0001558370-24-015068 | 10-Q | XBRL Viewer | Fennec Pharmaceuticals INC

Subsequent Events	9 Months Ended
Sep. 30, 2024
Subsequent Events
Subsequent Events	9. Subsequent Events On October 28, 2024, Fennec Pharmaceuticals Inc.’s (the “Company”) announced the appointments of Mr. Pierre S. Sayad, PhD, M.S., as Chief Medical Officer (“CMO”), Mr. Terry Evans as Chief Commercial Officer (“CCO”), and Ms. Christiana Cioffi, MBA, as Chief Strategy Officer (“CSO”), all of which became effective on October 28, 2024. There are no arrangements or understandings between each of Mr. Sayad, Mr. Evans, or Ms. Cioffi, and any other person pursuant to which such individual was appointed as CMO, CCO, and CSO, respectively. Neither Mr. Sayad, Mr. Evans, nor Ms. Cioffi have any family relationships with any other executive officer or director of the Company. None of these appointments have been involved in any related person transactions with the Company that would require disclosure under Item 404(a) of Regulation S-K. In connection with their appointments to CMO, COO, and CSO, respectively, Mr. Sayad, Mr. Evans, and Ms. Cioffi each entered into an Executive Employment Agreement with the Company effective as of October 28, 2024. Each of these Executive Employment Agreements is an “at-will” agreement. Pursuant to the terms of Mr. Sayad’s Executive Employment Agreement, his initial base annualized salary will be at a rate of $450,000, subject to review and increase from time to time by the Company in its sole discretion. He shall be entitled to receive an annual target performance bonus (“Target Bonus”) of forty percent (40%) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months), based upon a determination by the Company’s Board of Directors (“Board”) of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus. In addition, the Company will grant Mr. Sayad 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan); (ii) have a term of ten years, with one-third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan. Pursuant to the terms of Mr. Evans’ Executive Employment Agreement, his initial base annualized salary will be at a rate of $400,000, subject to review and increase from time to time by the Company in its sole discretion. He shall be entitled to receive a Target Bonus of forty percent (40%) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus. In addition, the Company will grant Mr. Evans 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan); (ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan. Pursuant to the terms of Ms. Cioffi’s Executive Employment Agreement, her initial base annualized salary will be at a rate of $375,000, subject to review and increase from time to time by the Company in its sole discretion. She shall be entitled to receive a Target Bonus of forty percent (40%) of her base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that she must remain employed through the payment date to be eligible to receive the Target Bonus. In addition, the Company will grant Ms. Cioffi 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan); (ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan. Each of Mr. Sayad, Mr. Evans, and Ms. Cioffi’s Executive Employment Agreements generally provide that if their employment is terminated without “Cause” (as defined in the applicable Executive Employment Agreement) and other conditions are satisfied, then such executive officer shall receive as severance an amount equal to their then current base salary for a period of nine (9) months, less standard withholdings for tax and social security purposes.

Subsequent Events

9 Months Ended

Sep. 30, 2024

9. Subsequent Events

On October 28, 2024, Fennec Pharmaceuticals Inc.’s (the “Company”) announced the appointments of Mr. Pierre S. Sayad, PhD, M.S., as Chief Medical Officer (“CMO”), Mr. Terry Evans as Chief Commercial Officer (“CCO”), and Ms. Christiana Cioffi, MBA, as Chief Strategy Officer (“CSO”), all of which became effective on October 28, 2024. There are no arrangements or understandings between each of Mr. Sayad, Mr. Evans, or Ms. Cioffi, and any other person pursuant to which such individual was appointed as CMO, CCO, and CSO, respectively. Neither Mr. Sayad, Mr. Evans, nor Ms. Cioffi have any family relationships with any other executive officer or director of the Company. None of these appointments have been involved in any related person transactions with the Company that would require disclosure under Item 404(a) of Regulation S-K.

In connection with their appointments to CMO, COO, and CSO, respectively, Mr. Sayad, Mr. Evans, and Ms. Cioffi each entered into an Executive Employment Agreement with the Company effective as of October 28, 2024. Each of these Executive Employment Agreements is an “at-will” agreement.

Pursuant to the terms of Mr. Sayad’s Executive Employment Agreement, his initial base annualized salary will be at a rate of $450,000, subject to review and increase from time to time by the Company in its sole discretion. He shall be entitled to receive an annual target performance bonus (“Target Bonus”) of forty percent (40%) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months), based upon a determination by the Company’s Board of Directors (“Board”) of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus. In addition, the Company will grant Mr. Sayad 150,000 options to purchase common shares of the Company which (i) have an exercise

price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan); (ii) have a term of ten years, with one-third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Pursuant to the terms of Mr. Evans’ Executive Employment Agreement, his initial base annualized salary will be at a rate of $400,000, subject to review and increase from time to time by the Company in its sole discretion. He shall be entitled to receive a Target Bonus of forty percent (40%) of his base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that he must remain employed through the payment date to be eligible to receive the Target Bonus. In addition, the Company will grant Mr. Evans 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan); (ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Pursuant to the terms of Ms. Cioffi’s Executive Employment Agreement, her initial base annualized salary will be at a rate of $375,000, subject to review and increase from time to time by the Company in its sole discretion. She shall be entitled to receive a Target Bonus of forty percent (40%) of her base salary per 12-month period (which may be pro-rated for any partial period of less than 12 months), based upon a determination by the Board of the achievement of objectives to be set from time to time by the Board, provided that she must remain employed through the payment date to be eligible to receive the Target Bonus. In addition, the Company will grant Ms. Cioffi 150,000 options to purchase common shares of the Company which (i) have an exercise price per share equal to the “Fair Market Value” (as defined in Company’s 2020 Equity Incentive Plan); (ii) have a term of ten years, with one- third of the options vesting one year after the date of grant and the balance thereof vesting monthly thereafter for two years in equal increments, and (iii) are otherwise subject to the terms and conditions set forth in the Company’s 2020 Equity Incentive Plan.

Each of Mr. Sayad, Mr. Evans, and Ms. Cioffi’s Executive Employment Agreements generally provide that if their employment is terminated without “Cause” (as defined in the applicable Executive Employment Agreement) and other conditions are satisfied, then such executive officer shall receive as severance an amount equal to their then current base salary for a period of nine (9) months, less standard withholdings for tax and social security purposes.

Term Loans (Tables)

9 Months Ended

Sep. 30, 2024

Term Loans

Schedule of Aggregate Annual Term-Loan Payments


Years Ending December 31,		Amount
2024	$	—
2025		—
2026		—
2027		30,000
Payment in kind interest		2,323
Total future payments		32,323
Less: unamortized debt discount		(227)
Total term loan, net of debt discount	$	32,096

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Operating activities:
Net income/(loss)	$ 1,549	$ (13,363)
Adjustments to reconcile net loss to net cash used in operating activities:
Inventory reserve	517
Allowance for doubtful accounts	3,604
Amortization of debt discount	64	51
Loss on securities	14	43
Amortization of Norgine asset	774
Amortization of debt access fees		166
PIK interest	1,104	677
Stock-based compensation - employees	3,937	4,497
Changes in operating assets and liabilities:
Accounts receivables	(7,698)	(2,980)
Prepaid expenses	(491)	523
Inventory	514	(1,179)
Other current assets	109
Accounts payable	89	551
Accrued liabilities	(441)	(1,269)
Contract liability - Norgine	24,809
Net cash provided by / (used in) operating activities	28,454	(12,283)
Financing activities:
Issuance of shares, options exercise	504	969
Cash paid for taxes on restricted share release	(167)	(61)
Deferred costs	(1,740)
Net cash (used in) / provided by financing activities	(1,403)	908
Increase/(decrease) in cash and cash equivalents	27,051	(11,375)
Cash and cash equivalents - Beginning of period	13,269	23,774
Cash and cash equivalents - End of period	40,320	12,399
Non-cash investing and financing activities:
Capitalized lease asset	$ 21	$ 29

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2024

Stockholders' Equity

Schedule of Warrants to Purchase Common Stock


	Common Shares
	Issuable Upon Exercise
	of Outstanding		Weighted-Average
Investor Warrants	Warrants		Exercise Price $USD
Outstanding December 31, 2023	150	$	7.71
Issued	—		—
Outstanding March 31, 2024	150		7.71
Issued	—		—
Outstanding June 30, 2024	150		7.71
Issued	—		—
Outstanding September 30, 2024	150	$	7.71


	Common Shares
	Issuable Upon Exercise
	of Outstanding		Weighted-Average
Investor Warrants	Warrants		Exercise Price
Outstanding December 31, 2022	150	$	7.71
Issued	—		—
Outstanding March 31, 2023	150		7.71
Issued	—		—
Outstanding June 30, 2023	150		7.71
Issued	—		—
Outstanding September 30, 2023	150	$	7.71

Schedule of Recognized Expense Related to Employee Option Exercises

Three Months Ended

Nine Months Ended

September 30,

2024

2023

2024

2023

Employee options expense recognized

1,821

865

3,937

4,497

Total option expense recognized

1,821

865

3,937

4,497

Schedule of Share-Based Compensation, Stock Option Activity


	Number of	Weighted-Average
Options	Options (thousands)	Exercise Price $USD
Outstanding at December 31, 2023	4,798	$	6.27
Granted	45		7.29
Exercised	(75)		5.81
Forfeited	—		—
Outstanding at March 31, 2024	4,768		5.43
Granted	707		7.12
Exercised	(147)		2.36
Forfeited	(100)		8.00
Outstanding at June 30, 2024	5,228		6.48
Granted	558		5.58
Exercised	(55)		2.84
Forfeited	(276)		7.55
Outstanding at September 30, 2024	5,455	$	6.37

Schedule of Share-Based Compensation, Stock Option Volatility Measurements


		Valuation
		Assumptions
Black-Scholes Model Assumptions		September 30, 2024
Expected dividend		0.00%
Risk free rate		3.79 - 5.15%
Expected volatility		45 - 67%
Expected life		1.5 - 6.0 years

Schedule of Restricted Share Unit Activity


		Number of
		Restricted Share
RSUs Current Year		Units (thousands)
Outstanding at December 31, 2023		218
Awarded		17
Released		(21)
Outstanding at March 31, 2024		214
Awarded		299
Released		(68)
Forfeited		—
Outstanding at June 30, 2024		445
Awarded		—
Released		(48)
Forfeited		(30)
Outstanding at September 30, 2024		367

Stockholders' Equity - Recognized Contractor and Employee Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Recognized Employee Expense [Line Items]
Total option expense recognized	$ 1,821	$ 865	$ 3,937	$ 4,497
Employee Options
Recognized Employee Expense [Line Items]
Total option expense recognized	$ 1,821	$ 865	$ 3,937	$ 4,497

Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2024

Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with US GAAP and are the responsibility of the Company’s management. These unaudited interim condensed consolidated financial statements do not include all of the information and notes required by US GAAP for annual financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited condensed consolidated financial statements and notes filed with the Securities and Exchange Commission (“SEC”) in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. The Company’s accounting policies are consistent with those presented in the audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023. These unaudited interim condensed consolidated financial statements have been prepared in U.S. dollars. All amounts presented are in thousands except for per share amounts.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. Significant estimates include revenue recognition, allowance against trade receivables, measurement of stock-based compensation and estimates of the Company’s capital requirements over the next twelve months from the date of issuance of the consolidated financial statements. Actual results could differ from those estimates.

Segment and Geographic Information

Segment and Geographic Information

Operating segments are defined as components of an enterprise engaging in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment. As of September 30, 2024, the Company had an operating lease in Ireland which is scheduled to terminate on January 31, 2025. This is the only asset currently located outside of the United States.

Stock-Based Compensation

Stock-Based Compensation

Under the Company’s stock-based compensation programs, the Company periodically grants stock options and restricted stock to employees, directors and consultants. The Company also issues shares under an employee stock purchase plan. The fair value of each award is recognized in the Company’s statements of operations over the requisite service period for such award.

The Company uses the Black-Scholes option pricing model to value stock option awards without market conditions, which requires the Company to make certain assumptions regarding the expected volatility of its common stock price, the expected term of the option grants, the risk-free interest rate and the dividend yield with respect to its common stock. The Company calculates volatility using its historical stock price data. Due to the lack of the Company’s own historical data, the Company elected to use the “simplified” method for “plain vanilla” options to estimate the expected term of the Company’s stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option. The risk-free interest rate used for each grant is based on the United States Treasury yield curve in effect at the time of grant for instruments with a similar expected life. The Company utilizes a dividend yield of zero based on the fact that the Company has never paid cash dividends and, at present, has no intention to pay cash dividends.

Inventory

Inventory

Inventories are valued under a standard costing methodology on a first-in, first-out basis and are stated at the lower of cost or net realizable value. The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination to capitalize inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. Capitalized costs of inventories mainly include third party manufacturing, logistics and distribution costs. The Company assesses recoverability of inventory each reporting period to determine any write down to net realizable value resulting from excess or obsolete inventories. The manufacturing costs for PEDMARK prior to regulatory approval were not capitalized as inventory but were expensed as research and development costs. The Company expensed pre-launch inventory as it could not reasonably anticipate FDA approval of PEDMARK.

Revenue Recognition

Under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers, the Company recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration which the Company determines it expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation(s). As part of the accounting for these arrangements, the Company must make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.

License Agreements

License Agreements

The Company generates revenue from license or similar agreements with pharmaceutical companies for the commercialization of its product. Such agreements may include the transfer of intellectual property rights in the form of licenses. Payments made by the customers may include non-refundable upfront fees, payments based upon the achievement of defined milestones, and royalties on sales of product.

If a license to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to the license as revenue upon

transfer of control of the license. All other promised goods or services in the agreement are evaluated to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct. Optional future services where any additional consideration paid to the Company reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered performance obligations. If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as separate performance obligations.

Contingent milestones at contract inception are estimated at the amount which is not probable of a material reversal and included in the transaction price using the most likely amount method. Milestone payments that are not within the Company's control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received and therefore the variable consideration is constrained. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each reporting period, the Company re-evaluates the probability of achieving development or sales-based milestone payments that may not be subject to a material reversal and, if necessary, adjust the estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license and other revenue, as well as earnings, in the period of adjustment.

For arrangements that include sales-based royalties, including sales-based milestone payments, and a license of intellectual property that is deemed to be the predominant item to which the royalties relate, revenue is recognized at the later of when the related sales occur or when the performance obligation to which some or all of the royalties have been allocated has been satisfied (or partially satisfied).

Cost to Obtain Contract

Costs to Obtain Contract

As the majority of the Company's contracts are short-term in nature, sales commissions are generally expensed when incurred as the amortization period would have been less than one year. These costs are recorded within selling and marketing expenses in the condensed consolidated statements of operations. For contracts that extend beyond one year, the incremental expense recognition matches the recognition of related revenue.

Net Product Revenue

Net Product Revenue

On September 20, 2022, the FDA approved PEDMARK in the United States to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. PEDMARK became commercially available on October 17, 2022. PEDMARK is the Company’s first and only commercial product. Certain specialty distributors of the Company subsequently resell the Company’s products to health care providers and patients. In addition to distribution agreements with these customers, the Company enters into arrangements with health care providers and payors that provide for government-mandated and/or privately negotiated rebates, chargebacks and discounts with respect to the purchase of the Company’s products. Revenues from product sales are recognized when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon delivery to the customer.

Further, on March 17, 2024, the Company announced it had entered into an exclusive licensing agreement with Norgine to commercialize PEDMARQSI^® (EU brand name for PEDMARK) in Europe, New Zealand and Australia.

Product Sales Discounts and Allowances

Product Sales Discounts and Allowances

The Company records revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established primarily from discounts, chargebacks, rebates, co-pay assistance, returns and other allowances that are offered within contracts between the Company and its customers, health care providers, payors and other indirect customers relating to the sales of its products. These reserves are based on the amounts to be claimed on the related sales and are classified as a contra-asset or current liability. Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as current

contractual and statutory requirements, specific known market events and trends, industry data, forecasted customer buying and payment patterns, and the Company’s historical experience that will develop over time as PEDMARK and PEDMARQSI^® (European branded product name) is the Company’s first and only commercial product. Overall, these reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of its contracts. The amount of variable consideration that is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.

Chargebacks: Chargebacks are discounts that occur when contracted customers purchase directly from a specialty distributor. Contracted customers, which currently consist of Public Health Service institutions and Federal government entities purchasing via the Federal Supply Schedule, generally purchase the product at a discounted price. The specialty distributor, in turn, charges back to the Company the difference between the price initially paid by the specialty distributor and the discounted price paid to the specialty distributor by its contracted customer. The allowance for chargebacks is based on actual chargebacks received and an estimate of sales by the specialty distributor to its contracted customers.

Discounts for Prompt Payment: Customers typically receive a small discount for prompt payment. The Company expects its customers will earn 100% of their prompt payment discounts and, therefore, the Company deducts the full amount of these discounts from total product sales when revenues are recognized.

Rebates: Allowances for rebates include mandated discounts under the Medicaid Drug Rebate Program and other government programs. Rebate amounts owed after the final dispensing of the product to a benefit plan participant are based upon contractual agreements or legal requirements with public sector benefit providers, such as Medicaid. The allowance for rebates is based on statutory or contractual discount rates and expected utilization. The Company’s estimates for the expected utilization of rebates are based on customer and payor data received from the specialty distributors and historical utilization rates that will develop over time, as PEDMARK is the Company’s first and only commercial product. Rebates are generally invoiced by the payor and paid in arrears, such that the accrual balance consists of an estimate of the amount expected to be incurred for the current quarter’s shipments to the customers, plus an accrual balance for known prior quarters’ unpaid rebates. If actual future rebates vary from estimates, the Company may need to adjust its accruals, which would affect net product revenues in the period of adjustment.

Co-payment Assistance: Patients who have commercial insurance and meet certain eligibility requirements may receive co-payment assistance. The Company accrues a liability for co-payment assistance based on actual program participation and estimates of program redemption using customer data provided by the third party that administers the copay program.

Other Customer Credits: The Company pays fees to its customers for account management, data management and other administrative services. To the extent the services received are distinct from the sale of products to its customers, the Company classifies these payments in selling and marketing expenses in its condensed consolidated statements of operations.

Distribution and Other Fees: The Company pays distribution and other fees to certain customers in connection with the sales of PEDMARK. The Company records distribution and other fees paid to its customers as a reduction of revenue, unless the payment is for a distinct good or service from the customer and the Company can reasonably estimate the fair value of the goods or services received. If both conditions are met, the Company records the consideration paid to the customer as an operating expense. These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale.

The following table summarizes net product revenues for PEDMARK earned during the three and nine months ended September 30, 2024, and 2023, respectively:


	Three Months Ended				Nine Months Ended
		September 30,		September 30,		September 30,		September 30,
In thousands		2024		2023		2024		2023
Product revenues:
Gross product revenues	$	7,986	$	6,919	$	27,008	$	12,525
Discounts and allowances		(1,012)		(404)		(5,353)		(1,008)
Net product revenues	$	6,974	$	6,515	$	21,655	$	11,517

For the three and nine months ended September 30, 2024, the Company had one and four distributors that each represented more than 10% of net sales, respectively. For the three and nine months ended September 30, 2023, the Company had two distributors that each represented more than 10% of net sales.

The activities and ending allowance balances for each significant category of discounts and allowances for PEDMARK (which constitute variable consideration) for the nine months ended September 30, 2024, were as follows:



	Chargebacks,		Rebates, Customer
	Discounts for		Fees/Credits
	Prompt pay and		and Co-Pay
In thousands	Other allowances		Assistance		Totals
Balance at December 31, 2023	$	365	$	430	$	795
Provision related to sales made in:
Current period		352		1,640		1,992
Prior periods		—		—		—
Payments and customer credits issued		(497)		(104)		(601)
Balance at March 31, 2024	$	220	$	1,966	$	2,186
Provision related to sales made in:
Current period		175		2,644		2,819
Prior periods		—		—		—
Payments and customer credits issued		(66)		(2,614)		(2,680)
Balance at June 30, 2024	$	329	$	1,996	$	2,325
Provision related to sales made in:
Current period		837		328		1,165
Prior periods		—		—		—
Payments and customer credits issued		(834)		(959)		(1,793)
Balance at September 30, 2024	$	332	$	1,365	$	1,697

The allowances for chargebacks, fees due to customers, rebates and discounts for prompt payment are recorded as a contra-asset to accounts receivable, while Medicaid rebates and return allowances are in accrued liabilities in the accompanying condensed consolidated balance sheets.

Trade Receivables

Trade Receivables

The Company records gross trade receivables at the time of product sale to its customers. Amounts estimated for the associated chargebacks, cash discounts for prompt payment and any allowances for credit losses are booked as a reserve against accounts receivable and reduction of revenue. The Company determines its allowance methodology by pooling receivable balances at the customer level. The Company considers various factors, including loss history,

individual credit risk associated to each customer, and the current and future condition of the general economy. These credit risk factors are monitored on a quarterly basis and updated as necessary. To the extent that any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such a customer. Customers in the United States are specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low. Sales to non-specialty distributors outside the United States have greater potential for losses. It is the policy of the Company to use a sliding scale to establish a reserve of its gross sales to non-specialty distributors, based on the aging category, in combination with management's specific review of each past due customer balance. The Company had a balance in allowance for credit losses of $4,971 as of September 30, 2024.

Cash and Cash Equivalents

Cash equivalents consist of highly liquid investments with original maturities at the date of purchase of three months or less. The Company places its cash and cash equivalents in investments held by highly rated financial institutions in accordance with its investment policy designed to protect the principal investment. At September 30, 2024, the Company had $40,320 in cash, savings and money market accounts (13,269 at December 31, 2023). While the Company has not experienced any loss or write-down of its money market investments, the amounts it holds in money market accounts are substantially above the $250 amount insured by the FDIC and may lose value.

Financial Instruments

Financial Instruments

Financial instruments recognized on the balance sheets at September 30, 2024 and December 31, 2023 consist of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and term loans, the carrying values of which approximate fair value due to their relatively short time to maturity or interest rates that approximate market interest rates. The Company does not hold or issue financial instruments for trading.

The Company’s 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, when made, are made in U.S. or Canadian 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 risks are primarily the opportunity cost of the conservative nature of the allowable investments. The Company has chosen to avoid investments of a trading or speculative nature to preserve cash.

Common Shares and Warrants

Common Shares and Warrants

As of September 30, 2024, the Company has 150 warrants with a weighted average strike price of $7.71 outstanding to purchase common shares that have a weighted average life of 3.30 years.

Research and Development Costs and Investment Tax Credits

Research and Development Costs and Investment Tax Credits

Research costs, including employee compensation, laboratory fees, lab supplies, and research and testing performed under contract by third parties, are expensed as incurred. Development costs, including drug substance costs, clinical study expenses and regulatory expenses are expensed as incurred.

Investment tax credits, which are earned as a result of qualifying research and development expenditures, are recognized when the expenditures are made and their realization is reasonably assured. They are applied to reduce related capital costs and research and development expenses in the year recognized.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to credit risk primarily consist of cash and cash equivalents, and accounts receivable. The Company maintains deposits in highly rated, federally-insured financial institutions in excess of federally insured limits. The Company’s investment strategy is focused on capital preservation. The Company invests in instruments that meet the high credit quality standards outlined in the Company’s investment policy. This policy also limits the amount of credit exposure to any one issue or type of instrument.

The Company’s trade receivables includes amounts billed to customers for product sales of PEDMARK. In the U.S., the customers are a limited group of specialty distributors, and accordingly, the Company considers the risk of potential credit losses to be low. The Company also sells to a select group of global distributors. These global distributors are established companies and although the Company regards credit losses with these distributors to be remote, it does recognize the potential for credit losses with this group.

Income Taxes

The Company accounts for income taxes using the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts, using currently enacted tax rates. The Company has deferred tax assets, which are subject to periodic recoverability assessments. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. As of September 30, 2024, we maintained a full valuation allowance against our deferred tax assets.

The provisions of the Financial Accounting Standards Board (“FASB”) ASC 740-10, Uncertainty in Income Taxes, address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position.

Foreign Currency Translation

Foreign Currency Transactions

The U.S. dollar is the functional currency for the Company’s consolidated operations. All gains and losses from currency transactions are included in the results of operations.

Net Income/(Loss) Per Share

Net Income/(Loss) Per Share

Basic net income/(loss) per share is computed by dividing net loss by the weighted average number of common shares outstanding during the year. Diluted net income/(loss) per share is computed using the same method, except the weighted average number of common shares outstanding includes convertible debentures, restricted stock units, stock options and warrants, if dilutive, as determined using the if-converted method and treasury methods. Accordingly, warrants to purchase 150 of our common shares, restricted share units to purchase 367 of our common shares and options to purchase 5,455 of our common shares at September 30, 2024, were not included in earnings per share. Such warrants, options and convertible notes would have an antidilutive effect. In 2023, warrants to purchase 150 of our common shares and options to purchase 5,005 common shares were excluded from the computation of loss per share as their inclusion would have been antidilutive.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued amended guidance for improvements to reportable segment disclosures (ASU) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” that requires a public entity disclose significant segment expenses regularly reviewed by the chief operating decision maker (CODM), including public entities with a single reportable segment. The amended guidance is effective for fiscal years beginning January 1, 2024, and interim periods beginning January 1, 2025 and should be applied on a retrospective basis. Early adoption is permitted. The Company is currently evaluating the effect the adoption of this ASU will have on its consolidated financial statements.

In December 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. The Company is currently evaluating the effect the adoption of this ASU will have on its consolidated financial statements.

On March 21, 2024, the FASB issued Accounting Standards Update (ASU) 2024-01, Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards, which provides illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the scope of FASB Accounting Standards Codification (FASB ASC) 718, Compensation-Stock Compensation. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. The Company believes that ASU 2024-01 will not have a material impact on the Company’s condensed consolidated financial statements.

Commitments and Contingencies (Details)	9 Months Ended	113 Months Ended
Commitments and Contingencies (Details)	Sep. 30, 2024 USD ($)	Sep. 30, 2024 USD ($)	Aug. 01, 2023 USD ($)	Jan. 23, 2020 USD ($)
Oregon Health & Science University Agreement
Licensing term OHSU agreement	8 years
Days notice required to terminate OHSU agreement	45 days
Days notice required by Fennec to terminate OHSU agreement	60 days
Accrued royalty expenses	$ 162,000	$ 460,000
Lease Contingencies \| Triangle Park, North Carolina
Monthly lease expense	$ 400,000
Operating lease, days notice required to terminate agreement	30 days
Operating lease, penalties and contingent payments payable	$ 0
Lease Contingencies \| Hoboken, New Jersey \| Office Service Agreement
Monthly lease expense	1,000
Security deposit				$ 2,000
Lease Contingencies \| Dublin, Ireland \| Second Office Service Agreement
Monthly lease expense	$ 2,000
Security deposit			$ 5,000
Variable rate over prime	1.50%
CIPLA ANDA Litigation
Days following receipt of Notice Letter to file patent infringement suit	45 days
Duration of FDA's ability to give final approval to proposed products that reference PEDMARK	30 months
PEDMARK's Orphan Drug Exclusivity period	7 years
PEDMARK's exclusivity period under PUMA	10 years
Executive Severance \| Jeff Hackman, CEO
Severance payments due	$ 550,000	$ 550,000
Number of severance payments	1	1
Severance payment term	12 months
Executive Severance \| Robert Andrade
Severance payments due	$ 331,000	$ 331,000
Number of severance payments	1	1
Severance payment term	9 months

License Agreement

9 Months Ended

Sep. 30, 2024

License Agreement

License Agreement

8. License Agreement

License Agreement with Norgine Pharma UK Limited

On March 17, 2024, the Company announced that, through its wholly-owned subsidiary, Fennec Pharmaceuticals, Inc. entered into a License and Supply Agreement (the “Agreement”) with Norgine Pharma UK Limited (“Norgine”), pursuant to which Norgine is granted an exclusive license to commercialize the Company’s product PEDMARQSI^® (known as PEDMARK in the United States) for all human indications in the European Economic Area, Switzerland, the United Kingdom, Australia and New Zealand (collectively, the “Territory”). On July 26, 2024, Norgine and Fennec amended the exclusive licensing agreement. The amended agreement maintains all principal payment terms with the primary addition of Norgine assuming responsibility for packaging and labeling of PEDMARQSI^®.

Pursuant to the terms of the Agreement, Fennec shall receive the following payments from Norgine: (i) an upfront payment in the amount of €40,000 or approximately $43,200, which was paid to Fennec on March 15, 2024, (ii) up to €210,000 (or approximately $230,000) upon the achievement of certain regulatory and commercial milestones, and (iii) tiered royalty payments based on net sales of PEDMARQSI^® in the Territory, which royalty payment range from mid-teen percent to mid-twenty percent based on the aggregate net sales of PEDMARQSI^® in the Territory. The tiered royalty payments are subject to material reduction if an alternative or generic version of PEDMARQSI^® becomes available in any respective country or jurisdiction within the Territory.

Subject to customary rights of each party to earlier terminate the Agreement, the term of the Agreement continues for the longer of: (i) March 15, 2034, or (ii) with respect to any particular country in the Territory, (a) the expiration of regulatory market exclusivity for PEDMARQSI^® in such country, or (b) the last-to-expire of all patents for PEDMARQSI^® in such country. The term of the Agreement shall be automatically renewed for additional three-year periods unless either party

provides the other party written notice of its intent not to renew the Agreement at least one year prior to the applicable termination date of the Agreement.

The Company evaluated the Agreement under ASC 606 and concluded that Norgine represents a customer in the transaction. There were two performance obligations: a license of functional IP and a material right for future supply. The Company will allocate the transaction price, including currently unrecognized variable consideration, to the two performance obligations based on estimated standalone selling price, which was estimated using projected cash flows. The initial transaction price consisted of the non-refundable upfront payment, a portion of which was allocated to and recognized as License Revenue in the first quarter of 2024 as the requirements for revenue recognition under ASC 606 were met. The portion of the transaction price associated with the material right is deferred and reflected as deferred revenue in the condensed consolidated balance sheets. Deferred revenue associated with the material right is recognized as contract liabilities under the supply arrangement are made. The remaining forms of consideration are variable because they are dependent on the achievement of sales-based or other milestones. The Company evaluated the constraint on variable consideration and concluded that the milestone payments are dependent on regulatory approvals and actions of third parties, and thus are highly susceptible to factors outside the Company’s influence. Therefore, at contract inception, the milestones are not included in the transaction price as it is not probable that a significant reversal of revenue would not occur. Sales-based milestones will be recognized as revenue or deferred as part of the material right in the period when the related sales threshold is met. All other milestones will be recognized as revenue or deferred as part of the material right immediately in the period the underlying milestone is achieved. Any consideration related to sales-based royalties will be recognized as revenue or deferred as part of the material right when the related sales occur. For the nine months ended September 30, 2024, the Company did not recognize any milestone or royalty revenue payments from Norgine sales of PEDMARQSI^® pursuant to the Agreement.

In conjunction with entering into the Agreement, the Company paid approximately $1,700 in incremental costs, which were capitalized and recorded within other non-current assets. The Company amortizes the asset over the period of expected benefit using a systematic basis that reflects the pattern of transfer to the customer. A portion that represents the license was recognized immediately and is recorded within selling and marketing expense in the condensed consolidated statements of operations. As of September 30, 2024, $948 in incremental cost was capitalized.

Significant Accounting Policies - Cost of Products Sold (Details) - PEDMARK $ in Thousands	Sep. 30, 2024 USD ($)
Manufacturing costs capitalized to inventory	$ 1,125
Manufacturing costs capitalized to inventory, raw materials	377
Manufacturing costs capitalized to inventory, work-in-process	108
Manufacturing costs capitalized to inventory, finished goods	$ 640

Significant Accounting Policies - Revenue recognition (Details) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenues	$ 6,974	$ 6,515	$ 39,613	$ 11,517
PEDMARK
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenues	$ 6,974	$ 6,515	$ 21,655	$ 11,517
Processa Pharmaceuticals, Inc
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement			41

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

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+ Details

Income/(loss) per Share

9 Months Ended

Sep. 30, 2024

Income/(loss) per Share

Income/(loss) per Share

3. Net Income/(Loss) Per Share

Net income/(loss) per common share is presented under two formats: basic net income/(loss) per common share and diluted income/(loss) per common share. Basic net income/(loss) per common share is computed by dividing net income/(loss) attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding during the period, plus the potentially dilutive impact of common shares equivalents (e.g. convertible debt, stock options and warrants). Dilutive common share equivalents consist of the incremental common shares issuable upon exercise of convertible debt, restricted stock units, stock options and warrants. The following table sets forth the computation of basic and diluted net income/(loss) per share (in thousands except per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator:
Net (loss) / income	$	(5,735)	$	(1,867)	$	1,549	$	(13,363)

Denominator:
Weighted-average common shares, basic		27,371		26,596		27,371		26,523
Dilutive effect of stock options		—		—		620		—
Dilutive effect of warrants		—		—		24		—
Weighted-average common shares, diluted		27,371		26,596		28,015		26,523
Net loss per share, basic and diluted	$	(0.21)	$	(0.07)	$	0.06	$	(0.50)

The following common stock equivalents, outstanding convertible debt, options and warrants were excluded from the computation of diluted net income/(loss) per share for the periods presented because including them would have had an anti-dilutive effect:


	Nine Months Ended September 30,
	2024	2023
Options to purchase common shares	4,835	5,005
Warrants to purchase common shares	126	150

Term Loans - Aggregate annual payments due on Term Loan (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Long-Term Debt, Fiscal Year Maturity [Abstract]
2027	$ 30,000
Payment in kind interest	2,323
Total future payments	32,323
Less: unamortized debt discount	(227)
Total term loan, net of discount	$ 32,096

- Definition

Amount, after deduction of unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Stockholders' Equity - Summary of Option Activity (Details) - Employee Stock Option - $ / shares shares in Thousands	3 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Number of Options Outstanding at Beginning	5,228	4,768	4,798
Number of Options Granted	558	707	45
Number of Options Exercised	(55)	(147)	(75)
Number of Options Forfeited	(276)	(100)
Number of Options Outstanding at Ending	5,455	5,228	4,768
Weighted-average Exercise Price outstanding at Beginning	$ 6.48	$ 5.43	$ 6.27
Weighted-average Exercise Price Granted	5.58	7.12	7.29
Weighted-average Exercise Price Exercised	2.84	2.36	5.81
Weighted-average Exercise Price Forfeited	7.55	8.00
Weighted-average Exercise Price Outstanding at Ending	$ 6.37	$ 6.48	$ 5.43
Number of options fully vested and exercisable	4,278

Commitments and Contingencies - Lease Agreements (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Commitments and Contingencies
Remaining lease terms (in months)	4 years
Discount rate	10.00%
2024	$ 5
2025	2
lease liabilities to be paid before imputed interest	7
lease liabilities imputed interest	2
Total lease liabilities	5
Current operating lease liabilities	7	$ 21
Total lease liabilities	$ 7

Significant Accounting Policies - Product Sales Discounts and Allowances (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Disaggregation of Revenue [Line Items]
Net product revenues	$ 6,974	$ 6,515	$ 39,613	$ 11,517
PEDMARK
Disaggregation of Revenue [Line Items]
Gross product revenue	7,986	6,919	27,008	12,525
Discounts and allowances	(1,012)	(404)	(5,353)	(1,008)
Net product revenues	$ 6,974	$ 6,515	$ 21,655	$ 11,517

- Definition

Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.

+ References + Details

- Definition

+ References

+ Details

Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies

Commitments and Contingencies

6. Commitments and Contingencies

Oregon Health & Science University Agreement

On February 20, 2013, Fennec entered into a new exclusive license agreement with OHSU for exclusive worldwide license rights to intellectual property directed to thiol-based compounds, including PEDMARK and their use in oncology (the "OHSU Agreement"). OHSU will receive certain milestone payments, royalty on net sales for licensed products and royalty on any consideration received from sublicensing of the licensed technology.

On May 18, 2015, Fennec negotiated an amendment ("Amendment 1") to the OHSU Agreement, which expands Fennec's exclusive license to include the use of N-acetylcysteine as a standalone therapy and/or in combination with PEDMARK for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers. Further, Amendment 1 adjusts select milestone payments entered in the OHSU Agreement including but not limited to the royalty rate on net sales for licensed products, royalty rate from sublicensing of the licensed technology and the fee payable upon the regulatory approval of a licensed product. Certain milestone payments are due upon FDA approval and achievement of sufficient positive EBITDA over a specified period. PEDMARK received FDA approval in September 2022, however at this time, due to significant uncertainty surrounding timing and magnitude of certain milestones, the Company has only recorded a royalty liability associated with net revenue.

The term of the OHSU Agreement as amended by Amendment 1 expires on the date of the last to expire claim(s) covered in the patents licensed to Fennec or 8 years, whichever is later. The Company now has a licensed product with regulatory approval that is covered by the Orphan Drug Designation, the parties amended the term of the agreement. PEDMARK® is currently protected by methods of use patents that the Company exclusively licensed from OHSU that expired in Europe in 2021 and that expire in the United States in 2038. The OHSU Agreement is terminable by either Fennec or OHSU in the event of a material breach of the agreement by either party after 45 days prior written notice. Fennec also has the right to terminate the OHSU Agreement at any time upon 60 days prior written notice and payment of all fees due to OHSU under the OHSU Agreement. The Company had accrued approximately $162 in royalty expense to OHSU for the nine-month period ended September 30, 2024. The total amount accrued in royalty expense to OHSU as of September 30, 2024, was $460.

Litigation

Hope Medical Enterprises, Inc. Inter Partes Review (IPR) Challenges

On October 29, 2021, Hope Medical Enterprises, Inc. (“Hope”) filed a Petition for inter partes review (IPR2022-00123) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO to invalidate U.S. Patent No. 10,596,190 (the “‘190 Patent”), which is exclusively in-licensed from Oregon Health & Science University (“OHSU”) and relates to a method of using PEDMARK®. The ‘190 Patent was issued on March 24, 2020. On April 18, 2023, the PTAB invalidated the only claim of the‘190 Patent. The final written decision became effective June 20, 2023. The ‘190 Patent was previously listed in the United States Approved Drug Products with Therapeutic Equivalence Evaluations (also known as the “Orange Book”). In light of PTAB’s final written decision on the invalidity of the ‘190 Patent, we requested that the FDA remove the ’190 Patent from the Orange Book. Two United States patent applications claiming priority through the ‘190 Patent remain pending at the United States Patent and Trademark Office (“USPTO”).

On October 29, 2021, Hope Medical Enterprises, Inc. (“Hope”) filed a Petition for inter partes review (IPR2022-00125) to invalidate our wholly owned U.S. Patent No. 10,792,363 (the “’363 Patent”), which relates to an anhydrous form of STS and its method of manufacture, which is the active pharmaceutical ingredient in the PEDMARK® product. The ‘363 Patent was issued October 6, 2020. During the ‘363 IPR, we disclaimed the patent claims directed to the anhydrous morphic form of STS and continued with claims directed to its method of manufacture. Because the remaining claims in the ‘363 patent are directed to a method of manufacture, the ‘363 patent is not eligible for listing in the Orange Book. In September 2023, the PTAB issued a Final Written Decision in favor of Fennec and upholding the amended claim.

The USPTO has now granted six additional U.S. patents that cover the PEDMARK formulation and its use, each of which have been, or are in the process of being, listed in the U.S. FDA’s “Orange Book” (U.S. Patent No. 11,291,728 (issued April 5, 2022), U.S. Patent No. 11,510,984 (issued November 29, 2022), U.S. Patent No. 11,617,793 (issued April 4, 2023), U.S. Patent No. 11,964,018 (issued April 23, 2024)). U.S. Patent No. 11,992,530 (issued May 28, 2024), and U.S. Patent No. 11,998,604 (issued June 4, 2024) Five additional United States patent applications from this family are pending at the USPTO covering various sodium thiosulfate formulations and uses. We plan to vigorously defend our intellectual property rights to PEDMARK if challenged. An invalidation of our patents covering PEDMARK could have a material adverse effect on our ability to protect our rights in PEDMARK beyond periods of marketing exclusivity for PEDMARK in the United States under Orphan Drug Designation.

CIPLA Litigation

On December 1, 2022, we received a letter dated November 30, 2022, notifying us that CIPLA Ltd. and CIPLA USA (“CIPLA”) submitted to the FDA an ANDA (ANDA No. 218028) for a generic version of PEDMARK (sodium thiosulfate solution) that contains Paragraph IV Certifications on two of our patents covering PEDMARK: the OHSU licensed‘190 Patent, expiration date January 2038; and our US 11,291,728 Patent (the “’728 Patent”), expiration date July 2039. On January 6, 2023, we received a letter dated January 5, 2023, notifying us that CIPLA submitted to the FDA a Paragraph IV Certification on our newly issued US 11,510,984 Patent (the “’984 Patent”). These patents are listed in FDA’s list of Approved Drug Products with Therapeutic Equivalence Evaluations, commonly referred to as the Orange Book, for PEDMARK. The certifications allege these patents are invalid or will not be infringed by the manufacture, use, or sale of CIPLA’s sodium thiosulfate solution.

Under the Food, Drug, and Cosmetic Act, as amended by the Drug Price Competition and Patent Term Restoration Act of 1984, as amended, after receipt of a valid Paragraph IV notice, the Company may bring a patent infringement suit in a federal district court against CIPLA within 45 days from the receipt of the Notice Letter and if such a suit is commenced within the 45-day period, the Company is entitled to a 30 month stay on the FDA’s ability to give final approval to any proposed products that reference PEDMARK. In addition to the 30-month stay, because we have received Orphan Drug Exclusivity, the FDA may not approve CIPLA’s ANDA for at least 7 years from PEDMARK’s FDA approval date of September 20, 2022, which is September 20, 2029.

On January 10, 2023, we filed suit against the CIPLA entities in the United States District Court for the District of New Jersey (Case No. 2:23-cv-00123), for infringement of the ’190 Patent, the ’728 Patent, and the ’984 Patent. On April 20, 2023, we filed an Amended Complaint to assert infringement of the ’728 Patent and the ’984 Patent. On April 4, 2023, we were granted US 11,617,793 Patent (the “’793 Patent”) covering the formulation of the PEDMARK product, which was listed in the Orange Book on or around April 17, 2023, and has an expiration date of July 2039. On May 11, 2023, we received written notice of CIPLA’s Paragraph IV Certification as to the ’793 Patent, which was dated May 10, 2023, along with an enclosed statement of alleged factual and legal bases for stating that the ’793 Patent is invalid, unenforceable, and/or will not be infringed by CIPLA’s ANDA Product. On July 27, 2023, we filed a Second Amended Complaint to assert the ‘793 Patent. CIPLA filed an Answer to the Second Amended Complaint on August 31, 2023.

On April 23, 2024, we were granted US 11,964,018 Patent (the “’018 Patent) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around May 8, 2024, and has an expiration date of July 2039. On May 28, 2024, we were granted US 11,992,530 Patent (the “’530 Patent”) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 20, 2024, and has an expiration date of July 2039. On June 4, 2024, we were granted US 11,998,604 Patent (the “’604 Patent”) covering a method of using our PEDMARK product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer, which was listed in the Orange Book on or around June 24, 2024, and has an expiration date of July 2039.

On June 13, 2024, we filed a Motion for Leave to File a Third Amended Complaint to focus the ANDA litigation against CIPLA on the ’018 Patent and the ‘793 Patent only. The non-asserted patents remain listed in the Orange Book. On July 22, 2024, CIPLA filed a response indicating that they do not oppose our Motion for Leave to File a Third Amended Complaint. On July 30, 2024, the court granted us leave to file the Third Amended Complaint. The suit is ongoing.

Further, PEDMARQSI^® (EU Brand name for PEDMARK) received European Commission approval in June 2023 and was granted 10 years of market exclusivity in Europe under Pediatric Use (“PUMA”).

Executive Severance

In the event of termination of Mr. Hackman's (Chief Executive Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one-time severance payment equal to twelve months of salary (currently $550). In the event of termination of Mr. Andrade’s (Chief Financial Officer) employment with the Company other than for cause, the Company will be obligated to pay him a one-time severance payment equal to nine months of salary which is equivalent to $331. Further, as announced on October 28, 2024, each of Mr. Sayad, Mr. Evans, and Ms. Cioffi’s Executive Employment Agreements generally provide that if their employment is terminated without “Cause” (as defined in the applicable Executive Employment Agreement) and other conditions are satisfied, then such executive officer shall receive as severance an amount equal to their then current base salary for a period of nine (9) months, less standard withholdings for tax and social security purposes.

Leases

The Company has an operating lease in Research Triangle Park, North Carolina utilizing a small space within a commercial building. The operating lease has payments of $0.4 per month with no scheduled increases. This operating lease is terminable with 30 days’ notice and has no penalties or contingent payments due.

On January 23, 2020, the Company entered into an Office Service Agreement (the “Office Service Agreement”) with Regus to lease office space in Hoboken, New Jersey. Per the terms of the Office Service Agreement, the monthly rent payments are $1. The Company was required to pay a security deposit of $2, which is the equivalent to two months of rent. The Office Service Agreement commenced on January 27, 2020, and terminated on July 31, 2020, thereafter the lease has been continuing on a month-to-month basis with either party being able to terminate the agreement by providing one month’s advance written notice of termination.

On August 1, 2023, the Company entered into a second Office Service Agreement (the “Second Office Service Agreement”) with Regus to lease office space in Dublin, Ireland. Per the terms of the Second Office Service Agreement, the monthly rent payments are $2. The Company was required to pay a security deposit of $5, which is the equivalent of two months rent. This lease will terminate on January 31, 2025.

The Second Office Service Agreement commenced on August 1, 2023, and terminates on January 31, 2025, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination. The Second Office Service Agreement does not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the operating lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. The Company uses an incremental borrowing rate consisting of the current prime rate plus 150 basis points for operating leases that commenced after August 2023. The depreciable lives of operating leases and leasehold improvements are limited by the expected lease term.


		September 30, 2024

Remaining lease terms (in months)		4
Discount rate		10	%

Maturities of lease liabilities as of December 31, 2023 were as follows (in thousands):
Year Ending December 31,
2024		5
2025		2
		7
Less imputed interest		2
Total lease liabilities	$	5

Current operating lease liabilities	$	7
Non-current operating lease liabilities		—
Total lease liabilities	$	7

Employee Benefit Plan

In May 2021, the Company established the Fennec Pharmaceuticals, Inc. 401(k) Plan (the “401(k) Plan”) for its employees, which is designed to be qualified under Section 401(k) of the Internal Revenue Code of 1986. Eligible employees are permitted to contribute to the 401(k) Plan within statutory and 401(k) Plan limits. As of September 30, 2024, the Company does not offer matching contributions.

Income/(Loss) per Share - Computation of Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Numerator:
Net income/(loss)	$ (5,735)	$ (5,553)	$ 12,837	$ (1,867)	$ (5,444)	$ (6,052)	$ 1,549	$ (13,363)
Denominator:
Weighted-average common shares, basic	27,371			26,596			27,371	26,523
Dilutive effect of stock options							620
Dilutive effect of warrants							24
Weighted-average common shares, dilutive	27,371			26,596			28,015	26,523
Basic net (loss) / income per common share	$ (0.21)			$ (0.07)			$ 0.06	$ (0.50)
Diluted net (loss) / income per common share	$ (0.21)			$ (0.07)			$ 0.06	$ (0.50)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

+ Details

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2024

Fair Value Measurements

Schedule of Assets/Liabilities Measured at Fair Value on Recurring Basis


	Fair Value Measurement at September 30, 2024 and December 31, 2023
	(in thousands)
	Quoted Price in Active
	Market for Identical						Significant Other				Significant
	Instruments						Observable Inputs				Unobservable Inputs
	Level 1						Level 2				Level 3					Total
	2024				2023			2024		2023		2024		2023		2024		2023
Assets
Cash and cash equivalents	$	3,049	⁽¹⁾	$	1,340	⁽¹⁾	$	37,271	$	11,929	$	—	$	—	$	40,320	$	13,269
Processa common shares	$	2	⁽²⁾	$	17	⁽²⁾	$	—	$	—	$	—	$	—	$	2	$	17

(1)	The Company held approximately $37,271 in money market accounts as of September 30, 2024. As of December 31, 2023, the Company held approximately $11,929 in money market accounts.

(2)	The Company holds 41 unrestricted common shares of Processa Pharmaceuticals, Inc. (NASDAQ:PCSA), which it received as part of a royalty arrangement in 2020.

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2024	Dec. 31, 2023
Condensed Consolidated Balance Sheets
Common stock, no par value	$ 0	$ 0
Common stock, shares issued	27,422	27,027
Common stock, shares outstanding	27,422	27,027

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Condensed Consolidated Statements of Operations
Product sales, net	$ 6,974	$ 6,515	$ 21,655	$ 11,517
Licensing revenue			17,958
Gross profit	6,974	6,515	39,613	11,517
Operating expenses:
Cost of product sales	1,357	331	2,515	574
Research and development	97	12	257	24
Selling and marketing	4,601	3,384	14,482	8,255
General and administrative	6,121	3,805	18,857	13,617
Total operating expenses	(12,176)	(7,532)	(36,111)	(22,470)
(Loss) / Income from operations	(5,202)	(1,017)	3,502	(10,953)
Other (expense)/income
Realized foreign exchange (loss)/gain		(11)	(55)	3
Amortization expense	(21)	(72)	(64)	(217)
Unrealized loss on securities	(3)	(13)	(14)	(43)
Interest income	516	102	1,283	326
Interest expense	(1,025)	(856)	(3,103)	(2,479)
Total other expense	(533)	(850)	(1,953)	(2,410)
Net (loss) / income	$ (5,735)	$ (1,867)	$ 1,549	$ (13,363)
Basic net (loss) / income per common share	$ (0.21)	$ (0.07)	$ 0.06	$ (0.50)
Diluted net (loss) / income per common share	$ (0.21)	$ (0.07)	$ 0.06	$ (0.50)
Weighted-average number of common shares outstanding basic	27,371	26,596	27,371	26,523
Weighted-average number of common shares outstanding diluted	27,371	26,596	28,015	26,523

Income/(Loss) per Share - Outstanding Options and Warrants (Details) - shares shares in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Employee Stock Option
Antidilutive securities excluded from EPS	4,835	5,005
Warrants to Purchase Common Shares
Antidilutive securities excluded from EPS	126	150

Stockholders Equity - Restricted Share Units Activity (Details) - Equity Incentive Plan - shares shares in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2024
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting period				3 years
Restricted Stock Units (RSUs)
US Denominated RSU's
Unvested RSUs, beginning of period	445	214	218	218
RSU's awarded		299	(17)
RSU's released	(48)	(68)	(21)	(137)
RSU's forfeited	(30)
Unvested RSUs, end of period	367	445	214	367
Restricted Stock Units (RSUs) \| Minimum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting period				1 year
Restricted Stock Units (RSUs) \| Maximum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting period				3 years

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Nov. 05, 2024
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2024
Document Transition Report	false
Securities Act File Number	001-32295
Entity Registrant Name	FENNEC PHARMACEUTICALS INC.
Entity Incorporation, State or Country Code	CA
Entity Tax Identification Number	20-0442384
Entity Address, Address Line One	PO Box 13628, 68 TW Alexander Drive
Entity Address, City or Town	Research Triangle Park
Entity Address, State or Province	NC
Entity Address, Postal Zip Code	27709
City Area Code	919
Local Phone Number	636-4530
Title of 12(b) Security	Common Shares, no par value
Trading Symbol	FENCF
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		27,432,234
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001211583
Amendment Flag	false

Income/(Loss) per Share (Tables)

9 Months Ended

Sep. 30, 2024

Income/(loss) per Share

Schedule of Antidilutive Securities Excluded from Net Loss Per Share


	Nine Months Ended September 30,
	2024	2023
Options to purchase common shares	4,835	5,005
Warrants to purchase common shares	126	150

Schedule of Earnings Per Share, Basic and Diluted


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Numerator:
Net (loss) / income	$	(5,735)	$	(1,867)	$	1,549	$	(13,363)

Denominator:
Weighted-average common shares, basic		27,371		26,596		27,371		26,523
Dilutive effect of stock options		—		—		620		—
Dilutive effect of warrants		—		—		24		—
Weighted-average common shares, diluted		27,371		26,596		28,015		26,523
Net loss per share, basic and diluted	$	(0.21)	$	(0.07)	$	0.06	$	(0.50)

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended						9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (5,735)	$ (5,553)	$ 12,837	$ (1,867)	$ (5,444)	$ (6,052)	$ 1,549	$ (13,363)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies

Schedule of components of operating lease liability


		September 30, 2024

Remaining lease terms (in months)		4
Discount rate		10	%

Maturities of lease liabilities as of December 31, 2023 were as follows (in thousands):
Year Ending December 31,
2024		5
2025		2
		7
Less imputed interest		2
Total lease liabilities	$	5

Current operating lease liabilities	$	7
Non-current operating lease liabilities		—
Total lease liabilities	$	7

Nature of Business and Going Concern

9 Months Ended

Sep. 30, 2024

Nature of Business and Going Concern

Nature of Business and Going Concern

1.	Nature of Business and Going Concern

Fennec Pharmaceuticals Inc., a corporation existing under the laws of British Columbia (“Fennec,” the “Company,” “we,” “us,” or “our”), was originally formed under the name Adherex Technologies Inc. and subsequently changed its name on September 3, 2014. Fennec is a commercial stage specialty pharmaceutical company with one U.S. Food and Drug Administration (“FDA”) approved and European Commission approved product, PEDMARK^® in the U.S. and PEDMARQSI^® the European branded name for PEDMARK^® (collectively, “PEDMARK”), developed to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. The Company has four wholly owned subsidiaries: Oxiquant, Inc. (“Oxiquant”) and Fennec Pharmaceuticals, Inc., both Delaware corporations, Cadherin Biomedical Inc. (“CBI”), a Canadian corporation, and Fennec Pharmaceuticals (EU) Limited (“Fennec Limited”), an Ireland company, collectively referred to herein as the “Company.” With the exception of Fennec Pharmaceuticals, Inc. and Fennec Limited all subsidiaries are inactive.

These unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) that are applicable to a going concern which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business.

During the three and nine-month period ended September 30, 2024, the Company earned a (loss)/income from operations of $(5,202) and $3,502 respectively. At September 30, 2024, it had an accumulated deficit of $217,696 and had experienced positive cash flows from operating activities during the nine months ended September 30, 2024, in the amount of $28,454.

On August 1, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Petrichor Opportunities Fund I LP (the “Investor”) in connection with the issuance of up to $45,000 of senior secured floating rate convertible notes (the “Notes”), issuable in multiple tranches (the “Note Financing”). On August 19, 2022, the Company closed on the initial tranche of $5,000 (the “First Closing Note”) which has an Initial Conversion Price equal to $8.11 per share, which was calculated based on a 20% premium of the 5-day volume weighted average price of the Company’s common shares as traded on the Nasdaq Capital Market (the “VWAP”) immediately prior to the announcement of the SPA dated August 1, 2022. In connection with the closing of the First Closing Note, the Company repaid in full its secured indebtedness with Bridge Bank in the amount of $5,000.

On September 23, 2022, the Company closed on the second tranche of the Note Financing in the amount of $20,000 (the “Second Closing Note”), which has an Initial Conversion Price equal to $7.89 per share, which was calculated based on a 20% premium of the 5-day VWAP immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK.

The SPA provided that subsequent to the funding of the Second Closing Note, and before December 31, 2023, the Company could draw up to $20,000 of additional financing under the SPA, in one or more tranches of $10,000 upon mutual agreement of the Company and the Investor (the “Subsequent Closing Notes”). The Subsequent Closing Notes will be convertible at a price per share equal to $7.89 per share, which price is calculated on the same basis as for the Second Closing Note.

A commitment fee of 2.0% of the Notes was payable under the SPA, which was paid by the Company issuing the Investor warrants to purchase 110,996 of the Company’s common shares (one half issued at the closing of the First Closing Note and the other half issued at the closing of the Second Closing Note).The warrants are exercisable at a price per share of $8.11 and have a term of five years from the date of the grant.

On December 4, 2023, the Company closed the third tranche of the Note Financing in the amount of $5,000 (the “Third Closing Note”) which is convertible at a price equal to $7.89 per share, calculated as a 20% premium of the 5-day VWAP immediately prior to September 20, 2022, which was the date the Company obtained FDA approval of PEDMARK.

Also on December 4, 2023, the Company entered into a First Amendment to the Securities Purchase Agreement (the “SPA Amendment”) with the Investor, which, among other things, extends the period that the Company may draw the remaining $15,000 under the SPA from December 31, 2023, to December 31, 2024. Subsequent draws are subject to mutual agreement of the Company and the Investor and will be represented by Notes that will also be convertible at a price equal to $7.89 per share.

On March 17, 2024, the Company announced it had entered into an exclusive licensing agreement with Norgine Pharma UK Limited (“Norgine”) to commercialize PEDMARQSI^® (EU brand name for PEDMARK) in Europe, New Zealand and Australia. The licensing agreement provided Fennec with approximately $43,200 up front and may provide Fennec with up to approximately $230,000 in milestone and royalty payments in the future. On July 26, 2024, Norgine and Fennec amended the exclusive licensing agreement. The amended agreement maintains all principal payment terms with the primary addition of Norgine assuming responsibility for packaging and labeling of PEDMARQSI^®.

The Company believes current funds provide sufficient funding for the Company to carry out its planned activities, including the continuation of commercialization efforts of PEDMARK, for at least the next twelve months and into 2026.

These financial statements do not reflect the potentially material adjustments in the carrying values of assets and liabilities, the reported expenses, and the balance sheet classifications used, that would be necessary if the going concern assumption were not appropriate.

License Agreement (Details) - Licensing Agreement - Norgine Ltd.	9 Months Ended
	Sep. 30, 2024 USD ($)	Mar. 15, 2024 USD ($)	Mar. 15, 2024 EUR (€)
License agreement funding received		$ 43,200	€ 40,000
License agreement funding, potential milestone payments		$ 230,000	€ 210,000
Incremental costs paid	$ 1,700,000,000
Incremental costs capitalized to other non-current assets	$ 948,000

Stockholders' Equity - Black Scholes Option Pricing Model (Details)	9 Months Ended
	Sep. 30, 2024
Expected dividend	0.00%
Minimum
Risk free rate	3.79%
Expected volatility	45.00%
Expected life	1 year 6 months
Maximum
Risk free rate	5.15%
Expected volatility	67.00%
Expected life	6 years

Stockholders' Equity - Warrants to Purchase Common Stock (Details) - $ / shares	3 Months Ended	9 Months Ended	18 Months Ended
	Sep. 30, 2023	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024	Mar. 31, 2023
Class of Warrant or Right [Line Items]
Exercised warrants during period			0
Issued warrants during period			0
Warrants to Purchase Common Shares
Class of Warrant or Right [Line Items]
Common shares issuable upon exercise of outstanding warrants, beginning balance	150,000	150,000	150,000
Warrants outstanding	150,000	150,000	150,000	150,000	150,000
Weighted Average Remaining Life (years)		3 years 3 months 18 days
Common shares issuable upon exercise of outstanding warrants, ending balance	150,000	150,000	150,000
Weighted-average exercise price, beginning of period	$ 7.71	$ 7.71	$ 7.71
Issued warrants during period, weighted-average price	$ 7.71
Weighted-average exercise price, end of period		$ 7.71	$ 7.71

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets
Cash and cash equivalents	$ 40,320	$ 13,269
Accounts receivable, net	12,908	8,814
Prepaid expenses	3,066	2,575
Inventory	1,125	2,156
Other current assets	546	44
Total current assets	57,965	26,858
Non-current assets
Other non-current assets, net of amortization	956	6
Total non-current assets	956	6
Total assets	58,921	26,864
Current liabilities:
Accounts payable	3,867	3,778
Accrued liabilities	3,313	3,754
Operating lease liability - current	7	21
Contract liability - Norgine	248
Total current liabilities	7,435	7,553
Liabilities, Noncurrent [Abstract]
Term loan	30,000	30,000
PIK interest	2,323	1,219
Debt discount	(227)	(288)
Contract liability - long-term	24,561	2
Total long term liabilities	56,657	30,933
Total liabilities	64,092	38,486
Stockholders' deficit:
Common stock, no par value; unlimited shares authorized; 27,422 shares issued and outstanding (2023 27,027)	145,438	144,307
Additional paid-in capital	65,844	62,073
Accumulated deficit	(217,696)	(219,245)
Accumulated other comprehensive income	1,243	1,243
Total stockholders' deficit	(5,171)	(11,622)
Total liabilities and stockholders' deficit	$ 58,921	$ 26,864

Term Loans (Details) - USD ($)				9 Months Ended
Term Loans (Details) - USD ($)	Dec. 04, 2023	Sep. 23, 2022	Aug. 19, 2022	Sep. 30, 2024	Dec. 31, 2023	Aug. 01, 2022
Debt Instrument [Line Items]
Debt discount				$ (227,000)	$ (288,000)
Petrichor Financing \| Securities Purchase Agreements \| Secured Convertible Debt
Debt Instrument [Line Items]
Maximum borrowing capacity						$ 45,000,000
Commitment fee percentage				2.00%
Common shares available through issuance of warrants				110,996
Exercise price of warrants issued				$ 8.11
Exercise term of warrants				5 years
Debt issuance costs				$ 175,000
Debt discount				(227,000)
Fair value warrants				$ 441,000
Cash interest accrual rate over Prime				4.50%
Cash interest accrual rate				13.00%	13.00%
Accrual rate, PIK interest				3.50%
Accrued Paid-in-Kind Interest				$ 1,600,000
Petrichor Financing \| Securities Purchase Agreements \| First Closing Note
Debt Instrument [Line Items]
Borrowings, face amount			$ 5,000,000
Initial conversion price			$ 8.11
Premium over 5-day VWAP			20.00%
VWAP term			5 days
Petrichor Financing \| Securities Purchase Agreements \| Second Closing Note
Debt Instrument [Line Items]
Borrowings, face amount		$ 20,000,000
Initial conversion price		$ 7.89
Premium over 5-day VWAP		20.00%
VWAP term		5 days
Petrichor Financing \| Securities Purchase Agreements \| Third Closing Note
Debt Instrument [Line Items]
Borrowings, face amount	$ 5,000
Initial conversion price	$ 7.89
Premium over 5-day VWAP	20.00%
VWAP term	5 days
Petrichor Financing \| Securities Purchase Agreements \| Subsequent Closing Notes
Debt Instrument [Line Items]
Remaining borrowing capacity		$ 20,000,000
Initial conversion price		$ 7.89
Petrichor Financing \| Securities Purchase Agreements \| Subsequent Closing Notes \| Minimum
Debt Instrument [Line Items]
Number of loan tranches for remaining borrowing capacity		1
Petrichor Financing \| Securities Purchase Agreements \| Subsequent Closing Notes \| Maximum
Debt Instrument [Line Items]
Maximum borrowing capacity		$ 10,000,000
Borrowings, face amount		$ 10,000,000
Petrichor Financing \| Securities Purchase Agreements \| First Closing Warrant
Debt Instrument [Line Items]
Commitment fees payable in cash or warrants				50.00%
Petrichor Financing \| Securities Purchase Agreements \| Second Closing Warrant
Debt Instrument [Line Items]
Commitment fees payable in cash or warrants				50.00%
Petrichor Financing \| SPA First Amendment \| Subsequent Closing Notes
Debt Instrument [Line Items]
Remaining borrowing capacity	$ 15,000
Initial conversion price	$ 7.89
Bridge Bank \| Bridge Bank Term Loan
Debt Instrument [Line Items]
Repayment of term loan			$ 5,000,000

Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Stockholders Equity Note [Line Items]
Common stock, no par value	$ 0		$ 0
Proceeds from issuance of stock options	$ 504	$ 969
Equity Incentive Plan
Stockholders Equity Note [Line Items]
Shares issuable under Stock Option Plan, as percent of shares outstanding	25.00%
Shares issuable under Stock Option Plan	6,825
Vesting period	3 years
Expiration term	10 years
Maximum [Member] \| Restricted Stock Units (RSUs) [Member] \| Equity Incentive Plan
Stockholders Equity Note [Line Items]
Vesting period	3 years
Minimum [Member] \| Restricted Stock Units (RSUs) [Member] \| Equity Incentive Plan
Stockholders Equity Note [Line Items]
Vesting period	1 year

Subsequent Events (Details) - Subsequent Events - Executive Employment Agreement	Oct. 28, 2024 USD ($) shares
Mr. Pierre S. Sayad, PhD, MS, CMO
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Initial base salary \| $	$ 450,000
Employment period to be eligible for bonus compensation	12 months
Bonus compensation, percentage of base salary	40.00%
Mr. Pierre S. Sayad, PhD, MS, CMO \| Executive Severance
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Severance payment term in the event of early termination	9 months
Mr. Pierre S. Sayad, PhD, MS, CMO \| Employee Stock Option
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Share based payments, number of options authorized \| shares	150,000
Mr. Pierre S. Sayad, PhD, MS, CMO \| Employee Stock Option \| Vesting Tranche After One Year
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Percentage of options vesting after grant	33.00%
Mr. Pierre S. Sayad, PhD, MS, CMO \| Employee Stock Option \| Vesting Tranche After Two Years
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Percentage of options vesting after grant	67.00%
Mr. Terry Evans, CCO
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Initial base salary \| $	$ 400,000
Employment period to be eligible for bonus compensation	12 months
Bonus compensation, percentage of base salary	40.00%
Mr. Terry Evans, CCO \| Executive Severance
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Severance payment term in the event of early termination	9 months
Mr. Terry Evans, CCO \| Employee Stock Option
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Share based payments, number of options authorized \| shares	150,000
Mr. Terry Evans, CCO \| Employee Stock Option \| Vesting Tranche After One Year
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Percentage of options vesting after grant	33.00%
Mr. Terry Evans, CCO \| Employee Stock Option \| Vesting Tranche After Two Years
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Percentage of options vesting after grant	67.00%
Christiana Cioffi, MBA, CSO
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Initial base salary \| $	$ 375,000
Employment period to be eligible for bonus compensation	12 months
Bonus compensation, percentage of base salary	40.00%
Christiana Cioffi, MBA, CSO \| Executive Severance
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Severance payment term in the event of early termination	9 months
Christiana Cioffi, MBA, CSO \| Employee Stock Option
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Share based payments, number of options authorized \| shares	150,000
Christiana Cioffi, MBA, CSO \| Employee Stock Option \| Vesting Tranche After One Year
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Percentage of options vesting after grant	33.00%
Christiana Cioffi, MBA, CSO \| Employee Stock Option \| Vesting Tranche After Two Years
Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]
Percentage of options vesting after grant	67.00%

Term Loans

9 Months Ended

Sep. 30, 2024

Term Loans

Term Loans

7. Term Loans

On August 1, 2022, the Company entered into the SPA with the Investor in connection with the issuance of up to $45,000 of Notes, issuable in multiple tranches (see Note 1). On August 19, 2022, the Company closed on the initial tranche of $5,000, which has an Initial Conversion Price equal to $8.11 per share, which was calculated based on a 20% premium of the 5-day VWAP immediately prior to the announcement of the SPA. In connection with the first closing, the Company

repaid in full its secured indebtedness with Bridge Bank in the amount of $5,000. The Notes become due on the maturity date, which is August 19, 2027.

On September 23, 2022, the Company closed on the second tranche of the Note Financing in the amount of $20,000, which has an Initial Conversion Price equal to $7.89 per share, which was calculated based on a 20% premium of the 5-day VWAP immediately prior to the date the Company obtained FDA approval for PEDMARK.

Subsequent to the funding of the Second Closing Note, and before December 31, 2023, the Company may draw up to $20,000 of additional financing under the SPA, in one or more tranches of $10,000 upon mutual agreement of the Company and the Investor (the “Subsequent Closing Notes”). The Subsequent Closing Notes will be convertible at a price per share equal to $7.89 per share, which price is calculated on the same basis as for the Second Closing Note.

A commitment fee of 2.0% of the Notes was payable under the SPA, which was paid by the Company issuing the Investor warrants to purchase 110,996 of the Company’s common shares (one half issued at the first closing and the other half issued at the second closing). The warrants are exercisable at a price per share of $8.11 and have a term of five years from the date of the grant.

On December 4, 2023, the Company closed a third tranche under the SPA in the amount of $5,000 and issued the Investor a Note in the same amount that is convertible at a price equal to $7.89 per share, which price was calculated on the same basis as the Second Closing Note.

Also on December 4, 2023, the Company entered into the SPA Amendment, which, among other things, extends the period that the Company may draw the remaining $15,000 under the SPA from December 31, 2023, to December 31, 2024. Subsequent draws are subject to mutual agreement of the Company and the Investor and will be represented by Notes that will also be convertible at a price equal to $7.89 per share.

Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5% per annum, from the date of funding (13% at September 30, 2024 and 13% as of December 31, 2023). Cash interest is due on the first business day of each calendar quarter (“Interest Date”). Payment-in-kind (“PIK”) interest will commence on funding date and accrue at a rate of 3.5% per annum. PIK interest will stop accruing on August 24, 2024. Any accrued PIK interest shall remain outstanding and be payable on each Interest Date and be added to the outstanding principal amount. The Company has accrued $1,600 in PIK interest and has classified the PIK interest in long-term liabilities.

The Notes are convertible into fully paid, non-assessable shares of the Company’s common shares at any point after their issuance dates and before the maturity date. Any amount of the Notes may be converted into common shares so long as it does not create partial shares. The conversion rate is determined by dividing the conversion amount by the conversion

price. Provisions of the SPA create legal, valid and enforceable liens on, and security interests in, all of the Company’s and each of its subsidiaries’ assets.

Aggregate annual payments due on the SPA as of September 30, 2024, are as follows (in thousands):


Years Ending December 31,		Amount
2024	$	—
2025		—
2026		—
2027		30,000
Payment in kind interest		2,323
Total future payments		32,323
Less: unamortized debt discount		(227)
Total term loan, net of debt discount	$	32,096

In the event of default or change of control, all unpaid principal and all accrued and unpaid interest amounts (if any) become immediately due and payable. Events of default include, but are not limited to, a payment default, a material adverse change, and insolvency. The SPA facility is secured by all the Company’s assets, including all capital stock held by the Company.

Debt issuance costs of $175 were paid in cash for legal fees and to the Investor in 2022 and warrants valued at $441 were granted to the Investor to secure access to the SPA. These amounts were capitalized and are being amortized over the access period of the SPA. Upon drawing tranche 1 through 3, the Company recorded a debt discount of $227, which was based on a pro-rata allocation of the issue costs to secure the SPA, reducing the capitalized amount by the same amount. The debt discount is being amortized over the life of the SPA.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481544/470-10-50-6

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481544/470-10-50-6

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)(3)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)(2)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)(1)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 405
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147477092/405-40-50-1

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 470
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 1B
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org/1943274/2147481139/470-20-50-1B

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
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+ Details

Significant Accounting Policies - Additional Information (Details) $ / shares in Units, shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2024 USD ($) $ / shares shares	Sep. 30, 2023 shares	Jun. 30, 2024 $ / shares shares	Mar. 31, 2024 $ / shares shares	Dec. 31, 2023 USD ($) $ / shares shares	Jun. 30, 2023 $ / shares shares	Mar. 31, 2023 $ / shares shares	Dec. 31, 2022 $ / shares shares
Summary Of Significant Accounting Policies [Line Items]
Number of Operating Segments	1
Allowance for doubtful accounts \| $	$ 4,971
Percentage of prompt payment discounts expected to pay out	100.00%
FDIC insured amount \| $	$ 250,000
Money Market Funds
Summary Of Significant Accounting Policies [Line Items]
Cash \| $	$ 40,320,000				$ 13,269
Warrants to Purchase Common Shares
Summary Of Significant Accounting Policies [Line Items]
Antidilutive securities excluded from EPS	150	150
Restricted Stock Options
Summary Of Significant Accounting Policies [Line Items]
Antidilutive securities excluded from EPS	367
Common Stock Options
Summary Of Significant Accounting Policies [Line Items]
Antidilutive securities excluded from EPS	5,455	5,005
Warrants to Purchase Common Shares
Summary Of Significant Accounting Policies [Line Items]
Warrants outstanding	150	150	150	150	150	150	150	150
Warrants exercise price \| $ / shares	$ 7.71		$ 7.71	$ 7.71	$ 7.71	$ 7.71	$ 7.71	$ 7.71
Exercise term of warrants	3 years 3 months 18 days

Fair Value Measurements - Assets/Liabilities Measured at Fair Value (Details) - USD ($) shares in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2024	Dec. 31, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cash and cash equivalents	$ 40,320	$ 13,269
Processa common shares	2	17
Quoted Price in Active Markets for Identical Instruments Level 1
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cash and cash equivalents	3,049	1,340
Processa common shares	2	17
Significant Other Observable Inputs Level 2
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Cash and cash equivalents	$ 37,271	$ 11,929
Processa Pharmaceuticals, Inc
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Shares to be issued under agreement	41

Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Money Market Accounts
Fair Value Assets and Liabilities Measured On Recurring Basis [Line Items]
Cash	$ 37,271	$ 11,929

- Definition

Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Excludes cash and cash equivalents within disposal group and discontinued operation.

+ References + Details

Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Significant Accounting Policies

Significant Accounting Policies

2. Significant Accounting Policies

Basis of Presentation

Use of Estimates

Segment and Geographic Information

Stock-Based Compensation

Inventory

Revenue Recognition

License Agreements

Costs to Obtain Contract

Net Product Revenue

Product Sales Discounts and Allowances

The following table summarizes net product revenues for PEDMARK earned during the three and nine months ended September 30, 2024, and 2023, respectively:


	Three Months Ended				Nine Months Ended
		September 30,		September 30,		September 30,		September 30,
In thousands		2024		2023		2024		2023
Product revenues:
Gross product revenues	$	7,986	$	6,919	$	27,008	$	12,525
Discounts and allowances		(1,012)		(404)		(5,353)		(1,008)
Net product revenues	$	6,974	$	6,515	$	21,655	$	11,517



	Chargebacks,		Rebates, Customer
	Discounts for		Fees/Credits
	Prompt pay and		and Co-Pay
In thousands	Other allowances		Assistance		Totals
Balance at December 31, 2023	$	365	$	430	$	795
Provision related to sales made in:
Current period		352		1,640		1,992
Prior periods		—		—		—
Payments and customer credits issued		(497)		(104)		(601)
Balance at March 31, 2024	$	220	$	1,966	$	2,186
Provision related to sales made in:
Current period		175		2,644		2,819
Prior periods		—		—		—
Payments and customer credits issued		(66)		(2,614)		(2,680)
Balance at June 30, 2024	$	329	$	1,996	$	2,325
Provision related to sales made in:
Current period		837		328		1,165
Prior periods		—		—		—
Payments and customer credits issued		(834)		(959)		(1,793)
Balance at September 30, 2024	$	332	$	1,365	$	1,697

Trade Receivables

Cost of Products Sold

Cost of products sold is related to the Company's product revenues for PEDMARK and consists primarily of product production costs associated with finished goods inventory and royalties the Company is required to pay to Oregon Health & Science University (“OHSU”) on all net sales of PEDMARK. Cost of products sold also consists of shipping and other third-party logistics and distribution costs for PEDMARK. The Company considered regulatory approval of PEDMARK to be uncertain and product manufactured prior to regulatory approval could not have been sold unless regulatory approval was obtained. As such, the manufacturing costs for PEDMARK incurred prior to regulatory approval were not capitalized as inventory but were expensed as research and development costs. After FDA approval in September 2022, the Company had various lots of PEDMARK in various stages of production in connection with the product launch in the fourth quarter of 2022. As of September 30, 2024, the Company capitalized approximately $1,125 of costs as inventory on the condensed consolidated balance sheet. Of the items capitalized, $377 was capitalized as raw materials, $108 was capitalized as work in process, $640 was capitalized into finished goods.

Cash and Cash Equivalents

Financial Instruments

Common Shares and Warrants

As of September 30, 2024, the Company has 150 warrants with a weighted average strike price of $7.71 outstanding to purchase common shares that have a weighted average life of 3.30 years.

Research and Development Costs and Investment Tax Credits

Concentrations of Credit Risk

Income Taxes

Foreign Currency Transactions

The U.S. dollar is the functional currency for the Company’s consolidated operations. All gains and losses from currency transactions are included in the results of operations.

Net Income/(Loss) Per Share

Recent Accounting Pronouncements

Nature of Business and Going Concern (Details)				3 Months Ended		9 Months Ended
Nature of Business and Going Concern (Details)	Dec. 04, 2023 USD ($) $ / shares	Sep. 23, 2022 USD ($) $ / shares	Aug. 19, 2022 USD ($) $ / shares	Sep. 30, 2024 USD ($)	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($) $ / shares shares	Sep. 30, 2023 USD ($)	Mar. 15, 2024 USD ($)	Mar. 15, 2024 EUR (€)	Dec. 31, 2023 USD ($)	Aug. 01, 2022 USD ($)
Nature of Business and Going Concern [Line Items]
(Loss) / Income from operations				$ (5,202,000)	$ (1,017,000)	$ 3,502,000	$ (10,953,000)
Accumulated deficit				$ (217,696,000)		(217,696,000)				$ (219,245,000)
Cash flows from operating activities						$ 28,454,000	$ (12,283,000)
Petrichor Financing \| Securities Purchase Agreements \| Secured Convertible Debt
Nature of Business and Going Concern [Line Items]
Maximum borrowing capacity											$ 45,000,000
Commitment fee percentage						2.00%
Common shares available through issuance of warrants \| shares						110,996
Exercise price of warrants issued \| $ / shares						$ 8.11
Exercise term of warrants						5 years
Petrichor Financing \| Securities Purchase Agreements \| First Closing Note
Nature of Business and Going Concern [Line Items]
Borrowings, face amount			$ 5,000,000
Initial conversion price \| $ / shares			$ 8.11
Premium over 5-day VWAP			20.00%
VWAP term			5 days
Petrichor Financing \| Securities Purchase Agreements \| Second Closing Note
Nature of Business and Going Concern [Line Items]
Borrowings, face amount		$ 20,000,000
Initial conversion price \| $ / shares		$ 7.89
Premium over 5-day VWAP		20.00%
VWAP term		5 days
Petrichor Financing \| Securities Purchase Agreements \| Third Closing Note
Nature of Business and Going Concern [Line Items]
Borrowings, face amount	$ 5,000
Initial conversion price \| $ / shares	$ 7.89
Premium over 5-day VWAP	20.00%
VWAP term	5 days
Petrichor Financing \| Securities Purchase Agreements \| Subsequent Closing Notes
Nature of Business and Going Concern [Line Items]
Remaining borrowing capacity		$ 20,000,000
Initial conversion price \| $ / shares		$ 7.89
Petrichor Financing \| Securities Purchase Agreements \| Subsequent Closing Notes \| Minimum
Nature of Business and Going Concern [Line Items]
Number of loan tranches for remaining borrowing capacity		1
Petrichor Financing \| Securities Purchase Agreements \| Subsequent Closing Notes \| Maximum
Nature of Business and Going Concern [Line Items]
Maximum borrowing capacity		$ 10,000,000
Borrowings, face amount		$ 10,000,000
Petrichor Financing \| Securities Purchase Agreements \| First Closing Warrant
Nature of Business and Going Concern [Line Items]
Commitment fees payable in cash or warrants						50.00%
Petrichor Financing \| Securities Purchase Agreements \| Second Closing Warrant
Nature of Business and Going Concern [Line Items]
Commitment fees payable in cash or warrants						50.00%
Petrichor Financing \| SPA First Amendment \| Subsequent Closing Notes
Nature of Business and Going Concern [Line Items]
Remaining borrowing capacity	$ 15,000
Initial conversion price \| $ / shares	$ 7.89
Bridge Bank \| Bridge Bank Term Loan
Nature of Business and Going Concern [Line Items]
Repayment of term loan			$ 5,000,000
Licensing Agreement \| Norgine Ltd.
Nature of Business and Going Concern [Line Items]
License agreement funding received								$ 43,200	€ 40,000
License agreement funding, potential milestone payments								230,000	€ 210,000
Licensing Agreement \| Norgine Ltd. \| Maximum
Nature of Business and Going Concern [Line Items]
License agreement funding, potential milestone payments								$ 230,000

Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2024

Significant Accounting Policies

Schedule of PEDMARK Revenues, Net


	Three Months Ended				Nine Months Ended
		September 30,		September 30,		September 30,		September 30,
In thousands		2024		2023		2024		2023
Product revenues:
Gross product revenues	$	7,986	$	6,919	$	27,008	$	12,525
Discounts and allowances		(1,012)		(404)		(5,353)		(1,008)
Net product revenues	$	6,974	$	6,515	$	21,655	$	11,517

Schedule of PEDMARK Revenues, Discounts and Allowances



	Chargebacks,		Rebates, Customer
	Discounts for		Fees/Credits
	Prompt pay and		and Co-Pay
In thousands	Other allowances		Assistance		Totals
Balance at December 31, 2023	$	365	$	430	$	795
Provision related to sales made in:
Current period		352		1,640		1,992
Prior periods		—		—		—
Payments and customer credits issued		(497)		(104)		(601)
Balance at March 31, 2024	$	220	$	1,966	$	2,186
Provision related to sales made in:
Current period		175		2,644		2,819
Prior periods		—		—		—
Payments and customer credits issued		(66)		(2,614)		(2,680)
Balance at June 30, 2024	$	329	$	1,996	$	2,325
Provision related to sales made in:
Current period		837		328		1,165
Prior periods		—		—		—
Payments and customer credits issued		(834)		(959)		(1,793)
Balance at September 30, 2024	$	332	$	1,365	$	1,697

Significant Accounting Policies - Product Sales Discounts and Allowances Continued (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2024	Jun. 30, 2024	Mar. 31, 2024
Provision for discounts and allowances, beginning balance	$ 2,325	$ 2,186	$ 795
Current period	1,165	2,819	1,992
Payments and customer credits issued	(1,793)	(2,680)	(601)
Provision for discounts and allowances, ending balance	1,697	2,325	2,186
Chargebacks, Discounts for Prompt pay and Other allowances
Provision for discounts and allowances, beginning balance	329	220	365
Current period	837	175	352
Payments and customer credits issued	(834)	(66)	(497)
Provision for discounts and allowances, ending balance	332	329	220
Rebates, Customer Fees/Credits and Co-pay Assistance
Provision for discounts and allowances, beginning balance	1,996	1,966	430
Current period	328	2,644	1,640
Payments and customer credits issued	(959)	(2,614)	(104)
Provision for discounts and allowances, ending balance	$ 1,365	$ 1,996	$ 1,966

Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock Employees	Common Stock	Additional Paid-in Capital Employees	Additional Paid-in Capital	Accumulated Deficit Employees	Accumulated Deficit	Accumulated Other Comprehensive Income Employees	Accumulated Other Comprehensive Income	Employees	Total
Balance at Dec. 31, 2022		$ 142,591		$ 56,797		$ (203,200)		$ 1,243		$ (2,569)
Balance (in shares) at Dec. 31, 2022		26,361
Stock-based compensation	$ 0		$ 1,089		$ 0		$ 0		$ 1,089
Stock option exercise		$ 213								213
Stock option exercise (in shares)		49
Restricted stock release				(20)						(20)
Restricted stock release (in shares)		1
Net income/(loss)						(6,052)				(6,052)
Balance at Mar. 31, 2023		$ 142,804		57,866		(209,252)		1,243		(7,339)
Balance (in shares) at Mar. 31, 2023		26,411
Balance at Dec. 31, 2022		$ 142,591		56,797		(203,200)		1,243		(2,569)
Balance (in shares) at Dec. 31, 2022		26,361
Net income/(loss)										(13,363)
Balance at Sep. 30, 2023		$ 143,560		61,229		(216,563)		1,243		(10,531)
Balance (in shares) at Sep. 30, 2023		26,633
Balance at Mar. 31, 2023		$ 142,804		57,866		(209,252)		1,243		(7,339)
Balance (in shares) at Mar. 31, 2023		26,411
Stock-based compensation			2,543						2,543
Stock option exercise		$ 541								541
Stock option exercise (in shares)		95
Restricted stock release				(28)						(28)
Restricted stock release (in shares)		3
Net income/(loss)						(5,444)				(5,444)
Balance at Jun. 30, 2023		$ 143,345		60,381		(214,696)		1,243		(9,727)
Balance (in shares) at Jun. 30, 2023		26,509
Stock-based compensation			865						865
Stock option exercise		$ 215								215
Stock option exercise (in shares)		92
Restricted stock release				(17)						(17)
Restricted stock release (in shares)		32
Net income/(loss)						(1,867)				(1,867)
Balance at Sep. 30, 2023		$ 143,560		61,229		(216,563)		1,243		(10,531)
Balance (in shares) at Sep. 30, 2023		26,633
Balance at Dec. 31, 2023		$ 144,307		62,073		(219,245)		1,243		(11,622)
Balance (in shares) at Dec. 31, 2023		27,027
Stock-based compensation	$ 0		1,191		$ 0		$ 0		1,191
Restricted stock release				(19)						(19)
Restricted stock release (in shares)		3
Net income/(loss)						12,837				12,837
Balance at Mar. 31, 2024		$ 144,934		63,245		(206,408)		1,243		3,014
Balance (in shares) at Mar. 31, 2024		27,105
Balance at Dec. 31, 2023		$ 144,307		62,073		(219,245)		1,243		(11,622)
Balance (in shares) at Dec. 31, 2023		27,027
Net income/(loss)										1,549
Balance at Sep. 30, 2024		$ 145,438		65,844		(217,696)		1,243		(5,171)
Balance (in shares) at Sep. 30, 2024		27,422
Balance at Mar. 31, 2024		$ 144,934		63,245		(206,408)		1,243		3,014
Balance (in shares) at Mar. 31, 2024		27,105
Stock-based compensation			925						925
Stock option exercise		$ 347								347
Stock option exercise (in shares)		147
Restricted stock release				(90)						(90)
Restricted stock release (in shares)		77
Net income/(loss)						(5,553)				(5,553)
Balance at Jun. 30, 2024		$ 145,281		64,080		(211,961)		1,243		(1,357)
Balance (in shares) at Jun. 30, 2024		27,329
Stock-based compensation			$ 1,821						$ 1,821
Stock option exercise		$ 157								157
Stock option exercise (in shares)		55
Restricted stock release				(57)						(57)
Restricted stock release (in shares)		38
Net income/(loss)						(5,735)				(5,735)
Balance at Sep. 30, 2024		$ 145,438		$ 65,844		$ (217,696)		$ 1,243		$ (5,171)
Balance (in shares) at Sep. 30, 2024		27,422

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

+ Details

- Definition

Amount of equity (deficit) attributable to parent. Excludes temporary equity and equity attributable to noncontrolling interest.

+ References

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-URI https://asc.fasb.org/1943274/2147480418/310-10-S99-2

+ Details

Stockholders' Equity

9 Months Ended

Sep. 30, 2024

Stockholders' Equity

Stockholders' Equity

4. Stockholders’ Equity

Authorized Capital Stock

The Company’s authorized capital stock consists of an unlimited number of common shares, no par value per share.

Warrants to Purchase Common Stock

During the three and nine months ended September 30, 2024 and 2023, there were no warrants issued or exercised. Outstanding warrants have a weighted average life of 3.30 years on September 30, 2024. The following tables detail the Company’s warrant activity for the three and nine months ended September 30, 2024, and 2023, respectively:


	Common Shares
	Issuable Upon Exercise
	of Outstanding		Weighted-Average
Investor Warrants	Warrants		Exercise Price $USD
Outstanding December 31, 2023	150	$	7.71
Issued	—		—
Outstanding March 31, 2024	150		7.71
Issued	—		—
Outstanding June 30, 2024	150		7.71
Issued	—		—
Outstanding September 30, 2024	150	$	7.71


	Common Shares
	Issuable Upon Exercise
	of Outstanding		Weighted-Average
Investor Warrants	Warrants		Exercise Price
Outstanding December 31, 2022	150	$	7.71
Issued	—		—
Outstanding March 31, 2023	150		7.71
Issued	—		—
Outstanding June 30, 2023	150		7.71
Issued	—		—
Outstanding September 30, 2023	150	$	7.71

Equity Incentive Plan

The Compensation Committee of the Board of Directors administers the Company’s equity incentive plan (the “Plan”). The Compensation Committee designates eligible participants to be included under the Plan and approves the number of equity instruments to be granted from time to time under the Plan. Currently, the maximum number of equity instruments issuable under the Plan, together with the Company’s prior stock option plan, is twenty-five percent (25%) of the total number of issued and outstanding common shares. Based upon the current shares outstanding, a maximum of 6,825 shares of common stock are authorized for issuance pursuant to stock options or other equity awards granted under the Plan. For all options issued under the Plan, the exercise price is the fair value of the underlying shares on the date of grant. All options vest within three years or less and are exercisable for a period of ten years from the date of grant. The Plan allows the issuance of Canadian and U.S. dollar grants. The table below outlines recognized contractor and employee expense from equity awards for the three- and nine-month periods ended September 30, 2024, and 2023. For all periods presented, there were no contractor option expense to recognize.

Three Months Ended

Nine Months Ended

September 30,

2024

2023

2024

2023

Employee options expense recognized

1,821

865

3,937

4,497

Total option expense recognized

1,821

865

3,937

4,497

Stock Option Activity

The following is a summary of option activity for the three and nine months ended September 30, 2024 and 2023.


	Number of	Weighted-Average
Options	Options (thousands)	Exercise Price $USD
Outstanding at December 31, 2023	4,798	$	6.27
Granted	45		7.29
Exercised	(75)		5.81
Forfeited	—		—
Outstanding at March 31, 2024	4,768		5.43
Granted	707		7.12
Exercised	(147)		2.36
Forfeited	(100)		8.00
Outstanding at June 30, 2024	5,228		6.48
Granted	558		5.58
Exercised	(55)		2.84
Forfeited	(276)		7.55
Outstanding at September 30, 2024	5,455	$	6.37

Of the 5,455 options granted and outstanding at September 30, 2024, 4,278 are fully vested and exercisable.

The value of options issued was estimated using the Black-Scholes option pricing model using the assumptions in the table below. The expected volatility was determined using historical volatility of our stock based on the expected term of the award.


		Valuation
		Assumptions
Black-Scholes Model Assumptions		September 30, 2024
Expected dividend		0.00%
Risk free rate		3.79 - 5.15%
Expected volatility		45 - 67%
Expected life		1.5 - 6.0 years

Restricted Share Units Activity

The Plan allows for the issuance of restricted share units (“RSUs”). The following is a summary of RSU activity for the three and nine months ended September 30, 2024 and 2023. During the three and nine months ended September 30, 2024, there were 48 and 137 RSUs released from restriction, respectively. Vesting of RSUs vary from one to three years.


		Number of
		Restricted Share
RSUs Current Year		Units (thousands)
Outstanding at December 31, 2023		218
Awarded		17
Released		(21)
Outstanding at March 31, 2024		214
Awarded		299
Released		(68)
Forfeited		—
Outstanding at June 30, 2024		445
Awarded		—
Released		(48)
Forfeited		(30)
Outstanding at September 30, 2024		367

The value of RSUs issued was estimated using the share price on the date of the award multiplied by the number of common shares granted.

- Definition

The entire disclosure for equity.

+ References

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+ Details

Insider Trading Arrangements - Rostislav Raykov	9 Months Ended
Insider Trading Arrangements - Rostislav Raykov	Sep. 30, 2024 shares
Trading Arrangements, by Individual
Material Terms of Trading Arrangement	Rostislav Raykov, a current member of our Board of Directors, adopted a trading arrangement on September 23, 2024, which is intended to satisfy the Rule 10b5-1 affirmative defense. This trading arrangement covers the disposition of up to 120,000 shares of the Company’s common shares, and will terminate on December 31, 2025, unless earlier terminated in accordance with its terms. No additional directors or officers informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408.
Name	Rostislav Raykov
Title	Board of Directors
Rule 10b5-1 Arrangement Adopted	true
Non-Rule 10b5-1 Arrangement Adopted	false
Adoption Date	Sep. 23, 2024
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false
Expiration Date	Dec. 31, 2025
Aggregate Available	120,000

Fair Value Measurements

9 Months Ended

Sep. 30, 2024

Fair Value Measurements

Fair Value Measurements

5. Fair Value Measurements

The Company has adopted ASC 820, the Fair Value Measurements and Disclosure Topic of the FASB. This Topic applies to certain assets and liabilities that are being measured and reported on a fair value basis. The Fair Value Measurements Topic defines fair value, establishes a framework for measuring fair value in accordance with US GAAP, and expands disclosure about fair value measurements. This Topic enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The Topic requires that financial assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.


	Fair Value Measurement at September 30, 2024 and December 31, 2023
	(in thousands)
	Quoted Price in Active
	Market for Identical						Significant Other				Significant
	Instruments						Observable Inputs				Unobservable Inputs
	Level 1						Level 2				Level 3					Total
	2024				2023			2024		2023		2024		2023		2024		2023
Assets
Cash and cash equivalents	$	3,049	⁽¹⁾	$	1,340	⁽¹⁾	$	37,271	$	11,929	$	—	$	—	$	40,320	$	13,269
Processa common shares	$	2	⁽²⁾	$	17	⁽²⁾	$	—	$	—	$	—	$	—	$	2	$	17

(1)	The Company held approximately $37,271 in money market accounts as of September 30, 2024. As of December 31, 2023, the Company held approximately $11,929 in money market accounts.

(2)	The Company holds 41 unrestricted common shares of Processa Pharmaceuticals, Inc. (NASDAQ:PCSA), which it received as part of a royalty arrangement in 2020.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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+ Details