Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 11, 2022 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2022 | |
Document Transition Report | false | |
Entity 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 | 26,237,726 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2022 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001211583 | |
Amendment Flag | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Current assets | ||
Cash | $ 29,752 | $ 21,100 |
Prepaid expenses | 278 | 1,034 |
Other current assets | 123 | 253 |
Total current assets | 30,153 | 22,387 |
Non-current assets | ||
Deferred issuance cost, net amortization | 264 | 27 |
Total non-current assets | 264 | 27 |
Total assets | 30,417 | 22,414 |
Current liabilities: | ||
Accounts payable | 2,533 | 777 |
Accrued liabilities | 394 | 877 |
Total current liabilities | 2,927 | 1,654 |
Long term liabilities | ||
Term loan | 25,000 | 5,000 |
Debt discount | (312) | (12) |
Total long term liabilities | 24,688 | 4,988 |
Total liabilities | 27,615 | 6,642 |
Commitments and Contingencies (Note 6) | ||
Stockholders' equity: | ||
Common stock, no par value; unlimited shares authorized; 26,238 shares issued and outstanding (2021 26,014) | 141,309 | 140,801 |
Additional paid-in capital | 56,593 | 53,214 |
Accumulated deficit | (196,343) | (179,486) |
Accumulated other comprehensive income | 1,243 | 1,243 |
Total stockholders' equity | 2,802 | 15,772 |
Total liabilities and stockholders' equity | $ 30,417 | $ 22,414 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares shares in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Condensed Consolidated Balance Sheets | ||
Common stock, no par value | $ 0 | $ 0 |
Common stock, shares issued | 26,238 | 26,014 |
Common stock, shares outstanding | 26,238 | 26,014 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Operating expenses: | ||||
Research and development | $ 846 | $ 1,242 | $ 3,414 | $ 4,458 |
General and administrative | 7,053 | 2,931 | 13,040 | 8,558 |
Loss from operations | (7,899) | (4,173) | (16,454) | (13,016) |
Other (expense)/income | ||||
Unrealized foreign exchange loss | (4) | (1) | (6) | (9) |
Amortization expense | (64) | (8) | (79) | (8) |
Unrealized (loss)/gain on securities | (27) | 39 | (126) | 137 |
Interest income | 24 | 13 | 42 | 41 |
Interest expense | (119) | (55) | (234) | (64) |
Total other (expense)/income | (190) | (12) | (403) | 97 |
Net loss | $ (8,089) | $ (4,185) | $ (16,857) | $ (12,919) |
Basic net loss per common share | $ (0.31) | $ (0.16) | $ (0.65) | $ (0.50) |
Diluted net loss per common share | $ (0.31) | $ (0.16) | $ (0.65) | $ (0.50) |
Weighted-average number of common shares outstanding basic | 26,108 | 26,007 | 26,105 | 26,004 |
Weighted-average number of common shares outstanding diluted | 26,108 | 26,007 | 26,105 | 26,004 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Operating activities: | ||
Net loss | $ (16,857) | $ (12,919) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of debt access fees | 77 | 7 |
Amortization of debt discount | 2 | 1 |
Unrealized loss/(gain) on securities | 126 | (137) |
Stock-based compensation - consultants | 103 | 9 |
Stock-based compensation - employees | 3,260 | 2,830 |
Changes in operating assets and liabilities: | ||
Prepaid expenses | 756 | (435) |
Other assets | 4 | |
Accounts payable | 1,756 | (417) |
Accrued liabilities | (483) | 84 |
Net cash used in operating activities | (11,256) | (10,977) |
Financing activities: | ||
Long-term Debt | 25,000 | 5,000 |
Long-term debt paid | (5,000) | |
Debt discount | (14) | |
Capitalized deferred issuance costs | (175) | (42) |
Cash paid for taxes on restricted share release | (166) | |
Issuance of shares, options exercise | 249 | 24 |
Net cash provided by financing activities | 19,908 | 4,968 |
Decrease in cash and cash equivalents | 8,652 | (6,009) |
Cash and cash equivalents - Beginning of period | 21,100 | 30,344 |
Cash and cash equivalents - End of period | 29,752 | $ 24,335 |
Non-cash investing and financing activities: | ||
Financed insurance policy | $ 441 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Common Stock Contractors Grantee Status - Contractors or Consultants | Common Stock Grantee Status - Employees | Common Stock | Additional Paid-in Capital Employees Grantee Status - Employees | Additional Paid-in Capital Contractors Grantee Status - Contractors or Consultants | Additional Paid-in Capital Grantee Status - Employees | Additional Paid-in Capital Grantee Status - Contractors or Consultants | Additional Paid-in Capital | Accumulated Deficit Contractors Grantee Status - Contractors or Consultants | Accumulated Deficit Grantee Status - Employees | Accumulated Deficit | Accumulated Other Comprehensive Income Contractors Grantee Status - Contractors or Consultants | Accumulated Other Comprehensive Income Grantee Status - Employees | Accumulated Other Comprehensive Income | Employees Grantee Status - Employees | Contractors Grantee Status - Contractors or Consultants | Grantee Status - Employees | Grantee Status - Contractors or Consultants | Total |
Balance at Dec. 31, 2020 | $ 140,733 | $ 49,234 | $ (162,140) | $ 1,243 | $ 29,070 | ||||||||||||||
Balance (in shares) at Dec. 31, 2020 | 26,003 | ||||||||||||||||||
Stock options issued | $ 0 | $ 0 | $ 9 | $ 587 | $ 0 | $ 0 | $ 0 | $ 0 | $ 9 | $ 587 | |||||||||
Net loss | (4,733) | (4,733) | |||||||||||||||||
Balance at Mar. 31, 2021 | $ 140,733 | 49,830 | (166,873) | 1,243 | 24,933 | ||||||||||||||
Balance (in shares) at Mar. 31, 2021 | 26,003 | ||||||||||||||||||
Balance at Dec. 31, 2020 | $ 140,733 | 49,234 | (162,140) | 1,243 | 29,070 | ||||||||||||||
Balance (in shares) at Dec. 31, 2020 | 26,003 | ||||||||||||||||||
Net loss | (12,919) | ||||||||||||||||||
Balance at Sep. 30, 2021 | $ 140,780 | 52,049 | (175,059) | 1,243 | 19,013 | ||||||||||||||
Balance (in shares) at Sep. 30, 2021 | 26,007 | ||||||||||||||||||
Balance at Mar. 31, 2021 | $ 140,733 | 49,830 | (166,873) | 1,243 | 24,933 | ||||||||||||||
Balance (in shares) at Mar. 31, 2021 | 26,003 | ||||||||||||||||||
Stock options issued | $ 1,326 | $ 1,326 | |||||||||||||||||
Exercise of stock options | $ 47 | (24) | 23 | ||||||||||||||||
Exercise of stock options (in shares) | 4 | ||||||||||||||||||
Net loss | (4,001) | (4,001) | |||||||||||||||||
Balance at Jun. 30, 2021 | $ 140,780 | 51,132 | (170,874) | 1,243 | 22,281 | ||||||||||||||
Balance (in shares) at Jun. 30, 2021 | 26,007 | ||||||||||||||||||
Stock options issued | 917 | 917 | |||||||||||||||||
Net loss | (4,185) | (4,185) | |||||||||||||||||
Balance at Sep. 30, 2021 | $ 140,780 | 52,049 | (175,059) | 1,243 | 19,013 | ||||||||||||||
Balance (in shares) at Sep. 30, 2021 | 26,007 | ||||||||||||||||||
Balance at Dec. 31, 2021 | $ 140,801 | 53,214 | (179,486) | 1,243 | 15,772 | ||||||||||||||
Balance (in shares) at Dec. 31, 2021 | 26,014 | ||||||||||||||||||
Stock options issued | $ 0 | $ 0 | $ 34 | 399 | $ 0 | $ 0 | $ 0 | $ 0 | $ 34 | 399 | |||||||||
Exercise of stock options | $ 31 | (16) | $ 15 | ||||||||||||||||
Exercise of stock options (in shares) | 26 | 26 | |||||||||||||||||
Net loss | (3,696) | $ (3,696) | |||||||||||||||||
Balance at Mar. 31, 2022 | $ 140,832 | 53,631 | (183,182) | 1,243 | 12,524 | ||||||||||||||
Balance (in shares) at Mar. 31, 2022 | 26,040 | ||||||||||||||||||
Balance at Dec. 31, 2021 | $ 140,801 | 53,214 | (179,486) | 1,243 | 15,772 | ||||||||||||||
Balance (in shares) at Dec. 31, 2021 | 26,014 | ||||||||||||||||||
Net loss | (16,857) | ||||||||||||||||||
Balance at Sep. 30, 2022 | $ 141,309 | 56,593 | (196,343) | 1,243 | 2,802 | ||||||||||||||
Balance (in shares) at Sep. 30, 2022 | 26,238 | ||||||||||||||||||
Balance at Mar. 31, 2022 | $ 140,832 | 53,631 | (183,182) | 1,243 | 12,524 | ||||||||||||||
Balance (in shares) at Mar. 31, 2022 | 26,040 | ||||||||||||||||||
Stock options issued | 1,008 | $ 35 | 1,008 | $ 35 | |||||||||||||||
Exercise of stock options | $ 90 | (44) | $ 46 | ||||||||||||||||
Exercise of stock options (in shares) | 19 | 19 | |||||||||||||||||
Restricted stock unit release (in shares) | 8 | ||||||||||||||||||
Net loss | (5,072) | $ (5,072) | |||||||||||||||||
Balance at Jun. 30, 2022 | $ 140,922 | 54,630 | (188,254) | 1,243 | 8,541 | ||||||||||||||
Balance (in shares) at Jun. 30, 2022 | 26,067 | ||||||||||||||||||
Stock options issued | $ 1,853 | $ 34 | $ 1,853 | $ 34 | |||||||||||||||
Exercise of stock options | $ 387 | (199) | $ 188 | ||||||||||||||||
Exercise of stock options (in shares) | 151 | 151 | |||||||||||||||||
Restricted stock unit release | $ 20 | (166) | $ (166) | ||||||||||||||||
Warrants issued to Petrichor | 441 | 441 | |||||||||||||||||
Net loss | (8,089) | (8,089) | |||||||||||||||||
Balance at Sep. 30, 2022 | $ 141,309 | $ 56,593 | $ (196,343) | $ 1,243 | $ 2,802 | ||||||||||||||
Balance (in shares) at Sep. 30, 2022 | 26,238 |
Nature of Business and Going Co
Nature of Business and Going Concern | 9 Months Ended |
Sep. 30, 2022 | |
Nature of Business and Going Concern | |
Nature of Business and Going Concern | 1. Nature of Business and Going Concern Fennec Pharmaceuticals Inc., a British Columbia corporation (“Fennec,” ”the “Company,” “we,” “us,” or “our”), is a commercial stage specialty biopharmaceutical company focused on PEDMARK ® These unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. 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 months ended September 30, 2022, the Company incurred a loss from operations of $7,899 and $16,454, respectively. At September 30, 2022, the Company had an accumulated deficit of $196,343 and had experienced negative cash flows from operating activities during the nine months ended September 30, 2022 in the amount of $11,256. On August 1, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Petrichor Opportunities Fund I LP (the “Creditor”) 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 Securities Purchase Agreement (“SPA”) dated August 1, 2022. In connection with the first closing, 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 “Second Closing Trigger”). 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 Creditor (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 is payable under the SPA. Half half The Company believes current funds, along with the funds from the Note Financing issued as part of the Creditor financing provide sufficient funding for the Company to carry out its planned activities, including the commencement of commercialization efforts for at least the next twelve months of PEDMARK. The Company also has the ability to obtain additional funds under the Subsequent Closing Notes. 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 was not appropriate or if there was a materially adverse event which affected the Company’s solvency. |
Significant Accounting Policies
Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Significant Accounting Policies | |
Significant Accounting Policies | 2. Significant Accounting Policies Basis of presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. 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 U.S. GAAP for annual financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited 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, 2021. 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, 2021. 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. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the full fiscal year. Use of estimates The preparation of financial statements in conformity with U.S. 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 interim condensed consolidated financial statements and the reported amounts of expense during the reporting period. Actual results could differ from those estimates. In the opinion of management, these unaudited interim condensed consolidated financial statements include all adjustments, which are normal and recurring in nature, necessary for the fair presentation of the Company’s financial position at September 30, 2022 and to state fairly the results for the periods presented. The most significant estimates utilized during the three and nine months ended September 30, 2022 include estimates necessary to value grants of various equity instruments to employees and contractors and the warrants issued to the Creditor, as disclosed in Note 4. New accounting pronouncements The Company did not adopt any new accounting pronouncements during the quarter ended September 30, 2022. 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, 2022, the Company had $29,752 in cash, savings and money market accounts ($21,100 at December 31, 2021). At September 30, 2022, the Company held $438 in cash of which $33 (as presented in U.S. dollars) was in Canadian dollars ($34 at December 31, 2021 as presented in U.S. dollars). At September 30, 2022, the Company held $29,314 in money market investments. Money market investments typically have minimal risks. 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. Inventory Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method. Inventory costs include third-party contract manufacturing, third-party packaging services and freight. At this time, we primarily use actual costs to determine the cost basis for inventory. The determination of whether inventory costs will be realizable requires management review of the expiration dates of PEDMARK ® Prior to FDA approval of PEDMARK ® ® Financial instruments Financial instruments recognized on the balance sheets at September 30, 2022 and December 31, 2021 consist of cash and cash equivalents, common shares of Processa Pharmaceuticals, Inc., accounts payable and accrued liabilities, the carrying values of which approximate fair value due to their relatively short time to maturity. 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. As our main purpose is preservation of capital while we endeavor to become cash flow positive through the sale of product, we have chosen to avoid investments of a trading or speculative nature. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The policy also provides for investment limits on concentrations of securities by issuer and a maximum-weighted average time to maturity of twelve months. Product revenue, net The ® and will ® |
Loss per Share
Loss per Share | 9 Months Ended |
Sep. 30, 2022 | |
Loss per Share | |
Loss per Share | 3. Loss Per Share Earnings per common share is presented under two formats: basic earnings per common share and diluted earnings per common share. Basic earnings per common share is computed by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period, plus the potentially dilutive impact of common stock equivalents (i.e. stock options and warrants). Dilutive common share equivalents consist of the incremental common shares issuable upon exercise of stock options and warrants. The following table sets forth the computation of basic and diluted net loss per share: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Numerator: Net loss $ (8,089) $ (4,185) $ (16,857) $ (12,919) Denominator: Weighted-average common shares, basic 26,108 26,007 26,105 26,004 Dilutive effect of stock options — — — — Dilutive effect of warrants — — — — Incremental dilutive shares — — — — Weighted-average common shares, diluted 26,108 26,007 26,105 26,004 Net loss per share, basic and diluted $ (0.31) $ (0.16) $ (0.65) $ (0.50) The following outstanding options and warrants were excluded from the computation of basic and diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Options to purchase common shares 4,466 3,653 4,466 3,653 Warrants to purchase common shares 150 39 150 39 |
Stockholders' Equity
Stockholders' Equity | 9 Months Ended |
Sep. 30, 2022 | |
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, 2022, the Company issued 111 warrants at a strike price of $8.11. The Company capitalized $441 in non-cash expense, and cash expense of $175 associated with issuing the SPA. During the three and nine month ended September 30, 2022, there were no Common Shares Issuable Upon Exercise of Outstanding Weighted-Average Creditor Warrants Warrants Exercise Price Outstanding December 31, 2021 39 $ 6.80 Issued — — Outstanding March 31, 2022 39 $ 6.80 Issued — — Outstanding June 30, 2022 39 $ 6.80 Issued 111 8.11 Outstanding September 30, 2022 150 $ 7.30 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 6,559 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, 2022 and 2021. Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Contractor options expense recognized $ 34 $ — $ 103 $ 9 Employee options expense recognized 1,853 917 3,260 2,830 Total option expense recognized $ 1,887 $ 917 $ 3,363 $ 2,839 Stock Option Activity The following is a summary of option activity for the three and nine months ended September 30, 2022, for stock options denominated in U.S. dollars. Since August of 2020, there have been no Canadian denominated options outstanding. Number of Weighted-Average US Denominated Options Options (thousands) Exercise Price Outstanding at December 31, 2021 4,259 $ 5.13 Granted 200 5.64 Exercised (26) 0.58 Forfeited (382) 6.13 Outstanding at March 31, 2022 4,051 5.34 Granted 305 5.71 Exercised (19) 2.38 Outstanding at June 30, 2022 4,337 5.14 Granted 310 6.93 Exercised (151) 1.25 Forfeited (30) 5.59 Outstanding at September 30, 2022 4,466 $ 5.33 During the three and nine month periods ended September 30, 2022, there were 310 and 815 options granted, respectively. During the three and nine month periods ended September 30, 2022, there were 151 and 196 exercises of options, respectively. This resulted in a cash inflow of $188 and $249, respectively. During the three and nine month periods ended September 30, 2022, there were 30 and 412 option grant forfeitures by departing employees. Of the 4,466 U.S. denominated options granted and outstanding at September 30, 2022, 3,448 are fully vested and exercisable. The value of options and warrants 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, 2022 Expected dividend 0.00% Risk free rate 1.18 - 4.11% Expected volatility 67 - 74% Expected life 5 - 6.0 years Restricted Share Units Activity The Plan allows for the issuance of restricted share units (“RSU’s”). The following is a summary of RSU activity for the three and nine months ended September 30, 2022. During the three and nine month ended September 30, 2022, there were 20 and 28 RSU’s released from restriction, respectively. During the nine months ended September 30, 2022, there were 88 RSU’s forfeited by departing employees. All RSU’s vest over one Number of Restricted US Denominated RSUs Share Units (thousands) Outstanding at December 31, 2021 219 Awarded — Forfeited (88) Outstanding at March 31, 2022 131 Awarded — Released (8) Outstanding at June 30, 2022 123 Awarded — Released (20) Outstanding at September 30, 2022 103 The value of RSU’s issued was estimated using the share price on the date of the award multiplied by the number of shares granted. |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2022 | |
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 U.S. 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, 2022 and December 31, 2021 (in thousands) Quoted Price in Active Market for Identical Significant Other Significant Instruments Observable Inputs Unobservable Inputs Level 1 Level 2 Level 3 Total 2022 2021 2022 2021 2022 2021 2022 2021 Assets Cash and cash equivalents 438 (1) 82 (1) 29,314 21,018 — — 29,752 21,100 Processa common shares — — 114 (2) 240 (2) — — 114 240 (1) The Company held approximately $438 in cash as of September 30, 2022, of which approximately $33 was in Canadian funds (translated into U.S. dollars). As of December 31, 2021, the Company held approximately $82 in cash of which approximately $34 was in Canadian funds (translated into U.S. dollars). (2) The Company holds 46 unrestricted common shares of Processa Pharmaceuticals, Inc. (NASDAQ:PCSA) (“Processa”). The Company received another 5 restricted common shares of Processa on October 20, 2022 which will become unrestricted one year after receipt. The Company originally applied a 20%, 30% and 40% liquidity discount to the shares and will mark to market at each balance sheet date. The Company will also adjust the liquidity discounts being applied to the share valuation to appropriately reflect the passage of time and the existence of any restrictions on the shares. Valuation of the shares at September 30, 2022 had a 0%, 0% and 15% liquidity discount applied to the 41, 5 and 5 share tranches, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2022 | |
Commitments and Contingencies | |
Commitments and Contingencies | 6. Commitments and Contingencies Oregon Health & Science University Agreement On February 20, 2013, Fennec entered into an exclusive license agreement with Oregon Health & Science University (“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 a 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 sodium thiosulfate for the prevention of ototoxicity induced by chemotherapeutic agents to treat cancers. Further, Amendment 1 adjusts select milestone payments 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. 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. In the event a licensed product obtains regulatory approval and is covered by the Orphan Drug Designation, the parties will in good faith amend the term of the agreement. PEDMARK is currently protected by methods of use patent that the Company exclusively licensed from OHSU 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. Securities Class Action Suit Chapman v. Fennec Pharmaceuticals Inc. et al. On September 3, 2020, plaintiff Jim Chapman filed a putative federal securities class action lawsuit against the Company, our Chief Executive Officer, Rostislav Raykov, and Chief Financial Officer, Robert Andrade, in the United States District Court for the Middle District of North Carolina, captioned Chapman v. Fennec Pharmaceuticals Inc. et al concerning our NDA for PEDMARK, defendants made materially false or misleading statements and failed to disclose material facts about our third-party PEDMARK product manufacturing facility and the impact the facility would have on regulatory approval for PEDMARK. On December 3, 2020, the court appointed a lead plaintiff to represent the putative class. On February 1, 2021, the lead plaintiff filed an amended complaint. The amended complaint added members of our Board of Directors as defendants, asserts a putative class period from December 20, 2018 through August 10, 2020, makes allegations similar to those in the original complaint, claims the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5, and seeks an unspecified amount of compensatory damages and attorneys’ fees and costs. On March 3, 2021, defendants filed a motion to dismiss the amended complaint. On April 2, 2021, lead plaintiff filed an opposition to the motion to dismiss. On April 16, 2021, defendants filed a reply in support of the motion to dismiss, and on December 16, 2021, the Magistrate Judge entered an order recommending that defendants’ motion to dismiss be granted in its entirety. On January 24, 2022, lead plaintiff filed objections to the Magistrate Judge’s recommendation, and defendants filed their response on February 3, 2022. On March 2, 2022, the U.S. District Court Judge adopted the Magistrate Judge’s order and recommendation and entered an order and judgment dismissing the amended complaint with prejudice. On March 30, 2022, lead plaintiff filed a motion for post judgment relief, seeking leave to file a second amended complaint. In his proposed second amended complaint, lead plaintiff seeks to add allegations stemming from the receipt of a second CRL following our resubmission of our NDA for PEDMARK, which we received on November 29, 2021, among other things. Defendants filed an opposition to plaintiff’s motion for post judgment relief on April 20, 2022. On May 4, 2022, lead plaintiff submitted a reply in support of his motion. On September 27, 2022, defendants filed a request for judicial notice regarding the FDA’s press release announcing that it has approved PEDMARK. On October 18, 2022, lead plaintiff filed his opposition to request for judicial notice. On October 21, 2022, defendants filed a reply in support of the request for judicial notice. We believe that this lawsuit is without merit and intend to defend it vigorously. We cannot predict the outcome of this lawsuit. Failure by us to obtain a favorable resolution of the lawsuit could have a material adverse effect on our business, results of operations, and financial condition. We have not recorded a liability as of September 30, 2022, because we believe a potential loss is not probable or reasonably estimable given the nature of the proceedings and our success so far by obtaining a dismissal with prejudice of the amended complaint. Fisher v. Fennec Pharmaceuticals Inc. et al. On February 9, 2022, plaintiff Jeffrey D. Fisher filed a putative federal securities class action lawsuit against the Company and our CEO and CFO in the United States District Court for the Middle District of North Carolina, captioned Fisher v. Fennec Pharmaceuticals Inc. et al. TM On June 23, 2022, lead plaintiff filed an amended complaint. The amended complaint asserts the same putative class period from May 28, 2021 through November 28, 2021, is brought against the same defendants and makes allegations similar to those in the original complaint. On August 5, 2022, defendants filed a motion to dismiss the amended complaint. On August 26, 2022, lead plaintiff filed an opposition to the motion to dismiss. On September 9, 2022, defendants filed a reply in support of the motion to dismiss. On September 27, 2022, defendants filed a request for judicial notice regarding the FDA’s press release announcing that it approved PEDMARK. On September 30, 2022, lead plaintiff filed an opposition to the request for judicial notice. On October 6, 2022, defendants filed a reply in support of the request for judicial notice. On October 12, 2022, the U.S. District Court Judge issued a memorandum opinion and order dismissing the amended complaint in its entirety and with prejudice, and on October 14, 2022, entered judgment. Lead plaintiff has until November 14, 2022 to file a notice of appeal. We believe that the lawsuit is without merit and intend to defend it vigorously. We cannot predict the outcome of this lawsuit. Failure by us to obtain a favorable resolution of the lawsuit could have a material adverse effect on our business, results of operations, and financial condition. We have not recorded a liability as of September 30, 2022, because we believe a potential loss is not probable or reasonably estimable given the nature of the proceedings and our success so far by obtaining a dismissal with prejudice of the amended complaint. Hope Medical Enterprises, Inc. On October 29, 2021, Hope Medical Enterprises, Inc. (“Hope”) filed two petitions for inter partes review (“IPR”) with the Patent Trial and Appeal Board (“PTAB”) of the USPTO. In its petitions, Hope seeks to invalidate our U.S. Patent No. 10,596,190 (“US ‘190”), which is exclusively in-licensed from OHSU and relates to a method of using our PEDMARK product, and our U.S. Patent No. 10,792,363 (“US ’363”), which relates to an anhydrous form of STS, which is the active pharmaceutical ingredient in our PEDMARK product. US ‘190 was issued on March 24, 2020. US ‘363 was issued on October 6, 2020. On January 11, 2022, OHSU filed a Request for Supplemental Examination of US ‘190 requesting the consideration by the Central Re-examination Unit (“CRU”) of the USPTO of certain prior art references, including references cited by Hope in its Petition for IPR that are relevant to the granted claim of the patent. On May 9, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘190 patent and a stayed the Supplemental Examination pending the result of the ‘190 IPR. On August 12, 2022, we filed a Motion to Amend the single claim of the ‘190 Patent in the IPR to focus on the treatment of medulloblastoma. We expect a decision in the ‘190 IPR in May 2023, which can be appealed by the losing party. Further, in May 2022, the PTAB granted Hope Medical’s Petition to Institute the IPR against the ‘363 patent. 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. We expect a decision in the ‘363 IPR in May 2023, which can be appealed by the losing party. On April 5, 2022, the USPTO issued U.S. Patent No. 11,291,728 (‘728) that covers the PEDMARK pharmaceutical formulation. On September 14, 2022, the USPTO issued Notices of Allowance to us for two additional patent applications that cover the PEDMARK pharmaceutical formulation. We expect these two additional U.S. patents to issue in Q4 of 2022 or Q1 of 2023. These patents will expire in 2039, unless held invalid or unenforceable by a court of final jurisdiction. On approval of PEDMARK, we listed the ‘728 and the ‘190 patents in the FDA Orange Book. We plan to update the Orange Book with additional patents granted by the USPTO on issuance. We obtained U.S. Orphan Drug Designation for the use of PEDMARK in the prevention of platinum-induced ototoxicity in pediatric patients in 2004. We plan to pursue PUMA upon approval of the MAA, which would allow for 10 years of market exclusivity upon PUMA approval. We plan to vigorously defend our intellectual property rights related to PEDMARK. However, we are unable to predict the outcome of Hope’s IPR petitions, or the Supplemental Examination. While we now have, or will shortly receive, additional U.S. patents that cover PEDMARK over the IPR challenged patents, 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 possible in the United States under Orphan Drug Designation and in Europe under European Market Exclusivity for Pediatric Use (“PUMA”). Executive Severance In the event of his termination with us other than for cause, we will be obligated to pay Mr. Raykov a one-time severance payment equal to twelve months of salary ($513 as of September 30, 2022). In the event of his termination with us other than for cause, we will be obligated to pay Mr. Andrade a one-time severance payment equal to six months of salary ($186 as of September 30, 2022). Leases We have an operating lease in Research Triangle Park, North Carolina utilizing 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 at 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 terminates on July 31, 2020, 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. COVID-19 Our operations may be affected by the ongoing COVID-19 pandemic. The ultimate disruption that may be caused by the outbreak is uncertain; however, it may result in a material adverse impact on our financial position, operations and cash flows. Possible effects may include, but are not limited to, disruption to our product launch which includes the ability of sales reps to communicate with oncologists, absenteeism in our labor workforce, unavailability of products and supplies used in operations, and a decline in value of our assets, including inventories, property and equipment, and marketable securities. COVID-19 has not had a material effect on our operations to date as we have historically had a workforce which works remotely, preparations for product launch have been under the assumption of a virtual launch, and product supplies have not been impacted. |
Term Loans
Term Loans | 9 Months Ended |
Sep. 30, 2022 | |
Term Loans | |
Term Loans | 7. Term Loans On August 1, 2022, the Company entered into the SPA with the Creditor in connection with the issuance of up to $45,000 of Notes, issuable in multiple tranches. 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 note becomes 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 Second Closing Trigger. 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 A commitment fee of 2.0% of the Notes is payable under the SPA. Half half satisfy the payable on second closing. The warrants will be exercisable at a price per share of $8.11 and will have a term of five years from the date of the grant. The maturity date of the second tranche is September 23, 2027. Cash interest on outstanding principal shall accrue at a rate of prime, plus 4.5% per annum (10.75% as of September 30, 2022), from the date of funding. 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 (9.75% as of September 30, 2022). 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 SPA notes are convertible into fully paid, non-assessable share of common shares at any point after their issuance dates and before the maturity date. Any amount of the SPA 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. Aggregate annual payments due on the SPA as of September 30, 2022, are as follows: Years Ending December 31, Amount 2022 $ — 2023 — 2024 — 2025 — 2026 — 2027 25,000 Total future payments 25,000 Less: unamortized debt discount (312) Total term loan, net of debt discount $ 24,688 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 of the Company’s assets, including all capital stock held by the Company. Debt issuance costs amounting to $175 were paid in cash to the Creditor and warrants valued at $441 (non-cash) secured access to the SPA. These amounts were capitalized and are being amortized over the access period of the SPA. Upon drawing tranche 1 and tranche 2, the Company recorded a debt discount of $314, 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 term of the SPA. |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2022 | |
Subsequent Events | |
Subsequent Events | 8. Subsequent Events On October 17, 2022, the Company announced the U.S. commercial launch and availability of PEDMARK ® |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Significant Accounting Policies | |
Basis of presentation | Basis of presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. 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 U.S. GAAP for annual financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited 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, 2021. 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, 2021. 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. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the full fiscal year. |
Use of estimates | Use of estimates The preparation of financial statements in conformity with U.S. 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 interim condensed consolidated financial statements and the reported amounts of expense during the reporting period. Actual results could differ from those estimates. In the opinion of management, these unaudited interim condensed consolidated financial statements include all adjustments, which are normal and recurring in nature, necessary for the fair presentation of the Company’s financial position at September 30, 2022 and to state fairly the results for the periods presented. The most significant estimates utilized during the three and nine months ended September 30, 2022 include estimates necessary to value grants of various equity instruments to employees and contractors and the warrants issued to the Creditor, as disclosed in Note 4. |
New accounting pronouncements | New accounting pronouncements The Company did not adopt any new accounting pronouncements during the quarter ended September 30, 2022. |
Cash and cash equivalents | 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, 2022, the Company had $29,752 in cash, savings and money market accounts ($21,100 at December 31, 2021). At September 30, 2022, the Company held $438 in cash of which $33 (as presented in U.S. dollars) was in Canadian dollars ($34 at December 31, 2021 as presented in U.S. dollars). At September 30, 2022, the Company held $29,314 in money market investments. Money market investments typically have minimal risks. 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. |
Inventory | Inventory Inventory is stated at the lower of cost or estimated net realizable value with cost determined under the first-in first-out method. Inventory costs include third-party contract manufacturing, third-party packaging services and freight. At this time, we primarily use actual costs to determine the cost basis for inventory. The determination of whether inventory costs will be realizable requires management review of the expiration dates of PEDMARK ® Prior to FDA approval of PEDMARK ® ® |
Financial instruments | Financial instruments Financial instruments recognized on the balance sheets at September 30, 2022 and December 31, 2021 consist of cash and cash equivalents, common shares of Processa Pharmaceuticals, Inc., accounts payable and accrued liabilities, the carrying values of which approximate fair value due to their relatively short time to maturity. 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. As our main purpose is preservation of capital while we endeavor to become cash flow positive through the sale of product, we have chosen to avoid investments of a trading or speculative nature. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The policy also provides for investment limits on concentrations of securities by issuer and a maximum-weighted average time to maturity of twelve months. |
Product Revenue, Net | Product revenue, net The ® and will ® |
Loss per Share (Tables)
Loss per Share (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Loss per Share | |
Schedule of Earnings Per Share, Basic and Diluted | Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Numerator: Net loss $ (8,089) $ (4,185) $ (16,857) $ (12,919) Denominator: Weighted-average common shares, basic 26,108 26,007 26,105 26,004 Dilutive effect of stock options — — — — Dilutive effect of warrants — — — — Incremental dilutive shares — — — — Weighted-average common shares, diluted 26,108 26,007 26,105 26,004 Net loss per share, basic and diluted $ (0.31) $ (0.16) $ (0.65) $ (0.50) |
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Options to purchase common shares 4,466 3,653 4,466 3,653 Warrants to purchase common shares 150 39 150 39 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Stockholders' Equity | |
Schedule of Warrants Outstanding to Purchase Common Stock | Common Shares Issuable Upon Exercise of Outstanding Weighted-Average Creditor Warrants Warrants Exercise Price Outstanding December 31, 2021 39 $ 6.80 Issued — — Outstanding March 31, 2022 39 $ 6.80 Issued — — Outstanding June 30, 2022 39 $ 6.80 Issued 111 8.11 Outstanding September 30, 2022 150 $ 7.30 |
Schedule of Share Based Compensation, Stock Options Expense Recognized | Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Contractor options expense recognized $ 34 $ — $ 103 $ 9 Employee options expense recognized 1,853 917 3,260 2,830 Total option expense recognized $ 1,887 $ 917 $ 3,363 $ 2,839 |
Schedule of Share- Based Compensation Stock Options Activity | Number of Weighted-Average US Denominated Options Options (thousands) Exercise Price Outstanding at December 31, 2021 4,259 $ 5.13 Granted 200 5.64 Exercised (26) 0.58 Forfeited (382) 6.13 Outstanding at March 31, 2022 4,051 5.34 Granted 305 5.71 Exercised (19) 2.38 Outstanding at June 30, 2022 4,337 5.14 Granted 310 6.93 Exercised (151) 1.25 Forfeited (30) 5.59 Outstanding at September 30, 2022 4,466 $ 5.33 |
Fair values of options granted using weighted average assumptions | Valuation Assumptions Black-Scholes Model Assumptions September 30, 2022 Expected dividend 0.00% Risk free rate 1.18 - 4.11% Expected volatility 67 - 74% Expected life 5 - 6.0 years |
Schedule of Restricted Share Units Activity | Number of Restricted US Denominated RSUs Share Units (thousands) Outstanding at December 31, 2021 219 Awarded — Forfeited (88) Outstanding at March 31, 2022 131 Awarded — Released (8) Outstanding at June 30, 2022 123 Awarded — Released (20) Outstanding at September 30, 2022 103 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Fair Value Measurements | |
Schedule of Assets/Liabilities Measured at Fair Value on Recurring Basis | Fair Value Measurement at September 30, 2022 and December 31, 2021 (in thousands) Quoted Price in Active Market for Identical Significant Other Significant Instruments Observable Inputs Unobservable Inputs Level 1 Level 2 Level 3 Total 2022 2021 2022 2021 2022 2021 2022 2021 Assets Cash and cash equivalents 438 (1) 82 (1) 29,314 21,018 — — 29,752 21,100 Processa common shares — — 114 (2) 240 (2) — — 114 240 (1) The Company held approximately $438 in cash as of September 30, 2022, of which approximately $33 was in Canadian funds (translated into U.S. dollars). As of December 31, 2021, the Company held approximately $82 in cash of which approximately $34 was in Canadian funds (translated into U.S. dollars). (2) The Company holds 46 unrestricted common shares of Processa Pharmaceuticals, Inc. (NASDAQ:PCSA) (“Processa”). The Company received another 5 restricted common shares of Processa on October 20, 2022 which will become unrestricted one year after receipt. The Company originally applied a 20%, 30% and 40% liquidity discount to the shares and will mark to market at each balance sheet date. The Company will also adjust the liquidity discounts being applied to the share valuation to appropriately reflect the passage of time and the existence of any restrictions on the shares. Valuation of the shares at September 30, 2022 had a 0%, 0% and 15% liquidity discount applied to the 41, 5 and 5 share tranches, respectively. |
Term Loans (Tables)
Term Loans (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Term Loans | |
Schedule of aggregate annual payments | Aggregate annual payments due on the SPA as of September 30, 2022, are as follows: Years Ending December 31, Amount 2022 $ — 2023 — 2024 — 2025 — 2026 — 2027 25,000 Total future payments 25,000 Less: unamortized debt discount (312) Total term loan, net of debt discount $ 24,688 |
Nature of Business and Going _2
Nature of Business and Going Concern (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 23, 2022 USD ($) $ / shares shares | Aug. 19, 2022 USD ($) $ / shares shares | Aug. 01, 2022 USD ($) | Sep. 30, 2022 USD ($) $ / shares | Sep. 30, 2021 USD ($) | Sep. 30, 2022 USD ($) | Sep. 30, 2021 USD ($) | Dec. 31, 2021 USD ($) | |
Nature of Business and Going Concern [Line Items] | ||||||||
Loss from operations | $ 7,899 | $ 4,173 | $ 16,454 | $ 13,016 | ||||
Accumulated deficit | $ (196,343) | (196,343) | $ (179,486) | |||||
Cash flows from operating activities | $ (11,256) | $ (10,977) | ||||||
Exercise price of warrants issued | $ / shares | $ 8.11 | |||||||
Petrichor Financing | Securities Purchase Agreements | Convertible Note Borrowings | ||||||||
Nature of Business and Going Concern [Line Items] | ||||||||
Maximum borrowing capacity | $ 45,000 | |||||||
Commitment fee percentage | 2% | |||||||
Petrichor Financing | Securities Purchase Agreements | First Closing Note | ||||||||
Nature of Business and Going Concern [Line Items] | ||||||||
Borrowings, face amount | $ 5,000 | |||||||
Initial conversion price | $ / shares | $ 8.11 | |||||||
Premium over 5-day VWAP | 20% | |||||||
VWAP term | 5 days | |||||||
Commitment fees payable in warrants | 50% | |||||||
Common shares available through issuance of warrants | shares | 55,498 | |||||||
Exercise price of warrants issued | $ / shares | $ 8.11 | |||||||
Exercise term of warrants | 5 years | |||||||
Petrichor Financing | Securities Purchase Agreements | Second Closing Note | ||||||||
Nature of Business and Going Concern [Line Items] | ||||||||
Borrowings, face amount | $ 20,000 | |||||||
Initial conversion price | $ / shares | $ 7.89 | |||||||
Premium over 5-day VWAP | 20% | |||||||
VWAP term | 5 days | |||||||
Common shares available through issuance of warrants | shares | 55,498 | |||||||
Commitment fees payable in cash or warrants | 50% | |||||||
Petrichor Financing | Securities Purchase Agreements | Subsequent Closing Notes | ||||||||
Nature of Business and Going Concern [Line Items] | ||||||||
Initial conversion price | $ / shares | $ 7.89 | |||||||
Common shares available through issuance of warrants | shares | 55,498 | |||||||
Petrichor Financing | Securities Purchase Agreements | Subsequent Closing Notes | Minimum | ||||||||
Nature of Business and Going Concern [Line Items] | ||||||||
Remaining borrowing capacity | $ 10,000 | |||||||
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] | ||||||||
Remaining borrowing capacity | $ 20,000 | |||||||
Bridge Bank | Bridge Bank Term Loan | ||||||||
Nature of Business and Going Concern [Line Items] | ||||||||
Repayment of term loan | $ 5,000 |
Significant Accounting Polici_3
Significant Accounting Policies - Additional Information (Details) $ / shares in Units, shares in Thousands, $ in Thousands, $ in Thousands | Sep. 30, 2022 USD ($) $ / shares shares | Sep. 30, 2022 CAD ($) shares | Jun. 30, 2022 $ / shares shares | Mar. 31, 2022 $ / shares shares | Dec. 31, 2021 USD ($) $ / shares shares | Dec. 31, 2021 CAD ($) shares |
Summary Of Significant Accounting Policies [Line Items] | ||||||
Money market investments | $ 29,314 | |||||
Cash | 29,752 | $ 21,100 | ||||
FDIC insured amount | $ 250 | |||||
Warrants exercise price | $ / shares | $ 7.30 | $ 6.80 | $ 6.80 | $ 6.80 | ||
Class of Warrant or Right, Outstanding | shares | 150 | 150 | 39 | 39 | 39 | 39 |
Money Market Funds | ||||||
Summary Of Significant Accounting Policies [Line Items] | ||||||
Cash | $ 438 | $ 33 | $ 34 |
Significant Accounting Polici_4
Significant Accounting Policies - Revenue recognition (Details) shares in Thousands | 9 Months Ended |
Sep. 30, 2022 shares | |
Processa Pharmaceuticals, Inc | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |
Shares to be issued under agreement | 46 |
Loss per Share - Computation of
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, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2021 | Jun. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Numerator: | ||||||||
Net loss | $ (8,089) | $ (5,072) | $ (3,696) | $ (4,185) | $ (4,001) | $ (4,733) | $ (16,857) | $ (12,919) |
Denominator: | ||||||||
Weighted-average common shares, basic | 26,108 | 26,007 | 26,105 | 26,004 | ||||
Incremental dilutive shares | 0 | |||||||
Weighted-average common shares, dilutive | 26,108 | 26,007 | 26,105 | 26,004 | ||||
Basic net loss per common share | $ (0.31) | $ (0.16) | $ (0.65) | $ (0.50) | ||||
Diluted net loss per common share | $ (0.31) | $ (0.16) | $ (0.65) | $ (0.50) | ||||
Warrants | ||||||||
Denominator: | ||||||||
Dilutive effect of stock options | 0 | |||||||
Employee Options | ||||||||
Denominator: | ||||||||
Dilutive effect of stock options | 0 |
Loss per Share - Outstanding Op
Loss per Share - Outstanding Options and Warrants (Details) - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Employee Options | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 4,466 | 3,653 | 4,466 | 3,653 |
Warrants | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 150 | 39 | 150 | 39 |
Stockholders' Equity - Warrants
Stockholders' Equity - Warrants to Purchase Common Stock (Details) - $ / shares | 3 Months Ended | 9 Months Ended |
Sep. 30, 2022 | Sep. 30, 2022 | |
Stockholders' Equity | ||
Outstanding and exercisable at the beginning | 39,000 | 39,000 |
Issued | 111,000 | |
Outstanding and exercisable at the end | 150,000 | 150,000 |
Exercised | 0 | |
Weighted-Average Outstanding, beginning | $ 6.80 | $ 6.80 |
Issued | 8.11 | |
Weighted-Average Outstanding, end | $ 7.30 | $ 7.30 |
Stockholders' Equity - Recogniz
Stockholders' Equity - Recognized Contractor and Employee Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Recognized Employee Expense [Line Items] | ||||
Stock or Unit Option Plan Expense | $ 1,887 | $ 917 | $ 3,363 | $ 2,839 |
Contractor Option [Member] | ||||
Recognized Employee Expense [Line Items] | ||||
Stock or Unit Option Plan Expense | 34 | 103 | 9 | |
Employee Options | ||||
Recognized Employee Expense [Line Items] | ||||
Stock or Unit Option Plan Expense | $ 1,853 | $ 917 | $ 3,260 | $ 2,830 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Option Activity (Details) - $ / shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | |
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Number of Options Outstanding at Beginning | 4,337 | 4,051 | 4,259 | 4,259 |
Number of Options Granted | 310 | 305 | 200 | |
Number of Options Exercised | (151) | (19) | (26) | |
Number of Options Forfeited | (30) | (382) | ||
Number of Options Outstanding at Ending | 4,466 | 4,337 | 4,051 | 4,466 |
Stock Option In Us Dollars [Member] | ||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | ||||
Weighted-average Exercise Price outstanding at Beginning | $ 5.14 | $ 5.34 | $ 5.13 | $ 5.13 |
Weighted-average Exercise Price Granted | 6.93 | 5.71 | 5.64 | |
Weighted-average Exercise Price Exercised | 1.25 | 2.38 | 0.58 | |
Weighted-average Exercise Price Forfeited | 5.59 | 6.13 | ||
Weighted-average Exercise Price Outstanding at Ending | $ 5.33 | $ 5.14 | $ 5.34 | $ 5.33 |
Stockholders' Equity - Addition
Stockholders' Equity - Additional Information (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | Sep. 30, 2021 | Dec. 31, 2021 | Aug. 31, 2020 | |
Stockholders Equity Note [Line Items] | |||||||
Common stock, no par value | $ 0 | $ 0 | $ 0 | ||||
Options outstanding | 4,466 | 4,337 | 4,051 | 4,466 | 4,259 | ||
Exercise of options (in shares) | 151 | 19 | 26 | ||||
Number of stock options forfeited (in shares) | 30 | 382 | |||||
Number of Options Granted | 310 | 305 | 200 | ||||
Proceeds from issuance of stock options | $ 249 | $ 24 | |||||
Cash expense capitalized, warrant issues | 175 | ||||||
Non cash expense capitalized, warrant issues | $ 441 | ||||||
Equity Incentive Plan | |||||||
Stockholders Equity Note [Line Items] | |||||||
Exercise of options (in shares) | 151 | 196 | |||||
Number of Options Granted | 310 | 815 | |||||
Proceeds from issuance of stock options | $ 188 | $ 249 | |||||
Shares issuable under Stock Option Plan, as percent of shares outstanding | 25% | ||||||
Vesting period | 3 years | ||||||
Expiration term | 10 years | ||||||
Stock Option In Canadian Dollars [Member] | |||||||
Stockholders Equity Note [Line Items] | |||||||
Options outstanding | 0 | ||||||
Stock Option In Us Dollars [Member] | Equity Incentive Plan | |||||||
Stockholders Equity Note [Line Items] | |||||||
Options outstanding | 4,466 | 4,466 | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Exercisable, Number | 3,448 | 3,448 | |||||
U.S.dollars [Member] | |||||||
Stockholders Equity Note [Line Items] | |||||||
Class Or Warrant Or Right Outstanding Weighted Average Remaining Contractual Terms | 5 years 3 months 18 days | ||||||
Maximum | Equity Incentive Plan | |||||||
Stockholders Equity Note [Line Items] | |||||||
Shares issuable under Stock Option Plan | 6,559 | 6,559 |
Stockholders' Equity - Black Sc
Stockholders' Equity - Black Scholes Option Pricing Model (Details) | 9 Months Ended |
Sep. 30, 2022 | |
Expected dividend | 0% |
Minimum | |
Risk free rate | 1.18% |
Expected volatility | 67% |
Expected life | 5 years |
Maximum | |
Risk free rate | 4.11% |
Expected volatility | 74% |
Expected life | 6 years |
Stockholders Equity - Restricte
Stockholders Equity - Restricted Share Units Activity (Details) - Equity Incentive Plan - shares shares in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Sep. 30, 2022 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period | 3 years | |||
US Denominated RSU's | ||||
US Denominated RSU's | ||||
Outstanding at beginning of period | 123 | 131 | 219 | 219 |
Forfeited | (88) | (88) | ||
Released | 20 | 8 | 28 | |
Outstanding at end of period | 103 | 123 | 131 | 103 |
US Denominated RSU's | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period | 1 year | |||
US Denominated RSU's | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period | 3 years |
Fair Value Measurements - Asset
Fair Value Measurements - Assets/Liabilities Measured at Fair Value (Details) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Oct. 22, 2022 | Dec. 31, 2020 | Sep. 30, 2021 | Mar. 31, 2021 | Sep. 30, 2022 | Dec. 31, 2021 | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Cash and cash equivalents | $ 29,752 | $ 21,100 | ||||
Processa common shares | $ 114 | 240 | ||||
6 month interval | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Shares to be issued under agreement | 41 | |||||
Liquidity discount (as a percent) | 20% | 0% | ||||
9 month interval | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Shares to be issued under agreement | 5 | |||||
Liquidity discount (as a percent) | 30% | 0% | ||||
12 month interval | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Shares to be issued under agreement | 5 | |||||
Liquidity discount (as a percent) | 40% | 15% | ||||
Quoted Price in Active Markets for Identical Instruments Level 1 [Member] | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Cash and cash equivalents | $ 438 | 82 | ||||
Significant Other Observable Inputs Level 2 [Member] | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Cash and cash equivalents | 29,314 | 21,018 | ||||
Processa common shares | $ 114 | $ 240 | ||||
Processa Pharmaceuticals, Inc | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Shares to be issued under agreement | 46 | |||||
License agreement | Processa Pharmaceuticals, Inc | Restricted shares | 12 month interval | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Number of year after which shares will become unrestricted | 1 year | |||||
License agreement | Processa Pharmaceuticals, Inc | Forecast [Member] | Restricted shares | ||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||||
Shares to be issued under agreement | 5 |
Fair Value Measurements - Addit
Fair Value Measurements - Additional Information (Details) $ in Thousands, $ in Thousands | Sep. 30, 2022 USD ($) | Sep. 30, 2022 CAD ($) | Dec. 31, 2021 USD ($) | Dec. 31, 2021 CAD ($) |
Fair Value Assets and Liabilities Measured On Recurring Basis [Line Items] | ||||
Cash | $ 29,752 | $ 21,100 | ||
Quoted Price in Active Markets for Identical Instruments Level 1 [Member] | ||||
Fair Value Assets and Liabilities Measured On Recurring Basis [Line Items] | ||||
Cash | $ 438 | $ 33 | $ 82 | $ 34 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 1 Months Ended | ||
Jan. 23, 2020 | Sep. 30, 2021 | Sep. 30, 2022 | |
Rent expense | $ 1,000 | $ 400 | |
Security deposit | $ 2,000 | ||
Rostislav Raykov [Member] | |||
Severance Costs Payable In Case Of Termination Other Than For Cause | $ 513,000 | ||
Robert Andrade [Member] | |||
Severance Costs Payable In Case Of Termination Other Than For Cause | $ 186,000 |
Term Loans (Details)
Term Loans (Details) $ / shares in Units, $ in Thousands | 3 Months Ended | |||||
Sep. 30, 2022 USD ($) | Sep. 23, 2022 USD ($) $ / shares shares | Aug. 19, 2022 USD ($) $ / shares shares | Aug. 01, 2022 USD ($) | Sep. 30, 2022 USD ($) $ / shares | Dec. 31, 2021 USD ($) | |
Term Loans [Line Items] | ||||||
Exercise price of warrants issued | $ / shares | $ 8.11 | |||||
Debt discount | $ (312) | $ (312) | $ (12) | |||
Petrichor Financing | Securities Purchase Agreements | ||||||
Term Loans [Line Items] | ||||||
Debt issuance costs | 175 | 175 | ||||
Debt discount | (314) | (314) | ||||
Fair value warrants | $ 441 | $ 441 | ||||
Petrichor Financing | Securities Purchase Agreements | Convertible Note Borrowings | ||||||
Term Loans [Line Items] | ||||||
Maximum borrowing capacity | $ 45,000 | |||||
Commitment fee percentage | 2% | |||||
Cash interest accrual rate over Prime | 10.75% | 4.50% | ||||
Accrual rate, PIK interest | 9.75% | 3.50% | ||||
Petrichor Financing | Securities Purchase Agreements | First Closing Note | ||||||
Term Loans [Line Items] | ||||||
Borrowings, face amount | $ 5,000 | |||||
Initial conversion price | $ / shares | $ 8.11 | |||||
Premium over 5-day VWAP | 20% | |||||
VWAP term | 5 days | |||||
Commitment fees payable in warrants | 50% | |||||
Common shares available through issuance of warrants | shares | 55,498 | |||||
Exercise price of warrants issued | $ / shares | $ 8.11 | |||||
Exercise term of warrants | 5 years | |||||
Petrichor Financing | Securities Purchase Agreements | Second Closing Note | ||||||
Term Loans [Line Items] | ||||||
Borrowings, face amount | $ 20,000 | |||||
Initial conversion price | $ / shares | $ 7.89 | |||||
Premium over 5-day VWAP | 20% | |||||
VWAP term | 5 days | |||||
Common shares available through issuance of warrants | shares | 55,498 | |||||
Commitment fees payable in cash or warrants | 50% | |||||
Petrichor Financing | Securities Purchase Agreements | Subsequent Closing Notes | ||||||
Term Loans [Line Items] | ||||||
Initial conversion price | $ / shares | $ 7.89 | |||||
Common shares available through issuance of warrants | shares | 55,498 | |||||
Petrichor Financing | Securities Purchase Agreements | Subsequent Closing Notes | Minimum | ||||||
Term Loans [Line Items] | ||||||
Remaining borrowing capacity | $ 10,000 | |||||
Number of loan tranches for remaining borrowing capacity | 1 | |||||
Petrichor Financing | Securities Purchase Agreements | Subsequent Closing Notes | Maximum | ||||||
Term Loans [Line Items] | ||||||
Remaining borrowing capacity | $ 20,000 | |||||
Bridge Bank | Bridge Bank Term Loan | ||||||
Term Loans [Line Items] | ||||||
Repayment of term loan | $ 5,000 |
Term Loans - Aggregate annual p
Term Loans - Aggregate annual payments due on Term Loan (Details) - USD ($) $ in Thousands | Sep. 30, 2022 | Dec. 31, 2021 |
Aggregate annual payments due on Term Loan | ||
2027 | $ 25,000 | |
Total future payments | 25,000 | |
Less: unamortized debt discount | (312) | $ (12) |
Total term Loan | $ 24,688 |