Fennec Pharmaceuticals Inc. (NASDAQ:FENC) is a biopharmaceutical company that has made significant strides in the development and commercialization of its lead product, PEDMARK®, a groundbreaking treatment for reducing the risk of ototoxicity associated with cisplatin chemotherapy in pediatric patients. With a strong financial position, a growing commercial footprint, and an exciting partnership in Europe, Fennec is poised to capitalize on the immense potential of its innovative therapy.
Fennec Pharmaceuticals is a commercial-stage biopharmaceutical company focused on its sole product candidate, PEDMARK®. In September 2022, the company received approval from the U.S. Food and Drug Administration (FDA) for PEDMARK® 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 made PEDMARK® the first and only treatment approved by the FDA in this area of significant unmet medical need.
Cisplatin-Induced Ototoxicity: A Significant Unmet Need
Cisplatin and other platinum-based therapies are essential chemotherapeutic agents for the treatment of many pediatric malignancies. Unfortunately, these treatments can cause ototoxicity, or permanent and irreversible hearing loss, which is particularly harmful to the survivors of pediatric cancer. The incidence of ototoxicity depends on the dose and duration of chemotherapy, and many of these children require lifelong hearing aids or cochlear implants, which can be costly over time. Infants and young children affected by ototoxicity at critical stages of development often lack speech and language development, while older children and adolescents may struggle with social-emotional development and educational achievement. PEDMARK® is the first and only approved therapy to address this significant unmet need.Commercial Launch and Expansion
Fennec launched PEDMARK® in the United States in October 2022, and the product has since gained traction in the market. In the first quarter of 2024, the company reported net PEDMARK® product sales of $7.4 million, along with $18 million in licensing revenue from its exclusive licensing agreement with Norgine to commercialize PEDMARQSI® (the brand name for PEDMARK® outside the U.S.) in Europe, Australia, and New Zealand.The company's commercial strategy has focused on targeting the community hospital infusion centers that treat pediatric patients within PEDMARK®'s label and the National Comprehensive Cancer Network (NCCN) guidelines for adolescents and young adults. This segment represents a significant opportunity, as these older patients require approximately 4 times as much PEDMARK® as younger patients.
Fennec has faced some challenges in the early stages of its relaunch into the adolescent and young adult (AYA) population, including issues with the J-Code differentiation between PEDMARK® and other formulations of sodium thiosulfate. However, the company has worked closely with the Centers for Medicare & Medicaid Services (CMS) to resolve these issues, and the new J-Code specifying PEDMARK® became effective on April 1, 2024. Fennec expects this change to drive improved uptake in the coming quarters.
Another challenge has been the unlawful compounding of copies of PEDMARK® by some pediatric hospital pharmacies, which the company is actively addressing in collaboration with the FDA. Fennec remains optimistic that it will be able to navigate these marketplace challenges and achieve its long-term objectives.
Recent Developments
In March 2024, Fennec announced an exclusive licensing agreement with Norgine, a leading European specialty pharmaceutical company, to commercialize PEDMARQSI® in Europe, Australia, and New Zealand. Under the terms of the agreement, Fennec received an upfront payment of approximately $43.2 million and is eligible for up to $230 million in additional commercial and regulatory milestone payments, as well as tiered royalties on net sales of PEDMARQSI® in the licensed territories, ranging from the mid-teens to the mid-twenties.This partnership represents a significant milestone for Fennec, as it provides the company with substantial upfront funding, the potential for future milestone and royalty payments, and an experienced partner to successfully launch PEDMARQSI® in the licensed territories. Norgine has committed significant resources, including a sales and marketing team of over 50 FTEs, to support the launch and commercialization of PEDMARQSI® in Europe, Australia, and New Zealand.
Financials
Fennec's financial performance has been strong, with the company reporting net income of $12.8 million in the first quarter of 2024, compared to a net loss of $6.1 million in the same period of the previous year. This significant improvement in profitability was driven by the company's growing PEDMARK® product sales, as well as the $18 million in licensing revenue from the Norgine agreement.For the full year 2023, Fennec reported annual revenue of $21.6 million, annual net income of -$16.3 million, annual operating cash flow of -$17.5 million, and annual free cash flow of -$17.5 million. The company's financial position has been further strengthened by the $43.2 million upfront payment from the Norgine agreement, which, combined with its existing cash and cash equivalents, resulted in a cash balance of $51.2 million as of March 31, 2024.
Fennec's financial ratios also demonstrate the company's improving financial health. As of March 31, 2024, the company had a current ratio of 6.93, a quick ratio of 6.72, and a cash ratio of 5.2, indicating a strong liquidity position to support its ongoing operations and growth initiatives.
Risks and Challenges
While Fennec has made significant progress, the company faces several risks and challenges that investors should be aware of. The ongoing issue of unlawful compounding of PEDMARK® by some pediatric hospital pharmacies poses a potential threat to the company's market share and revenue growth. Fennec is actively working with the FDA to address this problem, but there is no guarantee of a timely or effective resolution.Additionally, the company's success is heavily dependent on the continued adoption and utilization of PEDMARK® in the AYA population, which may be impacted by factors such as physician education, payer coverage, and logistical challenges in administering the treatment. Fennec's ability to navigate these obstacles and drive increased PEDMARK® usage will be crucial to its long-term success.
Outlook
Despite the challenges, Fennec's outlook remains promising. The company's exclusive licensing agreement with Norgine provides a significant boost to its financial resources and expands the global reach of PEDMARK®. The company expects the PEDMARQSI® launch in Europe, Australia, and New Zealand to commence in the fourth quarter of 2024, further diversifying its revenue streams.In the United States, Fennec is confident that it can overcome the current marketplace challenges and drive increased adoption of PEDMARK® in the AYA population, which represents a substantial opportunity for the company. The resolution of the J-Code issue and the ongoing efforts to educate the medical community and address logistical hurdles are expected to contribute to an acceleration in PEDMARK® revenue in the coming quarters.