Fennec Pharmaceuticals Inc. (NASDAQ:FENC) Q2 2023 Earnings Call Transcript

Fennec Pharmaceuticals Inc. (NASDAQ:FENC) Q2 2023 Earnings Call Transcript August 6, 2023

Operator: Good morning, ladies and gentlemen and welcome to the Fennec Pharmaceuticals Second Quarter 2023 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.

Robert Andrade: Thank you, operator and good morning, everyone. We are delighted that you could join us today for Fennec Pharmaceuticals’ second 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 Rosty Raykov, our Chief Executive Officer; and our newly appointed Chief Operating Officer, Adrian Haigh. 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.

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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 this call over to Rosty Raykov.

Rostislav Raykov: Thank you, Robert and good morning, everyone. We’ll be discussing 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 ongoing launch efforts underway for PEDMARK in the U.S. and discuss our global opportunities, including the recent approval in Europe. Further, we will detail our second quarter financial results, all of which were outlined in our earnings press release issued this morning prior to this call. As a reminder, 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 is ushered in 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 of these young patients. In June, we announced Pedmarqsi, was granted marketing authorization by the European Commission. Pedmarqsi is the first and only approved therapy in the EU for prevention of hearing loss induced by cisplatin chemotherapy in patients one month to 18 years of age with localized non-metastatic solid tumors. Further, Pedmarqsi was granted Pediatric Use Marketing Authorization, PUMA which includes eight years plus two years of data and market protection. In terms of our commercial strategy, we’re pleased to share the results of the second quarter as we believe they underscore the growth potential of PEDMARK.

We remain focused on executing the following: 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 help 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. In addition, we have built out a strong commercial team to execute U.S. marketing, distribution, access and launch of PEDMARK with a sales team that is highly focused on targeting the approximately 200 pediatric hospital centers, including COG, NCI and NCCN institutions across the U.S. that drive 80% of cisplatin use.

More specifically, we’re pleased with the second quarter’s double-digit growth in new pediatric hospital centers prescribing PEDMARK and the consistent repeat orders from existing accounts. Further, we have had recent success in larger academic centers, including formulary approvals early in the third quarter at major pediatric hospital centers. As a reminder, early adoption has come from both major academic centers and regional practices. More recently, we have had adoption coming from some of the most recognized pediatric centers of excellence. Geographically, all of our territories have seen HCPs prescribing PEDMARK and we have seen highly encouraging adoption within our target accounts that are increasing over time. In terms of patients, we have seen patient utilization across several tumor types, including hepatoblastoma, osteosarcoma in terms of tumors.

Further, given our broad and favorable payer coverage and streamlined reimbursement process, we have been successful in securing coverage for prescribed patients. So we’re pleased that the effort and execution of the team is starting to become evident in the 98% net revenue growth experienced in the second quarter. 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. With regard to expanding in Europe, we announced in June the marketing authorization for PEDMARK which will be marketed as Pedmarqsi. Pedmarqsi will be the first and only treatment approval in the European Union to address this area of significant unmet medical need. We continue to evaluate the best commercial pathway for the company in Europe and rest of the world; either go it alone or with a partner or both, whatever pathway we select, we see Europe as another significant opportunity to create shareholder value.

Finally, as announced today, I am very pleased to have Adrian Haigh join the executive management team of Fennec as Chief Operating Officer. Adrian has been a major contributor to Fennec’s success since joining the Board from 2014 and he is part of the Fennec family. We are fortunate to have him available to help us at this pivotal stage in the commercial evolution of Fennec. Adrian comes to us from PTC Therapeutics, where his last role was Senior Vice President and Head of International. Prior to that, Adrian worked with our Chairman, Dr. Khalid Islam as Chief Operating Officer at Gentium, where he built and managed Gentium’s commercial and medical affairs organization and was also responsible for business development, playing a pivotal role in the sale of Gentium to Jazz Pharmaceuticals for $1 billion.

Adrian, it’s great to have you with us on this call. Can you give us a brief overview of the opportunity you see for Fennec given your new role?

Adrian Haigh: Thanks, Rosty. I’m delighted to have been asked to join Fennec full time as Chief Operating Officer. As many of you are aware, this has been quite a role across the ride over the last 10 years. But through everything, we remained laser focused on our mission to ensure that all pediatric cancer patients at risk of hearing less caused by cisplatin chemotherapy have access to PEDMARK. I left PTC at the end of last year after eight years building and leading the international commercial organization. Retirement was not for me and I’m delighted that the Board believes that my experience in leading global commercial teams in generating significant pre- and post-approval sales, while at the same time, evaluating all strategic options is the skill set that Fennec needs right now.

For example, at Gentium, the fact that we had a small commercial team in place across Europe with all the key HTA dossier submitted are in preparation, combined with significant pre-launch revenue that enabled us to generate considerable value for shareholders; doing the same at Fennec will be a priority. Now that we have EU approval, work needs to be done and done quickly to ensure a speedy and successful launch, whatever strategic direction we ultimately take. Of course, equally important is accelerating adoption of PEDMARK in the United States. As Rosty said, we’ve made considerable progress in the last quarter but we still need approval by a number of key pharmacy committees. Concluding these reviews and ensuring that PEDMARK is included as standard of care in all treatment protocols will be critical over the coming months.

These will be my two priorities. So once again, it’s a real pleasure to be a full time executive team member and I look forward to the next call, where we will provide further updates on our progress. With that, I’ll now turn the call over to Robert to review our financial results for the quarter.

Robert Andrade: Thank you, Adrian. Our press release contains details of our financial results for the second quarter of 2023 which can be viewed on the Investors & Media section of our website. Rather than read through all of those details, my comments today will focus on some key financial results. The company recorded net product sales of $3.3 million in the second quarter of 2023 versus $1.7 million in the first quarter of 2023 for a net revenue growth of 98%. As Rosty mentioned, we are pleased with the growing acceptance of PEDMARK within healthcare providers during the second quarter. And with the recent hospital formulary access approvals we have gained early in Q3. G&A for the second quarter of 2023 was $5.5 million which compares to $4.4 million in the first quarter of 2023.

The increase is largely attributable to non-cash employee remuneration. R&D expense is negligible as 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 or capitalized into inventory and eventually recorded to cost of product sales. The company began recording selling and marketing expenses when expanded its payroll to include an internal sales force. Selling and marketing expenses include distribution costs, logistics, shipping and insurance, advertising, wages, commissions and out-of-pocket expenses. The company recorded $2.3 million in selling and marketing expenses in the second quarter of 2023, compared to $2.5 million in the first quarter of 2023.

Our GAAP net loss for the second quarter of 2023 was $5.4 million or $0.21 per share compared to a GAAP net loss of $5.0 million or $0.19 per share. And finally, our cash position. We ended the second quarter with approximately $15 million in cash, cash equivalents and investment securities. This includes $25 million of capital drawn in the second quarter under our existing Petrichor convertible debt facility. Our cash burn for the second quarter was approximately $3.4 million compared to $5.5 million in the first quarter of 2023. As a reminder, we anticipate approximately $2 million in monthly cash operating expenses during 2023. We believe our available capital when coupled with PEDMARK revenue assumptions will take us out for at least the next 12 months.

And operator, with that, we are ready for questions.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Chase Knickerbocker of Craig-Hallum.

Chase Knickerbocker: Maybe just concerning the ramp of accounts, you have cleared P&T at. We’re now on the tail of that six to nine month period takes to get to those P&T committees at the larger accounts. Good to hear about the account growth. Maybe putting a finer point on it. Of those 200 focus accounts we talk about, what do you think your number of accounts is today are just general penetration there? And, however, you want to define it, I think just a finer point there would be helpful for investors.

Rostislav Raykov: Chase, this is Rosty. We’re shying away from giving details in terms of number of accounts. What I would say is that — what we have at the moment is actually quite significant compared to where we were at this time last quarter. As I mentioned in my prepared remarks, the growth in accounts was double-digit with — and this is prescribing accounts. In addition to that, we have had some major P&C wins in some of the most recognized and larger institutions in pediatric oncology. So hopefully, some of these accounts will be coming through this quarter. And again, that would really help further with a double-digit growth. But we still have significant opportunity ahead of us, as there are more P&T committees coming up.

Chase Knickerbocker: Got it. Maybe speak to the ongoing cisplatin shortages we’re seeing in the U.S. What are you hearing from customers? Do you think that’s having any impact on your ramp at this point?

Rostislav Raykov: No, that has not been — we have heard about the cisplatin shortages that have been ongoing for the last at least four months that has not been an issue in pediatric oncology. As you know, the — in pediatrics, there are not as many patients to begin with and cisplatin is — goes to those half of those first. We actually — we’re hearing a lot about nedaplatin [ph] shortages at the moment but not cisplatin.

Chase Knickerbocker: Got it. And then how should we be thinking about bringing Adrian on here in the COO role? Is this — is the implication that Adrian has been playing a large role in partnership discussions in Europe and thus it’s kind of just cementing the role there? Or should we be thinking there is an increased appetite from you guys to maybe go it alone in Europe now and Adrian through his PTC experience launching their international businesses is obviously would be a good fit there, building those capabilities out there.

Rostislav Raykov: Yes, in our prepared remarks. We personally have known Adrian for over 10 years now. And we at Fennec were a small company, we work very, very closely with our Board members. And so I’m very, very thankful that he was able to join us in this pivotal moment. As you could see from his resume, he has the necessary experience to help us with all of the above. This goes from helping set the ground up for launch in Europe to overseeing the U.S. sales organization and medical affairs and access to partnering opportunities, both in Europe, globally or all of the above. So maybe, Adrian, you may want to say a couple of things as well.

Adrian Haigh: Yes, not a lot really to add. I think my experience is that I’ve — this will be the third time if we do build the commercial organization that I’ve done it. I know how to do this. I know to how to do it quickly and I know how to do it at minimal cost. As Rosty said earlier on in the prepared remarks, at Gentium, I was heavily involved in business development and ultimately in the sale of Gentium to Jazz. So there I’d say, I think I tick all the boxes. And as I said earlier, the Board believes on the right person at the right time. And quite honestly, I was getting very board in retirement and have been quite actively engaged with Fennec over the last couple of months helping as a Board member and we all agreed kind of makes sense for me to take on a full-time role.

Chase Knickerbocker: Yes, that makes a lot of sense. Just last for me and I’ll hop back in the queue, guys. Any kind of update on how we should be thinking about launch in Europe, whether or not it’s on your own or with a partner? How should investors be thinking about a potential launch timing there?

Adrian Haigh: Well, I think we’re evaluating all options. I think a launch will be towards the end of the first quarter next year. But to enable that to happen, we have to do a lot of work. For example, you have to apply for a special license in Germany called [indiscernible] license that has to be submitted by the end of November. If that isn’t in place, then there’s no way that anybody can sell in Germany in hospitals in 2024 and that requires quite a lot of preparation. We have also started the work preparing all the HTA dossiers for the key countries. And as you know, that doesn’t happen overnight. It takes several months. So we’re doing whatever it takes to ensure that when PEDMARK is launched, whether it’s through Fennec or whether it’s through some kind of a partnership, it’s the most successful speedy launch possible.

Operator: Our next question comes from the line of David Nierengarten of Wedbush Securities.

David Nierengarten: I just had a couple kind of on the penetration of the markets. First, have there been centers, I know, thankfully, childhood cancers are rare occurrence. But have there been any centers that are repeated or have repeat dosing of patients? And then on your coverage of the academic centers, is there — do you have an estimate on how many patients utilize those centers as a percentage? Like is it 40%, 50%, 80%?

Rostislav Raykov: David, yes. So maybe I can answer the second one first. Yes, so if you look at the centers overall, it varies. So you have centers where the repeat customer orders, where they’re utilizing — most physicians are utilizing it. There are some centers where half of the physicians are utilizing it. So it varies. It’s sort of center-by-center, comfort-by-comfort from a physician-to-physician, disease-by-disease, of course, because our label plays into several tumor types and their experience and the growth that we’re seeing comes from really writing scripts, putting patients on drug and seeing the outstanding results, both from an efficacy perspective but importantly, safety perspective, only this product, I mean, here we are almost nine months into launch.

And there hasn’t been an A report which speaks to how good this drug is. As rarely would you see anything in pediatric oncology that — or any oncology product for that matter that has that. So that’s what makes us very, very excited because we have a really, really good treatment for these kids. Sorry, what was the first question, again?

David Nierengarten: I think the first question was actually on the repeat customers. The next one was the kind of the number of academic centers or — as the number of academic centers signed up and the percentage of patients typically that they treat in year out of the total population. So majority is 70%, yes.

Rostislav Raykov: Yes, it’s pretty — it’s — like I said, it’s pretty well distributed. Maybe, Robert, you have some more granularity on these numbers but it’s pretty well distributed between the academic centers and some of the smaller hospitals which typically in early launch tend to be some of the early adopters.

Robert Andrade: Yes. I’ll add, David, similar to what Rosty said. Every center is unique in the sense of the amount of patients, the type of patient it sees and their philosophy on how they roll out whether before formulary approval or after formulary approval. Similar to what we said already, we have gained some major academic centers recently. And so, we’re quite excited about that and anticipating some orders there. So hopefully, as the months go out, we actually learn more from all our centers in terms of patient numbers, PEDMARK applicability.

Operator: Thank you. This concludes our question-and-answer session. I would now like to turn the conference back to Rosty Raykov.

Rostislav Raykov: I would like to thank you all for joining us today. We look forward to updating you on our continued launch progress and corporate milestones in the future quarterly calls. Thank you and have a great morning.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.