Fennec Pharmaceuticals Q2 2024 Earnings Call Transcript

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August 13, 2024

There are 6 speakers on the call.

Operator

morning, ladies and gentlemen, and welcome to the Fennec Pharmaceuticals Second Quarter 20 24 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 Fenics' Chief Financial Officer, Robert Andrade.

Operator

Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. We appreciate you joining us today for Fenics Pharmaceuticals' 2nd quarter 2024 earnings conference call, during which we will review our financial results as well as provide a general business update. Joining me from FENIC this morning is our newly appointed Chief Executive Officer and Board Member, Jeff Hackman. Jeff joined Fennec on August 5 and brings more than 30 years of commercial leadership, including oversight of more than 10 product launches across a wide range of therapeutic areas and markets. Importantly, Jeff has successfully commercialized products that are specifically relevant to the Pedmark markets.

Speaker 1

Now 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. References 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.

Speaker 1

We specifically disclaim any obligation to update or revise any forward looking statements. This conference call is being recorded for audio rebroadcast on Fenics' website, www. Fennecpharma.com, where it will be available for the next 30 days. And now, it gives me pleasure to turn the call over to Jeff Hackman.

Speaker 2

Thank you, Robert, and good morning, everyone. I'm incredibly excited to lead Fennec in this new role, and I look forward to working with this team to direct the organization through its continued growth efforts. Before I introduce myself, I would like to thank Rusty for his dedication and leadership since 2,009. He's been critical not only to the success of Fennec, but bringing a much needed therapy to the pediatric oncology population that was at risk for irreversible hearing loss, which can be a profound lifelong impact, as you know, on these patients. On behalf of everyone at Fennec, we're pleased we will be able to continue to benefit from Rofte's experience and knowledge as we enter into the next chapter.

Speaker 2

Let me talk a little bit about me. My tenure in oncology spans the last 12 years or so with companies like Sigma Tau, Baxalta, Shire and USAA Pharma, where I was responsible for the U. S. Commercial organizations and managing the company's product portfolios in multiple franchises, generating billions in revenues over those years. As Robert mentioned, I have specific experience commercializing oncology products that are specifically relevant to Pedmark Markets.

Speaker 2

And in the pediatric oncology community where I've spent a lot of time and I'm passionate about. From my very first early interactions with the we have access to an incredible pool of talent at FENIC. FENIC's dedication, expertise and passion are evident and I'm confident that together we can work to fill any gaps and address any needs to drive our organization forward. Now turning to our Q2 2024 financial results, all of which were outlined in our earnings press release issued earlier this morning before the call. We will also discuss ongoing commercial launch efforts and the progress we're making with Pedmark in the U.

Speaker 2

S. And abroad following exclusive licensing agreement announcement we executed in March with Norgene to commercialize Pedmarxi in Europe, Australia and New Zealand. In the second quarter, Pedmarx delivered net revenues of 7,300,000 dollars We believe there were several key milestones that achieved that we achieved recently that will enable us to accelerate patient access and build off the Q2. In May, the Office of New Drugs at the FDA added a safety communication issued by CDER, professional affairs and stakeholder engagement staff to PetMark's approval on the FDA page. Now it is clear that substitutions pose potential health risks.

Speaker 2

Fennec continues to diligently work with the FDA to address this issue. During the Q2, notifications were sent outlining the FDA non substitution status. Payer recipients included Medicare Administrative Contractors, Medicare Advantage, Managed Medicaid and commercial payers. Provider recipients included all state oncology societies, the top 20 health systems, including children's hospitals and more than 360 oncology practices. These are community based or hospital owned.

Speaker 2

Additionally, as of April 1, our J code was issued and we fully resolved this with CMS amending it to specified PEDMARK. Now that this change is affected, we are seeing uptake that we believe will continue to improve the quarters as we move forward. Further and of great importance, the NCCN recently modified and updated their AYA guidelines for PedMark. The guidelines removed pediatric specific wording and allowed for patients up to 39 years of age. And 2, replaced cisplatin with platinum.

Speaker 2

We believe this allows PedMark to access a broader patient population within the autotoxicity prevention application. Now that see now that the NCCN AYA guidelines have been modified, we've submitted PetMark data packages to the remaining targeted clinical drug compendia and anticipate that these updates to the compendia will be completed by the end of this quarter. So with all these recent milestones achieved, we remain optimistic and excited about the second half of the year for Fennec given the foundation that we put into place the 1st 18 months of the launch. We're confident in our ability to navigate through these marketplace changes and to achieve long term objectives. Our outlook for the next few quarters will largely depend on our ability to continue to make positive steps forward with these key institutions and successfully target community hospitals and infusion centers to treat the outpatient setting with these older patients within our label and the NCCN guidelines for adolescents and young adults.

Speaker 2

Our plans to do so include our sales force has expanded their activities and now are into the community centers that treat this AYA population that fall within our label. We believe that there are significantly more patients in this segment compared to the inpatient hospital treated pediatric population. Recently, we have administered to patients within this population, including tumor types such as testicular cancer, ovarian cancer and head and neck cancer. We have successfully managed the reimbursement process with major health plans such as Blue Cross Blue Shield, United and Caremark. We continue to work diligently with senior managers to extend our reach into infusion center hours to accommodate the time that it takes to administer petvark, which is 6 hours after cisplatin infusion.

Speaker 2

We will continue to build off our recent success in partnering with Orsini Specialty Pharmacy to help patients access Pedmark through Orsini's high touch care model centers that provide personalized patient care. Now regarding our partnership with Norgene to commercialize Pedmarxi in Europe, Australia and New Zealand, efforts continue to progress these territories and our targeted launch late Q4 2024 and this remains on track. As a reminder, under the terms of the licensing agreement, Fennec received approximately $43,200,000 in upfront consideration and the potential of up to approximately $230,000,000 in additional commercial and regulatory milestone payments and tiered royalties on the net sales of Pedmarxi in these licensed territories up to the mid-20s. Norgene will be responsible for all commercialization activities in these license territories and will hold all marketing authorizations in these license territories. The next major milestone will be evaluated after the launch of Germany in Q4 of 2024.

Speaker 2

As we previously communicated, this partnership represents an important step for achieving our mission of expanding PEDMARXI to patients across the globe who are at risk of suffering from cisplatin induced ototoxicity. These terms provided us with many important benefits, including an upfront payment, further solidifying our balance sheet, attractive economic terms providing a meaningful participation in the ex U. S. Success of Pit Marcy and an experienced partner to successfully launch Pedmarxi in these licensed territories. So in closing, we continue to see promising opportunities for Pedmarc, including the steps we're taking to educate the marketplace along with executing on our commercial plans.

Speaker 2

We are looking forward to seeing the benefits of our actions in the coming months. So with that, I'm going to turn the call back over to Robert to go over the financials for the quarter.

Speaker 1

Thank you, Jeff. Our press release contains details of our financial results for the Q2 of 2024, which can also 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. As stated, company recorded PedMark net sales of $7,300,000 for the Q2 of 2024. This represents an increase of approximately 120% compared to the same quarter in 2023.

Speaker 1

G and A for the Q2 of 2024 was $6,900,000 which compares to 5,500,000 dollars in the comparable quarter of 2023 $5,800,000 in the Q1 of 2024. This increase is largely attributable to the pre commercialization efforts for potential European launch or partnership that we were exploring and expenses associated with the Noregene transaction. As discussed on previous calls, we anticipate all major EU related expenses to wind down in the Q2 of 2024. Selling and marketing expenses include remuneration of our sales and marketing employees, dollars on marketing campaigns such as sponsorships, trade shows and presentations and any activities to support marketing and sales. The company reported $4,600,000 in selling and margin expenses in the Q2 of 2024 compared to $2,400,000 in the comparable quarter and $5,800,000 in the Q1 of 2024.

Speaker 1

The increase was largely attributable to higher payroll and increased marketing expenses related to the previously mentioned AYA initiatives. And finally to our cash position, we ended the Q1 with approximately $43,000,000 in cash and cash equivalents. The decrease in cash over the Q1 of 2024 was as a result of cash expenses related to sales and marketing and G and A described earlier, along with EU related expenses, including those associated with the Noregene transaction. Further, as a reminder, the next milestone related to our Noregene agreement will be obtaining pricing approval in Germany, in which Fennec will have the opportunity to receive a €10,000,000 milestone. Additionally, FENICS royalties on net sales are anticipated to commence in the mid teens upon launch in Q4 of 2024.

Speaker 1

With that, we anticipate that our cash and cash equivalents as of June 30, 2024, when coupled with Penmark revenue assumptions and the recently announced licensing agreement for Europe with Norgene will be sufficient to fund our planned operations for at least the next 12 months. And lastly, I would like to thank the investors for their support as we take the necessary steps to regain market confidence. We successfully sold the EU rights to Norgene in March 2024. We are currently seeing signs that the AYA channel is open. And we look forward to sharing the next chapter of Fenics and the introduction of Jeff and his expertise in the coming weeks through various conferences and investor discussions, including Wedbush this week and H.

Speaker 1

C. Wainwright and Cantor in September of 2024. And operator, with that, we are ready for questions. Thank

Operator

Our first question comes from Chase Knickerbocker with Craig Hallum. Your line is open.

Speaker 3

Good morning. Thanks for taking the questions and Jeff congrats on the new role. Thank you. Maybe on that note, maybe just speak to Jeff, maybe just speak a little bit more as to what you saw here at Fennec that really got you excited to join the team. And then even more so kind of what opportunities you saw with your skill set and experiences to come in here and kind of quickly create shareholder value, kind of institute maybe some things that you had at previous companies around kind of commercial execution, commercial excellence, etcetera, that you think you can kind of create shareholder value with here at Fennec?

Speaker 2

Yes. It's day 7. So I'm excited to be on the call today. And I have seen some things and I did in my preparation to come here was I was excited to lead Fennec in this role because I did see a significant opportunity here. There's talent.

Speaker 2

There is leadership experience that I've seen and it's a great jumping point and great start for me. I've got the experience, Chase, to understand where the opportunities are and I'm excited to bring that here. I have I've got experience in these markets. I've got experience not only in the pediatric COG institutions, but also moving a product from pediatric into the AYA space. So right now, I'm identifying gaps and I'm looking to see where I can have some quick wins and move the company forward.

Speaker 2

So I'm looking forward to talking more about my experiences and what I'm going to be planning here.

Speaker 3

Great. And then we spoke to AYA Progress kind of in the press release and also kind of briefly on the call. Can you just maybe give us a little bit more a window into what we're seeing so far through July and into August? I mean, have we seen quite a few physicians adopt, try a couple of patients that we've seen some more high volume adopters. I mean, how should we think about the progress thus far?

Speaker 3

And was that largely unlocked from the NCCN guideline kind of wording change? And then kind of what are the gating factors still there in AYA that kind of need to be addressed? You mentioned the compendium. Just kind of speak to how you kind of see Q3 kind of developing from the AYA side?

Speaker 1

Yes. Thanks, Chase. It's Robert. I'll take the bulk of that question. As you know, we've laid quite a bit of foundation work the last several quarters in preparing for and hopefully manifesting this AYA opportunity.

Speaker 1

Part of that work included the updating of the NCCN guidelines, which we were pleased with and successful with. But I think really early on in this quarter, what we're seeing are institutions becoming more aware of PetMark. And that's really a credit to our commercial team. As they become more aware, and they get reimbursed, we start to see some follow through. And we're pleased with that again in July and going into August.

Speaker 1

And it's just it's really just the tip, but that's starting to come through. And I think that's hopefully what is being messaged to you.

Speaker 3

And is it also being successful in getting the clinics to stay open later? Are we treating these patients? Are we infusing them in the home setting? I mean, just kind of walk through maybe that logistical challenge and how that's kind of played out?

Speaker 1

Yes. It's a good question. It's a combination of both. What we also even alluded to in our script and our commentary was the Orsini partnership that we have, which we've started to see some traction there. And that includes either bringing a home nurse to the patient or bringing it through a white bag to the actual oncologist.

Speaker 1

And important with that is also the reimbursement. And so I think we signaled a few large payers that have reimbursed. And so that's again quite a bit of progress over the last quarter. And then lastly to your question in terms of clinics, we have, depending on the clinic, been able to get them to keep their hours open, etcetera. But I think it's really a combination of both and we anticipate that going forward.

Speaker 3

Got it. And then just maybe, how has the pediatric business, how did it kind of play out in Q2? I would think it was kind of down, it was obviously down modestly sequentially. Do you think that that business has kind of found its footing now and you expect this to kind of be the bottom there or kind of walk through how we should think about the pediatric business from here?

Speaker 1

Yes, I'll take that as well to start and I think maybe Jeff can add in some of the experience on the pediatric side. But as you know, this is a very small population. We have some a great base of business there in terms of some centers and some hospitals and some KOLs that really understand the product and the benefits. Do we think there's an opportunity to continue to grow? Yes.

Speaker 1

But again, we really have that stable base with us. There's ebbs and flows in every quarter. And I think part of what Jeff's doing here and what he's going to bring in here is bringing in a 2 pronged focus so that we continue to make traction on that AYA, while at the same time also evaluate that opportunity within the traditional pediatric.

Speaker 2

Yes, I think there's an opportunity still there, Chase. So we'll continue to look at the levers that we need to pull and what the execution has been and what it should be going forward with these pediatric institutions. So it's something I'm evaluating.

Speaker 1

Got it.

Speaker 3

And then just last for me guys, I'm sorry for all the questions. But just with kind of the combination of those 2 starting to see progress in AYA and pediatric seeming to be a stable business, kind of put your commentary there and kind of potentially trying to return that to growth obviously. Would you expect this the business as a whole with those two parts to start to grow meaningfully sequentially again? And then again, I'll hop back in the queue, but grow meaningfully sequentially again from here is what I mean. Thanks.

Speaker 1

I'll start with it. Maybe Jeff can get I mean Jeff's on day 7. We are here to grow meaningfully. Jeff's here to grow us meaningfully and to help us grow meaningfully. So that's always our

Speaker 2

goal. I wouldn't have come if that wasn't the case. So that's our plan. Thanks guys. Yes, I appreciate your questions.

Operator

Thank you. One moment for our next question. Our next question comes from Naren Khabir with Capital One Securities. Your line is open.

Speaker 4

Hi, good morning. And yes, Jeff, congratulations on the neuro, lofty will be missed. So I guess my first question sort of following up on one of Chase's questions, which is on the AYA opportunity. I believe on the last call, there were plans to conduct pilot studies in the community setting. Could you sort of comment on what's happening there or the progress there?

Speaker 2

Yes, Noreen, thank you for

Speaker 1

the question and always the interest. Yes, you're correct. We've been able to make progress and traction and that goes to our commentary with some of these new institutions. And the good news is that we are seeing reimbursement from these institutions and that eventually will come with follow through. So the answer to your question is yes, we've had success there and we hope to continue to build off that here in Q3 and beyond.

Speaker 4

Okay, got it. And then can you just sort of comment a bit more on the compounding issue? I mean how prevalent is it now still?

Speaker 1

I mean, that's part of what we're going to evaluate on the pediatric side. We clearly know the value of PedMark, all the clinical studies that we've done there and the benefit to the patients. And so is that one of the challenges within the pediatric side? Yes. But we feel with execution and the proper approach and maybe Jeff can add a little bit to this, that we can continue to grow that side of the business as well.

Speaker 2

I think there's I know there's opportunity there. It's about the message and is the message being heard, is it being delivered and the execution of how it's being delivered. These are all areas where I'll be focused in my efforts here early on and quickly to understand what execution looks like there. And I look forward to sharing more once I start to kind of dive into that approach.

Speaker 4

And just one more from me. Are you planning to backfill the COO role now or

Speaker 2

I'm looking at where we need to put our talent and the folks that I need to potentially bring in. So I can let you know. I haven't thought that through of what positions and the gaps I need to fill just yet. I'm evaluating that. My plan is I'm meeting with everybody in the organization.

Speaker 2

We're all doing 1 on ones throughout these next week or so. And then I can assess gaps going forward and what needs to be filled and where and with who.

Speaker 4

Thank you. That's all for me.

Speaker 1

Thanks, Maureen.

Operator

One moment for our next question. Our next question comes from rahkram Salvaraju with H. C. Wainwright. Your line is open.

Speaker 5

Hi, thanks so much for taking my questions. Can you hear me?

Speaker 1

Yes, Ram. How are you?

Speaker 5

Very good. And Jeff, congratulations on your new role, very exciting. So I wanted to ask about specifically the context with respect to the next milestone from Norgene. And if you could maybe give us a little bit more color on how that's likely to be earned and how you would recognize it if and when it is

Speaker 1

earned? Yes. As mentioned, the plan is to launch Pedmarxi in Q4. The first market we will launch Pedmarxi with Norgene will be in Germany. And the first milestone is related to achieving a certain price for the product in Germany.

Speaker 1

We are excited about that opportunity. We are optimistic about it. And so assuming we achieve that in the Q by late Q4, early Q1 time period, then we would recognize that €10,000,000 to Fennec and we would get the cash into the company. And then secondly, you didn't specifically ask this, but there is also a net royalty or royalty on net sales to Fennec And that will start in the mid teens and grow as the revenues grow to certain thresholds. In other words, grow into higher percentages from the mid teens.

Speaker 5

Okay, great. I wanted to also see if Jeff would be prepared at this point to comment on kind of historical experiences that he's had, specifically with regard to a situation that might be analogous to this one where there is a clear difference in safety profile, in overall risk profile between a branded agent and a compounded agent or a generically available agent. And if there's any specific aspects with regard to his past history with commercialization of products and the specialty oncology arena that could inform strategies that might be implemented here to speed up the uptake of PetMark?

Speaker 2

Yes. It's a good question. Thank you, Ram. And I've had 2 specific experiences that relate very closely to this and it's one of the reasons why I got excited about coming here. One was in the while my I was at Vaxalta and as we were moving a product from COG usage into AYA market.

Speaker 2

And in that market, there was a product that was used that potentially could have some side effects with in the AYA population looking at infertility. And so we had to when we did not have that issue with the current product that we moved into that market. So very, very similar to what we're seeing here. And I understand the levers that need to be pulled to make sure that customers understand that. And then the other was that while we were at use of pharma and we were launching a product in the market there and there was a current product that was used that had a black box warning and had a higher safety threshold that they had to overcome in the usage of that.

Speaker 2

So in both instances, we had products that were safer but weren't being used and we had to focus our messages to make sure that we got that across. We did it through relationships with KOLs. We did it with execution of in our commercial team. And we really did it in making sure that the message was clear and the companies and my teams were able to get across that message effectively. And those are the things that I'm going to jump into quickly here very similar.

Speaker 2

So that's why I think my experience can help.

Speaker 5

Great. And then the last question from me is, from a strategic perspective, looking further down the road, maybe you can give us a sense of how you folks are thinking about BD opportunities, the possibility of broadening the portfolio within specialty oncology going forward, possibly in some kind of synergistic manner that would make it even more efficient to promote continue to promote PedMark in the U. S? And what might be some of the triggers that would influence when you might take a decision to bring on another product or 2?

Speaker 2

Well, I can let Robert jump on some of the things that he's done in the past here, but we've got to create a success story here for PedMar, no doubt in the U. S. And that's priority number 1 for me. Once we do that and we drive that potential to where we think it can be, yes, I think those are all things that we need to consider. And I don't know, Robert, if you want to comment on it.

Speaker 1

No. Similarly, Raman, you know our history is, we take one step at a time. We are very excited about our partnership in Europe and PetMoxi. So I think we believe we're in really good shape there. And in the U.

Speaker 1

S, with bringing Jeff on, we're going to bring that expertise and as you mentioned, fill some gaps so that there will be a right time. But the opportunity is so great here with Penmark in the U. S. That we're focused on that. And then lastly, obviously, we have global for Penmark.

Speaker 1

And so and in particular, there's some very attractive markets for us to grow there alone just with our sold product. So we'll look at everything and anything, but the reality is we feel really good about what we have here today to grow off that.

Speaker 5

Great. And then very quickly, I think this is one for you, Robert. What do you expect to be the key factors that would influence putting you folks in a position to start to offer a more formal revenue guidance framework for us going forward? And what do you expect potential timing of that to be? At this juncture, looking at everything that's in front of you folks, would you anticipate that that could start to occur by the end of this year or is that more likely to occur in 2025?

Speaker 5

Thanks.

Speaker 1

Yes, no problem. No, this is something that I'm committed to and Jeff and I have spoken with in the 1st week. We, as you know, have really 2 buckets here in the U. S. That are going to drive this growth, both with the traditional pediatric, the COG centers and with the AYA.

Speaker 1

So I would anticipate as we move forward that you will be getting more guardrails around what our expectations are for the company. But no, this is something that we are focused with and feel is appropriate to present to both analysts and investors.

Speaker 5

Thank you.

Speaker 1

Thanks, Rob.

Operator

And I'm not showing any further questions at this time. I'd like to turn the call back over to Jeff for any closing remarks.

Speaker 2

Well, thank you, everybody. I appreciate you joining the call today and all of your continued support. I look forward updating all of you in the future on our ongoing commercial progress and success and the corporate milestones on future quarterly calls. So I want to thank you and appreciate it and hope you guys all have a great day.

Operator

Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect and have a wonderful

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Key Takeaways

  • Fennec named Jeff Hackman as CEO, bringing over 30 years of oncology commercial leadership and specific expertise in pediatric and adolescent/young adult (AYA) product launches relevant to Pedmark.
  • In Q2 2024, Pedmark delivered net revenues of $7.3 million, representing a 120% year-over-year increase driven by expanded payer outreach and heightened market awareness.
  • Key commercial and regulatory milestones were secured, including an FDA safety communication to prevent unsafe substitutions, issuance of a specified Pedmark J-code, and an NCCN guideline update extending Pedmark use to patients up to 39 years old.
  • AYA launch progress accelerated through expanded salesforce efforts in community centers, successful reimbursement agreements with major payers, and a partnership with Orsini Specialty Pharmacy for infusion and home nursing support.
  • The Norgene licensing agreement for Europe, Australia, and New Zealand provided $43.2 million upfront, up to $230 million in potential milestones, and tiered royalties, ensuring a cash runway of at least 12 months.
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Earnings Conference Call
Fennec Pharmaceuticals Q2 2024
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