What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-05-14 · 229 added, 147 removed, 501 unchanged (43% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

March 31, 2024

March 31, 2023

June 30, 2024

December 31, 2023

Current assets

7 unchanged sentences

Total non-current assets

Liabilities and stockholders’ equity/(deficit)

Liabilities and stockholders’ deficit

Current liabilities:

10 unchanged sentences

Commitments and contingencies (Note 6)

Stockholders’ equity/(deficit):

Stockholders’ deficit:

Common stock, no par value;

4 unchanged sentences

Accumulated other comprehensive income

Total stockholders’ equity/(deficit)

Total liabilities and stockholders’ equity/(deficit)

Total stockholders’ deficit

Total liabilities and stockholders’ 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

7 unchanged sentences

Total operating expenses

Net income/(loss) from operations

(Loss)/income from operations

Other (expense)/income

5 unchanged sentences

Total other expense

Net income/(loss) from operations

Basic net income/(loss) per common share

Diluted net income/(loss) per common share

Net (loss)/income

Basic net (loss)/income per common share

Diluted net (loss)/income per common share

Weighted-average number of common shares outstanding basic

3 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

Three Months Ended March 31, 2024 and 2023

Three and Six Months Ended June 30, 2024, and 2023

dollars and shares in thousands)

1 unchanged sentence

Stockholders’

Equity (deficit)

Balance at December 31, 2023

3 unchanged sentences

Balance at March 31, 2024

Stock-based compensation - employees

Stock option exercise

Restricted stock release

Balance at June 30, 2024

Comprehensive

Stockholders’

Equity (deficit)

Balance at December 31, 2022

3 unchanged sentences

Balance at March 31, 2023

Stock-based compensation - employees

Stock option exercise

Restricted stock release

Balance at June 30, 2023

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 provided by (used in):

4 unchanged sentences

Amortization of debt discount

Gain on securities

Amortization of debt access fees

17 unchanged sentences

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:

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.

Notes to the Consolidated Financial Statements

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Nature of Business and Liquidity

Fennec Pharmaceuticals Inc.

(“Fennec,” “the Company,” “we,” “us,” or “our”) was originally formed as a British Columbia corporation under the name Adherex Technologies Inc.

Nature of Business and Going Concern

Fennec Pharmaceuticals Inc., a corporation existing under the laws of British Columbia (“Fennec,” the “Company,” “we,” “us,” or “our”), was originally formed under the name Adherex Technologies Inc.

and subsequently changed its name on September 3, 2014.

Fennec, together with its wholly owned subsidiaries Oxiquant, Inc.

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

(“CBI”), a Canadian corporation and Fennec Pharmaceuticals (EU) Limited, an Irish Private Company Limited by Shares (“Fennec Limited”), collectively referred to herein as the “Company,” is a biopharmaceutical company with one U.S.

Food and Drug Administration (“FDA”) 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.

With the exception of Fennec Pharmaceuticals, Inc., and Fennec Limited, all subsidiaries are inactive.

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:

Oxiquant, Inc.

(“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.

and Fennec Pharmaceuticals (EU) 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, 2024, the Company earned net income from operations of $ 13,743 .

On March 31, 2024, it had an accumulated deficit of $ 206,408 and had experienced positive cash flows from operating activities in the amount of $ 39,047 for the period ended March 31, 2024.

During the three and six-month period ended June 30, 2024, the Company earned a (loss)/income from operations of $( 5,039 ) and $ 8,704 , respectively.

At June 30, 2024, it had an accumulated deficit of $ 211,961 and had experienced positive cash flows from operating activities during the six months ended June 30, 2024, in the amount of $ 30,660 .

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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A commitment fee of 2.0 % of the Notes was payable under the SPA, which was paid by the Company issuing the Investor warrants to purchase 110,996 of the Company’s common shares (one half issued at the first closing and the other half issued at the second closing).The warrants are exercisable at a price per share of $ 8.11 and have a term of five years from the date of the grant.

On December 4, 2023, the Company closed a third tranche under the SPA in the amount of $ 5,000,000 and issued the Investor a Note in the same amount (the “Third Closing Note”).

and the Third Closing Note is convertible at a price equal to $ 7.89 per share, calculated as a 20 % premium of the 5 -day volume weighted average price of the Company’s common shares as traded on the Nasdaq Capital Market immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK ® .

On December 4, 2023, the Company closed a third tranche under the SPA in the amount of $ 5,000,000 and issued the Investor a Note in the same amount (the “Third Closing Note”) and the Third Closing Note is convertible at a price equal to $ 7.89 per share, calculated as a 20 % premium of the 5 -day volume weighted average price of the Company’s common shares as traded on the Nasdaq Capital Market immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK®.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Also on December 4, 2023, the Company entered into a First Amendment to the Securities Purchase Agreement (the “SPA Amendment”) with the Investor, which, among other things, extends the period that the Company may draw the remaining $ 15,000,000 under the SPA from December 31, 2023, to December 31, 2024.

2 unchanged sentences

The licensing agreement provided Fennec with approximately $ 43.2 million up front and may provide Fennec with up to approximately $ 230 million in milestone and royalty payments in the future.

On July 26, 2024, Norgine and Fennec amended the exclusive licensing agreement.

The amended agreement maintains all principal payment terms with the primary addition of Norgine assuming responsibility for packaging and labeling of PEDMARQSI.

The Company believes current funds provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts of PEDMARK®, for at least the next twelve months.

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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.

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, 2023.

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 condensed 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, 2023.

The Company’s accounting policies are consistent with those presented in the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023.

3 unchanged sentences

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 revenue recognition, 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 revenue recognition, allowance against trade receivables, measurement of stock-based compensation and estimates of the Company’s capital requirements over the next twelve months from the date of issuance of the consolidated financial statements.

Actual results could differ from those estimates..

2 unchanged sentences

The Company views its operations and manages its business in one operating segment.

principally in the United States.

As of March 31, 2024, the Company had an operating lease in Ireland.

This is the only asset located outside of the United States.

As of June 30, 2024, the Company had an operating lease in Ireland which is scheduled to terminate on January 31, 2025.

This is the only asset currently located outside of the United States.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Stock-Based Compensation

24 unchanged sentences

Payments made by the customers may include non-refundable upfront fees, payments based upon the achievement of defined milestones, and royalties on sales of product.

If a license to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to the license as revenue upon transfer of control of the license.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

transfer of control of the license.

All other promised goods or services in the agreement are evaluated to determine if they are distinct.

10 unchanged sentences

As the majority of the Company's contracts are short-term in nature, sales commissions are generally expensed when incurred as the amortization period would have been less than one year.

These costs are recorded within selling and marketing expense in the consolidated statements of operations.

These costs are recorded within selling and marketing expenses in the condensed statements of operations.

For contracts that extend beyond one year, the incremental expense recognition matches the recognition of related revenue.

3 unchanged sentences

PEDMARK® is the Company’s first commercial product.

These specialty distributors 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.

Certain specialty distributors of the Company subsequently resell the Company’s products to health care providers and patients.

In addition to distribution agreements with these 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.

2 unchanged sentences

These reserves are based on the amounts to be claimed on the related sales and are classified as a contra-asset or a current liability.

Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, forecasted customer buying and payment patterns, and the Company’s historical experience that will develop over time as PEDMARK ® is the Company’s first commercial product.

Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of its contracts.

The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it

is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of its contracts.

The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.

Actual amounts of consideration ultimately received may differ from the Company’s estimates.

5 unchanged sentences

Discounts for Prompt Payment:

The Customers receive a discount of 0.65 % for prompt payment.

Customers typically receive a small discount for prompt payment.

The Company expects its customers will earn 100 % of their prompt payment discounts and, therefore, the Company deducts the full amount of these discounts from total product sales when revenues are recognized.

2 unchanged sentences

The allowance for rebates is based on statutory or contractual discount rates and expected utilization.

The Company’s estimates for the expected utilization of rebates are based on customer and payer data received from the specialty distributors and historical utilization rates that will develop over time as PEDMARK ® is the Company’s first commercial product.

The Company’s estimates for the expected utilization of rebates are based on customer and payor data received from the specialty distributors and historical utilization rates that will develop over time, as PEDMARK ® is the Company’s first commercial product.

Rebates are generally invoiced by the payor and paid in arrears, such that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s shipments to the customers, plus an accrual balance for known prior quarters’ unpaid rebates.

11 unchanged sentences

These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale.

The following table summarizes net product revenues for PEDMARK ® in the United States earned in the three months ended March 31, 2024 and 2023, respectively:

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The following table summarizes net product revenues for PEDMARK ® earned during the three and six months ended June 30, 2024 and 2023, respectively:

Three Months Ended

Six Months Ended

Product revenues:

2 unchanged sentences

Net product revenues

For the three months ended March 31, 2024 and 2023, the Company had three distributors that each represented more than 10% of net sales.

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, 2024, was as follows:

Rebates, Customer

For the three and six months ended June 30, 2024 and 2023, the Company had three distributors that each represented more than 10% of net sales.

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, 2024, was as follows:

Rebates, Returns, Customer

Discounts for

7 unchanged sentences

Balance at March 31, 2024

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.

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at June 30, 2024

Trade Receivables

2 unchanged sentences

The Company determines its allowance methodology by pooling receivable balances at the customer level.

The Company considers various factors, including loss history, individual credit risk associated with each customer, and the current and future condition of the general economy.

The Company considers various factors, including loss history, individual credit risk associated to each customer, and the current and future condition of the general economy.

These credit risk factors are monitored on a quarterly basis and updated as necessary.

1 unchanged sentence

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

Sales abroad to non-specialty distributors have the potential for losses.

It is the policy of the Company to use a sliding scale to establish a reserve of its gross sales to non-specialty distributors, based on aging category.

The Company had a balance in allowance for credit losses of $ 1,103 as of March 31, 2024.

Sales abroad to non-specialty distributors have greater potential for losses.

It is the policy of the Company to use a sliding scale to establish a reserve of its gross sales to non-specialty

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

distributors, based on aging category.

The Company had a balance in allowance for credit losses of $ 2,991 as of June 30, 2024.

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 royalty payments ( 1 % of net sales) the Company is required to pay to Oregon Health & Science University (“OHSU”) on all net sales of PEDMARK ® .

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 the Company is required to pay to Oregon Health & Science University (“OHSU”) on all net sales of PEDMARK ® .

Cost of products sold also consists of shipping and other third-party logistics and distribution costs for PEDMARK ® .

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 product launch in the fourth quarter of 2022.

As of March 31, 2024, the Company capitalized approximately $ 2,064 of costs as inventory on the condensed consolidated balance sheet.

Of the items capitalized, $ 774 was capitalized as work in process and raw materials, $ 1,290 was capitalized into finished goods, $ 550 of that being reclassified to cost of product sold.

As of June 30, 2024, the Company capitalized approximately $ 2.3 million of costs as inventory on the condensed consolidated balance sheet.

Of the items capitalized, $ 0.4 million was capitalized as raw materials, $ 0.5 million was capitalized as work in process, $ 1.3 million was capitalized into finished goods, and $ 1.2 million of that being reclassified to cost of product sold.

Cash and Cash Equivalents

1 unchanged sentence

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.

As of March 31, 2024, the Company had $ 51,184 in cash, savings and money market accounts ($ 13,269 at December 31, 2023).

As of March 31, 2024, the Company held $ 1,314 in cash of which $ 363 (as presented in U.S.

dollars) was held in foreign currencies ($ 570 at December 31, 2023 as presented in U.S.

As of March 31, 2024, the Company held $ 49,870 in money market investments.

Money market investments typically have minimal risks.

While the Company has not experienced any loss or write-down of its money market investments, the amounts it holds in money market accounts are substantially above the $ 250 amount insured by the FDIC and may lose value.

At June 30, 2024, the Company had $ 43.0 million in cash, savings and money market accounts ($ 13.3 million at December 31, 2023).

While the Company has not experienced any loss or write-down of its money market investments, the amounts it holds in money market accounts are substantially above the $ 0.25 million amount insured by the FDIC and may lose value.

Financial Instruments

Financial instruments recognized on the balance sheets at March 31, 2024 and December 31, 2023 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, 2024 and December 31, 2023 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.

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

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Common Shares and Warrants

As of March 31, 2024, the Company has 0.2 million warrants with a weighted average strike price of $ 7.71 outstanding to purchase common shares that have a weighted average life of 3.80 years.

As of June 30, 2024, the Company has 0.2 million warrants with a weighted average strike price of $ 7.71 outstanding to purchase common shares that have a weighted average life of 3.55 years.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Research and Development Costs and Investment Tax Credits

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The Company also sells to a select group of global distributors.

distributors are established companies and although the Company regards credit losses with these distributors to be remote, it does recognize the potential for credit losses with this group.

These global distributors are established companies and although the Company regards credit losses with these distributors to be remote, it does recognize the potential for credit losses with this group.

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.

1 unchanged sentence

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, 2024, we maintained a full valuation allowance against our deferred tax assets.

As of June 30, 2024, 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.

5 unchanged sentences

Basic net income/(loss) per share is computed by dividing net loss by the weighted average number of common shares outstanding during the year.

Diluted net income/(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 116 of our common shares, restricted share units to purchase 214 of our common shares, convertible notes convertible into 2,968 of our common shares and options to purchase 1,702 of our common shares at March 31, 2024, were not included in earnings per share.

Such warrants, options and convertible notes would have an antidilutive effect.

In 2023, warrants to purchase 150 of our common shares, convertible notes convertible into 3,127 of our common shares and options to purchase 5,032 common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

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

Accordingly, warrants to purchase 150 of our common shares, restricted share units to purchase 445 of our common shares and options to purchase 5,228 of our common shares at June 30, 2024, were not included in earnings per share.

Such warrants, options and convertible notes

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

would have an antidilutive effect.

In 2023, warrants to purchase 150 of our common shares and options to purchase 4,887 common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued amended guidance for improvements to reportable segment disclosures (ASU) No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” that requires a public entity disclose significant segment expenses regularly reviewed by the chief operating decision maker (CODM), including public entities with a single reportable segment.

The amended guidance is effective for fiscal years beginning January 1, 2024 and interim periods beginning January 1, 2025 and should be applied on a retrospective basis.

Early adoption is permitted.

The Company is currently evaluating the effect the adoption of this ASU will have on its consolidated financial statements.

In December 2023, the FASB issued Accounting Standards Update (ASU) No.

2023-09, “Income Taxes (Topic 740):

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Scope Application of Profits Interest and Similar Awards, which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of FASB Accounting Standards Codification (FASB ASC) 718, Compensation-Stock Compensation.

This guidance will be effective for the annual periods beginning the year ended December 31, 2025.

The Company believes that ASU 2024-01 will not have a material impact on the Company’s condensed consolidated financial statements.

Income/(loss) per Share

Income/(loss) per common share is presented under two formats:

basic income/(loss) per common share and diluted income/(loss) per common share.

Basic income/(loss) per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Net Income/(Loss) Per Share

Net income/(loss) per common share is presented under two formats:

basic net income/(loss) per common share and diluted income/(loss) per common share.

Basic net income/(loss) per common share is computed by dividing net income/(loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period.

Diluted income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding during the period, plus the potentially dilutive impact of common shares equivalents (e.g.

convertible debt, stock options and warrants).

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

Dilutive common share equivalents consist of the incremental common shares issuable upon exercise of convertible debt, restricted stock units, stock options and warrants.

The following table sets forth the computation of basic and diluted net income/(loss) per share (in thousands except per share data):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income/(loss)

6 unchanged sentences

Weighted-average common shares, diluted

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Net income/(loss) per share, basic and diluted

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

Three Months Ended March 31,

The following common stock equivalents, outstanding convertible debt, options and warrants were excluded from the computation of diluted net income/(loss) per share for the periods presented because including them would have had an anti-dilutive effect:

Diluted Earnings Per Share

Six Months Ended June 30,

Options to purchase common shares

6 unchanged sentences

Warrants to Purchase Common Stock

During the three months ended March 31, 2024, and 2023, there were no warrants issued or exercised.

Outstanding warrants have a weighted average life of 3.80 years on March 31, 2024.

The following tables detail the Company’s warrant activity for the three months ended March 31, 2024, and 2023, respectively:

During the three and six months ended June 30, 2024 and 2023, there were no warrants issued or exercised .

Outstanding warrants have a weighted average life of 3.55 years on June 30, 2024.

The following tables detail the Company’s warrant activity for the three and six months ended June 30, 2024, and 2023, respectively:

Common Shares

6 unchanged sentences

Outstanding March 31, 2024

Outstanding June 30, 2024

Common Shares

6 unchanged sentences

Outstanding March 31, 2023

Outstanding June 30, 2023

Equity Incentive Plan

1 unchanged sentence

The Compensation Committee designates eligible participants to be included under the Plan and approves the number of equity instruments to be granted from time to time under the Plan.

Currently, the maximum number of equity instruments issuable under the Plan, together with the Company’s prior stock option plan, is twenty-five percent ( 25 %) of the total number of issued and outstanding common shares.

Based upon shares outstanding as of March 31, 2024, a maximum of 6,776 shares of common stock are authorized for issuance pursuant to stock options or other equity awards granted under the Plan.

Currently, the maximum number of equity instruments

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

issuable under the Plan, together with the Company’s prior stock option plan, is twenty-five percent ( 25 %) of the total number of issued and outstanding common shares.

Based upon the current shares outstanding, a maximum of 6,825 shares of common stock are authorized for issuance pursuant to stock options or other equity awards granted under the Plan.

For all options issued under the Plan, the exercise price is the fair value of the underlying shares on the date of grant.

2 unchanged sentences

dollar grants.

The table below outlines recognized employee expense from equity awards for the three-month period ended March 31, 2024, and 2023.

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, 2024 and 2023.

Three Months Ended

Six Months Ended

Employee options expense recognized

1 unchanged sentence

Stock Option Activity

The following is a summary of option activity for the three months ended March 31, 2024, and 2023.

The following is a summary of option activity for the three and six months ended June 30, 2024 and 2023.

Weighted-Average

Options (thousands)

Exercise Price

1 unchanged sentence

Outstanding at March 31, 2024

Outstanding at June 30, 2024

Weighted-Average

Options (thousands)

Exercise Price

1 unchanged sentence

Outstanding at March 31, 2023

Of the 4,768 options granted and outstanding at March 31, 2024, 3,857 are fully vested and exercisable.

Outstanding at June 30, 2023

Of the 5,228 options granted and outstanding at June 30, 2024, 3,897 are fully vested and exercisable.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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, 2024

June 30, 2024

Expected dividend

4 unchanged sentences

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, 2024, and 2023.

During the three months ended March 31, 2024, 17 RSUs were awarded, 21 were released from restriction and none were forfeited.

For the same period in 2023, 264 RSUs were awarded, 1 was released from restriction and none were forfeited.

The Company recognized $ 0.3 million in RSU expense for the three months ended March 31, 2024, and $ 0.03 million for the same period in 2023.

Standard vesting of RSUs is over three years with 1/3 vesting on the first anniversary date of the grant and then 1/24 on the last day of each subsequent month.

The Compensation Committee may also award RSUs with alternative vesting.

Number of Restricted

RSUs Current Year

Share Units (thousands)

The following is a summary of RSU activity for the three and six months ended June 30, 2024 and 2023.

During the three and six months ended June 30, 2024, there were 21 and 68 RSUs released from restriction, respectively.

For the same period in 2023, there were 1 and 17 RSUs forfeited by departing employees.

Vesting of RSUs vary from one to three years .

Restricted Share

RSUs Current Periods

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Number of Restricted

RSUs Past Year

Share Units (thousands)

Outstanding at June 30, 2024

Restricted Share

RSUs Past Periods

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 RSUs issued was estimated using the share price on the date of the award multiplied by the number of common 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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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.

Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement.

The Company measures the fair value of the Processa Pharmaceuticals, Inc (“Processa”) common shares held by the Company by taking into consideration valuations obtained from public financial markets.

The Company uses Yahoo Finance to obtain share price data and Oanda for foreign currency pricing services to estimate fair value.

These inputs include reported trades of and broker- dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs.

As of March 31, 2024, the Company had financial assets valued based on Level 1 inputs consisting of cash and cash equivalents and had financial assets based on Level 2 inputs consisting of Processa common shares.

During the three months ended March 31, 2024, the Company did not have any transfers of financial assets between Levels 1 and 2.

Fair Value Measurement at March 31, 2024 and December 31, 2023

Fair Value Measurement at June 30, 2024 and December 31, 2023

(in thousands)

6 unchanged sentences

Processa common shares

The Company held approximately $ 1,314 in cash as of March 31, 2024, of which approximately $ 363 was held in foreign currencies (translated into U.S.

As of December 31, 2023, the Company held approximately $ 1,340 in cash of which approximately $ 570 was in foreign currencies (translated into U.S.

The Company holds 41 unrestricted common shares of Processa (NASDAQ:PCSA) .

The Company held approximately $ 42.4 million in money market accounts as of June 30, 2024.

As of December 31, 2023, the Company held approximately $ 11.9 million in money market accounts.

The Company holds 41 unrestricted common shares of Processa Pharmaceuticals, Inc.

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

Commitments and Contingencies

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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, 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.

2 unchanged sentences

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.

PEDMARK® 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.

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.

The Company had accrued approximately $ 77 ( 1 % net sales) in royalty expense to OHSU for the period ended March 31, 2024.

Total amount accrued in royalty expense to OHSU as of March 31, 2024 was $ 314 .

The Company had accrued approximately $ 162 in royalty expense to OHSU for the six-month period ended June 30, 2024.

Total amount accrued in royalty expense to OHSU as of June 30, 2024 was $ 399 .

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Hope Medical Enterprises, Inc.

33 unchanged sentences

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

licensed ‘190 Patent, expiration date January 2038;

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

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

4 unchanged sentences

In addition to the 30 -month stay, because we have received Orphan Drug Exclusivity, the FDA may not approve CIPLA’s ANDA for at least 7 years from PEDMARK®’s FDA approval date of September 20, 2022.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

On January 10, 2023, we filed suit against the CIPLA entities in the United States District Court for the District of New Jersey (Case No.

5 unchanged sentences

CIPLA filed an Answer to the Second Amended Complaint on August 31, 2023.

On April 23, 2024, we were granted US 11,964,018 Patent (the “’018 Patent) covering a method of using our PEDMARK® product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around May 8, 2024, and has an expiration date of July 2039.

On May 28, 2024, we were granted US 11,992,530 Patent (the “’530 Patent”) covering a method of using our PEDMARK® product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 19, 2024, and has an expiration date of July 2039.

On June 4, 2024, we were granted US 11,998,604 Patent (the “’604 Patent”) covering a method of using our PEDMARK® product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 21, 2024, and has an expiration date of July 2039.

On June 13, 2024, we filed a Motion for Leave to File a Third Amended Complaint to focus the ANDA litigation against CIPLA on the ’018 Patent and the ‘793 Patent only.

The non-asserted patents remain listed in the Orange Book.

On July 22, 2024, CIPLA filed a response indicating that they do not oppose our Motion for Leave to File a Third Amended Complaint.

On July 30, 2024, the court granted us leave to file the Third Amended Complaint.

On August 1, 2024, we received written notice of CIPLA’s Paragraph IV Certification on the ’530 Patent and ’604 Patent.

The suit is ongoing.

5 unchanged sentences

Andrade’s (Chief Financial Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to six months of salary (currently $ 220 ).

In the event of termination of Mr.

Haigh’s (Chief Operating Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to three months of salary (currently $112 as translated to US dollars at March 31, 2024).

The Company has an operating lease in Research Triangle Park, North Carolina utilizing a small space within a commercial building.

8 unchanged sentences

The Company was required to pay a security deposit of $ 5 , which is the equivalent of two months’ rent.

The Second Office Service Agreement commenced on August 1, 2023 and terminates on January 31,

2025, 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.

This lease will terminate on January 31, 2025.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

The Second Office Service Agreement commenced on August 1, 2023 and terminates on January 31, 2025, 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 Second Office Service Agreement does not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the operating lease liability.

2 unchanged sentences

The depreciable lives of operating leases and leasehold improvements are limited by the expected lease term.

March 31, 2024

June 30, 2024

Remaining lease terms (in months)

11 unchanged sentences

Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits.

As of March 31, 2024, the Company does not offer matching contributions.

As of June 30, 2024, the Company does not offer matching contributions.

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 (see Note 1).

4 unchanged sentences

Subsequent to the funding of the Second Closing Note, and before December 31, 2023, the Company may draw up to $ 20,000 of additional financing under the SPA, in one or more tranches of $ 10,000 upon mutual agreement of the Company

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

and the Investor (the “Subsequent Closing Notes”).

2 unchanged sentences

The warrants are exercisable at a price per share of $ 8.11 and have a term of five years from the date of the grant.

On December 4, 2023, the Company closed a third tranche under the SPA in the amount of $ 5,000,000 and issued the Investor a Note in the same amount (the “Third Closing Note”).

and the Third Closing Note is convertible at a price equal to $ 7.89 per share, which price was calculated on the same basis as the Second Closing Note.

Also on December 4, 2023, the Company entered into the SPA Amendment, which, among other things, extends the period that the Company may draw the remaining $ 15,000,000 under the SPA from December 31, 2023, to December 31, 2024.

Subsequent draws are subject to mutual agreement of the Company and the Investor and will be represented by Notes that will also be convertible at a price equal to $ 7.89 per share.

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 11 % as of March 31, 2024).

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 13 % at June 30, 2024 and 13 % as of December 31, 2023).

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

Payment-in-kind (“PIK”) interest will commence on funding date and accrue at a rate of 3.5 % per annum.

Payment-inkind (“PIK”) interest will commence on funding date and accrue at a rate of 3.5 % per annum.

PIK interest will stop accruing on August 24, 2024.

5 unchanged sentences

Provisions of the SPA 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 under the SPA as of December 31, 2023, are as follows (in thousands):

Aggregate annual payments due on the SPA as of June 30, 2024 are as follows (in thousands):

Years Ending December 31,

6 unchanged sentences

The SPA facility is secured by all of the Company’s assets, including all capital stock held by the Company.

Debt issuance costs of $ 175 were paid in cash for legal fees and to the Investor in 2022 and warrants valued at $ 441 were granted the Investor to secure access to the SPA.

Debt issuance costs of $ 175 were paid in cash for legal fees and to the Investor in 2022 and warrants valued at $ 441 were granted to the Investor to secure access to the SPA.

These amounts were capitalized and are being amortized over the access period of the SPA.

Upon drawing tranche 1 and tranche 2, the Company recorded a debt discount of $ 314 , which was based on a pro-rata allocation of the issue costs to secure the SPA, reducing the capitalized amount by the same amount.

Upon drawing tranche 1 through 3, the Company recorded a debt discount of $ 314 , which was

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

based on a pro-rata allocation of the issue costs to secure the SPA, reducing the capitalized amount by the same amount.

The debt discount is being amortized over the life of the SPA.

3 unchanged sentences

entered into a License and Supply Agreement (the “Agreement”) with Norgine Pharma UK Limited (“Norgine”), pursuant to which Norgine is granted an exclusive license to commercialize the Company’s product PEDMARQSI® (known as PEDMARK® in the United States) for all human indications in the European Economic Area, Switzerland, the United Kingdom, Australia and New Zealand (collectively, the “Territory”).

On July 26, 2024, Norgine and Fennec amended the exclusive licensing agreement.

The amended agreement maintains all principal payment terms with the primary addition of Norgine assuming responsibility for packaging and labeling of PEDMARQSI.

Pursuant to the terms of the Agreement, Fennec shall receive the following payments from Norgine:

4 unchanged sentences

The term of the Agreement shall be automatically renewed for additional three-year periods unless either party provides the other party written notice of its intent not to renew the Agreement at least one year prior to the applicable termination date of the Agreement.

The Company evaluated the Norgine License Agreement under ASC 606 and concluded that Norgine represents a customer in the transaction.

The Company evaluated the Agreement under ASC 606 and concluded that Norgine represents a customer in the transaction.

There were two performance obligations:

10 unchanged sentences

Any consideration related to sales-based royalties will be recognized as revenue or deferred as part of the material right when the related sales occur.

For the three months ended March 31, 2024, the Company did not recognize any milestone or royalty revenue payments to from the Norgine sales of PEDMARQSI ® Agreement.

For the six months ended June 30, 2024, the Company did not recognize any milestone or royalty revenue payments from Norgine sales of PEDMARQSI ® pursuant to the Agreement.

In conjunction with entering into the Agreement, the Company paid approximately $ 1.7 million in incremental costs, which were capitalized and recorded within other non-current assets.

The Company amortizes the asset over the period of expected benefit using a systematic basis that reflects the pattern of transfer to the customer.

A portion that represents the license was recognized immediately and is recorded within selling and marketing expense in the consolidated statements of operations.

As of March 31, 2024, $ 1.0 million in incremental cost was capitalized.

The Company amortizes the asset over the period of

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

expected benefit using a systematic basis that reflects the pattern of transfer to the customer.

A portion that represents the license was recognized immediately and is recorded within selling and marketing expense in the condensed consolidated statements of operations.

As of June 30, 2024, $ 0.97 million in incremental cost was capitalized.

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 July 26, 2024, the Agreement with Norgine was amended and restated, pursuant to which Norgine assumed responsibility for packaging and labeling of PEDMARQSI for the Territory.

On August 5, 2024, the Company announced the appointment of Mr.

Jeff Hackman as its Chief Executive Officer (CEO) and a member of the Board of Directors, effective on or about August 16, 2024.

Jeff will guide Fennec’s strategic direction for operational success in the expansion of PEDMARK® use in community oncology and the adolescent and young adult (AYA) population.

Raykov will remain on Fennec’s Board of Directors and will no longer serve as CEO upon Jeff Hackman’s appointment.

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