Fennec Pharmaceuticals - Q1 2024

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the Fennec Pharmaceuticals first quarter 2024 earnings and corporate update conference call. At this time, all participants are on 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 call is being recorded. Now I would like to turn the conference over to Fennec's Chief Financial Officer, Robert Andrade. Please go ahead.

Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Fennec Pharmaceuticals first quarter 2024 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. 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 United States 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, www.fennecpharma.com, where it will be available for the next 30 days. With that, I will now turn the call over to our Chief Executive Officer, Rosty Raykov. Rosty?

Rosty Raykov (CEO)

Thank you, Robert, and good morning, everyone. On today's call, we'll detail our first quarter 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 progress that we're making with PEDMARK in the U.S. and abroad following the exclusive licensing agreement announcement we executed in March with Norgine to commercialize PEDMARQSI in Europe, Australia, and New Zealand. In the first quarter, PEDMARK delivered total net revenues of $25.4 million, including $18 million in licensing revenues from Norgine transaction and $7.4 million in net PEDMARK product sales. Robert will further elaborate on the $18 million in the licensing revenue related to the Norgine transaction, but to be clear, we received $43.2 million from the transaction, which is reflected on our balance sheet as of March 31st, and cash of $51.2 million.

We believe that a couple of things affected PEDMARK sales during the first quarter of this year. First, the public reminder that the US FDA issued to healthcare professional organizations in January, stating that PEDMARK is not substitutable without a sodium thiosulfate product, may have caused some unintended confusion in the marketplace. Initially, the Professional Affairs and Stakeholder Engagement staff at the FDA issued the potential health risks with substitution as a targeted outreach to the following organizations: Alliance for Pharmacy Compounding, American Academy of Pediatrics, American College of Apothecaries, American Hospital Association, American Pharmacists Association, American Society of Clinical Oncology, American Society of Health System Pharmacies, Association of American Cancer Institutes, Children's Hospital Association, Federation of American Hospitals, Hematology/Oncology Pharmacy Association, International Academy of Compounding Pharmacies, and Professional Compounding Centers of America.

We believe that, in turn, some of these organizations communicated the FDA safety message to their respective members. Recently, the Office of New Drugs at the FDA added the safety communication issued by CDER's Professional Affairs and Stakeholder Engagement staff to PEDMARK's approval at the FDA page. Now it is clear that substitution poses potential health risks, including potassium chloride exposure, 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, anorexia, and indigestion. Although PEDMARK also contains boric acid, it is at a lower concentration than other STS products. Overexposure to sodium nitrite, which can lead to health risks, including methemoglobinemia.

Sodium nitrite is co-packaged with sodium thiosulfate as a separate vial in some products, and it's not present in PEDMARK. Unfortunately, Fennec continues to see unlawful compounding of copies of PEDMARK with pediatric hospital pharmacies, unnecessarily putting costs in front of children's safety. The majority of these hospitals are affiliated with Children's Oncology Group, and thus far the FDA safety communication has not changed their behavior. Fennec continues to diligently work with the FDA to address this issue. Additionally, prior to April 1st of this year, our J-code did not differentiate between PEDMARK and other formulations of STS. As a consequence, which we discussed in our call last quarter, there had been some confusion and some impact to the adoption of PEDMARK. The good news is that, as of April 1st, this issue has been fully resolved with CMS amending our J-code to specify PEDMARK.

Now that this change is effective, we expect uptake to improve in the quarters to follow. Despite these acute challenges, we remain optimistic that it will be an exciting year for Fennec, given the strong performance with PEDMARK in 2023, the first full fiscal year following our U.S. commercial launch. We're confident in our ability to navigate through these marketplace challenges to achieve our long-term objectives. Our outlook over the next few quarters will largely depend on our ability to successfully target the community hospitals and infusion centers, the treatment in the outpatient setting, all the pediatric patients within our label, and the NCCN guidelines for adolescents and young adults. PEDMARK continues to have broad and favorable payer coverage, as evidenced by payer-approved U.S. prescription claims with commercial insurance plans and Medicare Part D plans.

Regarding our partnership with Norgine to commercialize PEDMARQSI in Europe, Australia, and New Zealand, efforts are well underway in these territories with a targeted launch date of fourth quarter this year. PEDMARQSI is the first and only approved therapy in the E.U. and U.K. for prevention of ototoxicity induced by cisplatin chemotherapy in patients one month to 18 years of age with localized non-metastatic solid tumors. As a reminder, under the terms of the licensing agreement, Fennec received approximately $43.2 million in upfront consideration and the potential of 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-20s. Norgine will be responsible for all commercialization activities in the licensed territories and will hold all marketing authorizations.

As we previously communicated, this partnership represents an important step in achieving our mission of expanding PEDMARK to patients across the globe who are at risk of suffering from cisplatin-induced ototoxicity. The terms provided us with many important benefits, including an upfront payment further solidifying our balance sheet, tracking economic terms providing meaningful participation in the ex-US success of PEDMARK, and importantly, an experienced partner to successfully launch PEDMARK in the licensed territories. With that, I will now turn the call over to Adrian, who will provide an update on our commercial strategy and operations. Adrian?

Adrian Haigh (COO)

Thanks, Rosty. As Rosty has said, in the first quarter, our sales force has switched the focus of their activities to the community-treated AYA population that fall within our label. We believe that there are many more patients in this segment compared to the inpatient hospital-treated pediatric population. Additionally, these older patients require approximately 4x as much PEDMARK as the younger patients. On our prior quarterly call, I alluded to the challenges that we faced during the early stages of our relaunch into this segment. Prior to April 1st, 2024, our J-code did not differentiate between PEDMARK and other formulations of StS. Consequently, there has been some confusion and some impact on the adoption of PEDMARK. In January, CMS did two important things to address this matter.

First, they issued a new J-code for the Hope STS product, and second, they amended Fennec's J-code to specify PEDMARK. Encouragingly, CMS also stated that the two formulations are not interchangeable. As a reminder, the new J-code specifying PEDMARK was not active until April 1st. It is also important to understand that the J-code becoming effective on April 1st is not a simple on-off event. It is taking some considerable time to get the code uploaded into the electronic prescribing systems and payment plans, and this task is still ongoing. Additionally, we are awaiting updates to the NCCN compendia and others, for example, DrugDex and Lexicomp. These compendia are the proof source for payers to reimburse PEDMARK, and this process is expected to take 60-90 days to complete and validate from April 1st.

Another ongoing challenge has been extending infusion center hours to accommodate the time it takes to administer PEDMARK six hours after the cisplatin infusion. Again, this doesn't happen overnight and requires the intervention of senior management at the infusion center. We've had greater penetration in those centers that are open for 16hours -24 hours. Despite these acute challenges, we remain encouraged by the reaction to PEDMARK and the possibility to dramatically improve the quality of life for cancer survivors by preventing or significantly reducing hearing loss caused by cisplatin. We are confident that once these logistical hurdles are overcome, PEDMARK will become the standard of care and be routinely used in the AYA population.

We've had a very busy conference season with participation in 11 regional oncology conferences, as well as seven key scientific meetings, including the American Society of Pediatric Hematology/Oncology, the Community Oncology Alliance, the National Comprehensive Cancer Network, and the American Academy of Audiology annual conferences. We're looking forward to ASCO, where we intend to spread the word to as many AYA treating physicians as possible. In closing, we see promising opportunities for PEDMARK, including the steps we're taking to educate the marketplace along with executing on our commercialization plans, and we look forward to the acceleration in revenue in the coming months. With that, I'll turn the call over to Robert to go over the financials for the quarter.

Robert Andrade (CFO)

Thank you, Adrian. Our press release contains details of our financial results for the first quarter of 2024, which can be viewed on the Investors and Media section of our website. Rather than read through all of those details at previous conference calls, my comments today will focus on some key financial results. The company recorded PEDMARK net sales of $7.4 million for the first quarter of 2024. Net sales in the first quarter were more highly impacted than previous quarters by discounts, including an impact from select product that was returned due to expiry. The return product was due to production and launch dynamics in the first year after launch, which we don't anticipate to continue beyond the first quarter of 2024. Total net sales for the first quarter were $25.4 million, which, as mentioned, included $18 million for the accounting of licensing revenues for the Norgine transaction.

The company evaluated the Norgine license agreement under ASC 606 and concluded that Norgine represents a customer in the transaction. As such, a portion of the transaction price was recognized as license revenue in the first quarter of 2024, and a portion of the transaction price associated with the material right is deferred and reflected as deferred revenue. To be clear, for the three months ended March 31st, 2024, the company did not recognize any milestone or royalty revenue payments from the Norgine transaction. G&A expenses for the first quarter of 2024 were $5.9 million, which compares to $4.3 million in the fourth quarter of 2023. This increase is largely attributable to pre-commercialization expenses in preparation for the potential European launch or partnership. The company recorded $5.2 million in selling and marketing expenses in the first quarter of 2024, compared to $2.5 million in the fourth quarter of 2023.

The increase was largely attributable to higher payroll and increased marketing expenses related to the previously mentioned AYA initiatives. And finally, on our cash position, we ended the first quarter with approximately $51.2 million in cash, cash equivalents, and investment securities, which includes the approximately $43 million received from the licensing of Europe, Australia, and New Zealand to Norgine. Further, as a reminder, the next anticipated milestone related to our Norgine agreement will be obtaining pricing approval in Germany, in which Fennec will receive a EUR 10 million milestone payment. Further, Fennec's royalties on net sales will commence in the mid-teens % once PEDMARQSI is launched later in 2024.

We anticipate that our cash, cash equivalents, and investment securities as of March 31st, 2024, when coupled with PEDMARK revenue assumptions and the recently announced license agreement for Europe in March 2024, will be sufficient to fund our planned operations for at least the next 12 months. Operator, with that, we are ready for questions.

Operator (participant)

Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered or you wish to move yourself from the queue, please press star one one again. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Charles Duncan with Cantor Fitzgerald. Your line is open.

Charles Duncan (Managing Director and Senior Biotechnology Analyst)

Yeah. Good morning, Rosty and team. Thanks for taking the questions. And congrats on the progress in the quarter with the Norgine collaboration. Had a couple of questions, though, regarding the unlawful compounding. And you mentioned Children's Oncology Group. I guess I'm wondering if you could provide some additional color on the initiatives that you're taking to really correct this behavior. And then can you provide us any color on the level of compounding that you anticipate to occur in Europe versus here? Thanks.

Rosty Raykov (CEO)

Hi, Charles. I'll take this. Yeah, so as you saw from the FDA announcement and then subsequently putting that announcement on the approval of PEDMARK, the FDA page, the FDA is taking this issue very seriously. The problem that we run into at the pediatric hospital level is that they have a committee called the Expensive Drug Committee, and typically these committees are stacked with folks in the hospital that are not pediatric oncologists or pharmacists, for that matter. But they're really there to do everything possible but to avoid paying for an expensive drug, which they consider PEDMARK to be one. So this is what we're facing. In terms of initiatives, what I would say is that we continue to work with the FDA on this. The FDA is very concerned.

There is significant safety risk associated with the use of compounded products in this vulnerable population, particularly if you're pushing over 15 minutes to make a copy of PEDMARK, a very large and significant dose of potassium chloride in younger children. So with that, I think our engagement with the FDA is ongoing, and if there's anything more to report, we will hopefully soon. In terms of Europe, what I would say is there's a bit of a difference because there you're dealing with, so we have a Pediatric-Use Marketing Authorization, which by definition gives exclusivity to the market on the data from the studies to, in this case now, Norgine. How is that different than the United States? Is that you're not dealing by hospital-by-hospital basis.

You're dealing with a healthcare system and regulations that have already been approved for the use of an older drug in a pediatric population with a 10-year exclusivity. So that's well understood that you're bringing in tremendous value to this vulnerable population because you've invested in these studies and you have this 10-year exclusivity. And so you're also dealing with a single payer system. So there it's really the negotiations that will be ongoing between Norgine and each respective country in terms of the price achieved. But once that happens, this drug would be available and approved by a single payer. So there should not be a significant issue with compounding in Europe. And maybe I can turn it over to Adrian to elaborate on that as well.

Adrian Haigh (COO)

Yeah, thanks, Rosty. Yeah, it's exactly as you said.

We have the pediatric use marketing authorization, which is specifically designed for older products repurposed for children. Once there's an approved drug, in most of the European markets, compounding is illegal. As you can imagine, there was a lot of diligence done by the parties that were bidding for the European rights. All of them came to the conclusion, obviously including Norgine, that compounding would not be an issue in Europe.

Charles Duncan (Managing Director and Senior Biotechnology Analyst)

That makes sense. One quick follow-up then for you, Adrian, or Rosty, with regard to the J-code. Nice to see that happen in April and appreciate all the caveat with regard to the timing of that going from effective to actually effective. But when you think about either the second quarter or the second half of this year, how would you measure success beyond the obvious of revenue? What are the key operating metrics that you're looking at to see that PEDMARK's getting traction in the AYA population? Thanks.

Rosty Raykov (CEO)

Great question, Charles. So let me kind of maybe tell you how I look at the business holistically. So we got several components to this. One is our medical education. So how well do we engage and educate the staff at a community center that historically has not treated for ototoxicity? So I think that's very, very critical. The second component is market access. And I think Adrian alluded to that in his comments. That's the payer coverage, which so far we haven't had any significant issues with. The compendium update, which is really important. Then we have to deal with field reimbursement and ultimately pull-through. And these are all ongoing activities.

Then we have the logistics and distribution piece where we're working with the office, but importantly, we must listen to these offices to make sure we can provide PEDMARK despite the six-hour gap between the cisplatin therapy and when PEDMARK is administered. Lastly, I think it's just establishing best practices and really learning from the experiences. It is very important that we get it right. Basically, I look at this as sort of a mini-pilot at the moment, what we learn from that, and how do we then scale it. This goes back to the on-and-off switch that Adrian referred to. It's like, "Let's get this thing right now so that when it scales, we know how to exactly do this." Then we can expect, obviously, a meaningful inflection point when all the barriers are sort of removed and we've learned how to navigate through these.

I hope this is helpful.

Charles Duncan (Managing Director and Senior Biotechnology Analyst)

Would that increased visibility occur in the second half this year, you anticipate, Rosty?

Rosty Raykov (CEO)

That would be my anticipation, correct. Yeah, as I said, I think it's taking between 60 days-90 days to get everything sort of loaded up into the electronic prescribing systems to get the compendium updated. Just doesn't happen overnight. And once that's done, then we expect to see the inflection point. So I think you're right, second half of the year.

Charles Duncan (Managing Director and Senior Biotechnology Analyst)

Got it. Thanks for taking the question.

Operator (participant)

One moment for our next question. Next question comes from Chase Knickerbocker with Craig-Hallum. Your line is open.

Chase Knickerbocker (Senior Equity Research Analyst)

Good morning, guys. Thanks for taking the questions. So just maybe digging in a little bit on the inpatient side quickly. I understand the difficulty in signing up new customers, certainly on the inpatient side, if those potential customers are compounding. But if we just kind of look at existing customers in Q4, what drove utilization there down sequentially? At least that's kind of what it looks like on the top-line number, maybe just a little bit of color around existing customer utilization.

Rosty Raykov (CEO)

Yeah. Let me take this. So I would say there are a couple of things. One is that Robert touched on the bad debt expense, and he can elaborate further on that. And then the second piece, of course, is I mean, I can just tell you that the difference between our fourth quarter and first quarter sales without the bad debt expense is basically 3 patients-5 patients. So that's sort of the delta you're looking at. And also historically, Chase, just to also add a little more color, if you look at kind of last year as well, maybe there's some seasonality to this as well. We had a stronger fourth quarter than we did first quarter. But it's too early to tell.

Chase Knickerbocker (Senior Equity Research Analyst)

Yeah. I would just.

Operator (participant)

Got it. And then maybe Rob.

Robert Andrade (CFO)

I would just add, Chase, that as Rosty mentioned, the FDA publishing the do-not-substitute guidance on the website, on the PEDMARK label side of the website, seems to have had an impact. We've had a couple of really important pediatric hospitals just in the last week have ordered for the first time. So that's an encouraging trend. It's early days. But I think FDA publishing on the website has made an impact. But up until then, it really hadn't. Right, because the confusion came from, "We're getting this message communicated from these organizations instead of what is the FDA really saying," to now look at what the FDA is really saying. But again, this is very early. We're dealing with a very challenged hospital system with these expensive drug committees. So I want to make sure that we sort of tame expectations on this.

As we're getting some of them to switch, obviously, that will be welcome news. Obviously, we have been very, very patient with everyone, and we're working with the FDA to resolve all of this. I think at one point would happen, Chase. I just don't know when.

Chase Knickerbocker (Senior Equity Research Analyst)

Understood. And then Robert, maybe can you just quantify what that return was as far as a headwind to top-line revenue? Sorry. And then just to kind of dig in a little bit on those comments, you have seen some change in behavior in Q2, but really hasn't been material to revenue yet. But early signs of behavior are changing. Is that kind of the right way to characterize it?

Robert Andrade (CFO)

Correct. With a couple of larger accounts.

Yeah, I'll start with your question, Chase, as well. Just from a framework perspective, in Q4, we had gross sales of a little over $11 million and reported net sales of $9.7 million. In Q1, we had gross sales of $9.7 million and reported net sales of $7.4 million. So that delta and that jump-up in percentage was, as I mentioned, largely as a result of product that, due to expiry, we had to give a credit to some distributors in the quarter.

Chase Knickerbocker (Senior Equity Research Analyst)

Got it. Thank you. And then maybe just trends in AYA, digging in a little bit more there. Sounds like Q3 should kind of be our expectation of when that accelerates and really kind of inflects in the model. And biggest driver there, it probably is going to take some more time to obviously get those clinics to stay open. So is the biggest driver kind of that compendium ad or just kind of walk us through what the big kind of unlock on the inflection is there?

Rosty Raykov (CEO)

Yeah, I mean, I would say it's all of the above that I listed in the previous question. It's really getting the medical education. I cannot stress the importance of that, to be honest, because we've got, we have people that want to listen to our message. It's important how well the message is delivered, how well we're engaging. Because remember, these physicians are not treating for ototoxicity. They haven't treated historically because these are centers that are treating basically with chemo drugs the patients. So that's one that's ongoing. And obviously, we're refining our strategy there. We're learning from them, etc. So that engagement piece is critical. Then once they want to work with us, it's obviously all the logistics, the market access, making sure that all these pieces are together. And compendium is a very important piece from that as well.

There will be fuel reimbursement, pull-through, a bunch of things that we kind of and we have seen, actually, in a few patients. Again, the sample size is relatively small. So we want to make sure that we have a larger sample size. As I mentioned, these are kind of like mini-pilots, at least in my mind. Because one thing we learned at this company historically, what's worked for us well, is when we simplify things and we get it down to the very, very basics. And the very basics here are, are you treating one patient at a time truly? And is that a success for the patient, for the center, and ultimately for Fennec? Can you create this win-win-win? And all these components are really critical to that. And we're working through those.

I think there will be an inflection point because when you look at the number of volume of patients that these centers are seeing, it's actually quite encouraging that those numbers are substantially higher than what we've discussed with pediatrics. This is really the opportunity ahead of us. And then how do we accelerate it? Once we've established these best practices, how do we accelerate that through this network?

Chase Knickerbocker (Senior Equity Research Analyst)

All right. And then just last for me, maybe Adrian, what you're hearing from the field around kind of willingness of these clinics to stay open longer, are you getting some pushback there, or is it mainly just kind of working with the administration takes time to kind of change protocols there?

Adrian Haigh (COO)

Yeah, we're getting pushback when you speak to the people in the clinic because they don't have the authority to stay up longer. So you've got to work your way up through the senior management to find the decision-maker and then explain things to them. It just is taking a longer time than initially anticipated. It's happening. In the meantime, sort of as I said in the prepared remarks, we're searching for the centers that are open sort of 12 hours+ because then there's no issues. That's where we're really seeing uptake now.

Chase Knickerbocker (Senior Equity Research Analyst)

The other component.

Thanks for the questions, guys.

Rosty Raykov (CEO)

Yeah, yeah, no, the other component to this, and I just want to—and this is, again, credit to the team and how resourceful they are. We also have a relationship with a home infusion network that is able to provide the infusion of PEDMARK to the patient at home. So we're just starting to utilize that, which to me is also encouraging because, again, we're providing basically a suite of services. We're problem-solving for a lot of places. So there's initiatives ongoing there as well. But as Adrian mentioned, this takes a bit of time to work through all of this.

Operator (participant)

Thank you. One moment for our next question. Our next question comes from Jason McCarthy with Maxim Group. Your line is open.

Michael Okunewitch (Senior Analyst of Biotechnology)

Hey there. Thank you for taking my question. This is Michael Okunewitch on the line for Jason. I guess I'd like to see if you could give me a bit more color on how the value proposition varies between the under-15s and the adolescent young adult population. And then given that they do require more vials on average, is this something where you'd have to or where you'd expect you'd need additional discounts to adequately capture this larger market?

Rosty Raykov (CEO)

Yeah, no, it's a very good question. So let me just sort of compare for you a disease which starts occurring from the age of 15 all the way to the age of 39, which is germ cell testicular cancer. So largely, how you treat the 15-year-old is the same as how you treat the adolescent, the young adult, and the adolescent, as well as the older patient. What changes there, of course, is the body surface area. And our drug is administered based on that. So typically, you have and also, there's a decision-making there whether they go with the three cycles or the five cycles, which also could vary. But bottom line is kind of when you compare it to the typical sort of pediatric patient versus the young adult or adolescent or older patient, you have 3-4x more vials.

Again, just to get a flavor for that. So when I truly mention the difference between the fourth quarter versus the first quarter numbers, it's really a difference of that 3-5 patients. Now, in terms of giving discounts, and so now recall that you're dealing with the outpatient community where a meaningful discount is not really necessary because they have mechanisms in place by which they get to make over 5% for this on the upfront. And of course, if you there's also some volume discounts available to them as well, but they're not meaningful relative to the opportunity to treat these patients. And again, these patients are reimbursed based on the NCCN Type 2A recommendation.

Michael Okunewitch (Senior Analyst of Biotechnology)

All right. Thank you. And then as a follow-up, I just want to do a quick housekeeping question. With the EU partnered out now, should we expect that G&A line to start to come in a little bit in subsequent quarters?

Rosty Raykov (CEO)

Yeah, maybe that's over to you, Robert.

Robert Andrade (CFO)

Yeah, thanks, Michael. Yes, that is the expectation after this quarter being Q2 that we're in; it should come in significantly. So we did see a step up quite a bit in Q1, also some in Q4, and it's just tailing off here in Q2. But then yes, that's all being assumed by Norgine going forward.

Michael Okunewitch (Senior Analyst of Biotechnology)

All right. Thank you very much.

Operator (participant)

One moment for our next question. Our next question comes from Raghuram Selvaraju with H.C. Wainwright. Your line is open.

Raghuram Selvaraju (Managing Director and Senior Healthcare Equity Research Analyst)

Thanks very much for taking my questions. Just two very quick ones. Firstly, can you just give us a sense of what the repercussions would be, if any, for those hospitals and hospital systems that deliberately do not elect to follow the FDA's guidance? And secondly, if you can maybe elaborate upon the level of sales and marketing infrastructure that Norgine has communicated to you will be placed in the service of commercializing PEDMARQSI in its territory? Thank you.

Rosty Raykov (CEO)

Thank you. These are great questions. So the repercussions really are they causing harm and what that harm is? And ultimately, the parents filing a suit against the hospital for their child being treated with an unauthorized copy of an FDA-approved drug, which clearly states on its label, "Do not substitute." And now there is a public message announcement as to why it's not a good idea to substitute. In terms of Fennec legal repercussions, we're exploring all these options. But as you know, typically, in business, it's not a best practice to go after your customers. So again, we have been very, very patient and working through the FDA with that. On the Norgine transaction, maybe Adrian can elaborate a little more in terms of their commitment to PEDMARQSI and how important that is for them in Europe in particular.

Yeah, this is one of the reasons why we picked Norgine in that they promised and have committed to resource the launch appropriately. And what we understand is that it's north of 50 FTEs and what I consider to be a very appropriate level of spend in terms of promotional results. So it's much, much more firepower than Fennec could ever have done on our own. So I'm confident things are going to go off very well. And as a reminder, the launch is scheduled in Germany for October.

Operator (participant)

Thank you. I'm not showing any further questions at this time. I'd like to turn the call back over to Rosty for any closing remarks.

Rosty Raykov (CEO)

Well, thank you all for today. We look forward to updating everyone on our progress this quarter and beyond. Thank you for your patience with us. Stay tuned. We're working very hard to get this right. Thank you.

Operator (participant)

Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful day.