Hello, and welcome to the latest in our series of fireside chats here at H.C. Wainwright's BioConnect Conference at NASDAQ. My name is Ram Selvaraju, and I'm a senior healthcare equity research analyst and managing director within Wainwright's Equity Research Department. I'm joined here today by members of the senior executive leadership team at Fennec Pharmaceuticals. Fennec is traded on the NASDAQ under the ticker symbol FENC. We here at Wainwright cover Fennec with a buy rating and 12-month price target of $13 per share. Joining me here today are Jeff Hackman, Chief Executive Officer, and Robert Andrade, Chief Financial Officer. Gentlemen, it's a pleasure to have you with us.
Thanks for inviting us.
Thank you, Ram. Always a pleasure. It's been a number of years, so thank you.
Maybe, Jeff, we could start with having you provide us with an overview of Fennec's marketed product, PEDMARK, sodium thiosulfate, and its unique positioning within the domain of oncology supportive care.
Yeah, thanks. I mean, we're excited. You're always excited when you have a product that's approved right by the FDA and EMEA. So we're licensed with PEDMARK in both the U.S. and Europe. PEDMARK's the first and only FDA-approved product that's indicated for the risk of ototoxicity due to cisplatin use in cancer. And it's indicated for pediatric patients, ages one month of age and older. We recently also received, last year, an NCCN guidelines update, which approved through the NCCN guidelines approved this product, PEDMARK, for 15-39 years of age as well. So while that's not a recommendation, but in our space, that gives us a little bit broader opportunity. That's called a 2A endorsement from the NCCN. So we are very excited about that. This product continues to have a significant impact on patients.
That's what's really critical here is that, especially when you're dealing with patients that have been treated with cisplatin, and in many cases their cancer has been cured, but they, in some cases, can walk away with ototoxicity or loss of hearing. For a product like ours to be able to, for PEDMARK to protect that in many cases, it's a great, exciting opportunity for us to be in.
For those in the audience who don't know, cisplatin is one of the most widely used chemotherapeutic drugs. It's a member of a class of drugs called platinum-containing chemotherapy. The approval for PEDMARK is not dependent on a specific type of cancer for which cisplatin is used to treat it. Effectively, if you're a patient who could conceivably be at risk of undergoing ototoxicity because you're being treated with cisplatin, PEDMARK could conceivably be for you. Is that correct?
Correct. Yeah, I would just add the only alternative after hearing loss is either to live with a hearing loss, hearing aids, or cochlear implants. Our goal is to prevent those two alternatives through PEDMARK.
Jeff, maybe you could also give us a sense of kind of your history with respect to commercialization of drugs in this context, whether within oncology or within oncology supportive care, and how your prior experiences have kind of prepared you for your current role. I think it would be very helpful for the audience to get an overview of how PEDMARK is marketed, particularly in the context of the size of your field sales force and the types of marketing activities that you have deployed, as well as the distribution channel that is used to get PEDMARK into the hands, so to speak, of the prescribers who need it most.
Yeah, let me talk a little bit about me first, and then I'll go into the details here and why I came here and how we're marketing the product currently today. I've been in this business for 30 years, from big pharma to small biotech. Over the last 15 years, I've really focused on oncology. Some of the areas that I have been able to really focus my efforts on is in the AYA space, pediatric and AYA space in the past. As I was approached by Fennec to come here back in August after discussions with some of the board members, it was really to come here to continue to add on what Robert and the previous CEO had started and really kind of build on the commercial execution.
What's critical about sometimes you'll find is a small biotech will spend years, 15 years, to move to license a product, and it takes a lot of effort to get there, to get through the FDA. The work changes, but it's not any less, and in a lot of cases can be even more, especially when it comes to commercialization of the product. That's what my background has given me over the years. I've been able to do something like very, very similar to what it is we're trying to do here. We market the product through specialty distribution. We don't market it through that. We market ourselves, but we sell the product through specialty distribution, just the typical, the big three that's out there. We also distribute it through our Fennec HEARS or home health program as well.
We really have focused ourselves on really getting good at execution. That is really, I think, the most critical thing for us from a commercial standpoint: where is cisplatin being used? What is the message that needs to be given to these prescribers? Do they understand? Are they aware that PEDMARK exists? The third in the execution kind of wheel here is, are we able to do that? Do we have a team that is well-trained enough and has the ability to be able to achieve that? I came in and made some additions to the team, brought some folks in that I knew how to do this with us together in the past. Now we are executing. Over the last couple of quarters, you have seen two quarters of growth for the organization.
We're excited about where we're headed in the future, no doubt, with this product. I think that answered those. Was there a?
I just wanted to clarify, how many field reps do you have now?
We call them customer-facing representatives. We have 20 customer-facing people in the organization right now. It is a very small group. It is a small organization. It is interesting. It does not have to be that large to be able to get to the cisplatin users in the country. There are 20,000 in the AYA space. There are 20,000 cisplatin, I guess we call them prescriptions, in the AYA space. And patients in the AYA space, I am sorry, not prescriptions, but patients. In the pediatric side of the business, where this product is also indicated for, is that there are just about 3,000 patients that get cisplatin. You can see the size of this marketplace. The recent recommendations to AYA obviously give us a much larger opportunity there, but the product is really represented by about 20 people out in the field.
Yeah, if I can just segment it a little bit more for you, what the new commercial team has done is they've really taken a focus in terms of what are our real needs, what are our customers, who are the high prescribers, and how do we facilitate a white glove experience from beginning to end. What we've done is we've also had an alignment such that we have a focus on medical because of the NCCN recommendation. We've increased our MSLs, our medical science liaisons that can speak to anything, including the science of PEDMARK and also the mechanism of action. We've also brought in some key account managers that then can really, because there's some large accounts here, that need the handholding from beginning to end.
I think that with Jeff and the remainder of the leadership team have done a great job of being able to streamline and focus and pivot to a certain extent so that we can service those customers fully.
I think the key takeaway for the audience here is that now we are in a situation where all of the market segmentation, all of the market research, all of the refinement and optimization on the sales and marketing front that Fennec has done should now start to pay off. Plus, this is clearly a market opportunity that is targetable by a company of Fennec's size. This is not a case of this being you biting off more than you can chew. It is also not a case of there not being a there there.
There is clearly a market opportunity here that is lucrative enough to support the healthy growth of a company of your size. Maybe, Jeff, you can speak to some of the ways in which the shift in marketing and sales strategy and moving into the AYA population, adolescent and young adult, has really helped kind of reinvigorate the momentum behind PEDMARK in the United States. Also maybe give us a sense of what challenges you see that remain and how Fennec is planning to overcome those.
Yeah, Robert did a nice job of touching on it. On our side, there was a need when I walked into the organization back in August to really increase the focus on the medical side of PEDMARK and making sure that that medical group had the competency to be able to have these conversations with really top KOLs in the country. We brought in a Chief Medical Officer, someone who is bringing in his own team right now. That has been incredibly critical for this organization. It steps up our credibility, but it also steps up the ability for us to be able to talk about the product in all of the areas where it can benefit patients. This was the first part.
The second, what I wanted to do was this could potentially be overwhelming in some cases to say, where do I need to put my sales resources? Where do they need to go? How many territories really should be out there? What does this look like? Having done some of this in the past in the AYA space, I had a good feel for that. I understood how big the sales team really needed to be to cover 80% of the physicians that we were going to target out there. Also, the next thing was to give our commercial organization the right targets to be able to go out and target and call on, get them focused on, for example, the top 75 physicians in their territory who are really the top 75 physicians who are writing cisplatin in their territory.
By targeting better, by focusing our efforts on medical, and then really understanding who we're talking to and the benefit that we have to be able to offer with PEDMARK, those are some of the key things that we've been able to do right now over the last six months.
One thing I did also want to touch upon was kind of the nature of the value proposition in the AYA segment versus the pediatric segment. I think this is partly important because a lot of times we hear about how hearing loss is particularly critical in the young kids because it affects their ability to learn and how maybe it is not as significant of a problem in the AYA population. Maybe that is a misconception. Maybe there are different challenges in the AYA population. Care to elaborate?
Yeah, I mean, Robert, you can talk a little bit about that from what you've learned, I know, from your side over the years, and then I'll touch on it too.
Yeah, sure. I mean, if you speak to oncologists to start, they say any person should not be at risk if there is not a safe product to lose their hearing. Does not matter the age. We recently had a patient that is a teenager that went through cisplatin, survived, took PEDMARK, and is so grateful that she has everything in front of her from being able to talk to her friends, go to concerts, have social interactions. I will give you one more example. A pilot, any impact to their hearing, that is the loss of their profession. There are countless examples. I think it goes back to Dr. Peppi Brock, who I was quoting earlier, who said, "Everyone should have the opportunity to take PEDMARK to preserve their hearing. It should not be discriminated by age." I think that is where we stand.
Obviously, we're grateful to all ages, and in particular, the pediatric community. That's been our experience.
Yeah, I mean, that's where some of the studies were done, obviously, in the pediatric community. But we know that ototoxicity can impact multiple ages. And so when you think about AYA, is it less important for a 15-year-old versus a 3-year-old? We believe that it's an incredible responsibility on our side to make sure that we give those patients a chance. And again, physicians realize that they're treating an incredible disease, whether it's testicular cancer or germ cell tumors. So they know what their goals are and what they're trying to accomplish. I think the biggest thing is we can give them something else that they can utilize, and these physicians have the ability to be able to utilize a product like this when they think it's appropriate. So we've got some really incredible partnerships going on right now with different institutions.
These institutions have become just incredible partners of ours.
I think the key thing to underscore and reinforce for our audience is whether we talk about the need in pediatric patients or AYA patients, it's an acute and serious need. PEDMARK fulfills a very, very key role. Furthermore, by moving into the AYA population, you're just expanding the market substantially versus where things started off immediately after PEDMARK was originally approved. I was hoping that maybe, Jeff, you could touch upon two other aspects here. One is what sales and marketing strategies you have not yet deployed that you plan to deploy that you anticipate might have the most significant impact in terms of accelerating top-line growth for the company.
And also maybe talk a little bit about the status of compounding of sodium thiosulfate and the recent FDA recommendations in this regard to ensure that PEDMARK is the product being used and why that's important.
I'll take those in reverse, but we'll go. The sodium thiosulfate, the compounding, we know still continues. There was an FDA letter that was sent out last year asking physicians and institutions not to compound. But we know that that continues. We have seen a steady use of this product being compounded instead of PEDMARK in some institutions. One of the things that we've been able to do most recently is we're starting to see some growth in the pediatric places where we hadn't seen it before. Is that because now we have AYA patients in those institutions that are utilizing PEDMARK? In some cases, yes, and we see that. That continues to be utilized in the US in some pediatric institutions. We're going to continue to utilize our commercial organization and our medical organization to make sure they understand the differences. We're the only FDA-approved product.
We're the only product here that's been studied for years and got an approval. We make sure that we get across those points. What haven't we done on the commercial side? It's interesting. We were talking earlier today to one of our investors, and we had said that we're far away from getting to many of the cisplatin users in this country. The awareness of PEDMARK is really critical for people to understand that the product exists and there's something they can utilize. From a sales and marketing standpoint, from our side, is we have to get better at execution. Execution is critical. What I mean by that is targeting the right folks where cisplatin is being used and targeting those high prescribers and being able to be very focused on that.
The second thing is for our commercial organization is I want them to be some of the best trained salespeople and medical science liaisons in the industry. We spend a lot of time training. We spend a lot of time making sure that they have the right messages and can deliver those messages correctly. If I look at execution, those two critical things are so important for us in the future.
No Super Bowl ads, right?
No Super Bowl ads.
Actually, so Robert, I think this question is perhaps most appropriate for you. You reported, I think, roughly $8.8 million in top-line revenue for the most recently reported quarter. I think during the quarterly conference call, you actually provided some color around what the quarterly revenue run rate might need to be in order for the company to be cash flow break-even and potentially achieve sustainable profitability. Maybe just recapitulate that for our audience.
Sure, thank you. We have had two quarters of growth. If you look at Q4, we did $8 million in net product revenue. In that quarter, we burned approximately $500,000. In Q1, we did $8.8 million. That quarter, we had a larger burn as our seasonal spending is largely tilted towards Q1. On a normalized quarter, if we hit that $8.5 million-$9 million a quarter, that is when the cash flow starts to become break-even to positive. Just summing the whole thing up, on a yearly basis, our cash operating expenses are roughly $33 million-$35 million. In line with that $8.5 million-$9 million to get to break-even. That is what we are working towards here as we grow from Q4 to Q1 and now into Q2.
Just for context so that our audience is up to speed, here at H.C. Wainwright, we are expecting top-line net revenue of $46 million for the full year 2025. Maybe it would be helpful also, Robert, if you could just describe Fennec's partnership with Norgine, which tackles some of the ex-U.S. territories for PEDMARK, most notably Europe, and the economics of this arrangement.
Sure. We were very pleased in March of 2024 to announce the partnership with Norgine. That Norgine effectively licensed out Europe, Australia, and New Zealand. There was an upfront fee of approximately $43 million. In addition to that, we have royalties starting in the mid-teens. For every dollar earned, we get mid-teens growing to the mid-20s. We have the ability to earn over $200 million US dollars in milestones. An incredibly attractive deal for us. If I could add just a second to that, Norgine launched here in the recent months in both the U.K. and in Germany. Two of the milestones related to that $200 million, we believe, will be in a position to achieve towards the latter part of this year. One will be the pricing in Germany, and the other one will be a sales milestone. We are looking forward to that.
We're very enthused about them as a partner, and we're very pleased that we did the deal last year.
In addition to the U.K. and Germany, maybe just, A, recapitulate what other countries PEDMARQRY, which is the European trade name for PEDMARK, has been approved in, and in what other territories you anticipate Norgine might be in a position to launch before the end of 2025.
Excuse me, they're working on the EU5. You are going to see towards the end of this year the additional countries within the EU5. They have a very focused strategy. Obviously, it could potentially include France, Italy, Spain, Switzerland. You are going to have more to hear from that as we go into the latter part of 2025 and into 2026.
They just received an approval in Scotland. Again, small, but another approval. To get reimbursement and to clear the pathway for PEDMARQRY to be used in Scotland.
Maybe, Robert, you could also talk a little bit about the current cap structure of the company as well as your plans regarding either retirement or conversion of the convertible debt that still remains with Petrichor. I mention this mainly because you chose to retire a portion of that debt late last year.
Correct, thank you. Currently, we have, as of March 31, approximately $23 million in US cash. As you mentioned, we have a convertible note with Petrichor. They've been very supportive investors, strategic healthcare investors that helped us at launch. That note was, we retired $13 million of it. It currently stands at $19.5 million in the aggregate. As we build profitability, as we look to achieve some of these milestones related to Norgine, getting the royalties, we will look at additional ways to potentially retire it or find a more efficient capital structure. The convertible note is convertible at $7.89. As it stands today, they are also in the money. Lots of tools for us to address it, and we look forward to doing that in the coming months to year. It has a due date of August 2027.
What's the coupon on that?
It's low teens is the cost of capital. For our business and for our growth trajectory, we'd be looking to improve upon that cost of capital.
Just very briefly, Jeff, maybe you could recapitulate two things. You had mentioned on multiple previous conference calls that one aspect might be, as Fennec gets into the realm of cash flow break-even and sustainable profitability, the possibility of bringing in a couple of additional products, particularly if those are directly complementary to PEDMARK within oncology supportive care. Maybe give us a sense of how you're thinking about that at this juncture. Also, what maybe might be some of the other noteworthy value inflection points that we have not yet mentioned. Thank you.
Sure, sure. Yeah, there's multiple ways a company with one product can go. It can be acquired or we can build from here. My plan and discussion with the board when I came here was to get Fennec profitable, get this and build this organization to a place where they see profitability for the future. That's one of my first goals. The second, and more importantly, is once we achieve that, potentially, like Robert said, maybe later on this year, we'll have an organization that has a specific competency. We've been approached by others in the past to potentially, is there a way that we can partner, help bring another product in, grow this business from one product to multiple products. I've been able to do that before in my past. This gives us that opportunity as well as we start to move there.
The second part of that question is where else is on the horizon here that are potentially big inflections. It could be, and it's Japan. We did a trial in Japan. We did it out of the University of Hiroshima Hospital in Japan. We had 10 sites that utilized PEDMARK in Japan. They just completed the trial. The trial is now under review, and they're looking at getting the data to us probably later in the late summer, August, September timeframe. You see what we did with PEDMARK in Europe, we have the same opportunity to be able to do that in Japan as well. We've been approached by a few folks that potentially could be marketing partners for that part of the world. That is another significant inflection point for the organization as well.
Fantastic. I think we're out of time. So really appreciate both of you, gentlemen, walking us through the Fennec story. I think our audience will agree Fennec is really on the cusp of bigger and better things and certainly potentially attainment of sustainable profitability. Now is a very exciting time, particularly in the context of all this market volatility. I hope our audience will see what a compelling investment opportunity Fennec represents. Thank you so much, gentlemen, for your participation.
Thank you, Jerome. Thank you.