Business Overview and History
Fennec Pharmaceuticals Inc. (FENC) is a commercial-stage specialty pharmaceutical company focused on the development and commercialization of PEDMARK®, a breakthrough therapy to reduce the risk of ototoxicity, or hearing loss, associated with cisplatin chemotherapy in pediatric patients with localized, non-metastatic solid tumors. With its FDA approval in September 2022 and recent European Commission Marketing Authorization in June 2023, PEDMARK has emerged as a transformative solution for cancer patients facing the devastating lifelong impact of cisplatin-induced hearing loss.
Fennec Pharmaceuticals Inc. was originally formed under the name Adherex Technologies Inc. and subsequently changed its name to Fennec Pharmaceuticals Inc. on September 3, 2014. The company's sole focus has been on the development and commercialization of its only product, PEDMARK.
In February 2013, Fennec entered into an exclusive license agreement with Oregon Health Science University (OHSU) for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK and their use in oncology. This agreement was further expanded in May 2015 when Fennec negotiated an amendment to include the use of N-acetylcysteine as a standalone therapy and/or in combination with PEDMARK for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers.
A significant milestone was achieved in September 2022 when PEDMARK received FDA approval 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 made PEDMARK the first and only treatment approved by the FDA in this area of unmet medical need. The product became commercially available in the U.S. in October 2022.
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. This inclusion further solidified PEDMARK's position as a standard of care in the field.
June 2023 marked another crucial achievement for Fennec when PEDMARK, known as PEDMARQSI in Europe, received European Commission Marketing Authorization. This decision included the receipt of a Pediatric Use Marketing Authorization (PUMA) in the European Union, granting up to 10 years of data and market protection.
Throughout its history, Fennec has faced the challenge of navigating the complex regulatory approval process for PEDMARK, which took several years to complete. The company has successfully overcome these hurdles and established PEDMARK as the standard-of-care for the prevention of cisplatin-induced ototoxicity, positioning the product for commercial success.
Financial Performance and Ratios
Fennec's financial performance has undergone a significant transformation since the approval and launch of PEDMARK. In fiscal year 2024, the company reported net product sales of $29.6 million, a 40% increase from the prior year's $21.3 million. This growth was driven by the successful commercial launch of PEDMARK in the United States, as well as the recent European launches in the United Kingdom and Germany.
The company's gross profit margin stood at an impressive 93.5% in fiscal year 2024, reflecting the favorable economics of PEDMARK. However, Fennec's operating expenses have also increased, with selling and marketing expenses rising to $18.4 million in 2024 from $12.1 million in 2023, as the company invested in expanding awareness and adoption of PEDMARK.
Despite these investments, Fennec maintained a disciplined approach to spending, delivering a relatively low cash burn of $0.6 million in the fourth quarter of 2024. As of December 31, 2024, the company had $26.6 million in cash and cash equivalents, providing a solid financial foundation to support its ongoing operations and strategic initiatives.
For the most recent fiscal year, Fennec reported annual revenue of $29.6 million and an annual net loss of $16.05 million. The company's annual operating cash flow and free cash flow both stood at -$17.14 million. In the fourth quarter of 2024, Fennec achieved revenue of $7.9 million, representing a 13% year-over-year growth.
It's worth noting that Fennec currently sells PEDMARK only in the US market, with European sales expected to commence through its partnership with Norgine.
Liquidity
Fennec's liquidity position has remained strong, supported by the successful commercial launch of PEDMARK and strategic financial management. The company's cash and cash equivalents of $26.6 million as of December 31, 2024, provide a solid foundation for ongoing operations and future growth initiatives. Additionally, the company's disciplined approach to spending, as evidenced by the low cash burn of $0.6 million in the fourth quarter of 2024, demonstrates effective cash management practices.
Fennec's debt-to-equity ratio stands at -6.21, reflecting the company's current capital structure. The company has a $32 million convertible debt facility with Petrichor Healthcare Capital Management, of which $19 million is currently outstanding after an early partial repayment of $13 million.
The company's current ratio of 7.80 and quick ratio of 7.64 indicate a strong short-term liquidity position, with ample resources to meet its near-term obligations.
Expanding Reach and Impact
Fennec's primary focus has been on establishing PEDMARK as the standard of care for preventing cisplatin-induced ototoxicity in pediatric patients with localized, non-metastatic solid tumors. The company has made significant strides in this regard, with PEDMARK gaining inclusion in the National Comprehensive Cancer Network (NCCN) clinical practice guidelines for Adolescent and Young Adult (AYA) Oncology, receiving a category 2A recommendation.
Furthermore, Fennec has forged an exclusive licensing agreement with Norgine Pharma UK Limited to commercialize PEDMARQSI (the European branded name for PEDMARK) in Europe, New Zealand, and Australia. The agreement provides Fennec with an upfront payment of €40 million and the potential for up to €210 million in additional milestone and royalty payments.
The successful launches of PEDMARQSI in the United Kingdom and Germany in early 2025 mark an important step in Fennec's global expansion strategy, ensuring broader access to this transformative therapy for cancer patients at risk of hearing loss.
Importantly, Fennec is also exploring opportunities to expand the use of PEDMARK beyond the initial pediatric indication. The company has an ongoing investigator-initiated trial in Japan (STS-J01) evaluating the efficacy and safety of PEDMARK in reducing ototoxicity in children and adolescents with localized solid tumors. The results of this trial, expected in the second half of 2025, could pave the way for potential registration and partnering or licensing of PEDMARK in Japan.
Mitigating Risks and Enhancing Execution
While Fennec has made impressive strides, the company faces several risks and challenges that it must navigate effectively. The competitive landscape, which includes compounded sodium thiosulfate products, requires Fennec to maintain a strong focus on driving awareness and adoption of PEDMARK among healthcare providers.
Additionally, Fennec's reliance on a limited number of specialty distributors in the United States and its ongoing European commercialization efforts through the Norgine partnership introduce inherent risks that the company must manage carefully.
To mitigate these risks and enhance its execution, Fennec has strengthened its executive leadership team with the appointments of Pierre S. Sayad, PhD, M.S., as Chief Medical Officer, Terry Evans as Chief Commercial Officer, and Christiana Cioffi, MBA, as Chief Strategy Officer. These seasoned industry veterans bring deep expertise in clinical development, commercial strategy, and business operations, positioning Fennec for continued success.
Furthermore, the company's early partial repayment of $13 million of its outstanding convertible debt facility with Petrichor Healthcare Capital Management in December 2024 demonstrates a strategic focus on optimizing its capital structure and reducing interest expenses, further bolstering its financial flexibility.
Preserving Connections and Memories
At the heart of Fennec's mission is the profound impact PEDMARK can have on the lives of cancer patients and their families. By preventing the devastating, lifelong consequences of cisplatin-induced hearing loss, PEDMARK preserves the ability of these patients to hear the laughter of loved ones, engage in everyday conversations, and maintain their connections and memories – essential elements of a fulfilling life.
As Fennec continues to expand the availability of PEDMARK globally, the company remains steadfast in its commitment to making a meaningful difference in the lives of cancer patients and their loved ones. With a robust pipeline, a strengthened leadership team, and a strong financial position, Fennec is well-positioned to navigate the challenges ahead and drive sustained growth, ultimately fulfilling its mission of preserving connections and memories for those affected by cancer.
Product Segment and Market Opportunity
Fennec's primary product segment revolves around PEDMARK (sodium thiosulfate injection), which is the company's only FDA-approved and European Commission-approved product. PEDMARK is indicated to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older 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.
The cisplatin-induced ototoxicity (hearing loss) prevention market for pediatric cancer patients is estimated to be over $500 million globally, highlighting the significant market opportunity for PEDMARK. In the United States, Fennec sells PEDMARK through an experienced field force and medical science liaisons who are educating the medical community and patients about cisplatin-induced ototoxicity and the company's patient access program, Fennec HEARS. PEDMARK received 7 years of Orphan Drug Exclusivity in the U.S. starting from its September 2022 approval date.
For the nine months ended September 30, 2024, Fennec reported net product sales of PEDMARK of $21.66 million, compared to $11.52 million in the same period of 2023. The company also recognized $17.96 million in licensing revenue related to the exclusive licensing agreement with Norgine to commercialize PEDMARQSI in Europe, New Zealand, and Australia.
Future Outlook and Guidance
Looking ahead, Fennec anticipates the most significant quarter-over-quarter growth in net product sales for PEDMARK to occur in the second half of 2025, as the company's foundational pillars and initiatives are expected to materially impact PEDMARK's growth. The company expects full year 2025 cash operating expenses to be similar to the $33 million spent in 2024, which includes a step-up in marketing expenses and increased headcount, offset by the elimination of any pre-commercialization expenses related to Europe or the Norgine transaction.
Fennec has highlighted the potential to achieve the first two sales, royalty, and related milestones from its licensing agreement with Norgine for the commercialization of PEDMARK in the UK and Germany by the end of 2025. This, coupled with the ongoing focus on growing net product sales for PEDMARK, positions the company for continued growth and expansion in the coming years.
As Fennec continues to execute its strategic initiatives and expand the reach of PEDMARK, the company remains well-positioned to capitalize on the significant market opportunity in cisplatin-induced ototoxicity prevention, driving long-term value for patients, healthcare providers, and shareholders alike.