Executive Summary / Key Takeaways

• Fennec Pharmaceuticals is leveraging its unique, FDA-approved product, PEDMARK, the first and only therapy to reduce cisplatin-induced hearing loss in pediatric patients, to target significant growth in the underserved Adolescent and Young Adult (AYA) market.
• Recent strategic initiatives, including a refined targeting model, enhanced patient support programs (Fennec HEARS), and positive NCCN guideline updates, are driving tangible traction and increasing adoption in key academic and community centers for AYA patients.
• International expansion through the Norgine partnership is underway with commercial launches in Germany and the U.K. in early 2025, expected to provide additional revenue streams through royalties and potential milestones.
• Financial performance shows promising trends with Q1 2025 net product sales increasing 18% year-over-year and 11% quarter-over-quarter, marking the second consecutive quarter of growth, supported by operational efficiencies and a strengthened balance sheet following a recent debt paydown.
• Management anticipates the most significant quarterly growth in net product sales in the second half of 2025, targeting $8.5 million to $9 million in quarterly sales as an internal benchmark for cash flow breakeven, while maintaining full-year 2025 cash operating expenses similar to 2024 levels (~$33 million).

A Unique Solution for a Devastating Side Effect

Fennec Pharmaceuticals is a commercial-stage biopharmaceutical company singularly focused on addressing a critical unmet medical need: cisplatin-induced ototoxicity (CIO), or permanent hearing loss, in young cancer patients. At the heart of Fennec's business is PEDMARK (sodium thiosulfate injection), the first and only therapy approved by the FDA for this specific indication – reducing the risk of ototoxicity associated with cisplatin in pediatric patients aged one month and older with localized, non-metastatic solid tumors.

The devastating impact of hearing loss on children and adolescents undergoing life-saving chemotherapy is profound, affecting speech and language development, educational achievement, and social-emotional well-being. PEDMARK represents a significant technological advancement in supportive oncology care. Clinical studies, including the pivotal SIOPEL 6 and COG ACCL0431 Phase 3 trials, demonstrated a significant reduction in the occurrence of cisplatin-induced ototoxicity, approximately 50% compared to cisplatin alone. This quantifiable benefit provides a clear differentiation from existing alternatives, primarily compounded sodium thiosulfate, which may pose potential serious health risks to patients. PEDMARK's unique formulation as a single-dose, ready-to-use vial for intravenous use further enhances its appeal by simplifying administration. For investors, this technological differentiation and regulatory exclusivity translate into a competitive moat, potentially enabling premium pricing and driving market penetration in a focused niche.

Within the competitive landscape, Fennec operates against a backdrop of much larger pharmaceutical companies like Jazz Pharmaceuticals (JAZZ), Merck & Co. (MRK), and Pfizer Inc. (PFE), which have broad oncology portfolios and established market presence. While these giants may offer other supportive care products, they lack a directly approved therapy specifically for the prevention of cisplatin-induced ototoxicity. Fennec's strength lies in its specialized focus and regulatory advantage in this niche. However, its smaller scale presents operational challenges, potentially leading to higher per-unit costs compared to the economies of scale enjoyed by larger rivals. The primary direct competition comes from compounded sodium thiosulfate, which, while available, lacks the rigorous testing, regulatory oversight, and proven safety profile of an FDA-approved product like PEDMARK. Fennec's strategic positioning leverages its approved status and clinical data to educate healthcare providers and differentiate PEDMARK as the standard of care for CIO prevention.

Expanding Horizons: From Pediatrics to AYA and Beyond

Fennec launched PEDMARK commercially in the U.S. on October 17, 2022, initially focusing on the pediatric oncology community. Building on this foundation, the company has strategically expanded its focus to the Adolescent and Young Adult (AYA) population (ages 15-39), recognizing this segment as a significant growth opportunity. The AYA market is estimated to include approximately 20,000 cisplatin chemotherapy patients annually across various tumor types, presenting a market potential greater than the traditional pediatric segment.

Momentum in the AYA segment is building. PEDMARK's inclusion in the NCCN clinical practice guidelines for AYA Oncology with a Category 2A recommendation in January 2023 was a crucial step. This was further bolstered by the modification of NCCN AYA guidelines in Q2 2024 to broaden consideration for PEDMARK in platinum-based regimens beyond just cisplatin and for patients up to 39 years of age. The company is actively pursuing formal inclusion in the NCCN Drug and Biologics Compendium, with a decision anticipated by mid-2025, which is key for expanding access and reimbursement pathways.

Operational efforts are supporting this expansion. Fennec has implemented a sophisticated, data-driven targeting model to focus its commercial team on high-volume cisplatin prescribers in both academic institutions and large community practices. Early traction is evident, with PEDMARK gaining adoption in select major academic centers across the country. The company has also successfully navigated reimbursement for AYA patients with major health plans, reporting over 90% reimbursement in Q3 2024. Addressing the logistical challenge of administering PEDMARK six hours post-cisplatin infusion, particularly in outpatient AYA settings, Fennec has enhanced its Fennec HEARS patient support program to streamline access, reimbursement, and facilitate home nursing capabilities through partnerships like Orsini Specialty Pharmacy. This focus on improving adherence and providing high-touch support is critical for broader adoption.

Beyond the U.S., Fennec is expanding its reach through strategic partnerships. In March 2024, the company entered into an exclusive licensing agreement with Norgine Pharma for the commercialization of PEDMARQSI (the brand name for PEDMARK outside the U.S.) in Europe, Australia, and New Zealand. This partnership provided Fennec with a significant upfront payment of approximately $43.2 million and includes potential future regulatory and commercial milestones of up to $230 million, plus tiered royalties ranging from the mid-teens to the mid-twenties on net sales. Norgine announced the commercial launch of PEDMARQSI in Germany and the U.K. in early 2025. Recent positive developments include positive final draft guidance from NICE in England and Wales in December 2024 and acceptance by the Scottish Medicine Consortium in May 2025, paving the way for broader access in these markets. Further global expansion efforts include an investigator-initiated trial in Japan (STS-J01), which completed enrollment in October 2024 with results expected in the second half of 2025, and a distribution partnership in Turkey and Gulf Cooperation Council Countries.

Financial Performance and Path to Profitability

Fennec's financial performance reflects its transition to a commercial-stage company and the initial impact of its strategic expansion. For the first quarter of 2025, the company reported net product sales of $8.8 million, an 18% increase compared to $7.4 million in Q1 2024 and an 11% increase sequentially from Q4 2024 ($7.9 million). This marks the second consecutive quarter of growth in net product sales, indicating positive commercial momentum. Full fiscal year 2024 net product sales reached $29.6 million, a substantial 40% increase from $21.3 million in 2023.

Operating expenses show strategic shifts. Selling and marketing expenses in Q1 2025 were $2.9 million, down from $5.2 million in Q1 2024, primarily due to the elimination of European pre-commercialization activities following the Norgine deal. However, full-year 2024 S&M expenses increased year-over-year ($18.4 million vs. $12.1 million) due to increased headcount and marketing efforts focused on the AYA population. General and administrative expenses were $6.1 million in Q1 2025, consistent with Q1 2024 ($5.9 million), but increased from Q4 2024 ($4.1 million) largely due to non-cash stock compensation and ongoing intellectual property litigation expenses related to the CIPLA (CIPLA) suit. Interest expense decreased in Q1 2025 ($0.6 million) compared to Q1 2024 ($1.0 million), a direct result of the $13 million debt paydown in December 2024.

Liquidity remains a key focus. As of March 31, 2025, cash and cash equivalents stood at $22.6 million, down from $26.6 million at December 31, 2024. The Q1 2025 cash burn of approximately $4 million was attributed to seasonally higher operating expenses and working capital timing. However, the company demonstrated operational efficiency in Q4 2024 with minimal cash burn ($0.6 million). Management believes current funds, significantly bolstered by the $43.2 million upfront payment from Norgine received in March 2024, provide sufficient funding for planned operations for at least the next twelve months from the May 14, 2025 filing date. The early partial repayment of $13 million of the Petrichor convertible debt in December 2024 optimized the balance sheet, saving approximately $1.5 million in future annual interest payments. As of March 31, 2025, approximately $19.5 million (inclusive of PIK interest) remains outstanding on the Second Closing Notes.

Management has provided clear indicators regarding the path to profitability. They anticipate the most significant quarterly growth in net product sales in the second half of 2025, driven by the full impact of implemented initiatives. Full-year 2025 cash operating expenses are expected to be similar to 2024, around $33 million. Internally, the company targets achieving quarterly net product sales of roughly $8.5 million to $9 million to reach cash flow breakeven.

Outlook and Key Considerations

The outlook for Fennec Pharmaceuticals is centered on executing its commercial strategy to drive increased adoption of PEDMARK, particularly within the AYA population, and realizing value from its international partnerships. Management's expectation for accelerated growth in the second half of 2025 hinges on the successful implementation of its refined targeting model, continued positive experiences and increased adherence facilitated by the Fennec HEARS program, and the impact of ongoing educational initiatives.

Key factors to watch include the pace of adoption in the AYA segment, especially in community settings, and the ability to overcome logistical challenges related to infusion center hours through expanded home administration options. The outcome of the formal NCCN Compendium inclusion request for neuroblastoma guidelines, anticipated by mid-2025, could further broaden market access. Internationally, the progress of Norgine's launches in Germany and the U.K., and the potential achievement of the first two sales, royalty, and related milestones by the end of 2025, will be important indicators. Results from the Japan trial (STS-J01) in the second half of 2025 could open up new strategic opportunities.

Risks remain, notably the ongoing patent infringement litigation against CIPLA, which challenges Fennec's intellectual property covering PEDMARK. While Fennec has strengthened its patent portfolio, the outcome of this suit could impact future market exclusivity. Competition from compounded sodium thiosulfate, particularly in the pediatric market, continues to be a factor, although Fennec is making inroads in institutions that previously compounded. Potential impacts from tariffs are currently deemed immaterial but warrant monitoring.

Conclusion

Fennec Pharmaceuticals stands at a pivotal point, transitioning from establishing its initial pediatric market presence to unlocking significant growth potential in the AYA population and expanding globally through strategic partnerships. The company possesses a unique, FDA-approved product addressing a critical unmet need, supported by clinical data demonstrating a quantifiable reduction in cisplatin-induced ototoxicity. Recent strategic refinements, coupled with positive early traction in the AYA segment and the commencement of international commercialization via Norgine, provide a compelling narrative for future growth.

While challenges such as ongoing litigation and competition from compounded alternatives persist, Fennec's focused execution, strengthened leadership team, and enhanced patient support infrastructure position it to capitalize on the expanding market opportunity. The path to cash flow breakeven is clearly defined by management's sales targets and expense management. Investors should monitor the company's progress in driving AYA adoption, the success of international launches, and key regulatory/clinical milestones as indicators of its ability to translate its unique value proposition into sustainable financial performance and create long-term shareholder value.