Fennec Pharmaceuticals Inc

NASDAQ:FENC

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and welcome to Fennec Pharmaceuticals' First Quarter 2025 Earnings and Corporate Update Conference Call. [Operator Instructions] 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. Thank you, operator, and good morning, everyone. We appreciate you joining us today for Fennec Pharmaceuticals' First Quarter 2025 Earnings Conference Call, in 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.

And with that, I will now turn the call over to Jeff Hackman.

[Jeffrey Hackman, executive]

Thank you, Robert, and good morning, everyone. I want to thank you all for joining us today as we review our first quarter performance and show the outlook for the year ahead.

I'm excited to share the details and highlights of our results for Q1 and 2025. So 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 list 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 1 through 5, or those who treat high number of patients with cisplatin, allowing us to focus on engagement 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 1 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, 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 this segment is very significant in the U.S. Fennec estimates that approximately 20,000 cisplatin chemotherapy patients are treated annually in the primary type -- tumor types, fibroid 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, directors of pharmacy.

This discussion focused on AYA treatment paths within academic institutions in 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 HEARS patient support program to ensure a more seamless supportive experience for both providers and patients at every step of the PEDMARK journey.

These upgrades designed to improve access, streamline reimbursement and expand home nursing capabilities. Fennec HEARS is critical for the health care providers 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 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 Pharmaceuticals, the product has now launched commercially in Germany and in the U.K. And just this past week, Norgine announced that the Scottish Medicine Consortium or SMC, has accepted PEDMARQSI for use in Scotland.

Collectively, these recent launches market important steps in achieving Fennec's mission of expanding access to PEDMARK and PEDMARQSI 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 for 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 entered into 2025. This includes deepening our relationships with our key accounts, [indiscernible] in adoption with new existing customers and seeking evident-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 [indiscernible] progress and sharing those results with you throughout the year.

With that, I'll turn it back over to Robert.

[Robert Andrade, executive]

Thank you, Jeff. Our press release contains details of our financial results for the first quarter of 2025, which can be viewed on the Investors & 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 Norgine 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 noncash-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 '25 to '24 were 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 additional perspective on the recent discussions regarding potential tariffs. As you may know, PEDMARK is manufactured in the United States. And as such, we don't anticipate that currently proposed tariffs will have a material impact on our gross margins for overall financial performance.

Operator, with that, we will now open up the call for questions.

[Operator]

[Operator Instructions]

Our first question comes from Chase Knickerbocker with Craig-Hallum.

[Chase Knickerbocker, analyst]

Just a couple kind of metrics, 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?

And then kind of what percentage of patients are kind of making it through that full course? And maybe how that has improved and that's informed your patient support program.

[Jeffrey Hackman, executive]

Sure. Thanks for the question. Yes. 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 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.

And so kind of some of the focus that I had mentioned was is about getting Fennec HEARS in the right place. Fennec HEARS 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 HEARS and making sure that we increase those adherence numbers as high as we can get them, and we'll see that increase as we move throughout the year.

[Chase Knickerbocker, analyst]

And 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?

[Jeffrey Hackman, executive]

Yes. I think it's just resigning the program to really be focused on giving this product and potentially in the home setting with our partners. We have partners that -- and organizations that we had set up to make sure this product can be administered there. So 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 in when we gave -- when we get this product at home, right?

Because remember, we're giving this product, in some cases, 6 hours after -- in many -- in all cases, 6 hours after cisplatin has been given. So it's in the home setting, it's all the details have to be [ aired ] out to make sure that, that administration goes well.

[Robert Andrade, executive]

Yes. And Chase, I'll just add a little bit, as you know, but just to make other people aware, when you're -- when we're administering the AYA population largely done outpatient or as Jeff said in the home health setting. So the education of the product, the awareness and in particular, the administration what to expect, the antiemetics, the proper hydration. And so we've really put a focused effort in a concentrated effort with our Fennec HEARS program and with our medical team.

And as you know, we've augmented. So I think that all speaks well to what progress we've made in the last quarter, but also what we hope to happen throughout the year.

[Chase Knickerbocker, analyst]

Great. And then Robert, can you maybe just speak to -- so the OpEx, call it, flat into Q2 and then we should see a little bit of a step down in the back if it sounds like. And then just as far as kind of how that launch with Norgine has went so far? I mean, has that kind of been a long -- 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, executive]

Sure. Yes. 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 and 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.

So that's just traditional. It will see a tailing off in particular, as we start Q3 and Q4. Norgine, we're very enthused as we stated, they've launched in the U.K. with an official list pricing, about 10% less in 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. So we look forward to giving you more updates and material updates as the quarters progress.

As it relates to the sales milestones, there are 2 milestones that we've communicated before that are a particular note as it relates to 2025. One is the official pricing in Germany. That has one milestone related to it. And the second one would be for the first year sales. So as we get closer towards the end of 2025, we hope to give some more progress updates as it relates to those milestones.

[Operator]

[Operator Instructions]

Our next question comes from Sudan Loganathan with Stephens.

[Sudan Loganathan, analyst]

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? And is there any incentives in terms of reimbursements that they may get if they -- if a Tier 2, Tier 3 prescriber we're able to move up to be considered Tier 1?

[Jeffrey Hackman, executive]

Yes. I mean we don't -- Sudan, thanks for the question. I appreciate it. And yes, we don't typically share that information with our providers. Obviously, they are realize they're high prescribers versus flat, and that's one of the reasons why we're in their offices trying to educate them. And 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. And in some cases, there's still a significant lack of awareness, not only at PEDMARK, but also of what the impact of ototoxicity is having on their patients. And so I think it's really critical for us to get -- 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 1 because of our size, and because of the amount of folks that we have out there, but 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.

[Robert Andrade, executive]

Yes, 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. But obviously, if we make progress on a Tier 2 or Tier 3, we're just as focused and provided just equal support and as well as pricing and reimbursement options.

[Sudan Loganathan, analyst]

Yes. That's great to hear. And is currently like regionally, at least in the United States, do you have pretty much most regions covered now among the Tier 1? Do you have Tier 1 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 foothold in certain areas in the United States?

[Jeffrey Hackman, executive]

We're covering -- yes, we're now deploying our commercial organization throughout the United States in this tiering or these focused and large academic centers and large community centers are being targeted by our commercial organization. So it's throughout the country.

[Sudan Loganathan, analyst]

Okay. Cool. And then next on the 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 2? 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 company pharmacies coming through trying to get a solution out to education that way. Any way to eat into that, if possible?

[Jeffrey Hackman, executive]

Yes. No, it's a good question. And I think what you're asking is are we seeing any inroads even in the -- not just AYA, but pediatric setting and in accounts that potentially were compounding in the past. And our medical team has -- and I've asked them to continue to target these institutions. And 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 in the DRGs.

So we're reengaging every instance that we can in these organizations. And I'm hoping to share potentially some successes in the future with some of these discussions that we're having. But this is all real surrounding around, I think, as we upgraded and improved our competencies with our medical team.

[Sudan Loganathan, analyst]

Got you. Great. And one more last one if I can squeeze it in. Maybe more a question for Robert. In terms of revenue growth and the progress that you're making maybe in the second half of this year being a little bit better on that side. Is there a revenue number and with the current level of OpEx or maybe slightly lower that you think that 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, executive]

Yes. Thanks for the question, Sudan. I mean, as stated, we're pleased with 2 consecutive quarters of growth. And I think that should be specifically highlighted and noted. But we're not done yet. So 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 have put in place with the initiatives, including our new commercial leadership team, augmentation of staff, et cetera. So we look forward to giving you more progress there. As it relates to cash flow breakeven, another metric that for us internally is very, very important. We were close to in Q4.

And -- but what hasn't changed is the total revenue product sale number that we need to get there. And that's roughly $8.5 million to $9 million of sales. As I stated for the year, we will have roughly $33 million to $34 million of cash OpEx. So that's 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. But if we get to those levels, $8.5 million, $9 million, we start generating cash, we start generating earnings. And internally, that's a big focus for us.

[Operator]

Our next question comes from Jason McCarthy with Maxim Group.

[Michael Okunewitch, analyst]

It's Michael Okunewitch on the line. So 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 those the smaller proportion of patients that are treated at those NCI centers? Or are you meaningfully penetrating now into the community setting?

[Jeffrey Hackman, executive]

Yes. We're -- the NCI centers, we've said in the past are critical, obviously, where they have these AYA centers of excellence, right? And you see those in multiple places around the country. And those are places, obviously, we want to target because we know that a lot of the AYA patients will get treated in centers. But we're also seeing this to -- as we move out into the community and some of these. And 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.

So 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, will play critical roles for -- in both settings. So 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. And then just on the community segment, in particular, some of the infusion centers, has the operating hours of the centers remain a challenge for this AYA setting? Or some of the initiatives that you're working on kind of overcoming that challenge?

[Jeffrey Hackman, executive]

Yes. Yes. And it's a really good question because -- and that's why we -- I mentioned the Fennec HEARS enhancements that we had to make. And it is something that we needed to make and because when a physician realizes that he wants to prevent ototoxicity, but doesn't have the ability, he doesn't have a chair to have that available because their center closes at a certain time. That's 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. And those, in a lot of cases, will administer PEDMARK in that center. But we want to make it seamless to where if there is a situation where a patient wants to get this outside of these infusion centers that we have a program available. It's easy. It's -- it allows the patient to be able to be confident that this product can be given in a home setting. And we now have achieved that.

We've achieved multiple administrations of PEDMARK and AYA patients in the home. And I feel really, really confident that this is a big opportunity for us as we move forward.

[Operator]

[Operator Instructions]

Our next question comes from Ram Selvaraju with H.C. Wainwright.

[Raghuram Selvaraju, analyst]

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? And 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 PEDMARQSI as we look through the remainder of 2025, above and beyond the countries in which the product obviously has already been launched.

[Jeffrey Hackman, executive]

Yes. There's the big 5, right, in Europe. They're focused on moving -- again, with, of course, Scotland just coming on and getting approval is exciting, but again, another country, but obviously a small market, but it's still impactful.

You can think of countries as we -- as they focus themselves is the next up is Spain is Italy and France, and 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 2 in the first quarter. So they really -- the second quarter will really be the first full quarter of the launches in both those countries as well. So 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 and -- but 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. And we're going to stay close to them on making sure that those get achieved.

[Raghuram Selvaraju, analyst]

And just very briefly, secondary. 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. But 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.

[Jeffrey Hackman, executive]

Yes, that's a good question. I really wanted to come in and get the organization structured correctly and also executing correctly. And so the first quarter is really my second full quarter with the organization. And I really now are starting to feel comfortable with the execution and the way we're structured, and we have the right leadership in this organization.

So yes, now you start to kind of think, all right, and we have had people in the past, even in my time here in the last 6 months, reach out to -- that are in the supportive care space as well as not in the supportive care space to say, "Hey, we like -- 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 move 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 finalize. So 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. That's a good question.

[Operator]

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

[Jeffrey Hackman, executive]

Thank you. And thanks for the questions, everyone, and being a participant on the call. So in closing, I'd like to say that Q1 was really a pivotal and exciting start this year for the company. It marked really a strong execution of our team. It marked a strategic clarity and real momentum, and we want to continue that momentum, and 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. So thanks for joining today. I really appreciate it. Robert and I look forward to keeping you updated on our progress throughout the year. So thank you.

[Operator]

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