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OFFON

FENNEC PHARMACEUTICALS INC.

(FENC)
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FENNEC PHARMACEUTICALS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/10/2021 | 12:38pm EST

CAUTIONARY STATEMENT

This section and other parts of this Quarterly Report on Form 10-Q contain
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties.
Forward-looking statements provide current expectations of future events based
on certain assumptions and include any statement that does not directly relate
to any historical or current fact. Forward-looking statements can be identified
by words such as "future," "anticipates," "believes," "estimates," "expects,"
"intends," "plans," "predicts," "will," "would," "could," "can," "may," and
similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such
differences include, but are not limited to, those discussed in Part I, Item 1A
of the our Annual Report on Form 10-K for the year ended December 31, 2020 under
the heading "Risk Factors." We assume no obligation to revise or update any
forward-looking statements for any reason, except as required by law.

The following discussion should be read in conjunction with our Annual Report on
Form 10-K for the year ended December 31, 2020 and the condensed consolidated
financial statements and accompanying notes included elsewhere in this report.

Overview

Product Candidate PEDMARKTM

Our only product candidate in the clinical stage of development is:

PEDMARKTM (a unique formulation of sodium thiosulfate (STS)) for the prevention

of ototoxicity induced by cisplatin chemotherapy in patients one month to <18

years of age with localized, non-metastatic, solid tumors. We have announced

results of two Phase 3 clinical trials for the prevention of cisplatin induced

hearing loss, or ototoxicity in children, including the pivotal Phase 3 study

SIOPEL 6, "A Multicentre Open Label Randomised Phase 3 Trial of the Efficacy of

? Sodium Thiosulfate in Reducing Ototoxicity in Patients Receiving Cisplatin

Chemotherapy for Standard Risk Hepatoblastoma," and the proof of concept Phase

3 study in collaboration with the Children's Oncology Group ("COG ACCL0431")

"A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of

Cisplatin-Induced Ototoxicity in Children". COG ACCL0431 final results were

published in the Lancet Oncology in 2016. SIOPEL 6 final results were published

in the New England Journal of Medicine in June 2018.

We continue to focus our resources on the development of PEDMARKTM.


We have licensed from Oregon Health and Science University ("OHSU") intellectual
property rights for the use of PEDMARKTM as a chemoprotectant and are developing
PEDMARKTM as a protectant against the hearing loss often caused by
platinum-based anti-cancer agents in children. Preclinical and clinical studies
conducted by OHSU and others have indicated that PEDMARKTM can effectively
reduce the incidence of hearing loss caused by platinum-based anti-cancer
agents.

Hearing loss among children receiving platinum-based chemotherapy is frequent,
permanent and often severely disabling. The incidence of hearing loss in these
children depends upon the dose and duration of chemotherapy, and many of these
children require lifelong hearing aids. In addition, adults undergoing
chemotherapy for several common malignancies, including ovarian cancer,
testicular cancer, and particularly head and neck cancer and brain cancer, often
receive intensive platinum-based therapy and may experience severe, irreversible
hearing loss, particularly in the high frequencies.

We estimate in the U.S. and Europe that annually over 10,000 children with solid
tumors are treated with platinum agents.  The vast majority of these newly
diagnosed tumors are localized and classified as low to intermediate risk in
nature. These localized cancers may have overall survival rates of greater than
80%, further emphasizing the importance of quality of life after treatment. The
incidence of hearing loss in these children depends upon the dose and duration
of

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chemotherapy, and many of these children require lifelong hearing aids. There is
currently no established preventive agent for this hearing loss and only
expensive, technically difficult and sub-optimal cochlear (inner ear) implants
have been shown to provide some benefit. Infants and young children at critical
stages of development lack speech language development and literacy, and older
children and adolescents lack speech language development and literacy, and
older children and adolescents lack social-emotional development and educational
achievement.

In March 2018, PEDMARKTM received Breakthrough Therapy and Fast Track designations from the U.S. Food and Drug Administration ("FDA"). Further, PEDMARKTM has received Orphan Drug Designation in the U.S. in this setting.

We initiated our rolling New Drug Application ("NDA") for PEDMARKTM for the
prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to
< 18 years of age with localized, non-metastatic, solid tumors with the FDA in
December 2018. We announced that we had submitted full completion of the NDA in
February 2020. On April 13, 2020, we announced that the FDA had accepted for
filing and granted Priority Review for our NDA. The FDA set a Prescription Drug
Fee Act ("PDUFA") target action date of August 10, 2020 for the completion of
the FDA's review. On August 10, 2020, we announced that we received a Complete
Response Letter ("CRL") from the FDA regarding our NDA for PEDMARKTM, which
identified deficiencies in the third-party manufacturing facility that
manufactures PEDMARKTM on our behalf. Importantly, no clinical safety or
efficacy issues were identified during the review and there is no requirement
for further clinical data. In the fourth quarter of 2020, we engaged in a Type A
meeting with the FDA concerning the CRL that we believe was constructive and
collaborative. In May 2021, we announced the resubmission of our NDA for PEDMARK
and in June 2021 we further announced that the FDA accepted for filing the
resubmission of our NDA and set a PDUFA target action date of November 27, 2021.

In August 2018, the Pediatric Committee (PDCO) of the European Medicines Agency
(EMA) accepted our pediatric investigation plan (PIP) for sodium thiosulfate
with the trade name Pedmarqsi for the condition of the prevention of
platinum-induced hearing loss. An accepted PIP is a prerequisite for filing a
Marketing Authorization Application (MAA) for any new medicinal product
in Europe. The indication targeted by the Company's PIP is for the prevention of
platinum-induced ototoxic hearing loss for standard risk hepatoblastoma (SR-HB).
Additional tumor types of the proposed indication will be subject to the
Committee for Medicinal Products for Human Use (CHMP) assessment at the time of
the MAA. No deferred clinical studies were required in the positive opinion
given by PDCO. The Company was also advised that sodium thiosulfate (tradename
to be determined) is eligible for submission of an application for a Pediatric
Use Marketing Authorization (PUMA). Therefore, this decision allows Fennec to
proceed with the submission of a PUMA in the European Union (EU) with incentives
of automatic access to the centralized procedure and up to 10 years of data and
market protection The PUMA is a dedicated marketing authorization covering the
indication and appropriate formulation for medicines developed exclusively for
use in the pediatric population and provides data and market protection up to 10
years. In February 2020, Fennec announced that it has submitted a MAA for the
prevention of otoxicity induced by cisplatin chemotherapy patients 1 month to <
18 years of age with localized, non-metastatic, solid tumors.

Clinical Studies


PEDMARKTM has been studied by cooperative groups in two Phase 3 clinical studies
of survival and reduction of ototoxicity, COG ACCL0431 and SIOPEL 6. Both
studies have been completed. The COG ACCL0431 protocol enrolled one of five
childhood cancers typically treated with intensive cisplatin therapy for
localized and disseminated disease,
including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, and medulloblastoma.
SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.

SIOPEL 6


In October 2007, we announced that our collaborative partner, the International
Childhood Liver Tumour Strategy Group, known as SIOPEL, a multi-disciplinary
group of specialists under the umbrella of the International Society of
Pediatric Oncology, had launched a randomized Phase 3 clinical trial SIOPEL 6 to
investigate whether STS reduces hearing loss in standard risk hepatoblastoma
(liver) cancer patients receiving cisplatin as a monotherapy.

The study was initiated in October 2007 initially in the United Kingdom and completed enrollment at the end of 2014. 52 sites from 11 countries enrolled 109 evaluable patients. Under the terms of our agreement, SIOPEL conducted and funded


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all clinical activities and we provided drug, drug distribution and
pharmacovigilance, or safety monitoring, for the study. SIOPEL 6 was completed
in December 2014 and the final results of SIOPEL 6 were published in The New
England Journal of Medicine in June 2018.

The primary objectives of SIOPEL 6 were:

? To assess the efficacy of STS to reduce the hearing impairment caused by

cisplatin.



 ? To carefully monitor any potential impact of sodium thiosulfate on response to
   cisplatin and survival.


SIOPEL 6 - Results

Background / Objectives:
Bilateral high-frequency hearing loss is a serious permanent side-effect of
cisplatin therapy, particularly debilitating when occurring in young children.
STS has been shown to reduce cisplatin induced hearing loss. SIOPEL 6 was a
Phase 3 randomized trial to assess the efficacy of STS in reducing ototoxicity
in young children treated with cisplatin (Cis) for Standard Risk Hepatoblastoma
(SR-HB).

Design / Methods:
Newly diagnosed patients with SR-HB, defined as tumor limited to PRETEXT I, II
or III, no portal or hepatic vein involvement, no intra-abdominal extrahepatic
disease, AFP >100ng/ml and no metastases, were randomized to Cis or Cis+STS for
4 preoperative and 2 postoperative courses. Cisplatin 80mg/m2 was administered
over 6 hours, STS 20g/m2 was administered intravenously over 15 minutes exactly
6 hours after stopping cisplatin. Tumor response was assessed after 2 and 4
preoperative cycles with serum AFP and liver imaging. In case of progressive
disease (PD), STS was to be stopped and doxorubicin 60mg/m2 combined with
cisplatin.  The primary endpoint was centrally reviewed absolute hearing
threshold, at the age of ?3.5 years by pure tone audiometry.

Results:


109 randomized patients (52 Cisplatin only ("Cis") and 57 Cis+STS) were
evaluable. The combination of Cis+STS was generally well tolerated. With a
patient follow-up time of 52 months, the three-year Event Free Survival ("EFS")
for Cis was 78.8% Cisplatin and 82.1% for the Cis + STS. The three-year Overall
Survival ("OS") is 92.3% for Cis and 98.2% for Cis + STS. Treatment failure
defined as Progressive Disease ("PD") at 4 cycles was equivalent in both arms.
Among the first 101 evaluable patients, hearing loss occurred in 29/46=63.0%
under Cis and in 18/55=32.7% under Cis +STS, corresponding to a relative risk of
0.52(P=0.002).

                           [[Image Removed: Graphic]]

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Conclusions:

This randomized Phase 3 trial in SR-HB of cisplatin versus cisplatin plus STS shows that the addition of STS significantly reduces the incidence of cisplatin-induced hearing loss without any evidence of tumor protection.

COG ACCL0431


In March 2008, we announced the activation of a Phase 3 trial with STS to
prevent hearing loss in children receiving cisplatin-based chemotherapy in
collaboration with the Children's Oncology Group. The goal of this Phase 3 study
was to evaluate in a multi-centered, randomized trial whether STS is an
effective and safe means of preventing hearing loss in children receiving
cisplatin-based chemotherapy for newly diagnosed germ cell, liver
(hepatoblastoma), brain (medulloblastoma), nerve tissue (neuroblastoma) or bone
(osteosarcoma) cancers. Eligible children, one to eighteen years of age, were to
receive cisplatin according to their disease-specific regimen and, upon
enrollment in this study, were randomized to receive STS or not. Efficacy of STS
was determined through comparison of hearing sensitivity at follow-up relative
to baseline measurements using standard audiometric techniques. The Children's
Oncology Group was responsible for funding the clinical activities for the study
and we were responsible for providing the drug, drug distribution and
pharmacovigilance, or safety monitoring, for the study. The trial completed
enrollment of 131 pediatric patients in the first quarter of 2012. The final
results of COG ACCL0431 were published in Lancet Oncology in December 2016.

COG ACCL0431 - Results


COG Study ACCL0431, "A Randomized Phase 3 Study of Sodium Thiosulfate for the
Prevention of Cisplatin-Induced Ototoxicity in Children," finished enrollment of
131 patients of which 125 were eligible patients. The patients had been
previously diagnosed with childhood cancers.

The primary endpoint was to evaluate the efficacy of STS for prevention of hearing loss in children receiving cisplatin chemotherapy (hypothesis: 50% relative reduction in hearing loss).

Secondary endpoints included:

?Compare change in mean hearing thresholds. ?Compare incidence of other Grade 3/4 toxicities (renal and hematological). ?Monitor Event Free Survival (EFS) and Overall Survival (OS) in two groups.

125 eligible subjects were enrolled with germ cell tumor (32), osteosarcoma (29), neuroblastoma (26), medulloblastoma/pnet
(26), hepatoblastoma (7), or other (5). Of these, 104 subjects (64 male and 29
<5 years old) were evaluable for the primary endpoint.

Subjects were randomized either to no treatment (control) or treatment with STS
16 grams/m2 IV over 15 minutes, 6 hours after each cisplatin dose. Hearing was
measured using standard audiometry for age and data was reviewed centrally using
American Speech-Language-Hearing Association criteria.

The proportion of subjects with hearing loss assessed at 4 weeks post the final cisplatin dose (primary endpoint):

? The proportion of hearing loss for STS vs. Control was 28.6% (14/49) vs. 56.4%

(31/55), respectively (p=0.004).

In a predefined subgroup of patients less than 5 years old with 29 eligible

 ? subjects: STS vs. Control was 21.4% (3/14) vs. 73.3% (11/15), respectively
   (p=0.005).


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Conclusions:

STS protects against cisplatin-induced hearing loss in children across a

? heterogeneous range of tumor types, with even stronger efficacy in the protocol

predefined subgroup of patients under five years old, and is not associated

with serious adverse events attributed to its use.

? Further potential clinical use will be informed by the final results of SIOPEL

   6 study.


Capital Funding

We have not received and do not expect to have significant revenues from our
product candidate until we are either able to sell our product candidate after
obtaining applicable regulatory approvals or we establish collaborations that
provide us with up-front payments, licensing fees, milestone payments, royalties
or other revenue.

We generated a net loss of approximately $8.7 million for the six months ended
June 30, 2021, and a net loss of $8.7 million for the six months ended June 30,
2020. As of June 30, 2021, our accumulated deficit was approximately $170.9
million ($162.1 million at December 31, 2020).

We believe that our cash and cash equivalents as of June 30, 2021, which totaled
$27.3 million, plus the Bridge Bank Loan and Security Agreement, will be
sufficient to meet our cash requirements through at least the next twelve
months, including anticipated NDA approval and, if approved, the first
commercial launch of PEDMARKTM in the United States. Our projections of our
capital requirements are subject to substantial uncertainty, and more capital
than we currently anticipate may be required thereafter. To finance our
continuing operations, we may need to raise substantial additional funds through
either the sale of additional equity, the issuance of debt, the establishment of
collaborations that provide us with funding, the out-license or sale of certain
aspects of our intellectual property portfolio or from other sources. We may not
be able to raise the necessary capital, or such funding may not be available on
financially acceptable terms if at all. If we cannot obtain adequate funding in
the future, we might be required to further delay, scale back or eliminate
certain research and development studies, consider business combinations, or
even shut down some, or all, of our operations.

Our operating expenses will depend on many factors, including the progress of
our drug development efforts and efficiency of our operations and current
resources. Our research and development expenses, which include expenses
associated with our clinical trials, drug manufacturing to support clinical
programs, stock-based compensation, consulting fees, sponsored research costs,
toxicology studies, license fees, milestone payments, and other fees and costs
related to the development of our product candidate, will depend on the
availability of financial resources, the results of our clinical trials, and any
directives from regulatory agencies, which are difficult to predict. Our general
and administration expenses include expenses associated with the compensation of
employees, stock-based compensation, professional fees, consulting fees,
insurance and other administrative matters associated in support of our drug
development programs.

Results of Operations

Three months ended June 30, 2021 versus three months ended June 30, 2020:




                                       Three Months Ended             Three Months Ended
In thousands of U.S. Dollars             June 30, 2021        %        
June 30, 2020        %      Change
Revenue                               $                  -           $                  -           $     -
Operating expenses:
Research and development                               800     20 %                 1,121     23 %    (321)
General and administration                           3,120     80 %        
        3,724     77 %    (604)
Total operating expense                              3,920    100 %                 4,845    100 %    (925)
Loss from operations                               (3,920)                        (4,845)               925
Unrealized loss on securities                         (84)                 
            -              (84)
Amortization expense                                     -                           (30)                30
Other gains/losses                                     (9)                             13              (22)
Interest income and other, net                          12                 
           17               (5)
Net loss                              $            (4,001)           $            (4,845)           $   844


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Research and development expenses decreased by $321 for the three months ended
June 30, 2021 compared to the same period in 2020 as the Company's development
activities shifted back to product launch readiness and pre-commercial
development of PEDMARKTM.  General and administrative expenses decreased by $604
compared to same period in 2020. On June 30, 2020, the Company was relatively
much closer to the anticipated launch date than it is in 2021. We would
anticipate the same increase in pre commercialization activities as we near the
2021 launch date. The reduction in general and administrative expenses was
slightly offset by higher expenses associated with additional employees and the
increase in non-cash equity remuneration expense for employees and board members
related to the vesting of new and existing grants.

The Company holds shares of Processa (PCSA) which are marked to market each
balance sheet date and unrealized gains or losses are recognized at that time.
The unrealized loss on those shares for the three months ended on June 30, 2021
was $84. Other loss was driven mainly by fluctuations in the Company's foreign
currency transactions and is a non-cash expense. The Company has vendors that
transact in Euros, Great British Pounds and Canadian Dollars. There was a
decrease of $22 in other gain/(loss) for the three months ended June 30, 2021,
compared to the same period in 2020. Amortization expense is also a non-cash
expense and relates to amortization of the deferred issuance cost of the loan
facilities with Bridge Bank. Amortization expense decreased by $30 for the three
months ended June 30, 2021 compared to the same period in 2020. There was
virtually no amortization expense for the three months ended June 30, 2021.
Interest income was $5 lower for the three months ended June 30, 2021, compared
to the same period in 2020. This was driven mainly by lower average cash balance
despite the slightly higher interest rates for the three months ended June 30,
2021 compared to the same period in 2020.

Six months ended June 30, 2021 versus six months ended June 30, 2020:




                                          Six Months Ended            Six Months Ended
In thousands of U.S. Dollars                June 30, 2021      %        June 30, 2020      %      Change
Revenue                                   $               -           $               -           $     -
Operating expenses:
Research and development                              3,216     36 %              2,514     29 %      702
General and administration                            5,627     64 %              6,166     71 %    (539)
Total operating expenses                              8,843    100 %              8,680    100 %      163
Loss from operations                                (8,843)                     (8,680)             (163)
Unrealized gain on securities                            98                           -                98
Other gains/losses                                     (17)                           4              (21)
Amortization expense                                      -                        (47)                47
Interest income and other                                28                          52              (24)
Net loss                                  $         (8,734)           $         (8,671)           $  (63)




Research and development expenses increased by $702 for the six months ended
June 30, 2021, compared to the same period in 2020. The Company's research and
development activities for the first six months of 2021 increased as the Company
prepared for the NDA resubmission. General and administrative expenses decreased
by $539 over same period in 2020 as expenses associated with
pre-commercialization activities decreased on a year over year basis.

The Company holds shares of Processa (PCSA) which are marked to market each
balance sheet date and unrealized gains or losses are recognized at that time.
The unrealized gain on those shares for the six months ended on June 30, 2021
was $98. Other loss was driven mainly by fluctuations in the Company's foreign
currency transactions and is a non-cash expense. The Company has vendors that
transact in Euros, Great British Pounds and Canadian Dollars. There was a
decrease of $21 in other gain/(loss) for the six months ended June 30, 2021
compared to the same period in 2020. Amortization expense is also a non-cash
expense and relates to amortization of the deferred issuance cost of the loan
facilities with Bridge Bank. Amortization expense decreased by $47 for the six
months ended June 30, 2021 compared to  the same period in 2020 due to the
deferred issuance cost of the loan facility being fully expensed in the fourth
quarter of 2020. Interest income was $24 lower for the six months ended June 30,
2021, compared to the same period in 2020. This

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was driven mainly by a sharp decrease in interest rates and lower average cash
balance for the six months ended June 30, 2021 compared to the same period
in
2020.

Quarterly Information

The following table presents selected condensed financial data for each of the last eight quarters through June 30, 2021, as prepared under US GAAP (U.S. dollars in thousands, except per share information):




                                        Net (Loss)/Income for the      Basic Net (Loss)/Income per      Diluted Net (Loss)/Income per
Period                                           Period                       Common Share                      Common Share
September 30, 2019                     $                   (1,809)    $                      (0.09)    $                        (0.09)
December 31, 2019                                          (3,610)                           (0.18)                             (0.18)
March 31, 2020                                             (3,826)                           (0.19)                             (0.19)
June 30, 2020                                              (4,845)                           (0.21)                             (0.21)
September 30, 2020                                         (6,200)                           (0.24)                             (0.24)
December 31, 2020                                          (3,238)                           (0.13)                             (0.13)
March 31, 2021                                             (4,733)                           (0.18)                             (0.18)
June 30, 2021                                              (4,001)                           (0.15)                             (0.15)



Liquidity and Capital Resources




                                                               As at                As at
Selected Asset and Liability Data (thousands):             June 30, 2021   
  December 31, 2020
Cash and equivalents                                      $        27,293    $            30,344
Other current assets                                                  781                  1,073
Current liabilities                                                   848                  2,347
Working capital (1)                                                27,226                 29,070

(1) [Current assets - current liabilities]


Selected Equity:
Common stock and additional paid in capital                       191,912  
             189,967
Accumulated deficit                                             (170,874)              (162,140)
Shareholders' equity                                               22,281                 29,070




Cash and cash equivalents were $27,293 at June 30,2021 and $30,344 at December
31, 2020. The decrease in cash and cash equivalents between June 30, 2021 and
December 31, 2020 is the result of expenses related to the development and
preparation of the NDA resubmission of PEDMARKTM and general and administrative
expenses, which was offset by a draw of $5,000 from the Bridge Bank Loan and
Security Agreement. There was a decrease of $292 in other current assets between
June 30, 2021 and December 31, 2020. This relates largely to a $388 reduction in
the value of prepaid expenses almost entirely offset by an increase in the
valuation of the Company's holdings of Processa shares.

Current liabilities decreased sharply, primarily due to the completion of manufacturing and pre-commercialization activities and regulatory expenses associated with the PEDMARKTM NDA resubmission.


Working capital decreased between December 31, 2020, and June 30, 2021 by
$1,800. The decrease relates to cash expenditures for operating activities for
the six months ended June 30, 2021, offset by the $5,000 draw from the Bridge
Bank Loan and Security Agreement. The Company expects increases in cash outflows
related to pre commercialization and product launch activities in the coming
months.



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The following table illustrates a summary of cash flow data for the three and six-month periods of June 30, 2021 and 2020:




         Selected Cash Flow Data                Three Months Ended June 30,          Six Months Ended June 30,
    (dollars and shares in thousands)             2021               2020              2021              2020

Net cash used in operating activities $ (4,426) $ (3,116) $ (8,019) $ (6,865) Net cash provided by investing activities

                  -                  -                -                 -
Net cash provided by financing activities              4,968             31,944            4,968            31,944
Net cash flow                                $           542    $        28,828   $      (3,051)    $       25,079




Net cash used in operating activities for the three and six months ended June
30, 2021, primarily reflected a net loss of $4,001 and $8,734, respectively.
These three and six month losses were adjusted for the add back of non-cash
items consisting of $1,326 and $1,913, respectively in stock-based compensation
expense, with a loss of $84 added back for the three months ended June 30, 2021,
less $98 for the six month period ended June 30, 2021, in unrealized loss/gain
on securities. For the three and six months ended June 30, 2021, there was a net
change in prepaid and other assets of $209 and $390, respectively; coupled with
a net decrease in current liabilities of $2,044 and $1,499, respectively. Three
and six month cash flows from operating activities were negative $4,426 and
$8,019, respectively; for the period ended June 30, 2021. Net cash provided by
financing activities for the three and six months ended June 30, 2021 was
$4,968, respectively. Financing activities consisting of $5,000 gross proceeds
from the Loan Security Agreement, $24 from the exercise of options, netted
against $56 in capitalized deferred loan cost. Net cash flows from the three and
six month period ended June 30, 2021 were $542 and ($3,051), respectively.

We continue to pursue various strategic alternatives including collaborations
with other pharmaceutical and biotechnology companies. Our projections of
further capital requirements are subject to substantial uncertainty. Our working
capital requirements may fluctuate in future periods depending upon numerous
factors, including: our ability to obtain additional financial resources; our
ability to enter into collaborations that provide us with up-front payments,
milestones or other payments; results of our research and development
activities; progress or lack of progress in our preclinical studies or clinical
trials; unfavorable toxicology in our clinical programs, our drug substance
requirements to support clinical programs; change in the focus, direction, or
costs of our research and development programs; headcount expense; the costs
involved in preparing, filing, prosecuting, maintaining, defending and enforcing
our patent claims; competitive and technological advances; the potential need to
develop, acquire or license new technologies and products; our business
development activities; new regulatory requirements implemented by regulatory
authorities; the timing and outcome of any regulatory review process; and
commercialization activities, if any.

Outstanding Share Information


Our outstanding share data as of June 30, 2021 and December 31, 2020 was as
follows (in thousands):




                          June 30,     December 31,
Outstanding Share Type      2021           2020         Change
Common shares                26,007           26,003         4
Warrants                         39               39         -
Stock options                 3,653            2,952       701
Total                        29,699           28,994       705




Financial Instruments

We invest excess cash and cash equivalents in high credit quality investments
held by financial institutions in accordance with our investment policy designed
to protect the principal investment. At June 30, 2021, we had approximately $400
million in our cash accounts and $26,900 in savings and money market
accounts. While we have never experienced any loss or write down of our money
market investments since our inception, the amounts we hold in money market
accounts are substantially above the $250,000 amount insured by the FDIC and may
lose value.

Our investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment. Investments may be made in U.S. or Canadian obligations


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and bank securities, commercial paper of U.S. or Canadian industrial companies,
utilities, financial institutions and consumer loan companies, and securities of
foreign banks provided the obligations are guaranteed or carry ratings
appropriate to the policy. Securities must have a minimum Dun & Bradstreet
rating of A for bonds or R1 low for commercial paper. The policy also provides
for investment limits on concentrations of securities by issuer and
maximum-weighted average time to maturity of twelve months. This policy applies
to all of our financial resources.

The policy risks are primarily the opportunity cost of the conservative nature
of the allowable investments. As our main purpose is research and development,
we have chosen to avoid investments of a trading or speculative nature.

Off-Balance Sheet Arrangements


Since our inception, we have not had any material off-balance sheet
arrangements. In addition, we do not engage in trading activities involving
non-exchange traded contracts. As such, we are not materially exposed to any
financing, liquidity, market or credit risk that could arise if we had engaged
in such activities.

Research and Development

Our research and development efforts have been focused on the development of PEDMARKTM since 2013.


We have established relationships with contract research organizations,
universities and other institutions, which we utilize to perform many of the
day-to-day activities associated with our drug development. Where possible, we
have sought to include leading scientific investigators and advisors to enhance
our internal capabilities. Research and development issues are reviewed
internally by our executive management and supporting scientific team.

Research and development expenses for the three months ended June 30, 2021 and
2020 were $800 and $1,121, respectively, and for the six-months ended June 30,
2021 and 2020 were $3,216, and $2,514, respectively. We have decreased our
research and development expenses related to PEDMARKTM as our efforts have
shifted to pre-commercialization activities after the NDA resubmission in May
2021.

Our product candidate still requires significant, time-consuming and costly
research and development, testing and regulatory clearances. In developing our
product candidate, we are subject to risks of failure that are inherent in the
development of products based on innovative technologies. For example, it is
possible that our product candidate will be ineffective or toxic, or will
otherwise fail to receive the necessary regulatory clearances. There is a risk
that our product candidate will be uneconomical to manufacture or market or will
not achieve market acceptance. There is also a risk that third parties may hold
proprietary rights that preclude us from marketing our product candidate or that
others will market a superior or equivalent product. As a result of these
factors, we are unable to accurately estimate the nature, timing and future
costs necessary to complete the development of this product candidate. In
addition, we are unable to reasonably estimate the period when material net cash
inflows could commence from the sale, licensing or commercialization of such
product candidate, if ever.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with US GAAP requires
management to make estimates that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. These estimates are based on assumptions and
judgments that may be affected by commercial, economic and other factors. Actual
results could differ from these estimates.

Our accounting policies are materially consistent with those presented in our
annual consolidated financial statements included in our Annual Report on Form
10-K for the year ended December 31, 2020.

                                       27

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Analyst Recommendations on FENNEC PHARMACEUTICALS INC.
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Financials (USD)
Sales 2021 25,0 M - -
Net income 2021 14,4 M - -
Net Debt 2021 - - -
P/E ratio 2021 8,64x
Yield 2021 -
Capitalization 124 M 124 M -
Capi. / Sales 2021 4,97x
Capi. / Sales 2022 24,1x
Nbr of Employees 9
Free-Float 83,1%
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Mean consensus BUY
Number of Analysts 5
Last Close Price 4,78 $
Average target price 10,80 $
Spread / Average Target 126%
EPS Revisions
Managers and Directors
Rostislav C. Raykov Chief Executive Officer & Director
Robert C. Andrade Chief Financial Officer
Khalid Islam Chairman
Chris A. Rallis Independent Director
Adrian James Haigh Independent Director
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