FENNEC PHARMACEUTICALS INC

Previous wording

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, and the condensed consolidated financial statements andaccompanying notes included elsewhere in this report.

Current wording

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

Previous wording

We are a commercial-stage biopharmaceutical company focused on our only product candidate PEDMARK®. On September 20, 2022, we received approval from the U.S. 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. This approval makes PEDMARK® the first and only treatment approved by the FDA in this area of significant unmet medical need. On October 17, 2022, we announced commercial availability of PEDMARK® in the United States. Further, PEDMARQSI® (PEDMARK® brand name outside of U.S.) received European Commission Marketing Authorization in June 2023 and received U.K. approval in October 2023.

Current wording

We are a commercial-stage biopharmaceutical company focused on our only product 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. This approval makes PEDMARK® the first and only treatment approved by the FDA in this area of unmet medical need. On October 17, 2022, we announced commercial availability of PEDMARK® in the U. S. 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.

Previous wording

We sell PEDMARK® in the United States through an experienced field force including Regional Pediatric Oncology Specialists 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®. Sales outside of the U.S. are through experienced distributors which market and promote PEDMARK®in developing markets.

Current wording

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 PEDMARQSITM 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.

Previous wording

We received Orphan Drug Exclusivity for PEDMARK© in January 2023, which provides seven years of market exclusivity in the United States from its FDA approval on September 20, 2022, until September 20, 2029. The USPTO has now granted four 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. FDA’s “Orange Book” (U.S. Patent No. 11,291,728 (issued April 5, 2022), U.S. Patent No. 11,510,984 (issued November 29, 2022), U.S. Patent No. 11,617,793 (issued April 4, 2023), and U.S. Patent No. 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. We are also pursuing additional patent applications in both the U.S. and internationally for PEDMARK®.

Current wording

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. In September 2022, the USPTO issued Patent No. 11,291,728 (the “US ‘728

Previous wording

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. It is a unique formulation of sodium thiosulfate in single-dose, ready-to-use vials for intravenous use in pediatric patients. PEDMARK® is also the only therapeutic agent with proven efficacy and safety data with an established dosing paradigm, across two open-label, randomized Phase 3 clinical studies, the Clinical Oncology Group (“COG”) Protocol ACCL0431 and SIOPEL 6.

Current wording

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, PEDMARQSITM, 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. PEDMARK® is also the only therapeutic agent with proven efficacy and safety data with an established dosing paradigm, across two open-label, randomized Phase 3 clinical studies, the Clinical Oncology Group (“COG”) Protocol ACCL0431 and SIOPEL 6.

Previous wording

Cash and cash equivalents were $51,184 as of March 31, 2024, and $13,269 at December 31, 2023. The increase in cash and cash equivalents between March 31, 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 $43,204 from Norgine licensing deal, cash collections on product sales of $3,115 and cash inflows of $627 from various option exercises. There was an increase of $3,398 in other current assets between March 31, 2024, and December 31, 2023, and an increase in current liabilities of $2,283. The overall result was an increase in working capital of $39,030.

Current wording

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.

Previous wording

The following table illustrates a summary of cash flows data for the three-month periods of March 31, 2024 and 2023:

Current wording

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

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024, primarily reflected a net income of $12,837. The three-month income was adjusted for the add back of non-cash items consisting of $1,191 in stock-based compensation expense, with unrealized loss on securities of $11, PIK interest of $398 and amortization expense of $743 for the three months ended March 31, 2024. For the three months ended March 31, 2024, there was a net increase in accounts receivable, inventory, prepaid and other assets of $3,414; coupled with a net increase in current liabilities of $27,281. Approximately, $25,246 of this increase relates to deferred revenue associated with the Norgine transaction.

Current wording

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.

Previous wording

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 ability to obtain additional financial resources; our ability to enter into collaborations that provide us with up-front payments, milestones or other payments; results of our research and development activities; progress or lack of progress in our preclinical studies or clinical trials; unfavorable toxicology in our clinical programs, our drug substance requirements to support clinical programs; change in the focus, direction, or costs of our research and development programs; headcount expense; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our patent claims; competitive and technological advances; the potential need to develop, acquire or license new technologies and products; our business development activities; new regulatory requirements implemented by regulatory authorities; the timing and outcome of any regulatory review process; and commercialization activities, if any.

Current wording

requirements may fluctuate in future periods depending upon numerous factors, including: our ability to obtain additional financial resources; our ability to enter into collaborations that provide us with up-front payments, milestones or other payments; progress or lack of progress in our preclinical studies or clinical trials; unfavorable toxicology in our clinical programs; our drug substance requirements to support clinical programs; change in the focus, direction, or costs of our research and development programs; headcount expense; the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our patent claims; competitive and technological advances; the potential need to develop, acquire or license new technologies and products; our business development activities; new regulatory requirements implemented by regulatory authorities; the timing and outcome of any regulatory review process; and commercialization activities, if any.

Previous wording

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. As of March 31, 2024, we had approximately $1.3 million in our cash accounts and $49.9 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 $250,000 amount insured by the FDIC and may lose value.

Current wording

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.

Previous wording

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 three months ended March 31, 2024.

Current wording

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.