Fennec Pharmaceuticals - Earnings Call - Q1 2025

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to Fennec Pharmaceuticals' first quarter 2025 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 call is being recorded. Now, I would like to turn the conference over to Fennec's Chief Financial Officer, Robert Andrade.

Robert Andrade (CFO)

Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Fennec Pharmaceuticals' first quarter 2025 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 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 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. I will now turn the call over to Jeff Hackman.

Jeff Hackman (CEO)

Thank you, Robert, and good morning, everyone. I wanted to thank you all for joining us today as we review our first quarter performance and share the outlook for the year ahead. I'm excited to share the details and highlights of our results for Q1 in 2025. The alignment of our organization around clear commercial priorities to enhance field execution and support sustainable growth across key PEDMARK segments really began back in Q4 2024. Much of the work was implemented, though, in Q1 of this year. Therefore, Q1 was a quarter marked by a stronger strategic focus, disciplined execution, and a much more meaningful progress across all areas of our business. This was accomplished with really just a few critical activities. Let me go into those. The first is the development and implementation of a targeting model, a much more sophisticated model than the organization had in the past.

It was data-driven, and prescriber and practice lists to guide field execution and engagement were used. This was a critical step to better understand our business and our opportunities, especially given our expansion beyond pediatrics into the adolescent and young adult, or AYA, patient population. This targeting includes a structured tiering of cisplatin prescribers nationally, prioritizing tiers like tier one through five, or those who treat a high number of patients with cisplatin, allowing us to focus on engagements in key academic institutions and large community practices where PEDMARK can have the greatest clinical and commercial impact. As a result, the first quarter tier one targets prescribed for PEDMARK demonstrated early traction and validation of our focused engagement strategy.

Some of the examples of these accounts are Tampa General Hospital in Florida, Rady Children's in San Diego, Huntsman Cancer in Salt Lake City, Zuni Comprehensive Health Center in New Mexico, and City of Hope, which is one of the largest advanced cancer centers in the country. These are just some accounts and others that have begun to integrate PEDMARK into their treatment plans, further validating its clinical utility and expanding patient access in real-world settings. As a part of these efforts, we continue to be encouraged by the interest and adoption we see in the AYA segment. We've mentioned on prior calls that this opportunity for the segment is very significant in the U.S. Fennec estimates that approximately 20,000 cisplatin chemotherapy patients are treated annually in the primary tumor types: thyroid cancer, breast cancer, germ cell, and testicular.

The market potential in AYA is greater than the size of the pediatric market and has a favorable reimbursement profile via outpatient reimbursement. We also made significant strides on the medical front, increasing positive engagements with key opinion leaders and building momentum around awareness of the impact of cisplatin-induced ototoxicity. Our medical team also strengthened their clinical messaging based upon the data and interactions and new medical science liaisons, or MSLs, that joined our team and are already engaging with national KOLs. As an example of our cross-functional alignment, in late April, Fennec and our teams had an advisory board comprised of key opinion leaders from across the nation with specialties in medical oncology, urologic surgery, and directors of pharmacy. This discussion focused on AYA treatment paths within academic institutions and these large community practices.

During this meeting, Fennec's team gathered additional market insights to further inform and refine our executional excellence moving forward. We're also actively working to further enhance our Fennec HERES patient support program to ensure a more seamless, supportive experience for both providers and patients at every step of the PEDMARK journey. These upgrades are designed to improve access, streamline reimbursement, and expand home nursing capabilities. Fennec HERES is critical for the healthcare provider's adoption and patient adherence. We experienced improvement in patient adherence throughout the quarter, and we expect this to continue throughout the year as we bolster and support our offerings both with the HCPs and patients that we serve. By removing some of these friction points and delivering a very high-touch experience across the treatment journey, we're not only supporting better care, but we're also helping to empower providers to identify and treat more eligible patients.

This is essential and critical given the growing recognition of hearing loss, which is an essential part of cancer survivorship. As awareness increases, our program ensures providers are equipped with the right tools and support to proactively engage patients who may benefit from PEDMARK intervention, helping us to advance both clinical access and also outcomes to care. Now, I'd like to also address the commercial launch efforts and the progress that we're making with PEDMARK outside the U.S. Following our exclusive licensing agreement that Fennec executed back in March 2024 with Norgine, the product has now launched commercially in Germany and in the U.K. Just this past week, Norgine announced that the Scottish Medicines Consortium, or SMC, has accepted PEDMARK C for use in Scotland.

Collectively, these recent launches mark important steps in achieving Fennec's mission of expanding access to PEDMARK and PEDMARK C to cancer patients at risk of hearing loss in the European Union and the U.K. Also, on the global front, the investigator-initiated trial in Japan, or STS-J01, evaluating PEDMARK, was fully now enrolled as of October 2024. The clinical trial, STS-J01, evaluates the efficacy and safety of PEDMARK in reducing ototoxicity induced by cisplatin in children and AYAs with localized solid tumors. The primary endpoint of this trial is to assess the frequency of hearing impairment at the end of treatment. Results of the trial are expected in the second half of 2025, with potential evaluation of both the registration and partnering, or licensing, of PEDMARK in Japan thereafter. Looking ahead, we are building a solid foundation with a laser-focused vision, as I mentioned, as we enter into 2025.

This includes deepening our relationships with our key accounts, expanding adoption with new existing customers, and seeking evidence-based data generation through investigator-sponsored trials, or we call them ISTs. Based on our sharpened messaging, our strategic focus, and this disciplined execution in the first quarter, we made some meaningful progress across all areas of our business. We're seeing positive momentum in our strategy to move healthcare providers from trial to adoption of PEDMARK. The strong momentum has continued in early Q2, and I look forward to continued progress and sharing those results with you throughout the year. With that, I'll turn it back over to Robert.

Robert Andrade (CFO)

Thank you, Jeff. Our press release contained details of our financial results for the first quarter of 2025, which can be viewed on the investors' and media section of our website. Rather than read through all those details, my comments today will focus on some key financial results. For the first quarter of 2025, the company recorded net product sales of approximately $8.8 million, compared to $7.4 million in the first quarter of 2024. This reflects 18% growth compared to the same period last year and an 11% increase over the fourth quarter of 2024. Of significance, we are pleased to report our second consecutive quarter of growth in net product sales.

As mentioned in March 2025, we are focusing on growing net product sales and anticipate the most significant quarterly growth in the second half of 2025, when all the foundational pillars and initiatives we are putting in place are expected to materially impact the growth of PEDMARK. The company recorded $2.9 million in selling and marketing expenses in the first quarter of 2025, compared to $3.9 million in the fourth quarter of 2024 and $5.2 million in the first quarter of 2024. The decrease on a year-over-year basis is primarily attributable to the elimination of expenses associated with European pre-commercialization activities, which occurred in 2024 prior to the announcement of the Norgeen partnership. To be clear, and as stated previously, European pre-commercialization expenses are not expected in 2025.

The company recorded $6.1 million in G&A expenses in the first quarter of 2025, compared to $4.1 million in the fourth quarter of 2024 and $5.9 million in the comparable quarter of 2024. For the first quarter of 2025, G&A expenses were consistent on a year-over-year basis and increased quarter over quarter, largely due to non-cash-based stock compensation traditionally done in the first fiscal quarter. Cash and cash equivalents were $22.6 million as of March 31, 2025. Company burned approximately $4 million in cash in the first quarter of 2025. As stated in our March 2025 call, we remain confident in the full-year cash operating expenses to be similar in 2025 to 2024, or approximately $33 million. This includes a step-up in marketing expenses and increased headcount offset by the elimination of European pre-commercialization expenses.

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 and fiscal year spending patterns. Before concluding, I'd like to offer some initial perspective on the recent discussions regarding potential tariffs. As you may know, PEDMARK is manufactured in the United States. As such, we don't anticipate the currently proposed tariffs will have a material impact on our gross margins or overall financial performance. Operator, with that, we will now open up the call for questions.

Operator (participant)

To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. Please stand by while we compile the Q&A roster. Our first question comes from Chase Knickerbocker with Craig-Hallum. Your line is open.

Chase Knickerbocker (Analyst)

Good morning. Thanks for the questions. Just a couple kind of metrics that I think would be helpful on the AYA side. First, so now that you've got a little bit more experience in that segment of the market, can you cue us in on kind of what the average number of vials per patient per full treatment has been and kind of how that's compared to your expectations? Then kind of what percentage of patients are kind of making it through that full course and maybe how that has improved and how that's informed your patient support program?

Jeff Hackman (CEO)

Sure. Hey, Chase, how are you? Thanks for the question. Yeah, we are seeing on average about 30 vials per patient in the AYA space. That can range, obviously, but on average, about 30. Again, you know this is a kind of a weight-based dosing regimen, so it depends on the size, as you can imagine. We're seeing, and one of the things that we're improving on is our adherence numbers, and we're seeing that that range is around 50% of the patients are getting through full dose or full adherence. Some of the focus that I had mentioned was about getting Fennec HEARS in the right place.

Fennec HERES was kind of designed for pediatric use in large institutions, but as this product now gets moved out into the community setting and a little bit more of the use in home administration, adherence is really critical for the product, and that's why we needed to really focus our efforts on kind of revamping Fennec HERES and making sure that we increase those adherence numbers as high as we can get them. We'll see that increase as we move throughout the year.

Chase Knickerbocker (Analyst)

What capabilities in the Fennec HEARS program have kind of been the biggest drivers of improvement or where you kind of sought to drive adherence improvement from?

Jeff Hackman (CEO)

Yeah, I think it's just redesigning the program to really be focused on giving this product and potentially in the home setting with our partners. We have partners and organizations that we had set up to make sure this product could be administered there. There are a whole bunch of different details, Chase, I can walk through with you offline, but those details needed to be really ironed out to make sure that that experience went well when we give this product at home, right? Because remember, we're giving this product in some cases six hours after, in all cases, six hours after cisplatin has been given. In the home setting, all the details have to be ironed out to make sure that that administration goes well.

Robert Andrade (CFO)

Yeah, and Chase, I'll just add a little bit, as you know, but just to make other people aware. When we're administering in the AYA population, largely done outpatient, or as Jeff said, in the home health setting. The education of the product, the awareness, and in particular, the administration and what to expect, the antiemetics, the proper hydration. We have really put a focused effort and a concentrated effort with our Fennec HERES program and with our medical team that, as you know, we have augmented. I think that all speaks well to what progress we have made in the last quarter, but also what we hope to happen throughout the year.

Chase Knickerbocker (Analyst)

Great. Robert, can you maybe just speak to, so the OpEx, call it flat in the Q2, and then we should see a little bit of a step down in the back half, it sounds like. Just as far as kind of how that launch with Norgeen has went so far, I mean, has that kind of been along, I know it's early, but along kind of what expectations were, and how does that inform your confidence in kind of future milestones over the next 12 months?

Robert Andrade (CFO)

Sure. Yeah, with the OpEx, yes, as stated in the remarks and in the script, it's front-end loaded for the year. That's just the spending patterns. Also, as we get into, we're trying to create additional awareness contracts. Generally half upfront and then amortized over the rest of the year. That's just traditional. It will see a tailing off, in particular, as we start Q3 and Q4. Norgeen, we're very enthused. As we stated, they've launched in the U.K. with an official list pricing, about 10% less than the U.S., but we're excited about that. Germany as well. It's early on, but we're really pleased with the progress. They've commented on some positive indicators of engagement and uptake. We look forward to giving you more updates and material updates as the quarters progress.

As it relates to the sales milestones, there are two milestones that we've communicated before that are of particular note as it relates to 2025. One is the official pricing in Germany. That has one milestone related to it. The second one would be for the first-year sales. As we get closer towards the end of 2025, we hope to give some more progress updates as it relates to those milestones.

Chase Knickerbocker (Analyst)

Great. Thanks, guys. Congrats on the progress.

Robert Andrade (CFO)

Thanks, Chase.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star 11. Our next question comes from Sudan Loganathan with Stephens. Your line is open.

Sudan Loganathan (Analyst)

Hi, good morning. Thank you for taking my questions. Great to hear about your new targeting strategy and how it's really showing in the stronger first quarter. On that front, do the prescribers know where they land on the tiering algorithm that you have? Is there any incentives in terms of reimbursements that they may get if a tier two, tier three prescriber were able to move up to be considered a tier one?

Robert Andrade (CFO)

Yeah, I mean, we don't, Sudan, thanks for the question. I appreciate it. Yeah, we don't typically share that information with our providers. Obviously, they realize they're high prescribers of cisplatin. That's one of the reasons why we're in their offices trying to educate them. I think many of them realize that the impact of ototoxicity is having. I think the more where we see the interest and the reason why we target these high prescribers is because they do see the impact of what's happening. In some cases, there's still a significant lack of awareness, not only of PEDMARK, but also of what the impact of ototoxicity is having on their patients. I think it's really critical for us to start there and to start at that top tier.

When it comes to physicians throughout that tiering or that targeting process, we're starting at tier one because of our size and because of the amount of folks that we have out there. Eventually, we'll move down throughout, and we shouldn't see any differences in reimbursement or any differences in our conversations as you start to move out throughout the rest of that list.

Sudan Loganathan (Analyst)

Yeah, great to hear.

Robert Andrade (CFO)

Just to add, there is no difference in terms of our pricing or reimbursement as it relates to the tiers. It's really more so that we can focus our commercial team on those top-level accounts. Obviously, if we make progress on a tier two or a tier three, we're just as focused and provide just equal support as well as pricing and reimbursement options.

Sudan Loganathan (Analyst)

Yeah, that's great to hear. Currently, regionally, at least in the United States, do you have pretty much most regions covered now among these tier one? Do you have tier one accounts in each region at this point that you're honed in on, or is there areas that still need to be kind of targeted and maybe just get more of a foothold in certain areas in the United States?

Jeff Hackman (CEO)

Yeah, we're now deploying our commercial organization throughout the United States. This tiering or these focused in large academic centers and large community centers are being targeted by our commercial organization. It's throughout the country.

Sudan Loganathan (Analyst)

Okay, cool. Next, since you've kind of been on the market now for a year, and you may be able to see the differences between the pharmacy formulation, the compounding component versus PEDMARK, or just how much of a breakdown there could be between the two. Is the more education and the ability to get out to the physicians and prescribers kind of helped get PEDMARK more traction there, or do you still see a small percentage of maybe some compounding pharmacies coming through and trying to get solution out to patients that way too, and any way to eat into that if possible?

Jeff Hackman (CEO)

Yeah, no, it's a good question. I think where you're asking is, are we seeing any inroads even in not just AYA, but in the pediatric setting and in accounts that potentially were compounding in the past? Our medical team has, and I've asked them to continue to target these institutions. We've had some really exciting discussions with institutions where we've maybe in the past have been kind of shut out of those discussions because of the compounding issue and any issue with reimbursement and the DRGs. We're reengaging in every instance that we can in these organizations. I'm hoping to share potentially some successes in the future with some of these discussions that we're having. This is all really surrounding around, I think, as we upgraded and improved our competencies with our medical team.

Sudan Loganathan (Analyst)

Gotcha. Great. One more last one, if I can squeeze it in. Maybe more a question for Robert. In terms of the revenue growth and the progress that you're making, maybe the second half of this year being a little bit better on that side, is there a revenue number with the current level of OpEx or maybe slightly lower that you think that you can consistently break even or also obviously be EPS positive going forward? Is that something that we can maybe expect for the second half of this year?

Robert Andrade (CFO)

Yeah, thanks for the question, Sudan. I mean, as stated, we're pleased with two consecutive quarters of growth. I think that should be specifically highlighted and noted. We're not done yet. Our goal is to continue that growth throughout the year. We are focused on the back half of the year as having that growth from all these pillars and the foundation put into place with the initiatives, including our new commercial leadership team, augmentation of staff, etc. We look forward to giving you more progress there as it relates to cash flow break even, another metric that for us internally is very, very important. We were close to it in Q4. What hasn't changed is the total revenue product sale number that we need to get there. That's roughly $8.5 million-$9 million of sales.

As I stated, for the year, we will have roughly $33 million-$34 million of cash OpEx. That is how we think of it internally. From a GAAP EPS perspective, there is some fluctuation quarter to quarter, primarily based on the stock-based comp, with the higher parts obviously being in Q1. If we get to those levels, $8.5 million-$9 million, we start generating cash, we start generating earnings. Internally, that is a big focus for us.

Sudan Loganathan (Analyst)

I appreciate all the answers to the questions and congrats on the great quarter too.

Jeff Hackman (CEO)

Thanks.

Robert Andrade (CFO)

Thanks for the questions.

Operator (participant)

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

Jason McCarthy (Analyst)

Hey, guys. This is Michael Kenowich on the line. Thank you so much for taking my questions today.

Robert Andrade (CFO)

No problem. Hi, Michael.

Michael Okunewitch (Analyst)

I just wanted to see if you could touch a little bit on where you're making these initial inroads into the AYA setting. Is this mostly in the smaller proportion of patients that are treated at those NCI centers, or are you meaningfully penetrating now into the community setting?

Jeff Hackman (CEO)

Yeah, the NCI centers, we've said in the past are critical, obviously, for this. Where they have these AYA centers of excellence, right? You see those in multiple places around the country. Those are places, obviously, we want to target because we know that a lot of the AYA patients will get treated in these centers. We're also seeing this, though, as we move out into the community and some of the—I think our targeting has really kind of allowed us to do that, to get into places where we typically probably wouldn't have gone, not just in the center itself, but in these community settings. We're seeing growth in both places. I think the community setting, as well as the academic, are probably, as we get much more focused on our efforts, going to play critical roles in both settings.

I can't tell you that one is right now more important than the other. But we've got a team that can be able to do that and be able to approach these top-tier targets and these large cisplatin users, whether they're in the academic or community setting.

Michael Okunewitch (Analyst)

All right. Thank you. And then just on the community setting, in particular, some of the infusion centers, has the operating hours of the centers remained a challenge for this AYA setting, or are some of the initiatives that you're working on kind of overcoming that challenge?

Jeff Hackman (CEO)

Yeah. Yeah. It is a really good question because—that is why I mentioned the Fennec HEARS enhancements that we had to make. It is something that we needed to make because when a physician realizes that he wants to prevent ototoxicity but does not have the ability or does not have a chair to have that available because their center closes at a certain time, that is when we move in with Fennec HEARS and with that team to be able to move into home health and into administrating outside that infusion center. Some infusion centers do stay open later. Those, in a lot of cases, will administer PEDMARK in that center. We want to make it seamless to the point where if there is a situation where a patient wants to get this outside of these infusion centers, we have a program available, it is easy.

Robert Andrade (CFO)

It allows the patient to be able to be confident that this product can be given in a home setting. We now have achieved that. We have achieved multiple administrations of PEDMARK in AYA patients in the home. I feel really, really confident that this is a big opportunity for us as we move forward.

Michael Okunewitch (Analyst)

All right. Thank you. I really appreciate the additional clarity.

Robert Andrade (CFO)

You got it. Thanks for the questions.

Operator (participant)

Thank you. As a reminder, to ask a question, please press star 11 on your telephone. Again, that is star 11 to ask a question. Our next question comes from Ram Selvaraju with H.C. Wainwright. Your line is open.

Ram Selvaraju (Analyst)

Hi. Thanks very much for taking my questions. Just on the ex-U.S. front, can you maybe give us a sense of your most updated thinking regarding any additional remaining ex-U.S. territories that you see as particularly strong potential future opportunities for PEDMARK? Also on the European side, if you could maybe run through for us what you expect to be the cadence of new country-by-country introductions of PEDMARK as we look through the remainder of 2025, above and beyond the countries in which the product obviously has already been launched.

Jeff Hackman (CEO)

Yeah, there's the big five, right, in Europe. They're focused on moving again, with, of course, Scotland just coming on and getting approval is exciting. Again, another country, but obviously a small market, but it's still impactful. You can think of countries as they focus themselves. The next up is Spain, is Italy, and France. You can start to kind of think through how the—and obviously then really continuing to expand both in Germany and the U.K. as the launches really just only got started a month or two in the first quarter. They really—the second quarter will really be the first full quarter of the launches in both those countries as well. We continue to be excited and bullish on what it is that they're doing. They've got a great team. We meet with them often.

We share best practices, and we share data that we can gather. It goes both ways as well. We're learning from them. There are milestones that Robert talked about that are potentially achievable towards the end of this year. We're going to stay close to them on making sure that those get achieved.

Michael Okunewitch (Analyst)

Just very briefly, secondarily, you had previously talked—and I suppose this is really a question for Jeff—about the possibility of looking at other strategic opportunities, particularly in the context of oncology supportive care. I was just wondering if you had any updated thoughts on that front, or if at this juncture, at least you can kind of give us a sense of when you think it would be most appropriate to look into that further and possibly identify assets or product marketing opportunities that might be synergistic with or accretive to the PEDMARK value opportunity in the United States. Thank you.

Jeff Hackman (CEO)

Yeah, that's a good question. I really wanted to come in and get the organization structured correctly and also executing correctly. The first quarter is really my second full quarter with the organization. I really now am starting to feel comfortable with the execution and the way we're structured. We have the right leadership in this organization. Yeah, now you start to kind of think, "All right." We have had people in the past, even in my time here in the last six months, reach out that are in the supportive care space as well as not in the supportive care space to say, "Hey, we see what you guys are building. Are there synergies there?" We're going to continue to look at that. I think Robert mentioned about our financial situation as we've moved throughout the year and sales continue to grow.

This is definitely an option, not only here, but also as we talked about Japan and partnership potential opportunities if that brings itself to light as well as we get more of the data finalized. We have a couple of opportunities like that that I think are really critical for the future and also are additive to not only what we're doing in the commercial organization here in the U.S., but those opportunities are additive to what it is that we potentially could deliver.

Robert Andrade (CFO)

That's a good question. Thank you.

Jeff Hackman (CEO)

Thank you.

Operator (participant)

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Jeff Hackman for closing remarks.

Jeff Hackman (CEO)

Thank you. And thanks for the questions, everyone, and being a participant on the call. In closing, I'd like to say that Q1 was really a pivotal and exciting start to this year for the company. It marked really strong execution of our team. It marked a strategic clarity and real momentum. We want to continue that momentum. You'll see that as we go throughout the year. We're encouraged by the early impact of our foundational work and remain to be focused on building a sustainable and valuable business here through deeper engagement, as I mentioned, smarter support, and continued innovation in this space. Thanks for joining today. I really appreciate it. Robert and I look forward to keeping you updated on our progress throughout the year. Thank you.

Operator (participant)

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