UPDATE: Fennec Pharma (FENC) is Saving Pediatric Cancer Patients Hearing, Initiated with Buy at Craig-Hallum Ahead of Major Catalyst
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Craig-Hallum analyst Robin Garner initiates coverage on Fennec Pharmaceuticals Inc. (NASDAQ: FENC) with a Buy rating and a price target of $17.00 on the believe that the company offers a therapy promising to reduce hearing loss in children undergoing chemotherapy. Cisplatin use, the most common platinum-based chemotherapy, is known to cause irreversible hearing loss. Accumulation of drug can be found in the cochlea even years after treatment. As a result of treatment, at least 50% of children (~5k patients in US) have significant permanent hearing loss. Fennec is developing Pedmark (sodium thiosulfate; STS) that protects against oxidative stress and demonstrated a 48% reduction in risk of pediatric hearing loss and a 70% reduction in risk in patients under the age of 5. Does it work? Two Phase III studies showed significant reduction in Pt-induced hearing loss vs. placebo. EFS and OS data also showed that Pedmark did not significantly reduce chemotherapy efficacy while protecting against ototoxicity.
With no approved therapies to prevent against Pt-induced hearing loss and two compelling pediatric Phase III studies, the analyst applies a 75% Probability of Success (POS) and 15% discount rate for Pedmark to be approved and used in localized, non-metastatic pediatric tumors (70% or ~3.5k in US). Near term worldwide revenue could be $183M (probability adjusted to $137M) by 2024.
The company has run into issues though. After the company submitted an NDA it received a FDA complete response letter (CRL) in Aug 2020 identifying deficiencies at the third-party product manufacturing site, but not identifying ANY clinical safety or efficacy issues. The FDA also did not request further clinical data from FENC. This manufacturing delay caused the stock price to drop nearly 50% over a month and should prove to be an opportunity for investors to build positions prior to Fennec’s resubmission of the NDA in Q2 2021.
The analyst offers 5 reasons to Buy shares ahead of the resubmission:
- Compelling data show reduction in pediatric hearing loss.
- Only a fraction of the TAM is being modeled today. US revenue estimates are based on 1/3 market share assuming 3.5k non-metastatic pediatric patients. With cochlear implants costing $100k per ear, pricing of Pedmark could be $120k or more per patient, generating a $420M base case opportunity.
- No other therapies are approved or used off label to prevent Pt-induced hearing loss. Fennec is ahead of competitors in Phase Ib (DBTX) and preclinical POC studies (OTIC).
- Management has a history of success.
- With near-term commercialization and no clinical or safety issues identified by the FDA, FENC shares appear undervalued ahead of the resubmission in Q2 2021
The analyst stated "With the Company expecting to resubmit an NDA in Q2 2021, we believe now is the time to start building a position in Fennec (if you haven’t done so already). If the Company receives Priority Review again, we could see a PDUFA date as early as October 2021 with potential launch in Q4 2021."
Shares of Fennec Pharmaceuticals Inc. closed at $6.22 yesterday.
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