Fennec Pharmaceuticals Inc 10-Q for FY2024 Q1

Fennec Pharmaceuticals Inc. (FENC)

10-Q 2024-05-14 For: 2024-03-31

Added on April 06, 2026

About this 10-Q

Fennec Pharmaceuticals Inc filed this 10-Q on May 14, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).

Headline figures

Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $25.38M; up 1413.2% from $1.68M a year earlier
Net income: $12.84M; compared with a net loss of $6.05M a year earlier
Diluted EPS: $0.41; compared with -$0.23 a year earlier

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British Columbia, Canada	20-0442384
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

PO Box 13628, 68 TW Alexander Drive Research Triangle Park, North Carolina (Address of Principal Executive Offices)	27709 (Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, no par value	FENC	Nasdaq Capital Market

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller reporting company	☒
		Emerging growth company	☐


	Page
PART I: FINANCIAL INFORMATION	3

Item 1. Condensed Consolidated Financial Statements	3

Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2024 and December 31, 2023	3

Condensed Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 2024, and 2023	4

Condensed Consolidated Statements of Stockholders' Equity/(Deficit) (Unaudited) for the Three Months Ended March 31, 2024 and 2023	5

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2024 and 2023	6

Notes to the Condensed Consolidated Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3. Controls and Procedures	31

PART II: OTHER INFORMATION	32

Item 1. Legal Proceedings	32

Item 1A. Risk Factors	33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3. Defaults Upon Senior Securities	34

Item 4. Mine Safety Disclosures	34

Item 5. Other Information	34

Item 6. Exhibits	34

Signatures	36


	March 31, 2024		March 31, 2023
	(Unaudited)		(Audited)

Assets
Current assets
Cash and cash equivalents	$	51,184	$	13,269
Accounts receivable, net		10,274		8,814
Prepaid expenses		4,488		2,575
Inventory		2,064		2,156
Other current assets		161		44
Total current assets		68,171		26,858

Non-current assets
Other non-current assets, net of amortization		1,022		6
Total non-current assets		1,022		6
Total assets	$	69,193	$	26,864

Liabilities and stockholders’ equity/(deficit)
Current liabilities:
Accounts payable	$	5,204	$	3,778
Accrued liabilities		4,363		3,754
Operating lease liability - current		17		21
Contract liability - Norgine		252		—
Total current liabilities		9,836		7,553

Long-term liabilities
Term loan		30,000		30,000
PIK interest		1,617		1,219
Debt discount		(268)		(288)
Contract liability - long-term		24,994		2
Total long-term liabilities		56,343		30,933
Total liabilities		66,179		38,486

Commitments and contingencies (Note 6)

Stockholders’ equity/(deficit):
Common stock, no par value; unlimited shares authorized; 27,105 shares issued and outstanding (2023 ‑27,027)		144,934		144,307
Additional paid-in capital		63,245		62,073
Accumulated deficit		(206,408)		(219,245)
Accumulated other comprehensive income		1,243		1,243
Total stockholders’ equity/(deficit)		3,014		(11,622)
Total liabilities and stockholders’ equity/(deficit)	$	69,193	$	26,864


	☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended
	March 31,		March 31,
	2024		2023

Revenue
PEDMARK product sales, net	$	7,419	$	1,677
Licensing revenue		17,958		—
Total revenue		25,377		1,677

Operating expenses:
Cost of product sales		550		95
Research and development		3		4
Selling and marketing		5,209		2,531
General and administrative		5,872		4,317

Total operating expenses		11,634		6,947
Net income/(loss) from operations		13,743		(5,270)

Other (expense)/income
Unrealized foreign exchange (loss)/gain		(38)		9
Amortization expense		(20)		(72)
Unrealized loss on securities		(11)		(30)
Interest income		197		109
Interest expense		(1,034)		(798)
Total other expense		(906)		(782)

Net income/(loss) from operations	$	12,837	$	(6,052)

Basic net income/(loss) per common share	$	0.47	$	(0.23)
Diluted net income/(loss) per common share	$	0.41	$	(0.23)
Weighted-average number of common shares outstanding basic		27,045		26,559
Weighted-average number of common shares outstanding diluted		31,091		26,559


								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity

Balance at December 31, 2023	27,027	$	144,307	$	62,073	$	(219,245)	$	1,243	$	(11,622)
Stock-based compensation - employees	—		—		1,191		—		—		1,191
Stock option exercise	75		627		—		—		—		627
Restricted stock release	3		—		(19)		—		—		(19)
Net income	—		—		—		12,837		—		12,837
Balance at March 31, 2024	27,105	$	144,934	$	63,245	$	(206,408)	$	1,243	$	3,014

								Accumulated
				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
Balance at December 31, 2022	26,361	$	142,591	$	56,797	$	(203,200)	$	1,243	$	(2,569)
Stock-based compensation - employees	—		—		1,089		—		—		1,089
Stock option exercise	49		213		—		—		—		213
Restricted stock release	1		—		(20)		—		—		(20)
Net loss	—		—		—		(6,052)		—		(6,052)
Balance at March 31, 2023	26,411	$	142,804	$	57,866	$	(209,252)	$	1,243	$	(7,339)



		Chargebacks,		Rebates, Customer
		Discounts for		Fees/Credits
		Prompt pay and		and Co-Pay
In thousands		Other allowances		Assistance		Totals
Balance at December 31, 2023	$	365	$	430	$	795
Provision related to sales made in:
Current period		352		1,640		1,992
Prior periods		—		—		—
Payments and customer credits issued		(497)		(104)		(601)
Balance at March 31, 2024	$	220	$	1,966	$	2,186


	Three Months Ended March 31,
	2024		2023
Numerator:
Net income/(loss)	$	12,837	$	(6,052)

Denominator:
Weighted-average common shares, basic		27,045		26,559
Dilutive effect of stock options		3,005		—
Dilutive effect of restricted share units		214		—
Dilutive effect of warrants		34		—
Dilutive effect of convertible debt		793		—
Incremental dilutive shares		4,046		—
Weighted-average common shares, diluted		31,091		26,559
Net income/(loss) per share, basic and diluted	$	0.41	$	(0.23)


	Common Shares
	Issuable Upon Exercise
	of Outstanding		Weighted-Average
Investor Warrants	Warrants		Exercise Price
Outstanding December 31, 2023	150	$	7.71
Issued	—		—
Outstanding March 31, 2024	150	$	7.71


	Number of	Weighted-Average
	Options (thousands)	Exercise Price
Outstanding at December 31, 2023	4,798	$	6.27
Granted	45		7.29
Exercised	(75)		5.81
Forfeited	—		—
Outstanding at March 31, 2024	4,768	$	6.29


	Valuation Assumptions
Black-Scholes Model Assumptions	March 31, 2024
Expected dividend	-	%
Risk free rate	4.73	%
Expected volatility	48	%
Expected life	1.50 years


		Number of Restricted
RSUs Current Year		Share Units (thousands)
Outstanding at December 31, 2023		218
Awarded		17
Released		(21)
Outstanding at March 31, 2024		214


		Fair Value Measurement at March 31, 2024 and December 31, 2023
		(in thousands)
		Quoted Price in Active
		Market for Identical				Significant Other						Significant
		Instruments				Observable Inputs						Unobservable Inputs
		Level 1				Level 2						Level 3				Total
		2024		2023			2024		2023			2024		2023		2024		2023
Assets
Cash and cash equivalents	$	1,314	⁽¹⁾	$	1,340	⁽¹⁾	$	49,870	$	11,929	$	-	$	-	$	51,184	$	13,269
Processa common shares	$	4	⁽²⁾	$	25	⁽²⁾	$	-	$	-	$	-	$	-	$	4	$	25


		Net (Loss)/Income for the			Basic Net (Loss)/Income per			Diluted Net (Loss)/Income per
Period		Period			Common Share			Common Share
June 30, 2022	$		(5,075)	$		(0.19)	$		(0.19)
September 30, 2022			(8,089)			(0.31)			(0.31)
December 31, 2022			(6,857)			(0.26)			(0.26)
March 31, 2023			(6,052)			(0.23)			(0.23)
June 30, 2023			(5,444)			(0.21)			(0.21)
September 30, 2023			(1,867)			(0.07)			(0.07)
December 31, 2023			(2,682)			(0.10)			(0.10)
March 31, 2024			12,837			0.47			0.41


		Number of Restricted
RSUs Past Year		Share Units (thousands)
Outstanding at December 31, 2022		35
Awarded		264
Released		(1)
Outstanding at March 31, 2023		298


		March 31, 2024

Remaining lease terms (in months)		10
Discount rate		10	%

Maturities of lease liabilities as of December 31, 2023 were as follows (in thousands):
Year Ending December 31,
2024	$	15
2025		2
		17
Less imputed interest		2
Total lease liabilities	$	15

Current operating lease liabilities	$	17
Non-current operating lease liabilities		-
Total lease liabilities	$	17


Years Ending December 31,		Amount
2024		—
2025		—
2026		—
2027		30,000
Payment in kind interest		1,617
Total future payments		31,617
Less: unamortized debt discount		(268)
Total term loan, net of debt discount	$	31,349


		Three Months Ended				Three Months Ended
In thousands of U.S. Dollars		March 31, 2024		%		March 31, 2023		%		Change
PEDMARK product sales, net	$		7,419		$		1,677		$		5,742
Licensing revenue			17,958				—				17,958
Total revenue			25,377				1,677				23,700

Operating expenses:
Cost of product sales			550	5			95	1			455
Research and development			3	0	%		4	0	%		(1)
Selling and marketing			5,209	45	%		2,531	36	%		2,678
General and administration			5,872	50	%		4,317	62	%		1,555
Total operating expense			11,634	100	%		6,947	100	%		4,687
Income/(loss) from operations			13,743				(5,270)				19,013

Unrealized loss on securities			(11)				(30)				19
Amortization expense			(20)				(72)				52
Interest expense			(1,034)				(798)				(236)
Unrealized foreign exchange loss			(38)				9				(47)
Interest income			197				109				88
Net income/(loss) from operations		$	12,837			$	(6,052)			$	18,889


	As at		As at
Selected Asset and Liability Data (thousands):	March 31, 2024		December 31, 2023
Cash and equivalents	$	51,184	$	13,269
Other current assets		16,987		13,589
Current liabilities		9,836		7,553
Working capital ⁽¹⁾		58,335		19,305
⁽¹⁾ [Current assets – current liabilities]

Selected Equity:
Common stock and additional paid in capital		208,179		206,380
Accumulated deficit		(206,408)		(219,245)
Stockholders’ equity/(deficit)		3,014		(11,622)


Selected Cash Flow Data	Three Months Ended		Three Months Ended
(dollars and shares in thousands)	March 31, 2024		March 31, 2023
Net cash provided by operating activities	$	39,047	$	(5,577)
Net cash provided by investing activities		—		—
Net cash provided by financing activities		(1,132)		193
Net cash flow	$	37,915	$	(5,384)


	March 31,	December 31,
Outstanding Share Type	2024	2023	Change
Common shares	27,105	26,411	694
Warrants	150	150	—
Stock options	4,767	5,032	(265)
Total	32,022	31,593	429


Exhibit No.		Description

10.1¹		License and Supply Agreement, dated March 15, 2024, between Fennec Pharmaceuticals, Inc. and Norgine Pharma UK Limited.

31.1		Certification of Chief Executive Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Chief Financial Officer of the Company in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Chief Executive Officer and Chief Financial Officer of the Company in accordance with Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

99.1		Press Release for Quarter Ended March 31, 2024 (filed herewith).

101.INS*		Inline XBRL Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)


	Fennec Pharmaceuticals Inc.

Date: May 14, 2024	By:	/s/ Rostislav Raykov
		Rostislav Raykov
		Chief Executive Officer
		(principal executive officer)

Date: May 14, 2024	By:	/s/ Robert Andrade
		Robert Andrade
		Chief Financial Officer
		(principal financial and chief accounting officer)


1.	I have reviewed this quarterly report on Form 10-Q for the period ended March 31, 2024 of Fennec Pharmaceuticals Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the unaudited interim condensed consolidated financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its condensed subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
		(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
		(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
		(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ Rostislav Raykov
		Rostislav Raykov
		Chief Executive Officer

	1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
	2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


	Unaudited		Audited
	March 31,		December 31,
	2024		2023

Assets

Current assets
Cash and cash equivalents	$	51,184	$	13,269
Accounts receivable, net		10,274		8,814
Prepaid expenses		4,488		2,575
Inventory		2,064		2,156
Other current assets		161		44
Total current assets		68,171		26,858

Non-current assets
Other non-current assets, net amortization		1,022		6
Total non-current assets		1,022		6
Total assets	$	69,193	$	26,864

Liabilities and stockholders’ equity/(deficit)

Current liabilities:
Accounts payable	$	5,204	$	3,778
Accrued liabilities		4,363		3,754
Operating lease liability - current		17		21
Contract liability - Norgine		252		—
Total current liabilities		9,836		7,553

Long term liabilities
Term loan		30,000		30,000
PIK interest		1,617		1,219
Debt discount		(268)		(288)
Operating lease liability - net of current portion		—		2
Contract liabilty - Norgine		24,994		—
Total long term liabilities		56,343		30,933
Total liabilities		66,179		38,486

Stockholders’ equity/(deficit):
Common stock, no par value; unlimited shares authorized; 27,105 shares issued and outstanding (2023 ‑27,027)		144,934		144,307
Additional paid-in capital		63,245		62,073
Accumulated deficit		(206,408)		(219,245)
Accumulated other comprehensive income		1,243		1,243
Total stockholders’ equity/(deficit)		3,014		(11,622)
Total liabilities and stockholders’ equity/(deficit)	$	69,193	$	26,864


Working capital	Fiscal Period Ended
Selected Asset and Liability Data:		March 31, 2024		December 31, 2023
(U.S. Dollars in thousands)
Cash and equivalents	$	51,184	$	13,269
Other current assets		16,987		13,589
Current liabilities		9,836		7,553
Working capital	$	58,335	$	19,305


Selected Equity:
Common stock and additional paid in capital		208,179		206,380
Accumulated deficit		(206,408)		(219,245)
Stockholders’ equity/(deficit)		3,014		(11,622)