Earnings Call Transcript - FENC Q2 2025

Operator, Operator

Good morning, ladies and gentlemen, and welcome to Fennec Pharmaceuticals' Second Quarter 2025 Earnings and Corporate Update Conference Call. 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.

Robert C. Andrade, CFO

Thank you, operator, and good morning, everyone. Thank you for joining us. We are pleased to host Fennec Pharmaceuticals' Second Quarter 2025 Earnings Conference Call today, during which we will review our financial results as well as provide a general business update. Joining me from Fennec this morning is our Chief Executive Officer and Board member, Jeff Hackman. 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. Reference 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 U.S. Securities and Exchange Commission. In addition, any forward-looking statements made on this call represent our views as of today only 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, www.fennecpharma.com, where it will be available for the next 30 days. And with that, I will now turn the call over to Jeff Hackman.

Jeffrey S. Hackman, CEO

Thanks, Robert. Good morning, everyone. Thanks for joining the call today. Well, it's hard to believe it's been a year since I stepped into the CEO role here at Fennec. When I joined, my focus was clear. I wanted to stabilize the business, sharpen our strategy, and build a strong foundation for sustainable growth. I'm proud to say that over the last 12 months, we've been delivering on these priorities, while also driving the awareness and adoption of PEDMARK for the prevention of cisplatin-induced ototoxicity or CIO. And the results are beginning to materialize. We are now talking about three consecutive quarters of growth and more to come. You may recall, after I joined Fennec last year, I outlined a focused set of strategic imperatives to drive our execution and accelerate the long-term growth of PEDMARK, which, remember, still remains the first and only FDA-approved therapy in the U.S. and Europe to reduce the risk of CIO or permanent hearing loss associated with cisplatin treatment. PEDMARK is specifically approved for pediatric patients one month of age and older with localized non-metastatic solid tumors and also was recognized by the National Comprehensive Cancer Network, or NCCN, with a 2A recommendation for the U.S. for use in adolescent and young adult patients. But before we dive into the performance for the quarter, let me update you on significant progress that we've made during the first half of this year. First, we made significant strides in increasing awareness of the unmet need among both oncology and broader cancer care communities. We've done this through continued presence at major conferences, targeted educational campaigns, and peer-to-peer interactions. We're seeing growing recognition that hearing loss from cisplatin is not just a side effect; it's preventable, and it's an issue with long-term consequences. We're seeing the strongest momentum in both large community practices and academic centers. Early validation of our targeted sales approach and enhanced patient support services is evident. And to that end, I'm pleased to share that a large national oncology group of providers recently added PEDMARK to its formulary for use in patients under 40 years of age. This is one of the largest and fastest-growing groups in the country; it’s a group of community-based oncology practices in the U.S. This decision reflects the growing recognition and the need to protect younger patients from cisplatin-induced hearing loss, and we're excited and encouraged by what it signals in terms of broader momentum for PEDMARK and adoption in the community settings. Second, we are actively working to cement PEDMARK as the standard of care for CIO prevention. During the second quarter, we held multiple advisory boards with leading academic centers across the country to better understand current approaches to diagnosing and managing CIO. The insights shared by key opinion leaders are now forming many of our cross-functional strategies. In parallel, positive feedback from existing accounts using PEDMARK continues to strengthen our confidence in our clinical value and support broader institutional adoption. I'm pleased to also share today that NCODA recently issued a positive quality intervention or PQI for PEDMARK. This is an important development that provides peer-reviewed, practical guidance to oncology care teams on the use, administration, and timing of PEDMARK to prevent CIO in pediatric and adolescent young adult patients. NCODA PQIs are widely used tools that support multidisciplinary cancer teams, including pharmacists, nurses, and oncologists in delivering high-quality care for patients receiving oral and IV therapies in oncology. Most importantly, we see PQI as a strong signal of growing clinical alignment around the importance of preventing cisplatin-induced ototoxicity and it supports our goal of establishing PEDMARK as the standard of care in this space. Third, we are expanding our CIO education to an important role of PEDMARK in preventing it, not just with oncologists but beyond. Many healthcare professionals are involved in the patient journey, including ENTs, audiologists, nurses, and pharmacists. These groups are now engaging with Fennec and PEDMARK, and we're seeing the benefit of this multidisciplinary support in day-to-day clinical practices. We are reminded that caring for these oncology patients, especially when it comes to survivorship and quality of life, goes beyond the role of just the oncologists. Fourth point I want to make is on the access front. We've made significant progress with payers and providers alike. Our field access and reimbursement teams have been instrumental in ensuring smoother coverage pathways and fewer barriers for the sites that are ready to treat. The strengthening of our Fennec HEARS patient assistance program has been central to this work. We've seen quarter-over-quarter growth in enrollment in Fennec HEARS programs, and the newly revamped offerings that we're delivering are giving improved experiences through strengthened healthcare provider practices, patient services, expanded payer reimbursement support, and streamlined access to home nursing resources. Finally, on the activation side, while our near-term commercial focus remains on educating healthcare providers to support a shift in the standard of care, we are also strengthening our efforts to educate and engage patients and caregivers. We are doing this through the support of several advocacy associations or organizations, such as the Testicular Cancer Awareness Foundation and activities surrounding initiatives like the Childhood Cancer Awareness month. These efforts help raise awareness of the risk of CIO and encourage families to engage in informed conversations about hearing protection during their treatment planning. Further, we are excited to announce that Fennec's senior leadership team and employees, along with several PEDMARK patients and their families, will ring the closing bell of the NASDAQ stock market on Friday, September 5, 2025. While this is an exciting business milestone for Fennec, it's a really important symbolic reminder of our mission, which is to help more patients be able to hear their own remission bells. Now turning to our second quarter 2025 results. Revenue grew 33% year-over-year and 10% sequentially with net revenues of $9.7 million. This kind of quarter-over-quarter growth just doesn't happen by chance. It reflects disciplined execution and a completely overhauled go-to-market strategy and having top talent in the right positions to execute this excellence. This quarter-over-quarter growth includes the addition of 14 new accounts, some of which are part of two large community oncology groups or purchase groups. Within these networks, we've seen PEDMARK activation in Q2, which continues to grow into Q3. Looking into Q3, we expect additional accounts within both of these networks to activate and prescribe PEDMARK. I'm incredibly proud of the Fennec team and encouraged by the continued growth that we're seeing, which reinforces our belief in the scalability of this model and the growing demand for PEDMARK across these key markets. With that, I'll now turn it back over to Robert.

Robert C. Andrade, CFO

Thank you, Jeff. It's really amazing to think that just one year ago, we did our first conference call together and the amount of progress to date under your leadership. I remember on that call, both thanking our shareholders for their support and patience as we underwent the transition, and stating that I believe the opportunity for Fennec was significant with proper execution ahead of us. Further, I'd like to give much appreciation and recognition to our new leadership team that Jeff brought into Fennec only nine months ago and who have been on the front lines in this execution. Christi Cioffi, our Chief Strategy Officer and leader in many areas, including our awareness and marketing initiatives; Terry Evans, our Chief Commercial Officer, who has primed our commercial team for optimal excellence; and Pierre Sayad, our Chief Medical Officer, whose experience and knowledge has transformed our medical team with new energy and vigor and the proper tools to educate and support providers and patients. I believe we are just getting started. Now on to the details. Our press release contains some of our financial results for the second quarter of 2025, which can be viewed on the Investors & Media section of our website. Rather than read through all those details, my comments today will focus on some key financial results. As Jeff outlined, for the second quarter of 2025, the company recorded net product sales of $9.7 million, representing a 33% increase compared to the same period last year and 10% growth over the first quarter of this year, matching the highest quarterly net product sales in the history of Fennec. Of significance, we are pleased to report our third consecutive quarter of sequential growth in net product sales. We have a great trend forming. Our revenue performance continues to demonstrate strong growth and commercial momentum, and we believe this is just getting started. As mentioned in our previous earnings, we are focused on growing net product sales throughout 2025. Importantly, we anticipate the most significant quarterly growth in the second half of 2025, when all the foundational pillars and initiatives we have implemented and continued to optimize are expected to materially impact growth of PEDMARK. The strong performance reflects both successful retention of existing customers and the exciting new uptake in demand for PEDMARK by new customers. Further, the launch of PEDMARQSI by Norgine in the EU is well underway in the United Kingdom and Germany, and we are pleased with the traction to date. We expect to provide additional updates on milestones and royalties from this partnership with Norgine in the quarters to come. Turning to our expenses. Our total cash operating expenses for the quarter, excluding noncash stock-based compensation, was approximately $11 million. This represents an increase of roughly $2 million compared to the first quarter of this year. The quarter-over-quarter increase was primarily driven by ongoing investments in marketing, additional headcount, as well as continued efforts related to our intellectual property. As is customary with our business, cash operating expenses are higher in the first half of the fiscal year, largely as a result of commercial and marketing spending patterns, and we expect these cash expenses to decrease in the second half of 2025. The company recorded $4.4 million in selling and marketing expenses in the second quarter of 2025 compared to $2.9 million in the first quarter of 2025 and $4.7 million in the second quarter of 2024. The primary drivers of the increase in the quarter include additional marketing expenses and a one-time accrual reversal that occurred only in Q1 2025. On the G&A front, the company recorded $7 million in the second quarter of 2025 compared to $6.1 million in the first quarter of 2025 and $6.9 million in the second quarter of 2024. For the second quarter of 2025, G&A expenses were consistent on a year-over-year basis and increased quarter-over-quarter, largely due to the following: one, increased noncash stock compensation; and two, ongoing litigation and intellectual property expenses. For the quarter, the company spent roughly $4 million in cash. Cash and cash equivalents were approximately $18.7 million as of June 30, 2025. We remain confident that full-year cash operating expenses will be similar in 2025 to that of 2024 or roughly $33 million. This includes an increase in commercial expenses, including higher headcount and marketing expenses offset by the elimination of European pre-commercialization costs, which only occurred in 2024. Importantly, we have several levers to potentially increase the cash balance in the second half of 2025: product revenues continue to gain momentum, and we aim towards cash profitability as cash expenses also decrease in the second half; potential milestones and royalties from the Norgine partnership; and the possible monetization or partnership after the release of the Japan study results, which are expected in the fourth quarter. And operator, with that, we will now open up the call for questions.

Operator, Operator

Our first question comes from Chase Knickerbocker with Craig-Hallum.

Chase Richard Knickerbocker, Analyst

Jeff, maybe just to start, would you guys be willing to share an active prescribers number, particularly obviously within AYA as it would be helpful to see kind of the number of active prescribers you have within that kind of cohort.

Jeffrey S. Hackman, CEO

We don't disclose the cumulative number for various reasons regarding that guidance. Could you provide a bit more detail on what you're looking for, and I may be able to share additional specifics.

Chase Richard Knickerbocker, Analyst

Just an active number of current writers basically. I mean you shared kind of double-digit accounts increase sequentially. I mean, maybe on that front, kind of if you'd be willing to share kind of an active account number just so we can think about the ramp from here in AYA.

Jeffrey S. Hackman, CEO

Yes, let me check on that. It could be something we can share in future quarters, Chase. I want to be cautious, especially when it comes to providing more details on actual accounts. It’s important to protect that relationship. However, discussing some numbers might be possible in the future.

Chase Richard Knickerbocker, Analyst

Maybe if we just focus on that double-digit accounts sequentially, Jeff. I mean, can you give us some kind of visibility into maybe how many patients within those accounts in AYA are treated with cisplatin and kind of what your kind of overall opportunity is maybe just in those accounts that have added on sequentially?

Jeffrey S. Hackman, CEO

Yes. I mean, we talked about in the AYA market, it's ten times the size of the pediatric. It's about 20,000 patients in that population between ages 15 to 39 that are treated with cisplatin. And so that population is significant. That's our market. That's where we've divided up the country into our commercial teams and supplied them with that data.

Robert C. Andrade, CFO

Yes. And Chase, I'll add, which is important, but it starts generally with one patient at a center or at a hospital. We have successful administration. We can create the awareness. We have successful administration, and we have successful reimbursement; that expands and what we've witnessed in particular in Q2 over Q1 is the retention of those existing customers and that also augmenting the amount of patients within those existing customers. So I think what we wanted to shed light on was we had 14 new accounts; don’t get focused on the amount of accounts because each account is unique, but we are growing. The goal is obviously then to build that existing base and augment that as well.

Chase Richard Knickerbocker, Analyst

And then maybe just a little bit additional color on that. When that account starts out, and let's say it's a single patient, what's kind of the cadence in which you start seeing increased writing from that account?

Jeffrey S. Hackman, CEO

Yes, we observed this more in the second quarter as we gained experience. What Robert highlighted is that we needed the initial patient at that center or practice to undergo PEDMARK therapy, witness the positive results, and understand how it’s administered, often utilizing our Fennec HEARS program. This is where a significant portion of our team will concentrate their efforts: expanding within those same practices. It's important to note that physicians in these oncology practices manage multiple cisplatin patients. Therefore, we experienced substantial growth through the expansion of current accounts in Q2, and we anticipate even more growth as the year progresses.

Chase Richard Knickerbocker, Analyst

Got it. Maybe just last for me, guys. Sorry to get so many in here. But on the EU side, could you share the amount of royalty revenue that was in the quarter from Norgine? And then just kind of general thoughts on kind of how that ramp is going with your partner, particularly as we go into the back half of the year here. And then on kind of final German pricing, I mean, do you have a thought on when we should hear back on that?

Robert C. Andrade, CFO

Yes. Thanks, Chase. To step back a little, as you're aware, the Norgine partnership has two primary components. The first component is the royalties, and that is a percent, starting in the mid-teens of Norgine sales. The second component is north of $200 million potential milestones. We started to see some significant traction in the second quarter from that partnership. As a reminder, they launched late in the first quarter. The second quarter, we started to see some traction really out of the U.K. as they work to get the different P&T approvals within Germany and final pricing later in the year. That number is not material enough at this point to move our financials on an aggregate basis. But the sequential increase in traction is significant. They plan to then roll that out to the broader EU5 later this year, early next year. We're quite enthusiastic about that opportunity. Near term, there are two primary milestones ahead of us: one is based on aggregate calendar year sales, and the other one is just on German pricing, and we look forward to giving updates on that in the quarters to come.

Operator, Operator

Our next question comes from the line of Sudan Loganathan with Stephens.

Sudan Naveen Loganathan, Analyst

Congrats on the progress in the second quarter. My first one, I wanted to just get some color on the mix of new and repeat customers. Maybe you can provide a percentage amount of either to kind of get a look at the potential net penetration and how that's progressing?

Jeffrey S. Hackman, CEO

Yes. When we first started, we primarily focused on new customers. In the early stages in the AYA space, all of our customers were new. We gained experience with PEDMARK in these patients. However, in the second quarter, we noticed a shift towards a higher percentage of repeat customers. I don’t want to provide a specific percentage since it's constantly changing, but we are seeing new patients come in. We mentioned that we've added 14 new accounts, and growing these accounts is crucial for us because there are numerous accounts that have yet to utilize PEDMARK. I believe we'll continue to add new accounts. As our business expands, we'll include more accounts that are repeat customers. Right now, the mix between new and repeat customers is starting to balance out, and we expect this trend to continue throughout the year.

Sudan Naveen Loganathan, Analyst

Great. I appreciate that color. The second one I wanted to ask here, with the trial results in Japan expected this fall, could you elaborate on the Japanese market opportunity? For example, the prevalence of CIO in both pediatric and AYA population and then outline your plans for a potential commercial rollout, including whether you anticipate partnering locally or the size of the sales force you may implement there in that region?

Jeffrey S. Hackman, CEO

We are in the final discussions to understand all the data. In September, we will have meetings with the investigators to thoroughly review the data tables and familiarize ourselves with the information. The initial focus is to ensure we fully understand and compile all the data. We are collaborating with our investigators and some consultants to determine our approach, particularly regarding regulatory matters, and how quickly we can submit this product. In Japan, we will need a partner to submit it to the PMDA, so we are exploring that partnership strategy concurrently. As mentioned previously, we are in discussions with potential partners, and this is an ongoing process as we progress. Japan's CIO usage is about one-third the size of that in the U.S. and Europe, which gives you a sense of the market. It’s important to note that this will likely be a pediatric indication in Japan, where ten centers participated in the trial. These centers are eager to continue using the product beyond the clinical trial, and we’ve received positive feedback from stakeholders in the country. More updates will come in September as we finalize the data and determine our approach. We are focused on submitting this product to the Japanese regulatory authorities as quickly as possible. We want the investigators and others in Japan who have worked with this product to have it approved without delay. The quicker we can get it to the Japanese regulatory authorities, the better.

Robert C. Andrade, CFO

Yes. And just to add, we've had a lot of enthusiasm from investigators, from patients, and a lot of unsolicited interest within Japan and the broader Asia area for the product. It's a known product. It's known to work. The reimbursement system is quite sophisticated. Having been through the Norgine process a year ago, I think it's quite analogous to it. So we look forward to giving more updates.

Sudan Naveen Loganathan, Analyst

Great to hear. Just lastly, if I can squeeze one more in. Do you anticipate the operating expenses to remain relatively stable in the second half of the year? And what areas do you expect will represent maybe your larger expenditures in upcoming quarters and may drive those expenditures? I know you mentioned, obviously, some of the IP expenses needed for the EU in the second quarter. And I'm just curious if there's any more kind of maybe one-time expenses in the second half of this year as you're growing the launch?

Robert C. Andrade, CFO

Yes. Thank you. So the first half of the year is heavier from a cash OpEx. A lot of our contracts are structured with 50% upfront and then the balance over the back half of the year. As mentioned in the stated remarks, I expect our second half expenses to go down, so from a cash operating expenses, we were roughly $20 million for the first half. So I expect it to go down and the full year to be consistent with '24 from a cash OpEx, which was roughly $33 million to $34 million. In the second quarter specifically, on a noncash basis, there was also a jump up in stock-based compensation as we aligned what we believe is a really effective and exciting team here with incentives that are aligned with our shareholders.

Operator, Operator

Our next question comes from the line of Jason McCarthy with Maxim Group.

Unidentified Analyst, Analyst

This is Chad on for Jason. We were wondering if you could provide some additional color on getting the PQI and how this differs from NCCN guidelines.

Jeffrey S. Hackman, CEO

Sure, Chad. It's great to hear from you. The NCODA PQIs are peer-reviewed guidance documents designed to assist patient care and oncology practices. They are somewhat different because NCODA stands for the National Community Oncology Dispensing Association. These are standardized, evidence-based recommendations for practice management, making them more targeted than the NCCN guidelines. The main goal of these PQIs is to enhance patient outcomes by standardizing care, optimizing treatments, and improving communication with oncology teams. They are more specific and complement the NCCN guidelines. The PQIs address various aspects, including patient selection, monitoring, counseling, and management strategies. We believe having a PQI for PEDMARK is a significant milestone, as it allows access to information about our product without our direct involvement; people can retrieve this information through the PQIs. We are very excited about this development.

Unidentified Analyst, Analyst

That's helpful. And then also, could you just talk about how you're splitting marketing resources between the larger AYA opportunity in earlier pediatric population? Are you laser-focused on driving this newly opened market? Or is there some balance you're targeting there?

Jeffrey S. Hackman, CEO

Yes. The balance between the two markets. I mean, listen, we've said all along that we believe that the opportunity is much larger in AYA, but that we don't especially in the academic institutions, when we're in an academic institution, we're there on the pediatric side as well as the AYA side. Obviously, we know that the size and the market is much different, but there's still that incredible need for PEDMARK in these pediatric settings. And so we continue to see growth. We don't see the growth that we see in AYA, of course, because during this launch phase, it’s obviously much larger. But we instruct our commercial organization as well as our medical organization when we're in these institutions to do both Pediatric and AYA commercial marketability.

Robert C. Andrade, CFO

Yes. And just to add, Chad, doors have opened for us in the AYA market as a result of our pediatric relationships that we've obviously built over the last several years. Conversely, doors have also opened for pediatric as a result of the progress that we've made with AYA. And so that's really the beauty of the opportunity: different size market opportunities but really growth potential in each one.

Operator, Operator

Our next question comes from the line of Ram Selvaraju with H.C. Wainwright.

Unidentified Analyst, Analyst

This is Eduardo on for Ram. I was wondering if you could provide any details on how proactive the FDA has been recently in ensuring that the market is compliant with its guidance, specifically regarding not substituting PEDMARK with other compounded versions of your AP and that formulation?

Jeffrey S. Hackman, CEO

I apologize, I missed the beginning of that. Eduardo, could you please repeat it? Thank you.

Unidentified Analyst, Analyst

Sure. No problem. Just how proactive the FDA has been in ensuring the market is complying with its guidance, not to substitute PEDMARK with compound versions of STS?

Jeffrey S. Hackman, CEO

We have received a clear statement from the FDA, which we continue to reference as we observe compounding activity. The FDA has endorsed the use of the FDA-approved product, PEDMARK, in these cases. This remains a significant aspect of our discussions regarding pediatrics, especially as we consider establishing new institutions. It's crucial for us to emphasize that we are the only FDA-approved product available in the market. In the AYA space, reimbursement and the use of compounded products differ significantly from the pediatric context, particularly in community settings, where we face fewer challenges compared to some academic centers. We will keep reinforcing the FDA's message and appreciate their ongoing support.

Robert C. Andrade, CFO

And Eduardo, when I briefly mentioned our medical team, they have really revitalized the fact that PEDMARK is the first and only approved product for the prevention of hearing loss related to cisplatinum. They also have a good understanding of why cisplatinum causes this hearing loss, the uniqueness of PEDMARK, and we began to see positive results in recent quarters, with more expected in the future. There is a lot of enthusiasm, as Jeff noted, both with new pediatric patients and also in adolescents and young adults. Specifically in this group, we have not seen any use of compounded products to date.

Unidentified Analyst, Analyst

Got it. That's really helpful. And then going back to the EU, I think you mentioned the timeline for expanding. You mentioned you started with Norgine has started the work and found some good traction in the U.K. markets. Could you repeat the timeline for when you expect them to launch? And you mentioned Italy, I think, and a few other countries. But yes, just a little bit more clarity on that timeline again.

Robert C. Andrade, CFO

Sure. So as a reminder, Norgine has the rights to all of the EU, Australia, and New Zealand. Principally, that first market is the U.K. They have also launched and they have their first patient in Germany. But there is not final pricing yet in Germany. There's only final pricing in the U.K. The additional, as I call it, the EU5 markets on top of Germany, U.K., where you have Italy, Spain, and France, we expect a launch early next year with preparation later this year. The Nordic countries, Denmark, Norway, and additionally, Switzerland starting to come on later this year and early next year. In summary, they're just getting going. They're just getting started, which we're very, very excited about.

Jeffrey S. Hackman, CEO

Yes, we're encouraged about the positive indications that we've seen in early engagement.

Unidentified Analyst, Analyst

And do you have any visibility to the Germany pricing that would trigger a milestone payment? Or is that correct?

Robert C. Andrade, CFO

That is a material milestone. We look forward to providing additional updates. What we do have is we have final pricing in the U.K., which well exceeded what we were anticipating just a year ago. And so if we're consistent with that in Germany, we look forward to giving additional updates on that milestone.

Operator, Operator

I'm currently showing no further questions at this time. I'd like to turn the call back over to Jeff Hackman for closing remarks.

Jeffrey S. Hackman, CEO

Thank you all for your questions. I appreciate your continued engagement. We are thrilled with the momentum we've built in the first half of 2025. The strong revenue growth we've experienced is crucial to achieving our milestones. We remain dedicated to executing our strategies and are confident in our future. Importantly, I want to emphasize the patients we serve, especially the young people undergoing cancer treatment, and how our product PEDMARK can significantly help preserve their hearing and improve their quality of life. We value your support and look forward to sharing more updates on our progress in the upcoming quarters. Thank you for being part of today’s call.

Operator, Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.