their use in oncology (the "OHSU Agreement").

OHSU will receive certain milestone payments, royalties on net sales for licensed products and a royalty on any consideration received from sublicensing of the licensed technology.

On May 18, 2015, Fennec negotiated an amendment ("Amendment 1") to the OHSU Agreement, which expands Fennec's exclusive license to include the use of N-acetylcysteine as a standalone therapy and/or in combination with PEDMARK ® for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers.

Further, Amendment 1 adjusts select milestone payments entered in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, the royalty rate from sublicensing of the licensed technology and the fee payable upon the regulatory approval of a licensed product.

Certain milestone payments are due upon FDA approval and achievement of sufficient positive EBITDA over a specified period.

PEDMARK ® received FDA approval in September 2022, however at this time, due to significant uncertainty surrounding timing and magnitude of certain milestones, the Company has only recorded a royalty liability associated with net revenue.

On February 20, 2013, Fennec entered into an exclusive license agreement with Oregon Health & Science University (“OHSU”) for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK, and their use in oncology (the “OHSU Agreement”).

OHSU will receive certain milestone payments, royalty on net sales for licensed products and a royalty on any consideration received from sublicensing of the licensed technology.

On May 18, 2015, Fennec negotiated an amendment (“Amendment 1”) to the OHSU Agreement, which expands Fennec’s exclusive license to include the use of N-acetylcysteine as a standalone therapy and/or in combination with sodium thiosulfate for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers.

Further, Amendment 1 adjusts select milestone payments in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing of the licensed technology and the fee payable upon the regulatory approval of a licensed product.

The term of the OHSU Agreement as amended by Amendment 1 expires on the date of the last to expire claim(s) covered in the patents licensed to Fennec or 8 years, whichever is later.

The Company now has a licensed product with regulatory approval that is covered by the Orphan Drug Designation, the parties amended the term of the agreement.

Sodium thiosulfate is currently protected by methods of use patents that the Company exclusively licensed from OHSU that expired in Europe in 2021 and that expire in the United States in 2038.

In the event a licensed product obtains regulatory approval and is covered by the Orphan Drug Designation, the parties will in good faith amend the term of the agreement.

PEDMARK is currently protected by methods of use patent that the Company exclusively licensed from OHSU that expire in the United States in 2038.

The OHSU Agreement is terminable by either Fennec or OHSU in the event of a material breach of the agreement by either party after 45 days prior written notice.

Fennec also has the right to terminate the OHSU Agreement at any time upon 60 days prior written notice and payment of all fees due to OHSU under the OHSU Agreement.

Securities Class Action Suits

Securities Class Action Suit

Fennec Pharmaceuticals Inc., et al.

12 unchanged sentences

District Court Judge adopted the Magistrate Judge’s order and recommendation and entered an order and judgment dismissing the amended complaint with prejudice.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

On March 30, 2022, lead plaintiff filed a motion for post judgment relief, seeking leave to file a second amended complaint.

1 unchanged sentence

Defendants filed an opposition to plaintiff’s motion for post judgment relief on April 20, 2022.

On May 4, 2022, lead plaintiff submitted a reply in support of his motion.

On May 4, 2022,

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

lead plaintiff submitted a reply in support of his motion.

On September 27, 2022, defendants filed a request for judicial notice regarding the FDA’s press release announcing that it has approved PEDMARK ® .

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On October 29, 2021, Hope Medical Enterprises, Inc.

(“Hope”) filed two petitions for inter partes review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO.

In its petitions, Hope seeks to invalidate U.S.

10,596,190 (“US ‘190 Patent”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using our PEDMARK ® product, and our wholly owned U.S.

10,792,363 (“US ’363 Patent”), which relates to an anhydrous form of STS and its method of manufacture, which is the active pharmaceutical ingredient in our PEDMARK ® product.

The US ‘190 Patent was issued on March 24, 2020.

The US ‘363 Patent was issued on October 6, 2020.

(“Hope”) filed a Petition for inter partes review (IPR2022-00123) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO to invalidate U.S.

10,596,190 (the “‘190 Patent”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using PEDMARK ® .

The ‘190 Patent was issued on March 24, 2020.

On May 9, 2022, the PTAB granted Hope’s Petition to Institute the IPR against the ‘190 Patent.

On August 12, 2022, we filed a Motion to Amend the single claim of the ‘190 Patent in the IPR to focus on the treatment of medulloblastoma.

On December 5, 2022, we filed a Revised Motion to Amend the single claim of the ‘190 Patent, maintaining the focus on the

On August 12, 2022, a Motion to Amend the single claim of the ‘190 Patent was filed in the IPR to focus on the treatment of medulloblastoma.

On December 5, 2022, a Revised Motion to Amend the single claim of the ‘190 Patent was filed in the IPR, maintaining the focus on the treatment of medulloblastoma.

On April 18, 2023, the PTAB issued a final written decision denying the Motion to Amend the claim of the ‘190 Patent, and invalidating the only claim of the‘190 Patent.

The final written decision became effective June 20, 2023.

The ‘190 Patent was previously listed in the United States Approved Drug Products with Therapeutic Equivalence Evaluations (also known as the “Orange Book”).

In light of PTAB’s final written decision on the invalidity of the ‘190 Patent, we requested that the FDA remove the ’190 Patent from the Orange Book.

Two United States patent applications claiming priority through the ‘190 Patent remain pending at the United States Patent and Trademark Office (“USPTO”).

Fennec Pharmaceuticals Inc.

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dollars and shares in thousands, except per share information)

treatment of medulloblastoma.

On April 18, 2023, the PTAB issued a final written decision against the only claim of the‘190 patent..

We have the opportunity to request reconsideration of the PTAB’s final written decision until May 18, 2023, and the opportunity to file an appeal of the PTAB’s final written decision with the United States Court of Appeals for the Federal Circuit until June 20, 2023.

On October 29, 2021, Hope Medical Enterprises, Inc.

(“Hope”) filed a Petition for inter partes review (IPR2022-00125) to invalidate our wholly owned U.S.

10,792,363 (the “’363 Patent”), which relates to an anhydrous form of STS and its method of manufacture, which is the active pharmaceutical ingredient in the PEDMARK ® product.

The ‘363 Patent was issued on October 6, 2020.

In May 2022, the PTAB granted Hope’s Petition to Institute the IPR against the ‘363 patent.

During the ‘363 IPR, we disclaimed the patent claims directed to the anhydrous morphic form of STS and continued with claims directed to its method of manufacture.

Because the remaining claims in the ‘363 patent are directed to a method of manufacture, the ‘363 patent is not eligible for listing in the U.S.

FDA’s Approved Drug Products with Therapeutic Equivalence Evaluations (commonly referred to as the “Orange Book”).

Because the remaining claims in the ‘363 patent are directed to a method of manufacture, the ‘363 patent is not eligible for listing in the Orange Book.

On December 14, 2022, we filed a Revised Motion to Amend the remaining claims in the ‘363 Patent.

In April 2023, the PTAB extended the time for a decision on the ‘363 Patent IPR up to an additional 6 months, or November 2023, after which the decision can be reconsidered and/or appealed by the losing party.

In addition to the ‘190 Patent, the USPTO has now granted three additional U.S.

The USPTO has now granted three additional U.S.

patents that cover the PEDMARK ® formulation, each of which have been listed in the U.S.

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11,510,984 (issued November 29, 2022), and U.S.

11,617,793 (issued April 4, 2023)).We plan to vigorously defend our intellectual property rights to PEDMARK®.

11,617,794 (issued April 4, 2023)), and additional United States patent applications from this family remain pending at the USPTO.

We plan to vigorously defend our intellectual property rights to PEDMARK ® .

An invalidation of our patents covering PEDMARK ® could have a material adverse effect on our ability to protect our rights in PEDMARK ® beyond periods of marketing exclusivity for PEDMARK ® in the United States under Orphan Drug Designation.

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218028) for a generic version of PEDMARK ® (sodium thiosulfate solution) that contains Paragraph IV Certifications on two of our patents covering PEDMARK ® :

the OHSU licensed US ‘190 Patent, expiration date January 2038;

and our US 11,291,728 Patent, expiration date July 2039.

On January 6, 2023, we received a letter dated January 5, 2023, notifying us that CIPLA submitted to the FDA a Paragraph IV Certification on our newly issued US 11,510,984 Patent.

the OHSU licensed ‘190 Patent, expiration date January 2038;

and our US 11,291,728 Patent (the “’728 Patent”), expiration date July 2039.

On January 6, 2023, we received a letter dated January 5, 2023, notifying us that CIPLA submitted to the FDA a Paragraph IV Certification on our newly issued US 11,510,984 Patent (the “’984 Patent”).

These patents are listed in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, for PEDMARK ® .

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On April 20, 2023, we filed an Amended Complaint to only assert infringement of the ‘728 patent and the ‘984 Patent.

On April 4, 2023, we were granted US 11,617,793 Patent (the “’793 Patent”) covering the formulation of the PEDMARK ® product, which was listed in the Orange Book on or around April 17, 2023, and has an expiration date of July 2039.

On May 11, 2023, we received written notice of CIPLA’s Paragraph IV Certification as to the ’793 Patent, which was dated May 10, 2023, along with an enclosed statement of alleged factual and legal bases for stating that the ’793 Patent is invalid, unenforceable, and/or will not be infringed by CIPLA’s ANDA Product.

On July 27, 2023, we filed a Second Amended Complaint to assert the ‘793 Patent.

The suit is ongoing.

In Europe, we plan to pursue approval of PEDMARK® under European Market Exclusivity for Pediatric Use (“PUMA”), which would allow for 10 years of market exclusivity in Europe upon PUMA approval.

PEDMARQSI (EU Brand name for PEDMARK) received European Commission approval in June 2023 and was granted 10 years of market exclusivity in Europe under Pediatric Use (“PUMA”).

Fennec Pharmaceuticals Inc.

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The Office Service Agreement commenced on January 27, 2020, and terminated on July 31, 2020, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination.

The Company’s operations may be affected by the ongoing COVID-19 pandemic.

The ultimate disruption that may be caused by the outbreak is uncertain;

however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows.

Possible effects may include, but are not limited to, disruption to the Company’s product launch which includes the ability of sales reps to communicate with oncologists, absenteeism in the Company’s labor workforce, unavailability of products and supplies used in operations, and a decline in value of the Company’s assets, including inventories, property and equipment, and marketable securities.

On August 1, 2022, the Company entered into the SPA with the Investor in connection with the issuance of up to $ 45,000 of Notes, issuable in multiple tranches.

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The warrants are exercisable at a price per share of $ 8.11 and respectively, and both have a maturity date of August 19, 2027.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 12.5 % as of March 31, 2023).

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 12.75 % at June 30, 2023 and 12 % as of December 31, 2022).

Cash interest is due on the first business day of each calendar quarter (“Interest Date”).

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Any accrued PIK interest shall remain outstanding and be payable on each Interest Date and be added to the outstanding principal amount.

The Company has accrued $ 0.48 in PIK interest and has classified the PIK interest in long-term liabilities.

The Company has accrued $ 0.71 million in PIK interest and has classified the PIK interest in long-term liabilities.

The Notes are convertible into fully paid, non-assessable shares of the Company’s common shares at any point after their issuance dates and before the maturity date.

Any amount of the Notes may be converted into the Company’s common shares so long as it does not create partial shares.

Any amount of the Notes may be converted into the Company’s common

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

shares so long as it does not create partial shares.

The conversion rate is determined by dividing the conversion amount by the conversion price.

Provisions of the PSA create legal, valid and enforceable liens on, and security interests in, all of the Company’s and each of its subsidiaries assets.

Aggregate annual payments due on the SPA as of March 31, 2023 are as follows (in thousands):

Aggregate annual payments due on the SPA as of June 30, 2023 are as follows (in thousands):

Years Ending December 31,

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Subsequent Events

Management has evaluated subsequent events through the date of this filing and concluded there are no events of significance which require disclosure.

On August 3, Fennec announced the appointment of Adrian Haigh as Chief Operating Officer of Fennec.

Further, with Adrian’s appointment he will be stepping down from Fennec’s board.

Adrian had been a board member of Fennec since 2014 and recently retired from PTC Therapeutics where his last role was Senior Vice President and Head of International.

Previously, Mr.

Haigh served as Chief Operating Officer at Gentium GmbH where he built and managed the company’s commercial and medical affairs organization and was also responsible for business development, playing a pivotal role in the sale of Gentium to Jazz Pharmaceuticals for $1 billion.

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 1. Financial Statements