Fennec Pharmaceuticals Inc. (FENC) is a commercial-stage specialty pharmaceutical company focused on the development and commercialization of PEDMARK, a revolutionary treatment to reduce the risk of ototoxicity, or permanent hearing loss, associated with cisplatin-based chemotherapy in pediatric patients. With its recent FDA and European Commission approvals, Fennec is poised to transform the landscape of childhood cancer treatment and provide a crucial solution to an unmet medical need.
Business Overview and History: Fennec Pharmaceuticals was originally formed under the name Adherex Technologies Inc. in 1998 and subsequently changed its name to Fennec Pharmaceuticals in 2014. The company is a specialty pharmaceutical company focused on developing and commercializing a product to reduce the risk of ototoxicity associated with cisplatin treatment in pediatric patients.
In February 2013, Fennec entered into an exclusive license agreement with Oregon Health & Science University (OHSU) for worldwide license rights to intellectual property directed to thiol-based compounds, including their lead product candidate PEDMARK. Fennec later negotiated an amendment to this agreement in 2015 that expanded their exclusive license to include the use of N-acetylcysteine as a standalone therapy or in combination with PEDMARK.
Fennec faced challenges in getting PEDMARK approved, as the manufacturing costs for the product prior to regulatory approval were not capitalized as inventory but were instead expensed as research and development costs. The company could not reasonably anticipate FDA approval of PEDMARK at that time.
Over the next decade, Fennec conducted two pivotal Phase 3 clinical trials, COG ACCL0431 and SIOPEL 6, which demonstrated PEDMARK’s ability to significantly reduce the risk of permanent hearing loss in pediatric patients receiving cisplatin-based chemotherapy. These landmark studies formed the basis for the product’s regulatory approvals.
In September 2022, PEDMARK became the first and only FDA-approved therapy indicated to reduce the risk of ototoxicity associated with cisplatin treatment in pediatric patients one month of age and older with localized, non-metastatic solid tumors. This approval was followed by the European Commission’s marketing authorization for PEDMARQSI (the European branded name for PEDMARK) in June 2023, which included 10 years of data and market protection under the Pediatric Use Marketing Authorization (PUMA) designation.
Financial Overview: Fennec’s financial performance has shown promising signs of growth since the commercial launch of PEDMARK. For the nine months ended September 30, 2024, the company reported net product sales of approximately $22 million, more than all of 2023’s net product sales. This growth was driven by the successful reimbursement and adoption of PEDMARK, particularly in the adolescent and young adult (AYA) patient population.
In the most recent fiscal year (2023), Fennec reported revenue of $21.25 million, with a net loss of $16.05 million. Operating cash flow (OCF) and free cash flow (FCF) for 2023 were both negative $17.14 million. For the most recent quarter (Q3 2024), the company reported revenue of $6.97 million, representing a 7.0% year-over-year growth compared to Q3 2023. The net loss for Q3 2024 was $5.74 million, compared to a $1.87 million net loss in Q3 2023, driven by higher operating expenses related to commercialization efforts and legal costs. OCF and FCF for Q3 2024 were negative $2.21 million as the company continues to invest in commercial launch activities.
In addition to product sales, Fennec reported $17.96 million in licensing revenue during the nine months ended September 30, 2024, related to an exclusive licensing agreement it entered into with Norgine Pharma UK Limited in March 2024 to commercialize PEDMARK (branded as PEDMARQSI) in Europe, New Zealand and Australia. The agreement provided Fennec with an upfront payment of $40 million and includes the potential for up to $230 million in future milestone and royalty payments.
Liquidity: The company’s balance sheet remains strong, with approximately $40.3 million in cash, cash equivalents, and investment securities as of September 30, 2024. This liquidity is expected to fund Fennec’s planned operations into at least 2026, providing the resources necessary to execute on its strategic initiatives. Excluding a $0.7 million severance payment to the previous CEO, the cash position would have been nearly $41 million, representing a decrease of approximately $2 million for the quarter.
Fennec’s debt-to-equity ratio stands at -6.21 as of Q3 2024. The company has access to up to $45 million in convertible notes under a financing agreement, of which $30 million was drawn as of Q3 2024. The current ratio is 7.80, and the quick ratio is 7.64, indicating a strong short-term liquidity position.
Operational Highlights and Growth Drivers: Under the leadership of newly appointed CEO Jeff Hackman, who joined the company in August 2024, Fennec has implemented a multi-pronged strategy to drive the adoption of PEDMARK and address the significant unmet need for ototoxicity prevention in pediatric cancer patients.
One of the key focus areas has been the expansion into the AYA patient segment. In the third quarter of 2024, Fennec achieved multiple patient administrations of PEDMARK in the AYA population, along with successful reimbursement from major health plans. This momentum was driven by increased awareness and educational efforts targeting the AYA oncology community, which represents a significant market opportunity with an estimated 10,000 patients treated annually with cisplatin.
Fennec has also made strategic investments to strengthen its executive leadership team, appointing experienced biopharmaceutical industry veterans as the Chief Medical Officer, Chief Commercial Officer, and Chief Strategy Officer. These new hires bring deep expertise in areas such as medical affairs, commercial strategy, and oncology market access, positioning the company for continued growth and execution.
On the international front, Fennec’s exclusive licensing agreement with Norgine to commercialize PEDMARQSI in Europe, New Zealand, and Australia is expected to generate an additional revenue stream starting in 2025 as the product is launched in these markets.
PEDMARK has been granted Orphan Drug Exclusivity in the U.S., providing seven years of market exclusivity from its September 2022 FDA approval until September 2029. Fennec has also obtained several patents covering the PEDMARK formulation and its use that have been listed in the FDA’s Orange Book, further protecting the product.
Risks and Challenges: While Fennec has made significant strides in the commercialization of PEDMARK, the company faces several risks and challenges that investors should be aware of:
Reimbursement and market access: Ensuring consistent and favorable reimbursement coverage for PEDMARK across various healthcare plans and systems, both in the U.S. and internationally, will be crucial for the product’s commercial success.
Competitive landscape: Although PEDMARK is currently the only FDA-approved therapy for ototoxicity prevention, the potential for future competition from alternative treatments or compounded formulations could pose a risk to Fennec’s market position.
Regulatory uncertainties: Any delays or setbacks in the regulatory approval process for PEDMARK in new markets or indications could hamper the company’s growth plans.
Financial performance: Despite growing revenues, Fennec continues to report net losses and negative cash flows. The company will need to carefully manage its expenses and cash position to achieve profitability.
Industry Trends: The pediatric cancer market, especially for platinum-based chemotherapies like cisplatin, is expected to see a compound annual growth rate (CAGR) of 5-7% over the next 5 years. The expanding use of PEDMARK in the adolescent and young adult (AYA) population represents a significant growth opportunity for the company, aligning with broader industry trends towards more targeted and supportive care in oncology.
Conclusion: Fennec Pharmaceuticals is at a pivotal juncture, poised to capitalize on the significant unmet need for ototoxicity prevention in pediatric cancer patients. With the recent approvals of PEDMARK/PEDMARQSI, a strengthened executive team, and a focus on strategic initiatives to drive awareness and adoption, the company is well-positioned to transform the standard of care and improve outcomes for children and adolescents undergoing cisplatin-based chemotherapy. The company’s financial performance shows promising growth in product sales and a strong liquidity position, supported by strategic licensing agreements.
As Fennec navigates the challenges ahead, including ongoing patent litigation and the need to expand market access, investors will be keen to monitor the company’s ability to execute on its growth plans and solidify its position as a leader in this important therapeutic area. The potential for expansion into the AYA market and international territories provides significant growth opportunities, while the company’s strong cash position offers runway to fund operations and continue its commercial initiatives. With its unique product offering and focused strategy, Fennec Pharmaceuticals represents an intriguing opportunity in the specialty pharmaceutical sector, particularly for those interested in companies addressing critical unmet needs in pediatric oncology.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.