What changed in this filing

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Item 1. Financial Statements

2024-11-08 compared with 2024-08-13 · 230 added, 167 removed, 563 unchanged (41% of the section changed)

3 unchanged sentences

Dollars and shares in thousands)

June 30, 2024

December 31, 2023

September 30,

Current assets

12 unchanged sentences

Operating lease liability - current

Contract liability - Norgine

Contract liability - current

Total current liabilities

Long-term liabilities

Non-current liabilities

Debt discount

Contract liability - long-term

Total long-term liabilities

Total non-current liabilities

Total liabilities

8 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

Nine Months Ended

September 30,

Product sales, net

Licensing revenue

8 unchanged sentences

Other (expense)/income

Unrealized foreign exchange (loss)/gain

Realized foreign exchange (loss)/gain

Amortization expense

11 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

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

Three and Nine Months Ended September 30, 2024, and 2023

dollars and shares in thousands)

4 unchanged sentences

Stock-based compensation - employees

Stock option exercise

Restricted stock release

4 unchanged sentences

Balance at June 30, 2024

Stock-based compensation - employees

Stock option exercise

Restricted stock release

Balance at September 30, 2024

Comprehensive

3 unchanged sentences

Stock-based compensation - employees

Stock-based compensation - consultants

Stock option exercise

2 unchanged sentences

Stock-based compensation - employees

Stock-based compensation - consultants

Stock option exercise

1 unchanged sentence

Balance at June 30, 2023

Stock-based compensation - employees

Stock-based compensation - consultants

Stock option exercise

Restricted stock release

Balance at September 30, 2023

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

2 unchanged sentences

Dollars in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows provided by (used in):

2 unchanged sentences

Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:

Amortization of Norgine asset

Inventory reserve

Allowance for doubtful accounts

Amortization of debt discount

Gain on securities

Loss on securities

Amortization of Norgine asset

Amortization of debt access fees

Unrealized loss on securities

Stock-based compensation - employees

10 unchanged sentences

Cash paid for taxes on restricted share release

Deferred issuance costs

Deferred costs

Net cash (used in) / provided by financing activities

2 unchanged sentences

Cash and cash equivalents - End of period

Supplemental disclosures of cash flow information:

Non-cash investing and financing activities:

Capitalized lease asset

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

6 unchanged sentences

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.

Food and Drug Administration (“FDA”) approved and European Commission approved product, PEDMARK ® in the U.S.

and PEDMARQSI ® the European branded name for PEDMARK ® (collectively, “PEDMARK”), developed to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

The Company has four wholly owned subsidiaries:

2 unchanged sentences

(“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.

and Fennec Limited 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 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 .

During the three and nine-month period ended September 30, 2024, the Company earned a (loss)/income from operations of $( 5,202 ) and $ 3,502 respectively.

At September 30, 2024, it had an accumulated deficit of $ 217,696 and had experienced positive cash flows from operating activities during the nine months ended September 30, 2024, in the amount of $ 28,454 .

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”).

On August 19, 2022, the Company closed on the initial tranche of $ 5,000 (the “First Closing Note”) which has an Initial Conversion Price equal to $ 8.11 per share, which was calculated based on a 20 % premium of the 5 -day volume weighted average price of the Company’s common shares as traded on the Nasdaq Capital Market (the “VWAP”) immediately prior to the announcement of the SPA dated August 1, 2022.

In connection with the first closing, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $ 5,000 .

In connection with the closing of the First Closing Note, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $ 5,000 .

On September 23, 2022, the Company closed on the second tranche of the Note Financing in the amount of $ 20,000 (the “Second Closing Note”), which has an Initial Conversion Price equal to $ 7.89 per share, which was calculated based on a 20 % premium of the 5 -day VWAP immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK.

1 unchanged sentence

The Subsequent Closing Notes will be convertible at a price per share equal to $ 7.89 per share, which price is calculated on the same basis as for the Second Closing Note.

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®.

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 closing of the First Closing Note and the other half issued at the closing of the Second Closing Note).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 the third tranche of the Note Financing in the amount of $ 5,000 (the “Third Closing Note”) which is convertible at a price equal to $ 7.89 per share, calculated as a 20 % premium of the 5 -day VWAP immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK.

Fennec Pharmaceuticals Inc.

4 unchanged sentences

On March 17, 2024, the Company announced it had entered into an exclusive licensing agreement with Norgine Pharma UK Limited (“Norgine”) to commercialize PEDMARQSI ® (EU brand name for PEDMARK) in Europe, New Zealand and Australia.

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.

The licensing agreement provided Fennec with approximately $ 43,200 up front and may provide Fennec with up to approximately $ 230,000 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.

These financial statements do not reflect the potentially material adjustments in the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used, that would be necessary if the going concern assumption were not appropriate.

14 unchanged sentences

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

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

As of September 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.

14 unchanged sentences

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business.

The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs.

The Company makes a determination to capitalize inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs.

Capitalized costs of inventories mainly include third party manufacturing, logistics and distribution costs.

8 unchanged sentences

License Agreements

The Company generates revenue from license or similar agreements with pharmaceutical companies for the commercialization of our product.

The Company generates revenue from license or similar agreements with pharmaceutical companies for the commercialization of its product.

Such agreements may include the transfer of intellectual property rights in the form of licenses.

7 unchanged sentences

If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct.

Optional future services where any additional consideration paid to us reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations.

Optional future services where any additional consideration paid to the Company reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations.

If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as separate performance obligations.

7 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 expenses in the condensed statements of operations.

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

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

2 unchanged sentences

PEDMARK became commercially available on October 17, 2022.

PEDMARK® is the Company’s first commercial product.

PEDMARK is the Company’s first and only commercial product.

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

1 unchanged sentence

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.

Further, on March 17, 2024, the Company announced it had entered into an exclusive licensing agreement with Norgine to commercialize PEDMARQSI ® (EU brand name for PEDMARK) in Europe, New Zealand and Australia.

Product Sales Discounts and Allowances

The Company records revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established primarily from discounts, chargebacks, rebates, co-pay assistance, returns and other allowances that are offered within contracts between the Company and its customers, health care providers, payors and other indirect customers relating to the sales of its products.

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® and PEDMARQSI (European branded product name) is the Company’s first commercial product.

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

Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as current

Fennec Pharmaceuticals Inc.

1 unchanged sentence

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.

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 and PEDMARQSI ® (European branded product name) is the Company’s first and only 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.

11 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 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.

14 unchanged sentences

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:

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Product revenues:

2 unchanged sentences

Net product revenues

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

For the three and nine months ended September 30, 2024, the Company had one and four distributors that each represented more than 10% of net sales, respectively.

For the three and nine months ended September 30, 2023, the Company had two 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 nine months ended September 30, 2024, were as follows:

Rebates, Customer

Discounts for

12 unchanged sentences

Balance at June 30, 2024

Provision related to sales made in:

Current period

Prior periods

Payments and customer credits issued

Balance at September 30, 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 condensed consolidated balance sheets.

3 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 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.

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.

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 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

The Company considers various factors, including loss history,

Fennec Pharmaceuticals Inc.

1 unchanged sentence

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.

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.

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.

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

Sales to non-specialty distributors outside the United States 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 distributors, based on the aging category, in combination with management's specific review of each past due customer balance.

The Company had a balance in allowance for credit losses of $ 4,971 as of September 30, 2024.

Cost of Products Sold

4 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 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.

As of September 30, 2024, the Company capitalized approximately $ 1,125 of costs as inventory on the condensed consolidated balance sheet.

Of the items capitalized, $ 377 was capitalized as raw materials, $ 108 was capitalized as work in process, $ 640 was capitalized into finished goods.

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.

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.

At September 30, 2024, the Company had $ 40,320 in cash, savings and money market accounts ( 13,269 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 $ 250 amount insured by the FDIC and may lose value.

Financial Instruments

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.

Financial instruments recognized on the balance sheets at September 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.

6 unchanged sentences

The Company has chosen to avoid investments of a trading or speculative nature to preserve cash.

Common Shares and Warrants

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.

1 unchanged sentence

dollars and shares in thousands, except per share information)

Common Shares and Warrants

As of September 30, 2024, the Company has 150 warrants with a weighted average strike price of $ 7.71 outstanding to purchase common shares that have a weighted average life of 3.30 years.

Research and Development Costs and Investment Tax Credits

16 unchanged sentences

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

As of June 30, 2024, we maintained a full valuation allowance against our deferred tax assets.

As of September 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.

2 unchanged sentences

dollar is the functional currency for the Company’s consolidated operations.

All gains and losses from currency transactions are included in results of operations.

All gains and losses from currency transactions are included in the results of operations.

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

1 unchanged sentence

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

Accordingly, warrants to purchase 150 of our common shares, restricted share units to purchase 367 of our common shares and options to purchase 5,455 of our common shares at September 30, 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 and options to purchase 5,005 common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

Fennec Pharmaceuticals Inc.

1 unchanged sentence

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

22 unchanged sentences

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 June 30,

Six Months Ended June 30,

Net income/(loss)

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Three Months Ended September 30,

Nine Months Ended September 30,

Net (loss) / income

Weighted-average common shares, basic

Dilutive effect of stock options

Dilutive effect of restricted share units

Dilutive effect of warrants

Dilutive effect of convertible debt

Incremental dilutive shares

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

Net loss per share, basic and diluted

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,

Nine Months Ended September 30,

Options to purchase common shares

Convertible debt to purchase common shares

Restricted share units to purchase common shares

Warrants to purchase common shares

3 unchanged sentences

Warrants to Purchase Common Stock

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:

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

Outstanding warrants have a weighted average life of 3.30 years on September 30, 2024.

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

Common Shares

3 unchanged sentences

Investor Warrants

Exercise Price

Exercise Price $USD

Outstanding December 31, 2023

1 unchanged sentence

Outstanding June 30, 2024

Outstanding September 30, 2024

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

Common Shares

7 unchanged sentences

Outstanding June 30, 2023

Outstanding September 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

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.

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 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.

3 unchanged sentences

dollar grants.

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.

The table below outlines recognized contractor and employee expense from equity awards for the three- and nine-month periods ended September 30, 2024, and 2023.

For all periods presented, there were no contractor option expense to recognize.

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Employee options expense recognized

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 and six months ended June 30, 2024 and 2023.

Weighted-Average

Exercise Price

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Outstanding at June 30, 2024

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

Weighted-Average

Exercise Price

Options (thousands)

Exercise Price $USD

Outstanding at December 31, 2023

1 unchanged sentence

Outstanding at June 30, 2024

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)

Outstanding at September 30, 2024

Of the 5,455 options granted and outstanding at September 30, 2024, 4,278 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.

1 unchanged sentence

Black-Scholes Model Assumptions

June 30, 2024

September 30, 2024

Expected dividend

Risk free rate

3.79 - 5.15 %

Expected volatility

Expected life

1.5 - 6.0 years

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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 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.

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

During the three and nine months ended September 30, 2024, there were 48 and 137 RSUs released from restriction, respectively.

Vesting of RSUs vary from one to three years .

Restricted Share

RSUs Current Periods

Outstanding at December 31, 2023

Outstanding at March 31, 2024

Outstanding at June 30, 2024

Restricted Share

RSUs Past Periods

RSUs Current Year

Units (thousands)

Outstanding at December 31, 2023

1 unchanged sentence

Outstanding at June 30, 2024

Outstanding at September 30, 2024

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.

2 unchanged sentences

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

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.

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 June 30, 2024 and December 31, 2023

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

(in thousands)

6 unchanged sentences

Processa common shares

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 held approximately $ 37,271 in money market accounts as of September 30, 2024.

As of December 31, 2023, the Company held approximately $ 11,929 in money market accounts.

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

3 unchanged sentences

On February 20, 2013, Fennec entered into a new 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, royalty on net sales for licensed products and a royalty on any consideration received from sublicensing of the licensed technology.

OHSU will receive certain milestone payments, royalty on net sales for licensed products and 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.

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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 $ 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 .

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

The total amount accrued in royalty expense to OHSU as of September 30, 2024, was $ 460 .

Fennec Pharmaceuticals Inc.

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In September 2023, the PTAB issued a Final Written Decision in favor of Fennec and upholding the amended claim.

The USPTO has now granted four additional U.S.

The USPTO has now granted six additional U.S.

patents that cover the PEDMARK formulation and its use, each of which have been, or are in the process of being, listed in the U.S.

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

11,617,793 (issued April 4, 2023), and U.S.

11,617,793 (issued April 4, 2023), U.S.

11,964,018 (issued April 23, 2024)).

The USPO has also recently allowed two additional patent applications (U.S.

Patent Application Nos.

17/992,703 and 17/992,707) that cover the use of the PEDMARK® formulation.

Five additional United States patent applications from this family are pending at the USPTO covering various sodium thiosulfate formulations and uses.

11,992,530 (issued May 28, 2024), and U.S.

11,998,604 (issued June 4, 2024) Five additional United States patent applications from this family are pending at the USPTO covering various sodium thiosulfate formulations and uses.

We plan to vigorously defend our intellectual property rights to PEDMARK if challenged.

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The certifications allege these patents are invalid or will not be infringed by the manufacture, use, or sale of CIPLA’s sodium thiosulfate solution.

Under the Food and Drug Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, after receipt of a valid Paragraph IV notice, the Company may bring a patent infringement suit in a federal district court against CIPLA within 45 days from the receipt of the Notice Letter and if such a suit is commenced within the 45 -day period, the Company is entitled to a 30 month stay on the FDA’s ability to give final approval to any proposed products that reference PEDMARK®.

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.

Under the Food, Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, after receipt of a valid Paragraph IV notice, the Company may bring a patent infringement suit in a federal district court against CIPLA within 45 days from the receipt of the Notice Letter and if such a suit is commenced within the 45 -day period, the Company is entitled to a 30 month stay on the FDA’s ability to give final approval to any proposed products that reference PEDMARK.

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, which is September 20, 2029.

Fennec Pharmaceuticals Inc.

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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.

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”).

Further, 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”).

Executive Severance

In the event of termination of Mr.

Raykov's (Chief Executive Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to twelve months of salary (currently $ 608 ).

Hackman's (Chief Executive Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one -time severance payment equal to twelve months of salary (currently $ 550 ).

In the event of termination of Mr.

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 ).

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 nine months of salary which is equivalent to $ 331 .

Further, as announced on October 28, 2024, each of Mr.

Evans, and Ms.

Cioffi’s Executive Employment Agreements generally provide that if their employment is terminated without “Cause” (as defined in the applicable Executive Employment Agreement) and other conditions are satisfied, then such executive officer shall receive as severance an amount equal to their then current base salary for a period of nine (9) months, less standard withholdings for tax and social security purposes.

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

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The Company was required to pay a security deposit of $ 2 , which is the equivalent to two months of rent.

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

On August 1, 2023, the Company entered into a second Office Service Agreement (the “Second Office Service Agreement”) with Regus to lease office space in Dublin, Ireland.

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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.

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

June 30, 2024

September 30, 2024

Remaining lease terms (in months)

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

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

As of September 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).

On August 19, 2022, the Company closed on the initial tranche of $ 5,000 , which has an Initial Conversion Price equal to $ 8.11 per share, which was calculated based on a 20 % premium of the 5 -day VWAP immediately prior to the announcement of the SPA.

In connection with the first closing, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $ 5,000 .

The Notes become due on the maturity date, which is August 19, 2027.

On September 23, 2022, the Company closed on the second tranche of the Note Financing in the amount of $ 20,000 , which has an Initial Conversion Price equal to $ 7.89 per share, which was calculated based on a 20 % premium of the 5 -day VWAP immediately prior to the date the Company obtained FDA approval for PEDMARK®.

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

In connection with the first closing, the Company

Fennec Pharmaceuticals Inc.

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dollars and shares in thousands, except per share information)

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

repaid in full its secured indebtedness with Bridge Bank in the amount of $ 5,000 .

The Notes become due on the maturity date, which is August 19, 2027.

The Subsequent Closing Notes will be convertible at a price per share equal to $ 7.89 per share, which price is calculated on the same basis as for the Second Closing Note.

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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 and issued the Investor a Note in the same amount that 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 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 ( 13 % at June 30, 2024 and 13 % as of December 31, 2023).

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5 % per annum, from the date of funding ( 13 % at September 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-inkind (“PIK”) interest will commence on funding date and accrue at a rate of 3.5 % per annum.

Payment-in-kind (“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.

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 $ 1.6 million in PIK interest and has classified the PIK interest in long-term liabilities.

The Company has accrued $ 1,600 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 common shares so long as it does not create partial shares.

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

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

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

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

Years Ending December 31,

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Events of default include, but are not limited to, a payment default, a material adverse change, and insolvency.

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

The SPA facility is secured by all 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 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 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.

Upon drawing tranche 1 through 3, the Company recorded a debt discount of $ 227 , which was 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.

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

(i) an upfront payment in the amount of € 40 million or approximately $ 43.2 million, which was paid to Fennec on March 15, 2024, (ii) up to € 210 million (or approximately $ 230 million) upon the achievement of certain regulatory and commercial milestones, and (iii) tiered royalty payments based on net sales of PEDMARQSI® in the Territory, which royalty payment range from mid-teen percent to mid-twenty percent based on the aggregate net sales of PEDMARQSI® in the Territory.

(i) an upfront payment in the amount of € 40,000 or approximately $ 43,200 , which was paid to Fennec on March 15, 2024, (ii) up to € 210,000 (or approximately $ 230,000 ) upon the achievement of certain regulatory and commercial milestones, and (iii) tiered royalty payments based on net sales of PEDMARQSI ® in the Territory, which royalty payment range from mid-teen percent to mid-twenty percent based on the aggregate net sales of PEDMARQSI ® in the Territory.

The tiered royalty payments are subject to material reduction if an alternative or generic version of PEDMARQSI ® becomes available in any respective country or jurisdiction within the Territory.

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(i) March 15, 2034, or (ii) with respect to any particular country in the Territory, (a) the expiration of regulatory market exclusivity for PEDMARQSI ® in such country, or (b) the last-to-expire of all patents for PEDMARQSI ® in such country.

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 term of the Agreement shall be automatically renewed for additional three-year periods unless either party

Fennec Pharmaceuticals Inc.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

dollars and shares in thousands, except per share information)

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

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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 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

For the nine months ended September 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 $ 1,700 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 condensed consolidated statements of operations.

As of September 30, 2024, $ 948 in incremental cost was capitalized.

Subsequent Events

On October 28, 2024, Fennec Pharmaceuticals Inc.’s (the “Company”) announced the appointments of Mr.

Sayad, PhD, M.S., as Chief Medical Officer (“CMO”), Mr.

Terry Evans as Chief Commercial Officer (“CCO”), and Ms.

Christiana Cioffi, MBA, as Chief Strategy Officer (“CSO”), all of which became effective on October 28, 2024.

There are no arrangements or understandings between each of Mr.

Evans, or Ms.

Cioffi, and any other person pursuant to which such individual was appointed as CMO, CCO, and CSO, respectively.

Evans, nor Ms.

Cioffi have any family relationships with any other executive officer or director of the Company.

None of these appointments have been involved in any related person transactions with the Company that would require disclosure under Item 404(a) of Regulation S-K.

In connection with their appointments to CMO, COO, and CSO, respectively, Mr.

Evans, and Ms.

Cioffi each entered into an Executive Employment Agreement with the Company effective as of October 28, 2024.

Each of these Executive Employment Agreements is an “at-will” agreement.

Pursuant to the terms of Mr.

Sayad’s Executive Employment Agreement, his initial base annualized salary will be at a rate of $ 450,000 , subject to review and increase from time to time by the Company in its sole discretion.

He shall be entitled to receive an annual target performance bonus (“Target Bonus”) of forty percent ( 40 %) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months ), based upon a determination by the Company’s Board of Directors (“Board”) of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus.

In addition, the Company will grant Mr.

Sayad 150,000 options to purchase common shares of the Company which (i) have an exercise

Fennec Pharmaceuticals Inc.

1 unchanged sentence

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

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.

price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan);

(ii) have a term of ten years, with one-third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Pursuant to the terms of Mr.

Evans’ Executive Employment Agreement, his initial base annualized salary will be at a rate of $ 400,000 , subject to review and increase from time to time by the Company in its sole discretion.

He shall be entitled to receive a Target Bonus of forty percent ( 40 %) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months ), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus.

In addition, the Company will grant Mr.

Evans 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan);

(ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Pursuant to the terms of Ms.

Cioffi’s Executive Employment Agreement, her initial base annualized salary will be at a rate of $ 375,000 , subject to review and increase from time to time by the Company in its sole discretion.

She shall be entitled to receive a Target Bonus of forty percent ( 40 %) of her base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months ), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that she must remain employed through the payment date to be eligible to receive the Target Bonus.

In addition, the Company will grant Ms.

Cioffi 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan);

(ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Evans, and Ms.

Cioffi’s Executive Employment Agreements generally provide that if their employment is terminated without “Cause” (as defined in the applicable Executive Employment Agreement) and other conditions are satisfied, then such executive officer shall receive as severance an amount equal to their then current base salary for a period of nine ( 9 ) months, less standard withholdings for tax and social security purposes.

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