Fennec Pharmaceuticals Inc.

Good morning, ladies and gentlemen, and welcome to Fennec Pharmaceutical's fourth quarter in full year 2024 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 Andretti. Please go ahead.

Thank you, Operator, and good morning, everyone. We appreciate you joining us today for Fennec Pharmaceutical's fourth quarter and full year 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 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 statement. This conference call is being recorded for audio rebroadcast on Fennec's website, www.fennecpharma.com, where it will be available for the next 30 days. And now it is my pleasure to turn the call over to Jeff Hackman. Jeff?

Hey, thank you, Robert, and good morning, everybody. Today I'm going to discuss our continued progress, including updates on our market expansion efforts, new academic endorsements, our new demographic interest, our educational investments, our operating efficiency, and our strong overall execution. All we believe will translate into significant shareholder value in 2025 and beyond. In 2024, it marked the beginning of a foundational transformation for Fennec, setting the stage for our PEDMARCH strategy. It's a strategy that we'll be utilizing throughout 2025 to realize our next phase of growth. With our recent key management and commercial hires in Q3 and Q4, we strengthened our leadership team and we enhanced our expertise. We are well positioned now to drive execution and excellence in the field, and we are already seeing encouraging momentum in early 2025. As a reminder, our first imperative was to increase our awareness around the unmet need and continuing to drive oncologists to recognize the importance of preventing cisplatin-induced ototoxicity, or CIO. Our second imperative is establishing and cementing PEDMARC as the standard of care for all CIO prevention. Next is PEDMARC's adoption. Beyond just the oncologist, Gain confidence throughout the office, first, and continued positive experiences with Pedmark. Fourth is access. Having advocacy, payers, and providers be ensured that we have seamless access for our product. And last, and equally an important pillar, is activation. Patients and caregivers are activated throughout the disease education process and realize the importance of Pedmark. One of the most exciting developments that we continue to see is the interest and adoption that we are seeing in the adolescent and young adult segment, or AYA. As mentioned previously, this opportunity for AYA is significant. In the U.S., we estimate it's approximately 20,000 cisplatin chemotherapy patients that are treated each year with the primary tumor types of thyroid, breast, germ cell, and testicular. Additionally, in contrast to the pediatric market, and based upon our market research, the USAYA oncology landscape is shaped by a combination of both academic and community centers across the nation. The key academic institutions play a critical role for establishing the treatment framework, with 72 NCI-designated academic centers that see high volume of patients across the country. In contrast, the remaining patients are treated at nearly 4,000 community practices throughout the country. The market potential for AYA is greater than the size of the pediatric market and has a favorable reimbursement profile through outpatient reimbursement efforts. We continue to be very encouraged by the response to PEDMARC from the AYA treating physicians. We are finding that most of them are acutely aware of hearing loss caused by cisplatin, but many of them are still not aware of the availability and prevention and treatment that Pedmark offers. I'm pleased to report that Pedmark is gaining traction in select major academic centers across the country. Institutions such as UCLA in California, Fred Hutchinson Cancer Center in Seattle, Mount Sinai in New York City, and Henry Ford Cancer Institute in Detroit, just to name a few examples, all have begun integrating Pedmark into their treatment plans, further validating the clinical utility and expanding patient access in real-world settings. These experiences have been very positive, and we are pleased with both the new and continued interest in Pedmark as the first and only approved therapy for the prevention of hearing loss related to cisplatin. These centers are critical in setting clinical standards, so this transition and endorsement by key institutions is a powerful signal for broader market acceptance for our product. This also opens opportunities in research settings, positioning us well for potential future expansion. As a reminder, PEDMARC 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. PEDMARC is recommended for the AYA population by the National Comprehensive Cancer Network, or the NCCN. It has a 2A endorsement. In addition, with this recommendation, as of the end of 2024, all medical compendia have received Phenix clinical updates. I'm pleased to announce that the AHFS, the largest online platform for pharmacists, has updated its content to reflect and differentiate Pedmark in accordance with our labeling. We anticipate additional compendia listings in the early 2025 and look forward to providing you all updates. Further, we continue to advance our efforts to have PEDMARC added to the NCCN Drug and Biologics Compendium, a key step in further expanding access and reimbursement pathways. As you can imagine, the process involves multiple steps. beginning with our request to modify the NCCN adolescent and young adult guidelines to expand consideration for PEDMARC in platinum based regimens beyond cisplatin. In parallel, we've also submitted a formal inclusion request to the NCCN for the neuroblastoma guidelines. Since inclusion in the compendium requires product recognition in a cancer-specific NCCN guideline, the submission is a key milestone. A decision is anticipated by mid-25, and we are actively engaging with key stakeholders to support a positive outcome here. In terms of the commercial launch and the progress, we are making significant steps outside the U.S. As previously announced, we have an exclusive licensing agreement that we've executed in March of last year, 2024, with Norgene to commercialize PedMarxi. The product is now commercially launched in both Germany and the UK in early 2025. In the UK, NICE published the list price of PedMarxi is 8,277 pounds. In Germany, the current public price is more than 10,500 euros per vial. And that final price in Germany is anticipated to happen at the end of 2025. Both markets are generating additional revenue source for Fennec in 2025 with potential for the achievement of the first two sales royalty and related milestones by the end of 2025. We look forward to providing you all updates to these recent launches as we move forward in Europe. Also on the ex-US front is the investigator-initiated trial in Japan. We call it STS-J01. It's evaluating PEDMARC and was currently enrolled and completed with enrollment in October 2024. The clinical trial STS-J01 evaluates the efficacy and safety of PEDMARC 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 the treatment. Results of the trial are expected by the fall of 2025 with the potential evaluation of both registration and partnering or licensing of PEDMARC in Japan thereafter. Further, we've partnered with Infamous, Infarmis, excuse me, for the distribution of PEDMARC in Turkey and in the Gulf cooperated council countries. These milestones collectively mark an important step in achieving Fennec's mission of expanding our access to PEDMARC to cancer patients across the globe who all have risk of hearing loss due to Cisplatin or CIO. I want to take a moment now to just reflect on why this work and what we're doing here at Pedmark truly matters, or what we're doing here at Fennec truly matters. I recently shared at an all-company Fennec national meeting that we're not just working to preserve hearing, we're preserving connections, memories, and life itself. At Fennec, we are constantly reminded through our daily interactions with both physicians and patients of the significant importance of protecting hearing for people who are going through cancer treatment. Every cancer patient who makes it through treatment and can still hear the laughter of a loved one or just everyday sounds because of the work that we are doing to raise awareness and the importance of CIO and PEDMARC. The progress we are sharing with you today is more important than just the milestones and numbers. It's making real impact on patients' lives and their families. I'm incredibly proud of our team here at Fennec and excited about our road ahead. With that, I'm going to turn it back over to Robert.

Thank you, Jeff. Our press release contains details of our financial results for the fourth quarter and full year of 2024, which can be viewed on the investors and media section of our website. Rather than read through all of those details, my comments today will focus on some key financial results. At Fennec, we have been consistent with a strategic and disciplined approach to spending. We are pleased to report that over the past 12 months, during a time of change and evolution at the company, we grew revenues by approximately 40%, and importantly, managed to burn only approximately $0.6 million in cash for the fourth quarter of 2024. In the fourth quarter of 2024, the company reported $7.9 million in net product sales or a quarterly growth rate of approximately 13%. For the full fiscal year 2024, the company recorded $29.6 million in net product sales compared to $21.3 million in 2023. As we approach fiscal year 2025, we are focused on growing net product sales. and anticipate the most significantly quarter 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 3.9 million in selling and marketing expenses in the fourth quarter of 2024, compared to 4.6 million in the third quarter of 2024. For the fiscal year 24, the company recorded $18.4 million in selling and marketing expenses compared to $12.1 million in fiscal year 23, with the increases largely related to increased payroll and additional marketing expenses as we focused on expanding our outreach and awareness to the AYA population. For the fourth quarter of 2024, G&A expenses decreased $2.9 million compared to the third quarter of 2024, largely due to non-cash equity compensation and the one-time severance paid to the previous CEO in the third quarter. For the fiscal year 24, G&A expenses increased by $2.4 million compared to fiscal 23, as a result of the increased European pre-commercialization expenses and expenses associated with the Norgene transactions. For the full year of 24, the company spent approximately $33 million in cash operating expenses, which included approximately $8 million in cash expenses related to the pre-commercialization of Europe and related Norgene transaction expenses. We would anticipate the full-year cash operating expenses to be similar in 25. This includes a step-up in marketing expenses and increased headcount, while there will be an elimination of any pre-commercialization expenses related to Europe or NorGene expenses that we incurred in 24. 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 fiscal year spending patterns. And finally, our cash position. Cash and cash equivalents were $26.6 million as of December 31st, 2024. I would like to remind those that in December 24, Fennec announced the early partial repayment of a significant portion of its debt to Petrocorps. The early repayment of $13 million of the company's approximately $32 million outstanding convertible debt facility is a financial and strategic action that optimizes the company's balance sheet and overall capital structure. while effectively saving approximately $1.5 million in future annual interest payments and eliminating potential dilutive shares. As mentioned, we were very pleased with our operational efficiency in the fourth quarter while reporting a cash burn of only $0.6 million. For the full fiscal year 2024, there was approximately a $13 million increase in cash and cash equivalents due primarily to the $43 million and upfront proceeds from the NorGene transaction, net product revenues collected, offset by operating expenses and the $13 million debt pay down in December 24. Additionally, as a reminder, the next milestone related to our NorGene agreement will be obtaining final pricing approval in Germany, in which Fennec will have the opportunity to receive a 10 million euro milestone. And thereafter, a sales milestone for the full fiscal year in which Fennec will have the opportunity to receive a 5 million euro milestone. With the PEDmark KV launch underway in two important markets in the UK and Germany, we look forward to providing further updates as the year progresses. And operator with that, we will now open up the call for questions.

Thank you. 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. Please limit to one question and one follow-up. And our first question will come from Chase Knickerbocker with Craig Hallam. Your line is open.

Good morning. Thanks for taking the questions. Just first, as it relates to Q4, Can you just give us a sense of a little bit more specifics? Did the pediatric business return to sequential growth in the quarter and then, you know, kind of back and into it? Can you give us a sense for what the AYA contribution was in Q4?

Yeah. Hi, Chase. How are you? Thanks for the question. Yeah, we continue to see growth in the pediatric segment. We're pleased with the momentum that was created earlier in that segment. And we continue to be, you know, that's an important part of our business. AYA has jumped out to be an incredible opportunity for us. And so as we, you know, provided, we won't give a breakdown of that, of the details of between how each has contributed to that. But, you know, our growth really is coming from both.

Got it. And so you mentioned kind of a second half inflection there. Is that just NCCN compendia related? And then I guess just an overarching question, Jeff. I mean... You know, it's good to hear you talk about kind of the next phase of growth on the call here with AYA. But AYA is not a business that we have a great visibility into. Can you maybe just give us a sense to what degree that you kind of expect inflection or seeing inflection in one queue? And then what investors' expectations should be, you know, kind of in 2025 for what potential growth we could see in that segment?

Sure. You know, in the, you know, obviously the absence of giving any guidance, we, you know, we really we believe the opportunity is significant. And again, you know, we're not, this is not a purely pediatric opportunity anymore for the product. And, you know, those institutions that I mentioned, which there are more that are adopting, you know, PEDMARC in the AYA population will continue. So the reason why, going to your question, the reason why we are looking as second half of the year continuing to see accelerated growth. It's just because we're building the business here and the business builds on itself and we'll continue to see that. We'll invest here in 2025 to do that, as Robert said, but the expansion really focuses on this opportunity and we'll see that growing throughout the year.

And I guess just to close up there, I mean, are you seeing enough so far on Q1 to kind of give you confidence that that growth is going to show its, you know, rear its head in 2025, or just maybe speak to specifically what you've seen in the first couple months of Q1?

We've seen it, and we're expecting it to continue, Chase.

Thank you.

And our next question will come from Raghuram Chauhan. Alvaro Ju with HC Wainwright. Your line is open.

Thanks very much for taking my questions and congratulations on all the recent progress. Just wanted to ask in particular about the progress so far that Norgene has been making in Europe. In particular, if you could provide us with any kind of granularity regarding relationships that have been built with key centers of excellence in European countries how you are expecting the broader rollout to occur, with what cadence, and which countries you anticipate being the most likely contributors to European revenue and therefore the European royalty stream. And if you could also maybe talk about whether the AYA population is likely to be in any way a comparable driver to revenue uptake in Europe relative to the United States. Thanks.

You know, we've, you know, we've, following the licensing agreement and the announcement with Norgene, as you guys know, we've, now the product is commercially available. So, and it just really, they're just really getting it off the ground, both in the UK and Germany, which will be two of probably of the largest markets in Europe, as you guys know, as you kind of look at the kind of the big five countries there. We issued a press release when we got the guidance from NICE, as well as the German launch. Both of these markets now are progressing well. We continue to be really close, obviously, as you can imagine, with Norgene to follow up. these updates and the launch progress. And we'll continue to update you more as more countries get approved and come on board with the Norgene opportunity. You know, in relation to AYA, you know, that's something obviously Norgene will start to kind of think through. It's a little bit different in Europe, obviously, as you can imagine, and they've got a You know, they have a different structure of how they would get to that population. But right now, you know, this product is approved through patients aged one month through 17 years of age with localized non-metastatic solid tumors in Europe.

And then just very briefly, when you think about going forward in the United States with Pedmark sort of leading the line, Has there been any kind of update in your thinking regarding business development initiatives, potential partnership opportunities, ways to potentially expand your presence in areas where you already are effectively in front of key prescribers?

Are you saying outside the U.S. or within?

No, no, within the U.S., within the U.S.

Yeah. Yeah, you know, we've... again, you know our indication and where we are. And the NCCN guidelines allow us, obviously, in the AYA population to be able to expand our business there. We've had discussions with key academic institutions in the U.S. talking about expanding that that opportunity. And we're going to continue to listen and potentially look at what that is. And we'll get to you with updates on if we, you know, as we kind of enter into, you know, some of these discussions with some of these academic institutions.

Thank you.

And our next question will come from Sudan Loganson with Stevens. Your line is open.

Hi, everyone. This is Felix Ampuma in for Sudan Luganathan. Congrats on the earnings call and for the progress that you're making. I have two or three questions. First and foremost, can you please comment on the competitive landscape for PetMac right now, especially in the U.S. market? And if you can comment a bit more on pricing. I know you did make mention of the pricing in OUS, and how is the prescription of the drug going right now? In terms of SG&A, how should we think about it going forward? It looks as if it came down a bit, and also the payment that was made to the ex-CEO, would that lead to operational expenses coming down a bit more.

Robert, do you want to take this second part, and I can jump back into the first?

Sure. Hey, Felix, how are you? I'm doing well, thanks. Good. On the SG&A, as mentioned in my prepared remarks, 2024 saw additional expenses of approximately $8 million, including the Norgene transaction, including European pre-commercialization expenses, and as you mentioned, CEO severance. So on a year-over-year basis, we anticipate that aggregate expenses, or those about $33 million, to be the same. And that's largely as a result of additional marketing and awareness expenditures that we're making in focus, both for the AYA market and just for PEDMARC in general, as well as the increased headcount that we have from some of the commercial expertise that we brought on board. So in aggregate, the same, but I think I gave you some of the ebbs and flows in terms of why there's pluses and minuses.

Okay, thanks. Yeah, and related to the cost of Pedmark, you know, your question is, obviously, Pedmark, it varies from patient to patient depending on a bunch of factors, right? Weight-based dosing, vial utilization, duration of treatment, obviously, cost of treatment. You know, we've said this in the past that the whack of Pedmark the wholesale acquisition cost of Pedmark is $11,000 per vial. And, you know, the number of vials Pedmark that's administered per patient, it varies based on how many doses of cisplatin, for example, it's given or, you know, and that can range. We've seen from six vials of Pedmark up to potentially 40 vials with larger and some of the older patients in the AYA market. So it just varies. And we are seeing favorable reimbursement from coverages right now across both commercial and government, both Medicaid payers and across inpatient and outpatient settings, which is really, really good news, especially as we enter into you know, the AYA market. Okay. Hope that answers your question.

Yeah, it does. If you can elaborate a bit more on the competitive landscape and other competing formulations that you are aware of and how, I mean, any idea in terms of the split. Okay.

Yeah, we don't give a breakdown of the splits of the competitive market. Right now, as you guys know, the compounded STS product still continues to be available. Mostly, I would say the majority of it is used in the pediatric settings. We really don't see any of that product or the compounding of that product in the community settings. And as you can see, as you know, I announced some of the institutions, the UCLA's, the Mount Sinai's, the Fred Hutch's, as you can see, those are large institutions that have adopted PEDMARC. And that's great news, especially when, you know, there is a compounding competitor that's available. So, you know, I would say that we're making progress there. And, you know, this will continue to be progress that will continue. we'll talk about as 2025 continues.

One last question, if you may. I think you made mention of label expansion. Will you be running clinical trials in all those labels that you potentially hope to expand into those indications?

Well, no, we'll update you more on that. That's a great question. You know, those are developments that are happening as we speak here in 2025. I can tell you that I'm open to having those discussions with institutions. I think it's an area where we have to play and continue to grow PEDMARC. So stay tuned for that. That's a great question.

We'll update you more as it comes. Thanks and congrats again.

Thanks. You're welcome.

As a reminder, to ask a question, please press star 1-1 on your telephone. And the next question will come from Michael Okunwich with Maxim Group. Your line is open.

Hey, guys. Thank you so much for taking my questions today. Congrats on the progress. Thank you.

Thanks, Michael.

Just a couple quick ones from me. Thinking about Japan, do you expect that you'll need to have that data in hand to gain a partner, or is there a potential you could see progress on the partnering front as we head into that data?

Yeah, you know, you'd always like to have the data first, right? But we have been approached and have had some discussions. And so, you know, those will, you know, I think about, you know, the business development of other countries like this, like Japan. It's a long process, but it's a process that we've begun to have conversations with. And as the data, you know, as we get information and you get hints of the data, you know, and it's, you know, the positive outcome of that data, that all is information that will lend to, you know, a much better, you know, value for us. And so that process is going to continue all throughout, you know, 2025 until we get the final data.

All right. Thank you. And then thinking about you know, that kind of bifurcation you mentioned in the AYA segment between the community centers and the more concentrated 72, I think you said, major centers. How do you prioritize your commercial efforts between those two settings?

Yeah, you know, it's interesting because what we're finding is the, you know, those 72 centers centers that we talked about, as well as these 20,000, you know, patients are, you know, in those 4,000 oncology, you know, offices around the country. It kind of, it's breaking out very, you know, almost as we start to see this as a very balanced where these patients are, both in the community and in the academic centers. So these academic centers play an important role And those institutions are really key for us, but we have to make sure that we're out in these 4,000 oncology community centers. It's critically important for us to be there as well. When I mentioned earlier in the call about the lower awareness levels in the AYA space, that's a great opportunity for us. Many of these physicians that we're talking to understand the issue with cisplatin, but in a lot of cases, they didn't have an alternative to be able to help with CIO with these patients, and now they do. And so this is an exciting opportunity for us in both the academic institutions and the community setting.

All right. Thank you very much. I appreciate the additional color. You got it.

Thanks, Michael.

I show no further questions in the queue at this time. I would now like to turn the call back over to Jeff Heckman for closing remarks.

Yeah, perfect. Thank you. And thanks for your questions, everybody. You know, it was truly an exciting year for us and for Fennec, given the strong performance of PEDMARC, especially this is the second full fiscal year following the U.S. commercial launch. We're pleased with our execution. especially against the foundational pillars that I mentioned earlier. And this sets us up for an incredible 2025 and beyond. We're also significantly strengthened our financial position, and we remain dedicated to further growing our revenues and expanding our availability of PEDMARC to patients and providers globally. So I want to thank you all today for joining the call and the support of FENIC. We look forward to updating you all on our commercial progress and important corporate milestones on future quarterly calls. Thanks, everybody.

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