| PART I | 25 | |
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| Item 1. | Business | 25 |
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| Item 1A. | Risk Factors | 66 |
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| Item 1B. | Unresolved Staff Comments | 66 |
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| Item 1C. | Cybersecurity | 67 |
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| Item 2. | Properties | 68 |
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| Item 3. | Legal Proceedings | 68 |
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| Item 4. | Mine Safety Disclosures | 69 |
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| PART II | 76 | |
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| Item 5. | Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer’s Purchases of Equity Securities | 76 |
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| Item 6. | Reserved | 76 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 84 |
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| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 84 |
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| Item 8. | Financial Statements and Supplementary Data | 85 |
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 85 |
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| Item 9A. | Controls and Procedures | 85 |
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| Item 9B. | Other Information | 86 |
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| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 86 |
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| PART III | 86 | |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 86 |
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| Item 11. | Executive Compensation | 86 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 87 |
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| Item 13. | Certain Relationships and Related Transactions and Director independence | 87 |
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| Item 14. | Principal Accounting Fees and Services | 87 |
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| PART IV | 88 | |
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| Item 15. | Exhibits and Financial Statement Schedules | 88 |
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| SIGNATURES | 91 | |
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Part I
You are urged to read this Annual Report on Form 10-K (“Annual Report”) in its entirety. “We,” “our,” “ours,” “us,” “Fennec,” or the “Company,” when used herein, refers to Fennec Pharmaceuticals Inc., a British Columbia corporation, and its wholly-owned subsidiary, Fennec Pharmaceuticals, Inc., a Delaware corporation.
Forward-Looking Statements
This Annual Report contains “forward-looking statements”, as that term is defined in the Private Securities Litigation Reform Act of 1995. These include statements regarding our expectations, beliefs, plans or objectives for future operations and anticipated results of operations. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, “believes”, “anticipates”, “proposes”, “plans”, “expects”, “intends”, “may”, and other similar expressions are intended to identify forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or other achievements to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the section entitled “Item 1A – Risk Factors” and those discussed in the section entitled “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Caution Concerning Forward-Looking Statements.”
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operations, and financial results. A more thorough discussion of these and other risks follows this summary.
Risks Related to Our Business
| ● | We have a history of significant losses and have generated limited revenue from the sale of products since our inception. |
| ● | We may be required to conduct additional clinical trials for PEDMARK®, which would be costly and time-consuming to complete. |
| ● | We may require additional financing to obtain additional regulatory approvals for and commercialize PEDMARK®, and a failure to obtain this capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce, or terminate further product development, other operations, or commercialization efforts. |
| ● | We may be the target of securities litigation, which may be costly and time-consuming to defend. |
We have only recently transitioned from a development stage biopharmaceutical company to a commercial stage biopharmaceutical company, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
| ● | Our business involves environmental risks and potential exposure to environmental liabilities. |
Risks Related to Marketing Approval of Our Product Candidate
| ● | PEDMARK® has received marketing approval from the FDA and from the European Commission, but not from any additional foreign authorities. These approval processes are costly, time-consuming, and inherently unpredictable, and it is possible that our applications for marketing approval will be denied. |
Risks Related to Commercialization of Our Product Candidate
| ● | Our success depends on our ability to successfully commercialize PEDMARK®. We are a single product company with only limited commercial experience, which makes it difficult to evaluate our current business, predict our future prospects and forecast our financial performance and growth. |
| ● | If we are unable to successfully commercialize PEDMARK®, our business, results of operations and financial condition may be materially adversely affected. |
| ● | Our business is subject to substantial competition. |
| ● | Our business may require additional capital. |
| ● | The obligations incident to being a public company place significant demands on our management. |
| ● | We are highly dependent on our small number of key personnel and advisors. |
| ● | A pandemic or epidemic (including were there to be a resurgence of the COVID-19 pandemic) and the worldwide attempts to contain it could harm our business and results of operations and financial condition and we could be adversely impacted by it. |
| ● | We face a risk of product liability claims and may not be able to obtain adequate insurance. |
| ● | Business or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses. |
| ● | Although we have received regulatory approvals for PEDMARK®, it still remains subject to continued regulatory review and could be subject to labeling and other restrictions. |
| ● | Sales of PEDMARK® will depend on reimbursement by payers and these payers are subject to pressures to contain costs. In addition, coverage and reimbursement for PEDMARK® may be limited or unavailable in certain market segments. |
| ● | PEDMARK® targets diseases with small patient populations and we may not be effective at identifying patients. |
| ● | We may not be able to gain or maintain market acceptance of PEDMARK® among the medical community, patients, or payers. |
| ● | If we fail to comply with applicable healthcare laws and regulations, we may be subject to investigations and civil or criminal penalties and could lose any regulatory approvals that we obtain for PEDMARK®. |
| ● | Changes in healthcare laws and regulations, as well as changes in healthcare policy, could adversely affect our business. |
Risks Related to Third Parties
| ● | We rely on third parties to supply raw materials, to conduct clinical trials, and to manufacture PEDMARK®. If these third parties fail to satisfactorily perform for us, or if they fail to comply with applicable legal and regulatory requirements, it could have a material adverse effect on our business. |
Risks Related to Government Regulation
| ● | The regulatory approval process is lengthy, and we may not be able to obtain all of the regulatory approvals required to manufacture and commercialize PEDMARK® in all areas in which we are licensed to supply it. |
| ● | We may face significant delays in our clinical studies and trials due to an inability to recruit patients for our clinical studies and trials or to retain patients in the clinical studies and trials we may perform. |
| ● | If our third-party suppliers or contract manufacturers do not maintain appropriate standards of manufacturing in accordance with cGMP and other manufacturing regulations, our development and commercialization activities could suffer significant interruptions or delays. |
| ● | PEDMARK® is subject to ongoing regulatory review. If we fail to comply with continuing United States and applicable foreign regulations, we could lose approvals for PEDMARK®, and our business would be severely harmed. |
| ● | Enacted and future legislation or judicial action may increase the difficulty and cost for us to commercialize PEDMARK® or any other drug candidates we may acquire or license and affect the prices we may obtain. |
| ● | If we fail to obtain or subsequently maintain orphan drug exclusivity or regulatory exclusivity for PEDMARK® and any other orphan drug candidates we may acquire or license, our competitors may sell products to treat the same conditions at greatly reduced prices, and our revenues would be significantly adversely affected. |
| ● | Changes to the Orphan Drug Act or successful legal challenges to the FDA’s interpretation of the Orphan Drug Act may affect our ability to obtain or subsequently maintain orphan drug exclusivity or may affect the scope orphan drug exclusivity for our product. |
| ● | Our operations and relationships with healthcare providers, healthcare organizations, customers and third-party payors are subject to applicable anti-bribery, anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which could expose us to, among other things, enforcement actions, criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings. |
Risks Related to Our Intellectual Property
| ● | We are dependent on our relationships and license agreements, and we rely upon the patent rights granted to us pursuant to the license agreements. |
| ● | Our success will depend significantly on our ability to operate without infringing the patents and other proprietary rights of third parties. |
| ● | We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights. |
| ● | If we cannot obtain new patents, maintain our existing patents, and protect our trade secrets and other intellectual property, our business and competitive position may be harmed. |
| ● | Patent protection for PEDMARK® may expire before we are able to fully realize its commercial value. |
| ● | We are currently and may in the future be the target of patent litigation, which may be costly and time-consuming to defend. |
| ● | Changes in United States patent law could diminish the value of patents in general, thereby impairing our ability to protect PEDMARK®. |
| ● | If we are found to be infringing third-party patents, we may be forced to pay damages and/or obtain a license. If we cannot obtain a license, we may be prevented from the manufacture and sale of PEDMARK®. |
| ● | It is possible that we could lose market exclusivity for PEDMARK® earlier than expected. |
Risks Related to Our Industry
| ● | Drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. |
| ● | The biotechnology and pharmaceutical industry, and in particular the field of cancer therapeutics where we are focused, is highly competitive. We face significant competition from other pharmaceutical, biopharmaceutical, and biotechnology companies, many of which have significantly greater financial, technical, and human resources than we do and may be better equipped to develop, manufacture, and market products. |
Risks Related to Information Technology
| ● | If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences. |
| ● | Increasing use of social media could give rise to liability, breaches of data security, or reputational damage. |
There are also general risk factors relating to us that you should consider that relate to our business and to our common stock.
Our current plans and objectives are based on assumptions relating to the continued commercialization of PEDMARK®. Although we believe that our assumptions are reasonable, any of our assumptions could prove inaccurate. In light of the significant uncertainties inherent in the forward-looking statements we have made herein, which reflect our views only as of the date of this report, you should not place undue reliance upon such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
