Fennec Pharmaceuticals Inc. (NASDAQ:FENC) Q1 2023 Earnings Call Transcript

Fennec Pharmaceuticals Inc. (NASDAQ:FENC) Q1 2023 Earnings Call Transcript May 13, 2023

Operator: Good morning, ladies and gentlemen, and welcome to Fennec Pharmaceuticals First Quarter 2023 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. Instructions on how to participate will be given at that time. As a reminder, today’s conference call is being recorded. Now I would like to turn the conference over to Fennec’s Chief Financial Officer, Robert Andrade. Please proceed.

Robert Andrade: Thank you, operator, and good morning, everyone. We are delighted that you can join us today for Fennec Pharmaceuticals first quarter 2023 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 Rostislav Raykov, our Chief Executive Officer. Before we begin, I would like to remind you that during this call, the company will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Reference to these risks and uncertainties are made in today’s press release and disclosed in detail in the company’s periodic and current event filings with the 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, it is my pleasure to turn the call over to Rosti Raykov. Rosti?

Rostislav Raykov: Thank you, Robert, and good morning, everyone. We appreciate this time you’re giving us today. We’ll be discussing the market opportunity ahead of us, our recent progress as we have achieved many significant milestones over the past several months. The focus of today’s call is to review updates on the recent launch efforts underway for PEDMARK in the U.S. as well as detail our first quarter 2023 financial results, all of which were outlined in our earnings press release issued this morning prior to this call. First, I’d like to discuss the market opportunity ahead of us. Each year in the U.S., there are about 5,000 new cases of pediatric solid tumor cases who would be candidates for platinum-based therapy.

About 70% of these patients or roughly 3,500 of them have localized non-metastatic disease. Cisplatin-based chemotherapy is the standard of care for the majority of these patients as their first therapeutic option. These localized tumors have generally very good prognosis with five-year survival rate of greater than 80%, further emphasizing the importance of quality of life after treatment is completed. Permanent hearing loss can be seen in roughly 60% of children treated with cisplatin and can be as high as 90%, with many requiring lifelong hearing aids and technically difficult in the suboptimal cochlear inner ear implants. Infants and young children at critical stages of development with even mild hearing loss lack speech, language development and literacy, while older children and adolescents lack social, emotional development and educational achievement.

The most common solid tumors indications include neuroblastoma, CNS tumors, including medulloblastoma and PNET, osteosarcoma, germ cell tumors with some examples of less common tumors, which are retinoblastoma and hepatoblastoma. There are many others as well, but those are the main ones. PEDMARK is the first and only FDA-approved therapy to reduce the risk of cisplatin-induced hearing loss in pediatric patients one month of age and older with localized non-metastatic solid tumors. The availability of PEDMARK represents a critical breakthrough for the pediatric oncology community, which was enthusiastically awaiting a rigorously tested and FDA-approved option to safely increase the potential long-term quality of life for these young patients.

To that end, our commercial strategy has been centered around a few critical components, establishing PEDMARK as the necessary complement agent when prescribing cisplatin-based therapy for a child with localized non-metastatic solid tumor, minimizing the barriers to access and ensuring rapid responses to product questions and establishing Fennec as a premier partner of choice among the pediatric oncology community. To address these goals, we have established a best-in-class patient services and support offering called Fennec HEARS, which is a comprehensive single source program designed to connect PEDMARK patients to both patient financial and product access support. The program offers the systems and resources regardless of insurance type that can address copays or lack of coverage when certain eligibility requirements are met.

Fennec HEARS also provides access to care coordinators that can answer insurance questions about coverage for PEDMARK and provide tips and resources for managing treatment. In addition, we have built out a strong commercial team to execute U.S. marketing, distribution and access and launch of PEDMARK with our regional pediatric oncology specialist team that is highly focused on targeting the approximately 200 pediatric hospitals that – and those centers include Children Oncology Group, NCI and NCCN institutions across the U.S. that drive 80% of the cisplatin use. So it’s a very concentrated effort. This team is also responsible for key partnering, awareness and education initiatives, and we continue to have critical interactions with nursing and pharmacy organizations, audiologists, key opinion leaders, advocacy groups, but most importantly, the patient-parent community.

With respect to the launch, we have said for some time that the profile of PEDMARK has been well received by health care providers, and we are pleased to see such enthusiasm carrying through to the commercial launch in the U.S. Early adoption has come from both major academic centers and regional practices. Geographically, all of our territories have seen HCPs prescribing PEDMARK, and we have seen nice adoption within our target accounts and increasing with every month. In terms of patients, we have seen patient utilization across several tumor types, but particularly the hepatoblastomas, osteosarcomas and germ cell tumors. Regarding reimbursement, PEDMARK has secured both broad and favorable payer coverage. We anticipate that within the pediatric oncology patient community, approximately 50% of patients are commercially insured, with another 50% insured through government-sponsored programs.

We also announced that the U.S. Centers of Medicare and Medicaid Services or CMS has issued a permanent J-Code for PEDMARK, which became effective on April 1 this year. This is great news and will help streamline the reimbursement process. We believe that this also leads to additional patient access at several key accounts who were waiting until the J-Code became effective to use PEDMARK. Additionally, some of our largest academic institutions in the country are not yet prescribing PEDMARK as they have formulary processes that can take up to a year and sometimes even more. We’re actively working with these institutions on the necessary steps and processes to gain formulary access. Accordingly, we see PEDMARK accelerating in the second quarter and second half of the year as these larger centers gain formulary approval.

So we feel as though the PEDMARK commercial launch is off to an overall solid start. We’re continuing to execute against our strategic launch plans and are confident in our disciplined and targeted approach to building share within the U.S. market. And again, this is a product that would not just stay at a 1% market share, but would really target – is 80% of cisplatin in these 200 centers. We’re confident we have the right team focused in the right places with a drug that we believe provides an attractive profile for physicians, patients and payers. Earlier this year, the National Comprehensive Cancer Network updated its Clinical Practice Guidelines for adolescent and young adult oncology to include PEDMARK. And although we’re very focused on the young children, this actually opens the opportunity for PEDMARK to be treated with some of the adolescents and older kids, which is very important to me personally.

In addition, the FDA granted orphan drug exclusivity for PEDMARK in January this year. The FDA orphan drug designation program is designed to advance the development of drugs to treat the condition affecting 200,000 or fewer U.S. patients annually. The seven-year market exclusivity for PEDMARK began on September and – the date of the FDA approval. It continues until September 2029. Additionally, the approved prescribing label, the FDA has explicitly directed that PEDMARK is not substitutable with other sodium thiosulfate products. With regard to expanding in Europe, we announced on March 31 that the Committee for Medicinal Products for Human Use of the European Medicines Agency issued a positive opinion and recommended granting a marketing authorization for PEDMARK, which will be marketed as PEDMARQSI in Europe.

When formally approved by the European Commission, PEDMARQSI will be the first and only treatment approved in the European Union to address this area of significant unmet medical need. The CHMP recommendation is now under review by the European Commission, and ratification of the CHMP recommendation is expected by early June. We continue to evaluate the best commercial pathway for the company in Europe and the rest of the world, either go it alone, or in some of the larger countries, go it alone and partner the rest or partner the entire European territory as we seek to answer this question in the coming months to enable a European launch later this year once that market, of course, is approved. Whatever pathway we select, we see Europe as another significant opportunity to create additional shareholder value by making PEDMARQSI available internationally.

With that, I will now turn the call over to Robert to review our financial results for the quarter. Robert, over to you.

Robert Andrade: Thank you, Rosti. Our press release contains details of our financial results for the first quarter of 2023, 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. The company reported gross PEDMARK sales of $1.9 million, translating into net product sales of $1.7 million in the first quarter of 2023. As Rosti mentioned, momentum is building in the second quarter as large centers gain formulary access, and with the recent issuance of our J-Code, helping to streamline the reimbursement process. General and administrative expenses for the first quarter of 2023 were $4.3 million, which compares with $2.1 million for the first quarter of 2022.

The $2.2 million increase on a year-over-year basis is as a result of ongoing support for PEDMARK as well as increased professional and legal expenses. R&D expense decreased by $1.4 million as compared to Q1 of 2022. The company reduced research and development costs when it received FDA approval of PEDMARK. The majority of traditional research and development expenses associated with PEDMARK are now recorded as general and administrative expenses or capitalized into inventory and eventually recorded to cost of product sales. The company recently began recording selling and marketing expenses when it expanded its payroll to include an internal sales force for the launch of PEDMARK. Selling and marketing expenses include distribution costs, logistics, shipping and insurance, advertising, wages related to commissions and out-of-pocket expenses.

Company recorded $2.5 million in selling and marketing expenses in the first quarter of 2023. Our GAAP net loss for the first quarter of ‘23 was $6 million or a loss of $0.23 per share compared to a GAAP net loss of $3.7 million in 2022 or a loss of $0.14 per share for the first quarter of 2022. And finally, on to our cash position. We ended the first quarter with approximately $18.4 million in cash, cash equivalents and investment securities, which includes $25 million of capital drawn down under our existing Petrichor convertible debt facility. We believe our available capital, when coupled with PEDMARK revenue assumptions, will be sufficient to fund our planned operations for at least the next 12 months. And operator, with that, we are ready for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] And our first question comes from Chase Knickerbocker with Craig-Hallum. Please proceed.

Operator: Thank you. One moment for our next question, please. And it comes from the line of Raghuram Selvaraju with H.C. Wainwright. Please proceed.

Operator: Thank you. One moment for our next question, please. It comes from the line of Naureen Quibria with Capital One Securities. Please proceed.

Operator: Thank you. One moment for our next question. And it comes from line of David Nierengarten with Wedbush Securities. Please proceed.

Operator: Thank you. And with that, ladies and gentlemen, we conclude the Q&A session. I will turn the call back to Rosti Raykov for final comments.

Rostislav Raykov: Yes. Well, I would like to thank for – everyone for their interest. And we are very thrilled with – especially after April 1, how the uptick of – or the uptake of the – of PEDMARK has dramatically increased, and we look forward to discussing that during our next quarter. So thank you all for the time today and the questions.

Operator: Thank you, ladies and gentlemen, for participating in today’s program. You may now disconnect.