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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-13 · 77 added, 77 removed, 154 unchanged (50% of the section changed)

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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 29, 2024 (the “Annual Report”) and our unaudited interim condensed consolidated financial statements and related notes appearing in this Quarterly Report on Form 10-Q (the “Quarterly Report”).

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to the Company’s plans and strategy for its business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties.

Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact.

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The following discussion should be read in conjunction with our Annual Report and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.

We are a commercial-stage biopharmaceutical company focused on our only product PEDMARK ® .

We are a commercial-stage biopharmaceutical company focused on our only product PEDMARK in the United States and PEDMARQSI ® the European brand name for PEDMARK.

On September 20, 2022, we received approval from the US Food and Drug Administration (“FDA”) for PEDMARK (sodium thiosulfate injection) to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

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In addition, in January 2023, PEDMARK was included in the National Comprehensive Cancer Network (NCCN) clinical practice guidelines for Adolescent and Young Adult (AYA) Oncology with a category 2A recommendation.

In June 2023, we received European Commission Marketing Authorization for PEDMARQSI TM (known as PEDMARK ® in the U.S.) Further, the decision included the receipt of a Pediatric Use Marketing Authorization (“PUMA”) in the European Union (“EU”) with up to 10 years of data and market protection.

The Company in conjunction with Norgine is currently preparing for an EU launch of PEDMARQSI TM in the fourth quarter of 2024.

In June 2023, we received European Commission Marketing Authorization for PEDMARQSI ® .

Further, the decision included the receipt of a Pediatric Use Marketing Authorization (“PUMA”) in the European Union (“EU”) with up to 10 years of data and market protection.

On March 17, 2024, we announced that we had entered into an exclusive licensing agreement with Norgine to commercialize PEDMARQSI ® in Europe, New Zealand and Australia.

The licensing agreement provided us with approximately $43,200 up front and may provide us with up to approximately $230,000 in milestone and royalty payments in the future.

Norgine is currently preparing for an EU launch of PEDMARQSI ® in the next several months.

In the U.S., we sell our product through an experienced field force and medical science liaisons who are helping to educate the medical communities and patients about cisplatin induced ototoxicity and our programs supporting patient access to PEDMARK.

Now that we have obtained applicable regulatory approval to sell PEDMARK ® in the U.S.

and authorization from the European Commission Marketing Authorization for PEDMARQSI TM in the EU, we recognize there may still be a need to establish collaborations that provide us with up-front payments, licensing fees, milestone payments, royalties, or other revenue.

Further, we have established Fennec HEARS™, a comprehensive single source program designed to connect PEDMARK ® patients to both patient financial and product access support.

Further, in the United States we have established Fennec HEARS™, a comprehensive single source program designed to connect PEDMARK patients to both patient financial and product access support.

The program offers assistance and resources, regardless of insurance type, that can address co-pays or lack of coverage when certain eligibility requirements are met.

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We received Orphan Drug Exclusivity for PEDMARK in January 2023, which provides seven years of market exclusivity from its FDA approval on September 20, 2022, until September 20, 2029.

We currently have five patents listed for PEDMARK ® in the FDA’s Orange Book.

We currently have six patents listed for

PEDMARK in the FDA’s Orange Book.

In September 2022, the USPTO issued Patent No.

11,291,728 (the “US ‘728

Patent”), in December 2022, the USPTO issued Patent No.

11,291,728 (the “US ‘728 Patent”), in December 2022, the USPTO issued Patent No.

11,510,984 (“US ‘984 Patent”) and in April 2023, the USPTO issued Patent No.

11,671,793 (“US ‘793 Patent”) that covers PEDMARK pharmaceutical formulation.

Further, US 11,964,018 Patent (the “’US 018’ Patent) and US 11,992,530 Patent (the “US ’530 Patent”) covering methods of using our PEDMARK® product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer.

The US ‘728 Patent, US ‘984 Patent, US ‘793.

US ‘018 and US’530 patents will expire in 2039.

Further, additional issued patents included US 11,964,018 Patent (the “’US 018’ Patent) and US 11,992,530 Patent (the “US ’530 Patent”) and US 11,998,604 Patent (the “’604 Patent”) covering methods of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer.

The US ‘728, US ‘984 US ‘793, US ‘018, US’530 and US’604 patents will expire in 2039.

We are also pursuing additional patent applications in both the U.S.

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PEDMARK is the first and only therapy approved by the FDA indicated to reduce the risk of ototoxicity associated with cisplatin treatment in pediatric patients with localized, non-metastatic, solid tumors.

Further, PEDMARQSI TM , known as PEDMARK ® in the U.S., was granted marketing authorization by the European Commission in June 2023.

Further, PEDMARQSI ® , known as PEDMARK in the U.S., was granted marketing authorization by the European Commission in June 2023.

PEDMARK is a unique formulation of sodium thiosulfate in single-dose, ready-to-use vials for intravenous use in pediatric patients.

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Results of Operations

Three months ended June 30, 2024 versus three months ended June 30, 2023:

Three months ended September 30, 2024 versus three months ended September 30, 2023:

Three Months Ended

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In thousands of U.S.

June 30, 2024

June 30, 2023

PEDMARK product sales, net

September 30, 2024

September 30, 2023

Product sales, net

Operating expenses:

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Loss from operations

Unrealized loss on securities

Amortization expense

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Interest income

● We reported net product sales for the three-month period ended June 30, 2024 of $7.3 million and gross profit of $6.7 million after applying cost of product sales of $0.6 million.

● Research and development expenses increased by $0.15 million for the three months ended June 30, 2024, compared to the same period in 2023.

● We reported net product sales for the three-month period ended September 30, 2024 of $6,974 and gross profit of $5,617 compared to net product sales of $6,515 and gross profit of $6,184 in the comparable period in 2023.

● Research and development expenses increased by $85 for the three months ended September 30, 2024, compared to the same period in 2023.

Our research and development activities for this period consisted of costs associated with investigator initiated clinical trials.

During the same period in 2023 and prior to approval of PEDMARK , manufacturing costs pertaining to PEDMARK were expensed to R&D expense in the period incurred, and following approval are reflected in inventory.

● Selling and marketing expenses were $4.7 million for the three months ended June 30, 2024.

● Selling and marketing expenses were $4,601 for the three months ended September 30, 2024 compared to $3,384 for the comparable three month period in 2023.

Selling and marketing expenses include remuneration of our sales and marketing employees, dollars spent on marketing campaigns (sponsorships, trade shows, presentations, etc.), and any activities to support marketing and sales activities.

● General and administrative expenses increased by $1.4 million compared to the same period in 2023, primarily due to an increase in consulting and professional costs and increased European pre-commercialization related expenses compared to same period in 2023.

● Interest expense increased $0.2 million compared to the same period in 2023.

This increase is associated with higher interest rates and higher debt levels as compared with the same period in 2023.

The increase is largely related to increased payroll and additional marketing expenses in the comparable period as we focused on expanding our outreach to community oncology centers and the adolescent and young adult (AYA) population.

● General and administrative expenses increased by $2,316 compared to the same period in 2023, as a result of an increase in select expenses such as salaries, equity renumeration and intellectual property litigation expenses compared to the same period in 2023.

● Interest expense increased $169 compared to the same period in 2023.

This increase is associated with higher debt levels as compared with the same period in 2023.

● Additionally, we hold shares of Processa Pharmaceuticals, Inc.

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

The value of the Processa shares held by the Company decreased for the three month period ending June 30, 2024, as compared with the same period in 2023.

The value of the Processa shares held by us decreased for the three month period ended September 30, 2024, as compared with the same period in 2023.

Other losses were driven mainly by unrealized losses related to our foreign currency transactions.

We have vendors that transact in Euros, Great British Pounds and Canadian Dollars.

● There was an increase of $0.02 million in other losses for the three months ended June 30, 2024, compared to the same period in 2023.

● Amortization expense is also a non-cash expense and relates to amortization of the deferred issuance costs of the loan facilities with Petrichor.

Amortization expense decreased by $0.05 million for the three months ended June 30, 2023 compared to the same period in 2023.

Interest income increased by $0.5 million for

the three months ended June 30, 2024, compared to the same period in 2023.

This was driven mainly by higher interest rates for the three months ended June 30, 2024 compared to the same period in 2023.

Six months ended June 30, 2024 versus six months ended June 30, 2023:

Six Months Ended

Amortization expense decreased by $51 for the three months ended September 30, 2023, compared to the same period in 2023.

Interest income increased by $414 for the three months ended September 30, 2024, compared to the same period in 2023.

This increase in interest income was primarily driven by a higher cash balance and higher interest rates for the three months ended September 30, 2024, compared to the same period in 2023.

Nine months ended September 30, 2024, versus nine months ended September 30, 2023:

Nine Months Ended

In thousands of U.S.

June 30, 2024

June 30, 2023

PEDMARK product sales, net

September 30, 2024

September 30, 2023

Product sales, net

Licensing revenue

Total revenue

Total Net revenue

Operating expenses:

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General and administration

Total operating expenses

Income/(loss) from operations

Total operating expense

Loss from operations

Unrealized loss on securities

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Interest expense

Unrealized foreign exchange loss

Unrealized foreign exchange (loss)/gain

Interest income

Net Income/ (loss)

● The Company recorded net product sales of $14.7 million and $18.0 million in licensing revenue related to the Norgine transaction for the six-month period ended June 30, 2024, compared to $5.0 million in product sales and no licensing revenue for the same period in 2023.

● We recorded net product sales of $21,655 and $17,958 in licensing revenue related to the Norgine transaction for the nine-month period ended September 30, 2024, compared to $11,517 in net product sales and no licensing revenue for the same period in 2023.

● Selling and marketing expenses include distribution costs, logistics, shipping and insurance, advertising, wages commissions and out-of-pocket expenses.

The Company recorded $9.9 million in selling and marketing expenses for the six-month period ended June 30, 2024, compared to $4.9 million for the same period in 2023.

The increase is largely related to increased payroll and additional marketing expenses in the comparable period as the Company focused on expanding our initial outreach to community oncology centers and the adolescent and young adult (AYA) population, who can greatly benefit from our treatments compared to the prior year.

● There was a $3.0 million increase in general and administrative expenses for the six-months ended June 30, 2024, compared to same period in 2023.

There was an increase in consulting and professional costs compared to same period in 2023 which is largely attributable to increased European pre-commercialization related expenses and expenses associated with the Norgine transaction.

● The value of the Processa shares held by us declined by $0.02 million for six-months ended June 30, 2024.

We recorded $14,482 in selling and marketing expenses for the nine-month period ended September 30, 2024, compared to $8,255 for the same period in 2023.

● There was a $5,240 increase in general and administrative expenses for the nine-months ended September 30, 2024, compared to same period in 2023.

● The value of the Processa shares held by us declined by $14 for nine-months ended September 30, 2024.

The shares declined in value by $43 during same period in 2023.

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The Processa shares are marked to market at each balance sheet date with the resulting change in value being booked as an unrealized gain or loss.

● Amortization expense decreased by $0.1 million for six-months ended June 30, 2024, over the same period in 2023.

● Interest expenses increased by $0.5 million for the six-month ended June 30, 2024 compared to same period in 2023.

● Amortization expense decreased by $153 for nine-months ended September 30, 2024, over the same period in 2023.

● Interest expenses increased by $624 for the nine-month ended September 30, 2024 compared to the same period in 2023.

The increase was driven mainly by higher average debt balances and higher interest rates on long-term debt.

● Interest income increased by $0.5 million for the six-months ended June 30, 2024, as compared to same period in 2023, due to higher cash balances and higher rates on money market accounts for the comparable periods.

● Interest income increased by $957 for the nine-months ended September 30, 2024, as compared to the same period in 2023, due to higher cash balances and higher rates on money market accounts for the comparable periods.

Liquidity and Capital Resources

Selected Asset and Liability Data (thousands):

June 30, 2024

September 30, 2024

December 31, 2023

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Stockholders’ deficit

Cash and cash equivalents were $43.0 million as of June 30, 2024, and $13.3 million at December 31, 2023.

The increase in cash and cash equivalents between June 30, 2024 and December 31, 2023 is the result of cash outlays for operating expenses related to the promotion of our product, small amounts of research and development and general and administrative expenses, which were offset by cash inflows of $43.2 million from Norgine licensing deal, cash collections on product sales of $4.4 million and cash inflows of $1.0 million from various option exercises.

There was an increase of $5.5 million in other current assets between June 30, 2024, and December 31, 2023, and an increase in current liabilities of $0.2 million.

The overall result was an increase in working capital of $35.0 million.

The following table illustrates a summary of cash flows data for the six-month periods of June 30, 2024 and 2023:

Cash and cash equivalents were $40,320 as of September 30, 2024, and $13,269 at December 31, 2023.

The increase in cash and cash equivalents between September 30, 2024 and December 31, 2023 is the result of cash outlays for operating expenses related to the promotion of our product, small amounts of research and development and general and administrative expenses, which were offset by cash inflows of $43,200 from Norgine licensing deal, cash collections on product sales of $8,923 and cash inflows of $1,131 from various option exercises.

There was an increase of $4,056 other current assets between September 30, 2024, and December 31, 2023, and a decrease in current liabilities of $118.

The overall result was an increase in working capital of $31,225.

The following table illustrates a summary of cash flows data for the nine-month periods of September 30, 2024 and 2023:

Selected Cash Flow Data

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars and shares in thousands)

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Net cash provided by investing activities

Net cash provided / (used) by financing activities

Net cash (used in) / provided by financing activities

Net cash flow

Net cash provided by operating activities for the six-month period ended June 30, 2024 and 2023, primarily reflected a net income of $7.2 million and a net loss of $13.3 million respectively.

The six month income was adjusted for the add back of non-cash items consisting of $3.7 million and $3.8 million, respectively, in stock-based compensation expense, amortization of debt access fee of $0.7 million and $0.1 million, respectively, and addition of PIK interest of $0.8 million and zero, respectively, for the six months ended June 30, 2024, and 2023.

For the six months ended June 30, 2024 there was an increase in other current assets of $5.5 million and $1.4 million during the same period in 2023.

For the six months ended June 30, 2024, there was a net increase in current liabilities of $0.1 million, with a net decrease of $0.4 million during that same period in 2023.

Six month cash flows provided by operating activities were $30.6 million and net cash flows used in operating activities were $9.5 million, respectively, for the periods ended June 30, 2024 and 2023.

Net cash used by financing activities for the six months ended June 30, 2024, were $0.9 million and net cash provided were $0.7 million, respectively.

Net cash flows from the six month period ended June 30, 2024 and 2023, were positive $29.7 million, and negative $8.8 million, respectively.

Net cash provided by operating activities for the nine-month period ended September 30, 2024 and 2023, primarily reflected a net income of $1,549 and a net loss of $13,363 million respectively.

The nine-month income was adjusted for the add back of non-cash items consisting of $5,893 and $5,434, respectively, in stock-based compensation expense, amortization of debt access fee of $774 and $166, respectively, and addition of PIK interest of $1,104 and 677, respectively, for the nine months ended September 30, 2024, and 2023.

For the nine months ended September 30, 2024 there was an increase in other current assets of $3,455 and $3,636 during the same period in 2023.

For the nine months ended September 30, 2024, there was a net increase in current liabilities of $24,457 and a net decrease of $41 during the same period in 2023.

Nine-month cash flows provided by operating activities were $28,454 million and net cash flows used in operating activities were $12,283, respectively, for the periods ended September 30, 2024 and 2023.

Net cash flows used in financing activities for the nine months ended September 30, 2024, were $1,403 and net cash provided were $908, respectively.

Net cash flows from the nine-month period ended September 30, 2024, and 2023, were positive $27,051, and negative $11,375, respectively.

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

Our projections of further capital requirements are subject to substantial uncertainty.

Our working capital

requirements may fluctuate in future periods depending upon numerous factors, including:

Our working capital requirements may fluctuate in future periods depending upon numerous factors, including:

our ability to obtain additional financial resources;

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Outstanding Share Information

Our outstanding share data as of June 30, 2024 and December 31, 2023 was as follows (in thousands):

Our outstanding share data as of September 30, 2024 and December 31, 2023 was as follows (in thousands):

September 30,

Outstanding Share Type

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We invest excess cash and cash equivalents in high credit quality investments held by financial institutions in accordance with our investment policy designed to protect the principal investment.

At June 30, 2024, we had approximately $0.9 million in our cash accounts and $42.2 million in savings and money market accounts.

While we have never experienced any loss or write down of our money market investments since our inception, the amounts we hold in money market accounts are substantially above the $0.25 million amount insured by the FDIC and may lose value.

At September 30, 2024, we had approximately $3,049 in our cash accounts and $37,271 in savings and money market accounts.

Our investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment.

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A summary of our critical accounting policies and use of estimates are presented in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report.

There have been no material changes to our critical accounting policies and use of estimates during the six months ended June 30, 2024.

There have been no material changes to our critical accounting policies and use of estimates during the nine months ended September 30, 2024.

Revenue Recognition

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company determines it expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

(i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s).

As part of the accounting for these arrangements, the Company must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, we recognizes revenue when our customers obtain control of promised goods or services, in an amount that reflects the consideration which we determine we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

As part of the accounting for these arrangements, we must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

Stock-based Compensation

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We also used historical data to estimate forfeiture experience.

In valuing options granted in the fiscal years ended June 30, 2024, we used the following weighted average assumptions:

In valuing options granted in the fiscal years ended September 30, 2024, we used the following weighted average assumptions:

Black-Scholes Model Assumptions

June 30, 2024

September 30, 2024

Expected dividend

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Expected life

1.5 - 6.0 years

Common shares and warrants

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis