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Home›Statement of Financial Accounting›FENNEC PHARMACEUTICALS INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

FENNEC PHARMACEUTICALS INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

By Thomas Heikkinen
May 12, 2022
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CAUTION

This section and other parts of this Quarterly Report on Form 10-Q contain
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, that involve risks and uncertainties.
Forward-looking statements provide current expectations of future events based
on certain assumptions and include any statement that does not directly relate
to any historical or current fact. Forward-looking statements can be identified
by words such as "future," "anticipates," "believes," "estimates," "expects,"
"intends," "plans," "predicts," "will," "would," "could," "can," "may," and
similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such
differences include, but are not limited to, those discussed in Part I, Item 1A
of the our Annual Report on Form 10-K for the year ended December 31, 2021 under
the heading "Risk Factors." We assume no obligation to revise or update any
forward-looking statements for any reason, except as required by law.

The following discussion should be read in conjunction with our Annual Report on
Form 10-K for the year ended December 31, 2021 and the condensed consolidated
financial statements and accompanying notes included elsewhere in this report.

Insight

Product candidate – PEDMARKTM

Our only product candidate in clinical development is:

PEDMARKTM (a unique formulation of sodium thiosulfate ("STS")). We have
announced results of two Phase 3 clinical trials for the prevention of cisplatin
induced hearing loss, or ototoxicity in children, including the pivotal Phase 3
study SIOPEL 6, "A Multicentre Open Label Randomised Phase 3 Trial of the
Efficacy of Sodium Thiosulfate in Reducing Ototoxicity in Patients Receiving
Cisplatin Chemotherapy for Standard Risk Hepatoblastoma," and the proof of
concept Phase 3 study in collaboration with the Children's Oncology Group ("COG
ACCL0431") "A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention
of Cisplatin-Induced Ototoxicity in Children". COG ACCL0431 final results were
published in the Lancet Oncology in 2016. SIOPEL 6 final results were published
in the New England Journal of Medicine in June 2018.

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

PEDMARKTM

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

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

In the U.S. and Europe, it is estimated that, annually, over 10,000 children may
receive platinum-based chemotherapy.  The incidence of ototoxicity depends upon
the dose and duration of chemotherapy. There is currently no established
preventive agent for this hearing loss and only expensive, technically difficult
and sub-optimal cochlear (inner ear) implants have been shown to provide some
benefit. Infants and young children that suffer ototoxicity at critical stages

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developmentally lack speech language development and literacy, and older children and adolescents lack social-emotional development and academic achievement.

In March 2018PEDMARKTM has received Breakthrough Therapy and Fast Track designations from the US Food and Drug Administration (“FDA”). In addition, PEDMARKTM has received orphan drug designation in the WE in this framework.

We initiated our rolling New Drug Application ("NDA") for PEDMARKTM for the
prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to
< 18 years of age with localized, non-metastatic, solid tumors with the FDA in
December 2018. We announced that we had submitted full completion of the NDA in
February 2020. The FDA set a Prescription Drug User Fee Act ("PDUFA") target
action date of August 10, 2020 for the completion of the FDA's review. On
August 10, 2020, we announced that we received a Complete Response Letter
("CRL") from the FDA regarding our NDA for PEDMARKTM, which identified
deficiencies in the third-party manufacturing facility that manufactures
PEDMARKTM on our behalf. Importantly, no clinical safety or efficacy issues were
identified during the review and there was no requirement for further clinical
data.

In May 2021, we announced the resubmission of our NDA for PEDMARKTM and in June
2021 we further announced that the FDA accepted for filing the resubmission of
our NDA and set a PDUFA target action date of November 27, 2021. On November 29,
2021, we announced that we received a CRL from the FDA regarding our NDA for
PEDMARKTM, which identified deficiencies in the third-party manufacturing
facility that manufactures PEDMARKTM on our behalf. In March 2022, we announced
the resubmission of our NDA for PEDMARKTM, and in April 2022, we further
announced that the FDA accepted for filing the resubmission of our NDA and set a
PDUFA target action date of September 23, 2022.

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

Clinical studies

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

SIOPEL 6

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

                                       20

Contents

The study was initiated in October 2007 initially in the United Kingdom and
completed enrollment at the end of 2014. 52 sites from 11 countries enrolled 109
evaluable patients. Under the terms of our agreement, SIOPEL conducted and
funded all clinical activities and we provided drug, drug distribution and
pharmacovigilance, or safety monitoring, for the study. SIOPEL 6 was completed
in December 2014 and the final results of SIOPEL 6 were published in The New
England Journal of Medicine in June 2018.

The main objectives of SIOPEL 6 were:

? To assess the effectiveness of STS in reducing hearing loss caused by

cisplatin.

? Carefully monitor any potential impact of STS on response to cisplatin and

   survival.


SIOPEL 6 - Results

Background / Objectives:

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

Design / Methods:

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

Results:

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

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  Table of Contents

     [[Image Removed: Chart

Description automatically generated]]

Conclusion :

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

COG ACCL0431

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

COG ACCL0431 – Results

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

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

Secondary endpoints included:

? Compare the evolution of average hearing thresholds.


 ? Compare incidence of other Grade 3/4 toxicities (renal and hematological).


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  Table of Contents

? Monitor event-free survival (EFS) and overall survival (OS) in two groups.

125 eligible subjects were enrolled with germ cell tumor (32), osteosarcoma (29), neuroblastoma (26), medulloblastoma/pnet (26), hepatoblastoma (7), or other (5). Of these, 104 subjects (64 men and 29

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

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

? The proportion of hearing loss for STS versus control was 28.6% (14/49) versus 56.4%

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

In a predefined subgroup of patients under 5 years of age with 29 eligible

? subjects: STS versus control was 21.4% (3/14) versus 73.3% (11/15), respectively

   (p=0.005).


Conclusions:

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

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

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

with serious adverse events attributed to its use.

? Other potential clinical uses will be informed by the final results of SIOPEL

   6 study.


Capital Funding

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

We generated a net loss of approximately $3.7 million for the three months ended
March 31, 2022, and a net loss of $4.7 million for the three months ended March
31, 2021. As of March 31, 2022, our accumulated deficit was approximately $183.2
million ($179.5 million at December 31, 2021).

We believe that our cash and cash equivalents as of March 31, 2022, which
totaled $18.3 million, plus the Bridge Bank Loan and Security Agreement, will be
sufficient to meet our cash requirements through at least the next twelve
months, including anticipated NDA approval and, if approved, the first
commercial launch of PEDMARKTM in the United States. Our projections of our
capital requirements are subject to substantial uncertainty, and more capital
than we currently anticipate may be required thereafter. To finance our
continuing operations, we may need to raise substantial additional funds through
either the sale of additional equity, the issuance of debt, the establishment of
collaborations that provide us with funding, the out-license or sale of certain
aspects of our intellectual property portfolio or from other sources. We may not
be able to raise the necessary capital, or such funding may not be available on
financially acceptable terms if at all. If we cannot obtain adequate funding in
the future, we might be required to further delay, scale back or eliminate
certain research and development studies, consider business combinations, or
even shut down some, or all, of our operations.

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

                                       23

Contents

expenses associated with employee compensation, stock-based compensation, professional fees, consulting fees, insurance and other administrative matters associated with supporting our drug development programs.

Operating results

Three months completed March 31, 2022 against three months ended March 31, 2021:

                                         Three Months Ended             Three Months Ended
In thousands of U.S. Dollars               March 31, 2022       %         March 31, 2021       %       Change
Revenue                                 $                  -           $                  -           $       -
Operating expenses:
Research and development                               1,437     41 %                 2,416     49 %      (979)
General and administration                             2,109     59 %                 2,507     51 %      (398)
Total operating expenses                               3,546    100 %                 4,923    100 %    (1,377)
Loss from operations                                 (3,546)                        (4,923)               1,377
Unrealized (loss)/gain on securities                    (91)               
            182               (273)
Other losses                                            (61)                            (8)                (53)
Amortization expense                                     (7)                              -                 (7)
Interest income                                            9                             16                 (7)
Net loss                                $            (3,696)           $            (4,733)           $   1,037


Research and development expenses decreased by $979 for the three months ended
March 31, 2022, compared to the same period in 2021. The Company's research and
development activities for the first three months of 2022 decreased as the
Company's efforts on a year over year basis were less focused on development and
shifted towards pre-commercialization activities. General and administrative
expenses decreased by $398 over same period in 2021 as select expenses
associated with pre-commercialization activities were previously done in 2021.

The Company holds shares of Processa (NASDAQ: PCSA) which are marked to market
each balance sheet date and unrealized gains or losses are recognized at that
time. The unrealized loss on those shares for the three months ended March 31,
2022 was $91. Other losses were driven mainly by interest expense and unrealized
losses related to the Company's foreign currency transactions. The Company has
vendors that transact in Euros, Great British Pounds and Canadian Dollars. There
was an increase of $52 in other losses for the three months ended March 31,
2022, compared to the same period in 2021. Amortization expense is also a
non-cash expense and relates to amortization of the deferred issuance cost of
the loan facilities with Bridge Bank. Amortization expense increased by $7 for
the three months ended March 31, 2022 compared to the same period in 2021. In
2022, the Company is amortizing the capitalized costs associated with the
renegotiated Bridge Bank loan facility. During the same period in 2020, the
Company had written off the remaining capitalized cost associated with the
former facility after it received the CRL from the FDA in August 2020. Interest
income was $7 lower for the three months ended March 31, 2022, compared to the
same period in 2021. This was driven mainly by lower average cash balances for
the three months ended March 31, 2022 compared to the same period in 2021.
                                       24

  Table of Contents

Quarterly Information
The following table presents selected condensed financial data for each of the
last eight quarters through March 31, 2022, as prepared under U.S. GAAP (U.S.
dollars in thousands, except per share information):

                                         Net Loss for the      Basic Net Loss per      Diluted Net Loss per
Period                                        Period              Common Share             Common Share
June 30, 2020                            $         (4,845)    $             (0.21)    $               (0.21)
September 30, 2020                                 (6,200)                  (0.24)                    (0.24)
December 31, 2020                                  (3,238)                  (0.13)                    (0.13)
March 31, 2021                                     (4,733)                  (0.18)                    (0.18)
June 30, 2021                                      (4,001)                  (0.15)                    (0.15)
September 30, 2021                                 (4,185)                  (0.16)                    (0.16)
December 31, 2021                                  (4,427)                  (0.18)                    (0.18)
March 31, 2022                                     (3,696)                  (0.14)                    (0.14)

Cash and capital resources

                                                               As of                 As of
Selected Asset and Liability Data (thousands):             March 31, 2022  
   December 31, 2021
Cash and equivalents                                      $         18,259    $            21,100
Other current assets                                                   869                  1,287
Current liabilities                                                  2,136                  1,654
Working capital (1)                                                 16,992                 20,733

(1) [Current assets – current liabilities]

Selected Equity:
Common stock and additional paid in capital                        194,463 
              194,015
Accumulated deficit                                              (183,182)              (179,486)
Shareholders' equity                                                12,524                 15,772


Cash and cash equivalents were $18,259 at March 31, 2022 and $21,100 at December
31, 2021. The decrease in cash and cash equivalents between March 31, 2022 and
December 31, 2021 is the result of expenses related to the development and
preparation of the NDA resubmission of PEDMARKTM and general and administrative
expenses, which was offset by minimal cash inflows of $15 from various option
exercises. There was a decrease of $418 in other current assets between March
31, 2022 and December 31, 2021. This is a result of a $249 decrease in deferred
charges related to the financing of our director and officer's insurance policy,
a $91 decrease in the value of Processa shares and an decrease in prepaid
expenses of $78.

Current liabilities increased primarily due to the timing of certain manufacturing and regulatory costs associated with the resubmission of the NDA PEDMARKTM.

Working capital decreased between December 31, 2021 and March 31, 2022 by
$3,741. The decrease relates to cash expenditures for operating activities for
the three months ended March 31, 2022, the recognition of $500 reclassification
of long-term debt to current liability, offset by the $15 cash inflow from
option exercises. The Company expects increases in cash outflows related to
pre-commercialization and commercialization activities in the coming quarters
upon potential NDA approval.

                                       25

  Table of Contents

The following table illustrates a summary of the cash flow data for the three-month periods of March 31, 2022 and 2021:

         Selected Cash Flow Data                  Three Months Ended March 

31,

    (dollars and shares in thousands)              2022                     

2021

Net cash used in operating activities        $        (2,856)               $ (3,593)
Net cash provided by investing activities                   -              

–

Net cash provided by financing activities                  15              
        -
Net cash flow                                $        (2,841)               $ (3,593)

Net cash used in operating activities for the three months ended March 31, 2022
primarily reflected a net loss of $3,696. The three month loss was adjusted for
the add back of non-cash items consisting of $433 in stock-based compensation
expense, with unrealized loss on securities of $91 and amortization expense of
$7 for the three months ended March 31, 2022. For the three months ended March
31, 2022, there was a net change in prepaid and other assets of $326; coupled
with a net decrease in current liabilities of $18 for the three months ended
March 31, 2022. Three month cash flows from operating activities were $2,856 and
$3,593, respectively, for the periods ended March 31, 2022 and 2021.  Net cash
provided by financing activities for the three months ended March 31, 2022 was
$15. There was no financing activity cash flows for the same period in 2021. Net
cash flows from the three month-periods ended March 31, 2022 and 2021, were
negative $2,841 and $3,593, respectively.

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

Outstanding Share Information

Our outstanding share data as of March 31, 2022 and December 31, 2021 was as
follows (in thousands):

                          March 31,     December 31,
Outstanding Share Type       2022           2021         Change
Common shares                 26,040           26,014        26
Warrants                          39               39         -
Stock options                  4,051            4,259     (208)
Total                         30,130           30,312     (182)


Financial Instruments

We invest excess cash and cash equivalents in high credit quality investments
held by financial institutions in accordance with our investment policy designed
to protect the principal investment. At March 31, 2022, we had approximately
$131 in our cash accounts and $18,128 in savings and money market
accounts. While we have never experienced any loss or write down of our money
market investments since our inception, the amounts we hold in money market
accounts are substantially above the $250 amount insured by the FDIC and may
lose value.

Our investment policy is to manage investments to achieve, in the order of
importance, the financial objectives of preservation of principal, liquidity and
return on investment. Investments may be made in U.S. or Canadian obligations
and bank securities, commercial paper of U.S. or Canadian industrial companies,
utilities, financial institutions and consumer loan companies, and securities of
foreign banks provided the obligations are guaranteed or carry ratings

                                       26

Contents

appropriate to the policy. Securities must have a minimum Dun & Bradstreet
rating of A for bonds or R1 low for commercial paper. The policy also provides
for investment limits on concentrations of securities by issuer and
maximum-weighted average time to maturity of twelve months. This policy applies
to all of our financial resources.

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

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

Research and Development

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

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

Research and development expenses for the three months ended March 31, 2022 was
$1,437. For the same period in 2021 research and development expense was $2,416.
We have decreased our research and development expenses related to PEDMARKTM as
our efforts have shifted to pre-commercialization activities after the NDA
resubmission in March 2022.

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

Significant Accounting Policies and Use of Estimates

A summary of our critical accounting policies and use of estimates are presented
in Part II, Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operation" of our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021 (filed February 28, 2022). There have been no material
changes to our critical accounting policies and use of estimates during the
three months ended March 31, 2022.

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