Fennec Pharmaceuticals Inc.

Good morning, ladies and gentlemen, and welcome to FANUC Pharmaceutical's Third Quarter 2024 Earnings and Corporate Update Conference Call. At this time, all participants are in listen-only mode. Later, we'll conduct question and answer session, and instructions on how to participate will begin at that time. If anyone requires operator assistance during today's call, please press star 0 on your telephone. As a reminder, today's conference call is being recorded. Now, I would like to turn the conference over to FANUC's Chief Financial Officer Robert Andrade.

Thank you, operator, and good morning, everyone. We appreciate you joining us today for FANUC Pharmaceutical's Third Quarter 2024 Earnings Conference Call, during which we will review our financial results, as well as provide a general business update. Joining me from FANUC this morning is our Chief Executive Officer and board member Jeff Hackman. As a reminder, Jeff joined FANUC on August 5th, and in just a few short months has made significant progress in positioning the company for near-term and future growth and sustainability. 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 US Securities and Exchange Commission. In addition, any forward-looking statements made on this call represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements. This conference call is being recorded for audio rebroadcast on FANUC's website, .fennucpharma.com, where it will be available for the next 30 days. Now, with that behind us, I will now turn the call over to Jeff Hackman. Jeff?

Thank you, Robert. And good morning, everyone. This morning, I'm going to discuss the recent progress that we've been making along with some key developments, including developments around market expansion, our academic endorsements, new demographic interests, our educational investments, our operational efficiencies, the strengthening of our leadership, and most importantly, our execution, all of which will drive meaningful growth in the quarters ahead. So since joining FANUC in August, as Robert mentioned, I've conducted several planning sessions with our senior leadership teams across multiple functional areas. I've done a detailed deep dive in each territory of the business. I know where we are getting our business, and I know where we are not. We're making adjustments, including selective modifications to some of the historical spending that we've been doing. We also are going to align our goals and our actions with the company's long-term vision to ensure that all eligible platinum treated cancer patients are spared further hardships by protecting their ears against the profound threat of hearing loss. I've put into place some strategic imperatives and objectives with my team to drive execution and growth in the coming months and the years to come. These are five pillars that are going to drive our brand vision for Pedmark, which, again, is a reminder. It's the first and only therapy approved in the US and Europe to reduce the risk of ototoxicity and permanent hearing loss associated with Cisplatin treatments.

Our first imperative is increasing the awareness

around the unmet patient need and continuing to drive the oncologist to recognize the importance of preventing CIO. Our second initiative is cementing Pedmark as the standard of care for all CIO prevention. Third is Pedmark's adoption as HCPs, beyond just the oncologist, but gain confidence and first and continued positive experience throughout the offices with Pedmark. Fourth is across having advocacy, payers, providers ensure seamless access for our product. And fifth and equally important is activation, especially around patients and caregivers, activating them through disease education and demand for Pedmark. One of the most exciting developments that we're seeing in addition to the pediatrics this quarter is the proof of concept emerging in the adolescent and young adult market segment. The opportunity in the AYA segment is significant, with at least 10,000 patients treated annually with Cisplatin, including primary tumors, such as germ cell tumors and thyroid tumors. Over the months, I've personally met with some of these opinion leaders in AYA, and I know many of them for years. And I've listened to them and have a better understanding of how we can help them and their patients avoid hearing loss. And the physicians that have used Pedmark and that are reporting, they are reporting compelling outcomes. So let me go into more detail in the AYA market. The market potential for AYA is much greater than the size of the pediatric market, and it has a favorable reimbursement profile via the outpatient reimbursement market. In fact, in the third quarter, we surpassed greater than 90% reimbursement for Pedmark in the AYA population patients. Including the third quarter, we've been very encouraged by the response from the AYA treating physicians to Pedmark. Most of them, while being actively or being acutely aware of the hearing loss caused by Cisplatin, were not aware of the availability of Pedmark as a preventative treatment. Again, as a reminder, Pedmark is indicated to reduce the risk of ototoxicity associated with Cisplatin in pediatric patients one month of age and older with localized non-metastatic solid tumors. As you know, Pedmark is recommended for the AYA population by the NCCN, or the National Comprehensive Cancer Care Network. So what gives us confidence in the proof of concept of the AYA population in Q3? So what is showing us confidence here? After several quarters of expanded awareness and activities focused on this community, the third quarter achieved multiple patients now being administered Pedmark in their respective successful reimbursement with major health plans. Further, we were able to partner with Orsini, a specialty pharmacy company, to administer multiple AYA patients within the Orsini partnership and platform at their homes. As a reminder, the Orsini partnership enables home administration and white bag delivery to the hospital with direct billing to the insurance provider or to Medicaid. This is all great news, and it's the beginning of what we believe is a strong, sustainable revenue stream. We expect this segment to ramp up over the coming quarters. And as an example of the opportunity in AYA, we have seen Pedmark vials per patient increasing as high as 40 vials per patient, and the center's repeating their orders for Pedmark. Further, we are seeing adoption of Pedmark in select new major academic centers versus substitutions or compounded versions of STS, which pose potential serious health risks to patients. Academic institutions are critical in setting clinical standards, so this transition and endorsement by these select institutions is powerful, and it's a signal for broader market acceptance. This also opens up opportunities in research settings, positioning us well for potential future expansion. We're working on strategic initiatives to raise awareness with the risk of ototoxicity or permanent hearing loss associated with Cisplatin treatment. To drive adoption of Pedmark to ultimately help address the significant unmet need for cancer patients, these efforts include key opinion leader engagements, educational initiatives, and digital outreach, all which are creating broader ecosystems for Pedmark. We expect these initiatives to continue generating value over the long term and the quarters to come. In terms of the commercial launch and progress that we're making with Pedmark outside the US, following the exclusive licensing agreement announcement we executed in March with Norgene to commercialize Pedmark C, the product is expected to launch in Germany and in the UK in the coming months. This will generate an additional revenue source for FENEC in 2025. We look forward to providing future updates as the launch progresses in these countries. Also on the ex-US front, the investigator initiated trial in Japan evaluating Pedmark was fully enrolled as of October 2024. The clinical trial called STSJ01 evaluates efficacy and safety of Pedmark and reducing ototoxicity induced by Cisplatin in children and AYA's in localized solid tumors. The primary endpoint of this trial is to assess the frequency of hearing impairment at the end of the treatment. Results of the trial are expected sometime in 2025 with the potential evaluation of both the registration and or partnering or licensing of Pedmark in Japan thereafter. Finally, we've significantly strengthened our executive leadership team with appointments of a few folks and I'd like to talk about them now. First is Pierre Sayad, who is now our chief medical officer. There's Terry Evans, who is now our chief commercial officer and Christiana Chaffee, our chief strategy officer. These roles are critically important for FENEC. Pierre will lead medical affairs, medical information, our KOL engagement and regulatory. Terry will lead our sales management, sales training, operations, trade, GPO and field reimbursement. And Christy will lead strategy, marketing, business operations, corporate development, business development and alliance management. These are all very experienced and multi-talented leaders and we expect them to make a big impact on FENEC as we embark on a new chapter in our organization's evolution. We're delighted to have Pierre, Terry and Christy on board. All of them are seasoned biopharmaceutical industry executives as I mentioned with proving clinical commercial sales, operation and oncology market experience. Their leadership combined with FENEC's talented employee base will significantly accelerate our ability to build upon and seamlessly execute our commercial strategy for Pedmark. As members of the executive leadership team, Pierre, Terry and Christy will join Robert to partner with me to ensure cross-functional alignment, operational efficiencies and executional excellence, all by creating high performing teams and strengthening our culture of this organization. Thank you so much and now I'm going to turn it back over to Robert to go through some of the financials of the quarter.

Robert? Thank you, Jeff. Our press release contains details of our financial results for the third quarter of 2024, which can be viewed on the investors and media section of our website. As customary, rather than read through all of those details, my comments today will focus on some key financial results. For the first nine months of 2024, the company has recorded approximately $22 million in net product sales, which is more than all of 2023 net product sales. Specifically for the quarter, the company recorded net product sales of $7.0 million, compared to $6.5 million in the comparable quarter in 2023. General and administrative expenses for the third quarter of 2024 were $6.1 million, which compares to $3.8 million in the comparable quarter of 2023 and $6.9 million in the second quarter of 2024. G&A increases year over year can be attributed to non-cash stock compensation, related both to the separation of our CEO and our new CEO. Further, cash severance related to our previous CEO and ongoing IP litigation expenses. Selling and marketing expenses include remuneration of our sales and marketing employees, dollars spent on marketing campaigns such as sponsorships, trade shows and presentations, and any activities to support marketing and sales activities. The company recorded $4.6 million in selling and marketing expenses in the third quarter of 2024, compared to $4.7 million in the second quarter of 2024 and $3.4 million in the comparable quarter in 2023. Selling and marketing expenses continued to focus on awareness and education with increased marketing expenses related to AYA initiatives on a year over year basis. And finally, to our cash position, we ended the third quarter with approximately $40.3 million in cash, cash equivalents and investment securities. Excluding an approximately $0.7 million severance payment to our previous CEO, cash would have been nearly $41 million or a decrease of approximately $2 million for the quarter. The strength and sustainability of our operating model is evident this quarter, as this was the smallest operating cash decrease for the company since launch and speaks to the operational efficiency and potential cash contribution from a growing and sustainable revenue base. We anticipate that our cash and cash equivalents and investment securities as of September 30th, 2024, will be sufficient to fund our planned operations into at least 2026. Before we open the call for questions, I'm going to turn it back to Jeff for closing remarks. Jeff. Thank you, Robert.

So in closing, we are embarking on a whole new chapter in FENIX Evolution. As I've dug into the business over the last 90 days, I'm even more excited to lead FENIX in this new role and direct this organization to continue growth efforts in the future. We have an incredible opportunity with Pedmark and I'm excited about the potential we have here to drive the product and our company forward. We believe the developments I've outlined, market expansion, academic endorsements, the new demographic interests, the educational investments, the operating efficiencies, the strong leadership and execution will all drive meaningful growth in the quarters ahead. We're excited about the future and we're excited about doing this together. I would like to thank you all today for joining our call and the continued support for FENIX and we look forward to updating all of these developments and we look forward to seeing you on our ongoing commercial progress and corporate milestones on future quarterly calls. And with that operator, I will now open it up to questions.

At this time, I would like to remind everyone in order to ask a question, please press star one on your telephone keypad. We do request for today's session that you please limit to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. And your next question, or your first question comes from the line of Chase Nickerbucker with Craig Hallam. Your line is open.

Good morning, thanks for taking the questions. I guess just first to start on the AYA side of things. Jeff, do you feel like you have everything in place from a standpoint of really being able to accelerate and drive growth in that market? Maybe give us an update on kind of the compendium. And again, do you think it's kind of open season for you guys there? Does anything else need to fall into place? And should we start to expect some pretty meaningful growth from that market kind of sequentially here kind of per your commentary on the call today? Thanks.

Yeah, thank you, Chase. Yeah, we do believe the commercial opportunity is significant for PedMark and AYA. We're in the process now, and especially as we brought new talent in here around not only the marketing, but also the medical side, that their impact and the value that these folks are gonna bring will be incremental to moving this opportunity forward. So to answer your question and moving and looking forward, yes, we believe that this is a significant opportunity for us, no doubt. And the progress that we've made already in this quarter gives us and gives me the signal that we've got, we've got a potential here and we've got a significant growth opportunity.

Certainly, and I guess, if we think about the potential kind of revenue per patient there with the weight-based dosing, it seemingly doesn't take many patients or kind of much initial success to kind of really start to drive the model. Jeff, and so I guess just from that perspective, do you feel like you have enough docs who you've gotten in front of where we can kind of start to expect in Q4 that those patients start to flow through? And then just kind of overarching that question, I think the street's having a little bit of difficulty kind of modeling your business in the near term. Anything that you can kind of help us with, Robert, as far as how to think about Q4, particularly with kind of these AYA comments today. Thank you very much.

Thanks, Jeff. I'll comment first, Robert, and I'll shoot it over to you. In Q3, we were able not only to begin to have patients in the AYA segment put on PedMark, but we also saw significant reimbursement, which was also really critically important. So the insights from this market, from what we're seeing, is the incidence is there, the population is open, and the physicians want to hear the information. There is an awareness gap, of course, as you can imagine in the AYA market, but that's an opportunity for us, especially in this segment. We know there's potentially upwards of 10,000 patients that are treated annually with Cisplatin, and these are across multiple tumor types. So we know that ototoxicity exists in this population. We know that physicians are interested as we bring them in and educate them, and so I believe that this is a significant opportunity for the organization in quarters to come. Robert, do you want to comment on the fourth quarter?

Yes, thank you. Thank you, Chase, and thanks for the question. As you could hear in the script and in our commentary, for Q3, we were quite pleased with the momentum we're building, specifically with new customers, and that's both in the AYA and in the pediatric. So during the quarter, we had several new customers, including large pediatric institutions that had never ordered PedMark before, and obviously the proof of market within the AYA. So as we get these new customers, as we get repeat orders from what was new customers and hopefully additional customers, we think this is gonna be the foundation of growth

in the quarters to come.

Again, if you would like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Raghuram Salvarahu with HC Lanewright. Your line is open.

Hi, thanks very much for taking my questions. Just three quick ones here. Jeff, I was wondering if you could comment on any changes in behavior of those purchasing departments that historically have relied on compounded versions of sodium thiosulphate, and if you are seeing any kind of shift in their disposition towards PedMark and what you expect to potentially accelerate that trend going forward into the future. Secondly, I don't know if you're in a position at this juncture to comment generally and qualitatively on what FENEC anticipates to be the key business development objectives and priorities going forward from a strategic standpoint. And then finally, I don't know whether either Jeff or Robert, you wanna talk about the status of ongoing IP litigation at this time and when you expect a resolution on that front. Thank you.

Sure. Yeah, thank you for your questions. I appreciate it. I'll take the first two. Maybe Robert, you can take the third, but you were asking about what we're seeing on the pediatric side. Robert mentioned it, but we are seeing, and we have multiple institutions this past quarter where they're starting to move towards PedMark, where they haven't and they were compounding in the past. There are multiple reasons why. In some cases in particular, and I won't mention the hospital, but there was a side effect that moved them then towards PedMark, a side effect of compounding. And so, for me, I've been around a lot of these institutions for a number of years. And as we've said, the timing in some cases to get through everybody that you need to have conversations within these institutions and consistent conversations as well as targeting PNT committees as well as getting access. In some cases, we're starting to see some of the early work that was done at FENEC coming to fruition there. And I think that that's one of the things that we're seeing. Repeat your second question again, sorry.

Was just wondering if you could provide us with some qualitative color regarding what you see as the business development priorities and principal initiatives for FENEC going forward at this point.

Sure, sure, yeah. I mean, there are some open territories that we're evaluating. And as we said about Japan, it's an evaluation that we will conduct here in the first half of next year is where we go with that market and is there a potential opportunity for options there. There are multiple things that obviously can be done in a market the size of Japan. And now that the trial has completed enrollment, we'll soon in sometime next year, in the first half of next year, start to get indications of how the trial, the results of that trial. And so again, stay tuned on where potentially that could go from a business development standpoint. Robert, do you wanna take the final question?

Yeah,

thank you, Jeff. On IP? Yeah, thank you,

Jeff. Yep, and I'll just add one other thing in terms of business development. While we're very excited and we announced the Norgene deal back in March, as we've made progress, as we've seen the progress of Norgene, we're quite enthusiastic in terms of their launch and being able to report their progress in 2025. And I do believe that that's a part that's not fully appreciated by the market is that value that's gonna be attributable to FENEC in the future. With respect to the IP, as you know, it's prudent for me not to comment publicly too much, except for to say the case is ongoing. As you've probably seen in our filings, our IP portfolio has strengthened significantly, not only this year, but over the last two years, with six orange book patents in our portfolio. So stay tuned there, and

thank you for the question. Thank you. I will now turn the call back to

Jeff Hackman for closing remarks.

Thank you so much. So I wanna thank all of you for joining the call today, and also thank many of you for your continued support in FENEC. We look forward to updating you more, either on -on-one calls or ongoing commercial calls that you'll that we'll have over the quarter. And we look forward to future milestones achieved, and as well, our future quarterly calls where we can update you as well. So thank you so much. We appreciate it. And operator, I'm gonna throw it back to you and to close the call.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

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