10-Q: Fennec Pharmaceuticals Achieves Record Q3 Sales, Operational Profit

Fennec Pharmaceuticals reported its strongest quarter in history with record net product sales of $12.5 million and its first profitable quarter from operations, driven by increased market penetration of PEDMARK.

Summary

• Achieved record net product sales of $12.5 million in Q3 2025, a 79% increase year-over-year.
• Reported its first profitable quarter from operations in Q3 2025, with a loss from operations of $(189) thousand, a significant improvement from $(5,202) thousand in Q3 2024.
• Net loss for Q3 2025 significantly improved to $(638) thousand, compared to $(5,735) thousand in Q3 2024.
• For the nine months ended September 30, 2025, net product sales increased by 42.5% to $30.9 million from $21.7 million in the same period of 2024.
• Total revenue for the nine months ended September 30, 2025, was $30.9 million, a decrease from $39.6 million in 2024, primarily due to the absence of the $17.9 million Norgine licensing revenue recognized in 2024.
• Cash and cash equivalents stood at $21.9 million as of September 30, 2025, up from $18.7 million as of June 30, 2025, but down from $26.6 million at December 31, 2024.
• Net cash used in operating activities for the nine months ended September 30, 2025, was $(6.5) million, compared to $28.5 million provided in the same period of 2024, largely due to the Norgine upfront payment in 2024.
• Interest expense decreased by $439 thousand in Q3 2025 and $1.331 million for the nine months ended September 30, 2025, primarily due to a $13 million debt paydown in December 2024.
• An exclusive licensing agreement with Norgine for PEDMARQSI in Europe, Australia, and New Zealand provided an upfront payment of approximately $43.2 million in March 2024, with potential for up to $230 million in future royalties and milestone payments.
• Ongoing patent infringement litigation against CIPLA entities regarding generic PEDMARK, with a new patent (US 026 Patent) granted May 27, 2025, and cases consolidated.

Sentiment

Score: 8

Explanation: The company demonstrated strong commercial execution with record quarterly product sales and achieved its first profitable quarter from operations. While year-to-date financials show a net loss compared to the prior year, this is primarily due to the absence of a one-time licensing payment in 2024, masking underlying operational improvements. The ongoing patent litigation and reliance on a single product are notable risks, but the positive commercial momentum, debt reduction, and upcoming Japan trial results provide a strong positive outlook.

Positives

• Record net product sales of $12.5 million in Q3 2025, representing 79% year-over-year growth.
• Achieved its first profitable quarter from operations in Q3 2025, with operating loss significantly reduced to $(189) thousand from $(5,202) thousand in Q3 2024.
• Net loss for Q3 2025 improved substantially to $(638) thousand from $(5,735) thousand in Q3 2024.
• Strong growth in net product sales for the nine months ended September 30, 2025, reaching $30.9 million, a 42.5% increase over the prior year.
• Increased market penetration and access for PEDMARK, including expansion into the Adolescent and Young Adult (AYA) population.
• Successful debt reduction of $13 million in December 2024, leading to a decrease in interest expense.
• Favorable court ruling on claim construction in the ongoing CIPLA patent litigation, adopting Fennec's proposed constructions.
• Grant of new US 12,311,026 Patent (US 026 Patent) on May 27, 2025, extending patent protection for PEDMARK until July 2039.
• Management believes current funds are sufficient to carry out planned activities for at least the next twelve months.
• Preliminary results from the STS-J01 clinical trial in Japan are expected in Q4 2025, offering potential for new market registration and partnering opportunities.
• Cash position grew to $21.9 million as of September 30, 2025, from $18.7 million as of June 30, 2025.

Negatives

• Net loss for the nine months ended September 30, 2025, was $(4,954) thousand, a shift from net income of $1,549 thousand in the same period of 2024, primarily due to the absence of the $17.9 million Norgine licensing revenue in 2025.
• Total revenue for the nine months ended September 30, 2025, decreased by $8,748 thousand (22.1%) compared to the same period in 2024, due to the one-time Norgine upfront payment in 2024.
• Net cash used in operating activities for the nine months ended September 30, 2025, was $(6,511) thousand, a significant decrease from $28,454 thousand provided in the same period of 2024, largely attributable to the Norgine upfront payment in 2024.
• Interest income decreased by $364 thousand in Q3 2025 and $724 thousand for the nine months ended September 30, 2025, due to lower average cash balances.
• General and administrative expenses increased by $996 thousand for the nine months ended September 30, 2025, compared to 2024, driven by increased headcount, consulting, professional costs, and intellectual property expenses related to ongoing patent litigation.
• Working capital decreased by $956 thousand between December 31, 2024, and September 30, 2025.
• Accumulated deficit increased to $(224,636) thousand as of September 30, 2025, from $(219,681) thousand at December 31, 2024.

Risks

• Ongoing patent infringement litigation with CIPLA entities, which could impact market exclusivity for PEDMARK. CIPLA alleges Fennec's patents are invalid or not infringed.
• The ability to draw the remaining $15,000 thousand under the Securities Purchase Agreement with Petrichor expired on December 31, 2024, limiting future debt financing options from this source.
• Uncertainty regarding future capital requirements, which may fluctuate based on clinical trial progress, regulatory approvals, commercialization activities, and competitive landscape.
• Potential for tariffs to impact business, although pharmaceuticals are largely exempt from current U.S. tariffs, such exemptions may be terminated or may not apply to any future tariffs.
• Cash and cash equivalents held in money market accounts are substantially above the $250 thousand FDIC insured limit and may lose value.
• The effectiveness of internal controls is subject to inherent limitations and may not provide absolute assurances.
• The Norgine licensing agreement's future milestone payments and royalties are variable and dependent on regulatory approvals and third-party actions, making them highly susceptible to factors outside the Company's influence.

Future Outlook

Management believes current funds, including the upfront payment from Norgine and current operating activities, provide sufficient funding for planned activities, including commercialization efforts for PEDMARK, for at least the next twelve months. Preliminary results from the STS-J01 clinical trial in Japan are expected in Q4 2025, which, if positive, will lead to pursuing registration and exploring partnering or licensing opportunities in Japan. The company is also evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its financial statements.

Management Comments

• "Today marks an inflection point for Fennec, as we delivered the strongest quarter in our history. Record net product sales, four consecutive quarters of double-digit growth, and our first profitable quarter from operations clearly demonstrate that our strategy is working." Jeff Hackman, CEO.
• "What began as a rebuild in the first half of 2025 is now translating into tangible performance. The actions we took to strengthen our commercial organization, drive broader adoption, and reinforce our balance sheet are firmly taking hold." Jeff Hackman, CEO.
• "With continued discipline in executing against our strategic priorities, we believe we are well positioned to sustain the growth trajectory of PEDMARK." Jeff Hackman, CEO.

Industry Context

Fennec Pharmaceuticals operates in the specialized biopharmaceutical market focusing on pediatric oncology, specifically addressing cisplatin-induced ototoxicity. PEDMARK is the first and only FDA and EMA-approved therapy for this unmet medical need, positioning the company as a leader in this niche. The expansion into the Adolescent and Young Adult (AYA) oncology market broadens its addressable patient population beyond traditional pediatric centers. The licensing agreement with Norgine for commercialization in Europe, Australia, and New Zealand demonstrates a strategy to leverage partnerships for international market penetration, a common approach for smaller biopharmaceutical companies. The ongoing patent litigation against generic competitors highlights the competitive pressures and intellectual property defense strategies typical in the pharmaceutical industry.

Comparison to Industry Standards

• PEDMARK is the first and only FDAand EMA-approved therapy to mitigate cisplatin-induced ototoxicity in pediatric patients, setting a new standard of care where previously only expensive, technically difficult, and sub-optimal cochlear implants offered some benefit.
• The NCCN's Category 2A recommendation for PEDMARK in Adolescent and Young Adult (AYA) Oncology positions it favorably compared to other treatments or supportive care options in this patient population.
• The licensing agreement with Norgine, including an upfront payment of approximately $43.2 million and potential for up to $230 million in future royalties and milestones, is a significant deal for a company with a single commercial product, reflecting strong market potential in the EU, Australia, and New Zealand.

Corporate Governance

Legal Proceedings

• Ongoing patent infringement litigation against CIPLA Ltd. and CIPLA USA (Case No. 2:23-cv-00123 and 2:25-cv-05709, consolidated) regarding their ANDA for a generic version of PEDMARK.
• CIPLA alleges Fennec's patents (US 190, US 728, US 984, US 793, US 018, US 530, US 604, US 026) are invalid or will not be infringed.
• Fennec filed suit to assert infringement of multiple patents, including the newly granted US 026 Patent (May 27, 2025).
• The court granted Fennec's motion to consolidate the two cases and adopted Fennec's proposed claim constructions for two disputed terms on July 14, 2025.
• CIPLA filed an Answer and Counterclaims on August 25, 2025, alleging the US 026 Patent was invalid, not infringed, and/or unenforceable. The suit is ongoing.
• Fennec has Orphan Drug Exclusivity until September 20, 2029, which prevents FDA approval of CIPLA's ANDA for at least 7 years from PEDMARK's FDA approval date.

Stakeholder Impact

• Shareholders: Positive impact from strong Q3 product sales growth and operational profitability, potential for future growth from AYA market expansion and Japan. Negative impact from ongoing net losses year-to-date and patent litigation risks.
• Employees: Increased headcount mentioned in G&A expenses, and an expanded sales team, indicating growth. Equity Incentive Plan amendment provides more shares for awards and an employee stock purchase program.
• Customers (Healthcare Providers/Patients): Increased market penetration and access for PEDMARK, including home infusions, white bag delivery, and direct billing, improving patient access to the only FDA-approved treatment for cisplatin-induced ototoxicity.
• Creditors (Petrichor): Debt paydown of $13 million in December 2024 reduces the company's overall debt burden and interest expense. Remaining outstanding Second Closing Notes of approximately $19.5 million.

Next Steps

• Management team to host one-on-one investor meetings at the 16th Annual Craig-Hallum Alpha Select Conference on November 18, 2025.
• Preliminary results from the investigator-initiated clinical trial (STS-J01) evaluating PEDMARK in Japan are expected in Q4 2025.
• If Japan trial data are positive, the company will pursue registration in Japan and explore partnering or licensing opportunities for PEDMARK.
• Continue to monitor and upgrade internal controls as necessary or appropriate for the business.
• Evaluate the impact of the One Big Beautiful Bill Act (OBBBA) on consolidated condensed financial statements and related disclosures.
• Evaluate the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement Expenses) on consolidated condensed financial statements.

Key Dates

Recommendation

The company has demonstrated exceptional commercial execution in Q3 2025, achieving record product sales and its first profitable quarter from operations. This indicates strong market acceptance and successful penetration of PEDMARK, including expansion into the AYA population. While year-to-date financials show a net loss, this is primarily due to the absence of a one-time licensing payment from 2024, rather than a deterioration of core business performance. The reduction in long-term debt and favorable developments in the patent litigation against CIPLA further strengthen the company's position. The upcoming preliminary results from the Japan clinical trial in Q4 2025 present a significant catalyst for potential new market expansion. Given the strong operational momentum, unique market position with the only FDA-approved product for this indication, and future growth opportunities, the stock appears to be an attractive 'buy' for long-term investors, despite the inherent risks of a single-product biopharmaceutical company and ongoing litigation.

Keywords

Fennec Pharmaceuticals, PEDMARK, PEDMARQSI, Ototoxicity, Cisplatin, Pediatric Oncology, Biopharmaceutical, SEC Filing, Q3 2025 Earnings, Patent Litigation, Norgine, Drug Approval, Orphan Drug, Clinical Trial Japan