Good morning, ladies and gentlemen. And welcome to the Fennec Pharmaceuticals' Fourth Quarter and Full Year 2023 Earnings and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions on how to participate will be given at that time. As a reminder, today's conference is being recorded. Now I would like to turn the conference over to Fennec's Chief Financial Officer, Robert Andrade. You may begin.

Thank you, operator. And good morning, everyone. We appreciate you joining us today for Fennec Pharmaceuticals' fourth quarter and full year 2023 earnings conference call, during which we will review our financial results as well as provide a general business update. Joining me from Fennec this morning are Rosty Raykov, our Chief Executive Officer; and Adrian Haigh, our Chief Operating Officer. Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. References to these risks and uncertainties are made in today's press release and disclosed in detail in the company's periodic and current event filings with the US Securities and Exchange Commission. In addition, any forward-looking statements made on this call represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements. This conference call is being recorded for audio rebroadcast on Fennec's website, where it will be available for the next 30 days. And now I will turn the call over to Rosty Raykov. Rosty?

Thank you, Robert, and good morning, everyone. On today's call, we will detail our fourth quarter and full year 2023 financial results, all of which were outlined in our earnings press release issued this morning prior to this call. We'll also discuss ongoing commercial launch efforts and the progress that we're making with PEDMARK in the US and provide details on the exclusive licensing agreement we announced on Monday with Norgine, to commercialize PEDMARQSI in Europe, Australia, and New Zealand. As you may recall, we announced preliminary unaudited fourth quarter and full year 2023 net revenues at the end of February and we're pleased to report that PEDMARK delivered fourth quarter revenues of approximately $9 million. This brings our full year 2023 net revenues to approximately $21 million. It was an exciting year for Fennec given the strong performance with PEDMARK in the full fiscal year following its US commercial launch. We're pleased with our execution against strategic plans and our momentum in 2023 which sets the stage for further success in 2024 and beyond. We continue to be very encouraged with the progress we've made and we're even prouder of the work that is underway to sustain this momentum throughout 2024 and beyond. Earlier this year, we announced the FDA issued a public communication that is aware that some providers may be preparing other sodium thiosulfate products for patients used in place of PEDMARK, including the ruling STS products approved for other users to match the strength of PEDMARK. The FDA reminded healthcare providers that as stated in PEDMARK's prescribing information, PEDMARK is not substitutable with other sodium thiosulfate products. The FDA stated that such substitutions pose potential health risks, including potassium chloride, which at high doses can lead to increased risk of acute cardiac events and other serious adverse reactions; potassium chloride is not present in PEDMARK; overexposure to boric acid can cause health risks, including headache, hypothermia, restlessness, weariness, renal injury, dermatitis, alopecia and anorexia and indigestion; although PEDMARK also contains boric acid, it is at a lower concentration than other STS products; overexposure to sodium nitrate can lead to health risks, including methemoglobinemia; sodium nitrate is co-packaged with sodium thiosulfate as a separate vial in some products is not present in PEDMARK. The public communication was issued by the FDA Professional Affairs and Stakeholder Engagement Staff with the Center for Drug Evaluation and Research Office and Communications. We are pleased with the FDA's reminder to providers of this issue, which supports our educational efforts in establishing PEDMARK as the necessary complement agent when prescribing a cisplatin-based therapy for appropriate patients with localized non-metastatic solid tumors. To that end, earlier this month, we sponsored an educational program with Med Safety Board, a subsidiary of Institute for Safe Medication Practices or ISMP, in which expert faculty Rita Jew and Noah Federman reviewed therapeutic considerations for reducing the risk of cisplatin-induced ototoxicity in pediatric patients. Regarding our commercial efforts, our sales force continues to target approximately 200 pediatric hospital centers, including COG, NCI, and NCCN institutions across the US that drive 80% of pediatric cisplatin use. We're also continuing to build upon our commercial momentum to expand the prescriber base to the community, increasing the utilization of the recent endorsement from the NCCN for PEDMARK in the adolescent and young adult (AYA) patient population. To be clear, our FDA indication is pediatric, and our commercial teams are only promoting our FDA indication. PEDMARK continues to have broad and favorable payer coverage, as evidenced by payer-approved US prescription claims with commercial insurance plans and Medicare Part D plans. As a reminder, we estimate that among current PEDMARK patients approximately 50% are commercially insured with another 50% insured through government-sponsored programs. With regards to our evaluation of the best commercial path in Europe, we were pleased to announce on Monday that Fennec has entered into an exclusive licensing agreement with Norgine, a leading European specialist pharmaceutical company, under which Norgine will commercialize PEDMARQSI in Europe, Australia, and New Zealand. PEDMARK is the first and only approved therapy in the EU and UK for the prevention of ototoxicity induced by cisplatin chemotherapy in patients one month to 18 years of age with localized non-metastatic solid tumors. Under the terms of the licensing agreement, Fennec received approximately $43 million in upfront consideration and the potential for up to approximately $230 million in additional commercial and regulatory milestone payments and tiered royalties on net sales of PEDMARQSI in the licensed territories up to the mid-2020s. Norgine will be responsible for all commercialization activities in the licensed territories and will hold all marketing authorizations. This partnership represents an important step in achieving our mission of expanding PEDMARQSI to patients across the globe who are at risk of suffering from cisplatin-induced ototoxicity. From a deal perspective, the terms provide us with many important benefits, including an upfront payment, further solidifying our balance sheet, attractive economic terms, providing meaningful participation in the ex-US success of PEDMARQSI, and an experienced partner to successfully launch PEDMARQSI in the licensed territory. In closing, I want to reiterate that the focus of our commercial strategy remains on executing the following: establishing PEDMARK as a necessary complement agent when prescribing the cisplatin-based therapy for appropriate patients with localized non-metastatic solid tumors; minimizing the barriers to access and ensuring rapid responses to product questions and inquiries; and establishing Fennec as the premier partner of choice in the oncology, inpatient, and community settings. With that, I will now turn the call over to Adrian who will provide an update on our commercial strategy and operations. Adrian?

Thanks, Rosty. As a reminder, we estimate that in the US, there are approximately 3,500 on-label pediatric oncology patients. The majority of these are treated in the specialist pediatric centers and receive an average of 12 vials per patient. Conversely, there are more than 25,000 15 to 39 year old cancer patients, many of whom receive cisplatin. And as Rosty said, the NCCN has recommended PEDMARK for this defined patient population with a 2A rating. Taking testicular cancer as an example, there are approximately 3,800 patients, and the majority of these are likely to receive high doses of cisplatin putting them at a very high risk of hearing loss. The average testicular cancer patient due to our weight-based dosing requires many more vials of PEDMARK than the younger pediatric patients. Testicular cancer has very high cure rates, 90% and beyond. But in such cases, hearing loss is lifelong and devastating; the unmet medical need for preventative treatment is clear. There is a very strong health economic argument that justifies spending on preventive treatment. These patients are exclusively treated in the community hospitals and infusion centers. AYA patients with cervical, ovarian, and head and neck cancers are also likely to be treated with cisplatin. And again, if prescribed, will require a significant number of vials of PEDMARK. Since November, our sales force has primarily focused their activities on the community-treated population. We have been very encouraged by the community's response to PEDMARK. Most of them, while being acutely aware of the hearing loss caused by cisplatin, were not aware of the availability of a preventative treatment. Incorporating PEDMARK into the treatment schedule requires some adjustment to current practice. For example, infusion clinics may have to stay open for an extra hour or so in order to accommodate the need to administer PEDMARK six hours after the end of cisplatin infusion. All of this takes some time to put in place. Consequently, we focused our efforts during the last few months on disease awareness and treatment awareness, and then subsequently working with the centers on the logistics of administration. We’re essentially just a couple of months into what is in effect a new launch for PEDMARK, but we're encouraged by the reception we've received. Patients have already been treated and reimbursed by payers. As we look forward to the conference season and in particular to ASCO, we intend to appropriately educate all oncologists and create awareness of PEDMARK. We've had to deal with one barrier to uptake and I'm pleased to say that from April 1st, this has been resolved. Prior to April 1, 2024, our J-Code did not differentiate between PEDMARK and other formulations of STS. As a consequence, there has been some confusion and impact to the adoption of PEDMARK. We informed CMS and in January 2024, CMS issued a new J-Code for the whole product and amended our J-Code to specify PEDMARK. Importantly, CMS has also stated that the two formulations are not interchangeable. To repeat, this important change will become effective on April 1, 2024 and we do expect a significant acceleration in uptake as a result. As Rosty mentioned, on January 8th, the FDA issued an email reminder that PEDMARK cannot be substituted with other formulations of STS due to significant safety concerns. As this email was not sent to individual doctors, individual pharmacists, or hospitals, but rather to organizations, for example, ASCO and the American Hospital Pharmacists Association, our sales force has been working to create further awareness of this notice to pediatric hospitals. As a result, a significant number of hospitals have scheduled new formulary committee meetings to discuss the FDA notice and some have already ceased compounding. Again, this doesn't happen overnight with many meetings taking place on a monthly or bi-monthly frequency. I'm also pleased to report that the American Hospital Pharmacist Association Drug Information Resource, AHFS has recently been amended to clearly differentiate between the various formulations of STS and clearly states they are not substitutable. So in closing, I'm very pleased with the progress we are making, and I'd like to thank the commercial and medical affairs teams for the tremendous effort they've made over the last few months, and I look forward to seeing the acceleration in revenue. With that, I'll turn the call over to Robert to go over the financials for the quarter and full year results. Robert?

Thank you, Adrian. Our press release contains details of our financial results for the fourth quarter and full year of 2023, which can be viewed on the Investors & Media section of our website. Rather than read through all of those details, my comments today will focus on some key financial results. The company recorded net product sales of PEDMARK for our first full fiscal year after launch of approximately $21 million in fiscal '23 with over $9 million in the recent Q4 2023. This compares to $1.5 million in fiscal year and fourth quarter of 2022. The increase in net sales reflects strong growth in new patient starts and accounts. G&A for the 2023 fiscal year increased by $2.3 million compared to the 2022 fiscal year. This increase is largely attributable to payroll and benefit-related expenses, which rose approximately $1 million, and higher non-cash stock-based compensation. Selling and marketing expenses, including remuneration of our sales and marketing employees, dollars spent on marketing campaigns, such as sponsorships, trade shows, presentations, and any activities to support marketing and sales activities. The company recorded $12.1 million in selling and marketing expenses in fiscal 2023 compared to $2.8 million in fiscal year 2022 as the launch of PEDMARK commenced in the fourth quarter of 2022. R&D expenses are negligible, as we've mentioned before, as the company reduced research and development costs when it received FDA and EMA approvals of PEDMARK. The majority of traditional research and development expenses associated with PEDMARK are now recorded as G&A expenses or capitalized into inventory and eventually recorded to costs of product sales. Our net cash used in operating activities was $16 million in 2023, which is consistent with our approximately $25 million in annual cash operating expenses prior to any contributions from net revenue. Further, Q4 2023 and the first six months of 2024 have additional expenses associated with the internal preparation for the EU launch, which with the announced partnership of Norgine, we anticipate these EU expenses to tail off significantly in the second half of 2024. And finally, our cash position, we ended the year with approximately $13 million in cash, cash equivalents, and investment securities, which included the December 2023 third closing of $5 million in senior secured convertible notes under the existing agreement with Petrichor. The original investment agreement provided access to up to $20 million of additional financing through December 31, 2023. As part of this closing, Fennec and Petrichor have amended the agreement to provide access to up to $15 million of additional financing through December 31, 2024. In addition and importantly, as announced earlier this week, we received approximately $43 million from the licensing of Europe, Australia, and New Zealand to Norgine. Inclusive of the licensing transaction, pro forma December 31, 2023 cash balance is in excess of $56 million. We anticipate that our cash, cash equivalents, and investment securities as of December 31, 2023, when coupled with PEDMARK revenue assumptions and the recently announced license agreement for Europe, will be sufficient to fund our planned operations for at least the next 12 months. And operator, with that, we are ready for questions.

And our first question will come from Naureen Quibria with Capital One Securities.

So I was just wondering if we think about the quarter last quarter, in terms of the growth, was it more from new accounts, repeat prescribers? And when do you think the contributions from the AYA group will filter in?

Yes, I would say overall it was really the hospital, the existing accounts, a few newer ones. I would also say that we did have several patients that started treatment that were in the AYA population and the volume attributed to the vial usage in those patients is significantly higher. But as you can imagine, those were also in the context of a CMS J-Code issue that has been resolved starting April 1.

And congrats on the licensing deal. I was just wondering maybe too related to that. So when will the transfer of the health technology, the ACA dossiers and any relevant materials, has that already occurred with Norgine? And do you expect to maintain the timeline for launch in Europe in the second quarter? And finally, related to that, who’s going to pursue the regulatory approval? I think you may have mentioned it, but I'm not sure in Switzerland, in Australia and New Zealand?

This is over to Adrian.

So the second question is easy to answer. Norgine will be responsible for everything regulatory in the licensed territories. So we've already begun the process of transferring the European and UK licenses to Norgine. They will be responsible for applying in Switzerland, Australia, and New Zealand. We already have begun the process of introducing Norgine to the health technology vendors. Norgine will take over or has taken over responsibility for the management of those vendors. It's not for me to comment on when Norgine will choose to launch. I think they will probably let the dust settle and evaluate where they are. So I would be anticipating a European launch probably in the second half of the year just for logistical reasons.

And our next question will be coming from Chase Knickerbocker with Craig-Hallum.

I wanted to share my congrats as well on the EU licensing deal. A really nice deal you negotiated there, I'm going to start there. Maybe the color is helpful around Norgine's plans kind of maybe second half of the year from a launch perspective. Maybe kind of building off that, they appear to be set to launch eflornithine in the near future as well, and it seems to be like they see some sort of strategic rationale on the synergies there. Can you kind of speak to the excitement level that Norgine has kind of launching those two assets together? And then second on that, this had to be, in my opinion, a pretty competitive process to get the strong terms that you received. Can you give us any sort of insight on how potential partners were thinking about the strategic value of PEDMARK as you kind of went through this process, not only in the EU but globally and in the US as well?

I can start by addressing the latter part of your question and then let Adrian take over. Regarding the value proposition of PEDMARQSI and PEDMARK, obtaining product approval is a challenging process, and it has taken us 14 years to reach this point. It's quite uncommon for a product to be developed within the pediatric oncology space. We have performed exceptionally well, not only in securing approval for this product but also in preparing it for a successful launch in Europe, thanks in large part to Adrian's efforts since he joined us in August. This preparation has positioned the asset to launch, with most of the associated risks now mitigated. This makes it very appealing to many interested parties, particularly given the specific market demand for such a unique product. Adrian, could you now address the initial part of the question regarding Norgine's overall direction moving forward?

Over the past six months, our work with European health technology vendors has led us to conclude that we can achieve a significant price in Europe. As you've noted, the process was competitive, and several potential partners reached the same conclusion. It was evident that they were excited about the product and were willing to invest more resources than we could commit due to our priorities in the US. The competition intensified, with several high-quality European specialty pharma companies eager to invest in PEDMARK. I am very pleased with our partnership with Norgine; they fully embrace the concept, and we are aligned on our pricing expectations. They view this as highly synergistic to their expanding portfolio in pediatric oncology and are ready to allocate substantial resources, both in personnel and funding, to support the launch.

Perhaps we can delve deeper into the J-Code matter. This is a somewhat complex question, but there will be a distinct J-Code for the other STS product. Is there any possibility of confusion regarding the ASP reporting for your J-Code? Will there be any ASPs reported for the other products that might be included in your J-Code, or will they be excluded?

There certainly has been that confusion that's going to be taken out. So it very clearly says STS PEDMARK, and then it says STS Hope. And there's also a footnote there saying that the products are not interchangeable.

And so you guys are confident that ASP is going to be accurate for your J-Code to reflect the pricing of your product starting April 1st?

Yes.

And if we kind of think about how that kind of parlays into maybe some of the confusion that was seen in the AYA population and those physicians. I mean, how should we think about potentially some volume kind of coming in, in that April 1st timeframe that once that confusion is kind of corrected, do you have a good handle on what kind of volumes out there that weren't using your product?

So what I would say, Chase, is that, as you know, this is not a chronic treatment. So you don't sort of have patients just waiting for it; it's really when the patient starts and then when the patient finishes with cisplatin treatment. So overall, we have visited many of these community oncology centers where the setting for cisplatin treatment takes place. And as Adrian mentioned from his comments, this is where the volume of cisplatin is administered for these patients and also where PEDMARK would be administered in this AYA population. So I think we have to wait and see how this plays out. But again, based on the numbers, we're highly encouraged that that will be well received.

And then maybe one more around the business and then one on financials. Just around the FDA communication. First of all, have you seen kind of any influx in kind of volume from that or subsequent to that communication? And then second, can you just update us on some of the metrics that you gave last quarter as far as kind of being in 20% of those 200 institutions and the max kind of being 25% penetration into an institution? Sorry if I missed that, but just an update there.

So maybe, Robert, you can address that, and then maybe, Adrian, you can address the earlier part.

Chase, I mean, our penetration continues to grow. I think that's reflected certainly in our net revenues. We don't want to set ourselves up on guardrails, and in particular, also as we expand in the market with the AYA population in the community hospitals. So those bases, the 25% and the 20% have certainly grown. But we're going to shy away from getting into the specific growth numbers at this time.

And Adrian, maybe you could chime one or two, I know you had in your prepared remarks in terms of how the P&T committees and hospitals take this FDA safety communication and how quickly they have that change.

As I said, unfortunately, this wasn't sent to individual doctors or hospitals, or pharmacists. It was sent to organizations, and I think it's about 12 different organizations. Initially, when our sales force went out, they would ask, 'Have you heard about the recent communications from the FDA?' Sometimes, the response was, 'No, I haven't seen it.' So the sales force has had to basically go out with the laptops or open up the laptops and show the email. And then things don't happen overnight. This has to go through the formulary committee process; there has to be discussion and people have to get buy-in. So these formulary committee meetings in most cases are just being scheduled or just about to take place. There's a handful that have stopped compounding immediately. But this takes time. So we have seen some increased use but it is not like switching a light on; it's slow.

And then just lastly, Robert, apologies for taking up so much time, guys, but I just want to dig in a little bit more on the SG&A. Can you give us a little bit more sense of what was in the quarter, at least benchmark us a little bit that we should consider kind of one-time expenses from any sort of consulting spend or deal-related expenses in Europe? Should we think of SG&A being flat once we back those out from Q3? And then as we look into 2024, how should we phase out those expenses, are we flat from an OpEx perspective into Q1 and then it starts to phase out, or how should we think about that?

I think you have a good benchmark there. Certainly in Q4, we did have a good amount of expenses related to our EU preparation and launch, which we believe is well worth it. That will continue. So those SG&A levels will continue into Q1 and start tailing off certainly into Q2. Our understanding is that it will basically go to very little, if any, for the second half of the year, kind of similar to my remarks.

Our next question will be a follow-up from Dipesh Patel of H.C. Wainwright.

This is Dipesh Patel on for Ron Selvaraju. Several questions. The first is, I'm wondering what are the stocking patterns like for PEDMARK at US hospitals and how does Fennec expect this to evolve over time?

I will address that. There are approximately 200 hospitals primarily associated with COG and CCN that we specifically target. These hospitals mainly treat pediatric patients in an inpatient setting. As we mentioned in previous calls, these hospitals undergo a stringent P&T process to approve a drug and add it to their formulary before usage. Our overall success in these accounts has been somewhat limited. With the recent FDA communication regarding safety risks, we feel encouraged, and our sales team, along with our medical team, is actively educating these hospitals. As Adrian noted, we are engaging with many of them, and while we have observed some changes, we would like to see more progress in the upcoming months. The hospital market can be challenging to navigate, so we take pride in what our team has achieved so far. Stay tuned for more positive developments, but it is important to note that changes may not happen overnight; they are gradual. We hope to see significant progress in the next three to six months, and we can discuss updates with you then.

And my second question, what kind of infrastructure does Norgine plan to use to launch PEDMARQSI in Europe and what is the estimated size of the opportunity there?

Adrian, over to you.

They have a presence in all major European markets as well as Australia and New Zealand. I estimate that they are planning to allocate around 50 full-time equivalents to the product and what I consider to be the necessary level of commercial investment to ensure the products' success. They are hiring a mix of new specialists to address gaps and also reallocating some existing staff. However, this is a very broad overview, and it's really a question for Norgine.

And what I would also add because we've interacted with several teams in Europe overall. And I would say that what Norgine is really committed to pediatric oncology. Not only do they have our product but they have another product as well that they're planning to launch roughly at the same time. It's really exciting because their passion and commitment is right up there with ours. I cannot be more pleased to see a very strong and capable player take on PEDMARQSI and really get access for it in these territories. So imagine that we're going through 200 hospitals in the NCCN/COG setting, so imagine that with each country and each healthcare system, health economic argument, etc. So it's a major, major task. And they have done this many times, and they're up for it. And importantly, they're really committed to this space. So this could not be a more perfect partner for PEDMARQSI. And in terms of the revenue expectations for the product, I would say that what we had modeled, as Adrian said earlier, is not that dissimilar to what they had modeled for it. So I think in terms of milestones and royalties, stay tuned to that. But most of the timing in these biotech deals, you have to be patient, if you will, and people sort of discount those things heavily. Let's give it a little bit of time, but I think most of these things are very realistic.

And then final question. Does Fennec plan to use any of the upfront cash from the Norgine transaction to expand its pipeline? If so, what kind of opportunities do you plan to pursue, whether it’s like development stage assets or approved products? And I think you kind of alluded to this, but I'll ask you the question. Is Fennec's long-term intent to remain focused on oncology?

I think we just closed this deal. So the Board and management obviously have to evaluate everything from 360 degrees. We've always been very good stewards of capital historically. I hope that to continue going forward. As you can imagine, the market is full of assets that need funding. And it's something that we, as management and Board will have to decide at some stage, whether that's what we want to pursue and we will obviously update the market on that. But for now, we're keeping our heads down, and we are executing on the opportunity ahead of us. I mean, as Adrian mentioned, from the number perspective, we have greater than 10 times the market opportunity in the community setting, and we're really focused on that. And what's really, really exciting is that despite the J-Code issue, we've been able to put patients on the drug, and those patients have been reimbursed, which is really important. So then from here, let's see what we can do in the coming months in terms of overall usage for the product, in addition to what's coming up down the pipe with the pediatric hospitals, which again, I discussed earlier from a P&T perspective.

And I'm showing no further questions at this time. I would now like to turn the conference back to Rosty for closing remarks.

Thank you for the discussion, and good questions and joining us today. We look forward to updating you on our continued launch progress and corporate milestones on future quarterly calls. Thank you, and have a great day.

And this concludes today's conference call. Thank you for participating. You may now disconnect.