Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Caution Concerning Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing at the end of this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the sections entitled "Cautionary Note Regarding Forward-Looking Statements" and "Item 1A - Risk Factors" of this Annual Report, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

Fennec Pharmaceuticals Inc., a corporation existing under the laws of British Columbia, was originally formed under the name Adherex Technologies Inc. and subsequently changed its name on September 3, 2014. Fennec is a commercial stage specialty pharmaceutical company dedicated to preventing cisplatin-induced ototoxicity ("CIO"), a serious and often irreversible side effect of cancer treatment, with one FDA approved and European Commission approved product, PEDMARK^® in the U.S. and PEDMARQSI^®, which is the branded name for PEDMARK^® outside of the U.S. (collectively, "PEDMARK"), developed to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. The Company has four wholly owned subsidiaries: Oxiquant, Inc. and Fennec Pharmaceuticals, Inc., both Delaware corporations, Cadherin Biomedical Inc., a Canadian corporation, and Fennec Pharmaceuticals (EU) Limited, an Ireland company ("Fennec Limited"). With the exception of Fennec Pharmaceuticals, Inc., all subsidiaries are inactive. On September 20, 2022, we received approval from the FDA for PEDMARK^® (sodium thiosulfate injection). This approval makes PEDMARK^® the first and only treatment approved by the FDA in this area of significant unmet medical need. On October 17, 2022, we announced commercial availability of PEDMARK^® in the United States. Further, PEDMARQSI^® received European Commission Marketing Authorization in June 2023 and received U.K. approval in October 2023.

PEDMARK^® is currently the only FDA-approved therapy indicated to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. In clinical studies in this population, treatment with PEDMARK^® resulted in an approximate 50% relative reduction in the incidence of cisplatin-induced hearing loss compared to cisplatin alone, without evidence of materially compromised antitumor efficacy. PEDMARK^® is administered as a short intravenous infusion and has generally been associated with a mild-to-moderate and manageable safety profile consistent with its known pharmacology.

In March 2024, we announced that we entered into an agreement with Norgine, a leading European specialist pharmaceutical company. This is an exclusive licensing agreement under which Norgine will commercialize PEDMARQSI^® in Europe, Australia and New Zealand. PEDMARQSI^® is the first and only approved therapy in the EU and U.K. for the prevention of ototoxicity (hearing loss) induced by cisplatin chemotherapy in patients one month to eighteen years of age with localized, non-metastatic solid tumors. During 2025, Norgine made PEDMARQSI^® commercially available and expects additional launches to occur in 2026 and beyond.

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Under the terms of the Norgine licensing agreement, Fennec received approximately $43 million in upfront consideration and may receive up to approximately $230 million in additional commercial and regulatory milestone payments and double-digit tiered royalties (up to the mid-twenties) on net sales of PEDMARQSI^® in the licensed territories. To date, Fennec has not received any milestone payments. Norgine will be responsible for all commercialization activities in the licensed territories and will hold all marketing authorizations in the licensed territories.

In the United States, we sell our product through an experienced field force including Regional Pediatric Oncology Specialists and we utilize medical science liaisons within our medical team who help educate the medical communities and patients about CIO and our programs supporting patient access to PEDMARK^®.

Further, we have established Fennec HEARS^®, a comprehensive single source program designed to connect PEDMARK^® patients to both patient financial and product access support. The program offers assistance and resources, regardless of

insurance type, that can address co-pays or lack of coverage when certain eligibility requirements are met. Fennec HEARS^® also provides access to care coordinators that can answer insurance questions about coverage for PEDMARK^® and provide tips and resources for managing treatment.

We received Orphan Drug Exclusivity for PEDMARK^® in January 2023, which provides seven years of market exclusivity from its FDA approval on September 20, 2022, until September 20, 2029. We currently have six patents listed for PEDMARK^® in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations("FDA Orange Book"). In September 2022, the United States Patent and Trademark Office ("USPTO") issued Patent No. 11,291,728 (the "US '728 Patent"), in December 2022, the USPTO issued Patent No. 11,510,984 ("US '984 Patent") and in April 2023, the USPTO issued Patent No. 11,671,793 ("US '793 Patent") that covers PEDMARK^® pharmaceutical formulation. Further, additional issued patents included US 11,964,018 Patent (the "US '018 Patent) and US 11,992,530 Patent (the "US '530 Patent") and US 11,998,604 Patent (the "US '604 Patent") covering methods of using our PEDMARK^® product to reduce ototoxicity in a patient receiving a platinum based chemotherapeutic for the treatment of a cancer. The US '728, US '984, US '793, US '018, US '530, and US '604 Patents will expire in 2039. Additional patents covering PEDMARK^® formulation have been granted in Australia, Canada, the European Patent Office (EPO) (described further below), Hong Kong, Indonesia, Japan, Korea, Malaysia, Mexico, and Russia, and patent applications covering PEDMARK^® are pending in Brazil, China, the European Patent Office (EPO), Hong Kong, Israel, Korea, Mexico, New Zealand, Singapore, and Thailand. Patents covering alternative sodium thiosulfate formulations have been granted in the United States (US 12,311,026 (the "US '026 Patent"), Canada, Korea, Mexico, and Russia, and patent applications covering alternative sodium thiosulfate formulations are pending in the United States, Australia, the EPO, Hong Kong, Indonesia, Japan, Malaysia, Mexico, and New Zealand. Applications from these patent families, where granted, valid, and enforceable, will expire in July 2039, exclusive of any patent term adjustment or extension

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There can be no assurance that we do not or will not infringe on patents held by third parties or that third parties in the future will not claim that we have infringed on their patents. In the event that our product or technologies infringe or violate the patent or other proprietary rights of third parties, there is a possibility we may be prevented from pursuing product development, manufacturing or commercialization of our product until the underlying patent dispute is resolved. For example, there may be patents or patent applications held by others that contain claims that our product or operations might be determined to infringe or that may be broader than we believe them to be. Given the complexities and uncertainties of patent laws, there can be no assurance as to the impact that future patent claims against us may have on our business, financial condition, results of operations, or prospects.

PEDMARK^® Product Overview

PEDMARK^® has been studied by co-operative 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 childhood cancer patients typically treated with intensive cisplatin therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma, medulloblastoma, and other solid tumors. SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.

In the United States, PEDMARK® is the first and only therapy approved to mitigate the risk of ototoxicity associated with cisplatin in pediatric patients aged one month and older with localized, non-metastatic solid tumors. Further, the National Comprehensive Cancer Network (NCCN) recommended the use of PEDMARK^® to reduce the risk of cisplatin-induced ototoxicity in patients with localized, non-metastatic solid tumors (category 2A) for Adolescent and Young Adult (AYA) Oncology. As of January 2025, all medical compendia have incorporated Fennec's clinical updates, and AHFS, the largest online platform for pharmacists, has updated its content to reflect and differentiate PEDMARK^® in accordance with its labeling.

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PEDMARK^® is the first and only FDA- and EMA-approved agent designed to reduce the risk of CIO in pediatric patients with localized solid tumors. The strategic imperatives driving the execution of PEDMARK^®'s strategy include increasing awareness of unmet patient needs and emphasizing the importance of preventing CIO among oncologists. A key goal is to establish PEDMARK^® as the standard of care (SOC) for all CIO prevention. Additionally, efforts focus on expanding adoption beyond oncologists by ensuring healthcare providers (HCPs) gain confidence in and have positive experiences with PEDMARK^®. Ensuring seamless access for advocacy groups, payers, and providers is also a priority, along with activating patients and caregivers through disease education to drive demand for PEDMARK^®. Key activities supporting these objectives include an expanded sales team with a strong track record in both academic and community settings,

partnerships with group purchasing organizations, and specialty pharmacy offerings such as home infusions, white bag delivery, and direct billing. Furthermore, digital materials, a digital speaker bureau to engage pediatric oncologists, audiologists, nurses, and pharmacists, along with a patient access services hub and ongoing support from advocacy groups, are all integral components of the strategy.

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In the U.S. and Europe, Fennec estimates that there are approximately 11,400 pediatric patients with localized, non-metastatic solid tumors each year, of which include approximately 2,157 cisplatin-treated pediatric patients in the U.S. and 1,250 in Europe who fall within the current PEDMARK^® market. The incidence and severity of CIO depends on the cumulative dose and duration of chemotherapy. Many affected children ultimately require hearing aids or, in more severe cases, cochlear implants, which are costly, technically complex and do not fully restore normal hearing. PEDMARK^® is the first and only therapy approved in the U.S. to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors. Infants and young children who experience ototoxicity during critical developmental windows are at risk for impaired speech and language development and literacy, while older children and adolescents may face long-term challenges in academic performance, social-emotional development, career potential and independent living.​

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In the U.S., approximately 90% of pediatric cancer patients receive care at approximately 200 key pediatric hospital centers, including institutions within the Children's Oncology Group (COG), National Cancer Institute (NCI) and National Comprehensive Cancer Network (NCCN).​

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The Adolescent and Young Adult ("AYA") oncology patient is defined as an individual between 15 and 39 years of age at the time of initial cancer diagnosis. In the U.S., Fennec estimates that there are approximately 51,282 new AYA solid tumor cases annually, of which approximately 25,536 involve cisplatin-treated patients with localized, non-metastatic solid tumors. The most common relevant tumor types include germ cell tumors, testicular cancer, thyroid cancer and breast cancer. The U.S. AYA oncology treatment landscape spans both academic and community settings, with 72 NCI-designated academic centers treating roughly 20% of AYA oncology patients, while approximately 80% are managed across approximately 3,750 community oncology centers nationwide.

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CIO and Unmet Medical Need

Cisplatin is a cornerstone of modern cancer therapy for many pediatric and AYA solid tumors, with reported overall survival rates in some cisplatin-treated cancers exceeding 80%. However, cisplatin is associated with a high incidence of ototoxicity. Published data indicates that approximately 60% to 90% of cisplatin-treated patients may develop some degree of permanent, sensorineural hearing loss, with reported rates of 40% to 80% occurring in adults and 50% to 90% in children. CIO typically begins as bilateral, high-frequency hearing loss that is progressive and irreversible, occasionally accompanied by tinnitus. In some cases, it may ultimately require the use of hearing aids or cochlear implants.

Published literature has linked treatment-related hearing loss to impairments in speech and language development, reduced academic performance, challenges in social-emotional development, and enduring impacts on educational attainment, vocational opportunities, and independent living. Additionally, published research indicates that severe to profound early-onset hearing loss can impose a substantial lifetime economic burden, with per-individual costs estimated at approximately $489 and potentially exceeding $1,000 on an undiscounted basis, primarily due to lost productivity, educational expenses, and medical costs. These figures are derived from published literature regarding the disease burden of hearing loss and do not represent demonstrated health-economic outcomes specifically attributable to PEDMARK.

European Commission Marketing Authorization

PEDMARQSI^® (PEDMARK^® brand name in Europe) received European Commission Marketing Authorization in June 2023 and received U.K. approval in October 2023.

As previously noted, in March 2024, we entered into an agreement with Norgine, a leading European specialist pharmaceutical company. This is an exclusive licensing agreement under which Norgine will commercialize PEDMARQSI^® in Europe, Australia and New Zealand. PEDMARQSI^® is the first and only approved therapy in the EU and U.K. for the prevention of ototoxicity (hearing loss) induced by cisplatin chemotherapy in patients 1 month to < 18 years of age with localized, non-metastatic solid tumors.

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Under the terms of the licensing agreement, Fennec received approximately $43 million in upfront consideration and may receive up to approximately $230 million in additional commercial and regulatory milestone payments and double-digit tiered royalties on net sales of PEDMARQSI^® in the licensed territories up to the mid-twenties. To date, Fennec has not received any milestone payments. Norgine will be responsible for all commercialization activities in the licensed territories and will hold all marketing authorizations in the licensed territories.

In December 2024, PEDMARQSI^® received positive final draft guidance from the National Institute for Health and Care Excellence (NICE). Most recently, in 2025, Norgine launched PEDMARQSI^® in Germany and the U.K

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Distribution Agreement - Turkey and the Gulf Cooperation Council

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In 2025, we entered into a distribution agreement with Inpharmus for the commercialization of PEDMARK^® in Turkey and the GCC countries. Under this agreement, Inpharmus will be responsible for certain regulatory, commercialization and distribution activities in the covered territories, and we will supply PEDMARK^® and receive payments, subject to specified terms and conditions. Commercialization in these markets is subject to obtaining and maintaining necessary regulatory approvals and reimbursement, and there can be no assurance as to the timing or magnitude of future revenues, if any, from these territories.

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Japan: STS-J01 Investigator-Initiated Trial and Registration Plans

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In Japan, an independent investigator-initiated clinical trial, known as STS-J01, has been evaluating PEDMARK^® for the prevention of CIO. In December 2025, we announced positive topline results from this trial that demonstrated use of PEDMARK^® was associated with a significant reduction in the incidence of hearing loss compared to historically reported rates in patients receiving cisplatin alone, with no evidence of reduced antitumor activity and an approximate 95% clinical response rate. Based on these results, we are pursuing a regulatory registration strategy for PEDMARK^® in Japan and are evaluating partnering or licensing opportunities in that market, similar to our model with Norgine in Europe. Any such registration and partnering activities will be subject to applicable regulatory requirements and successful negotiations with potential partners.

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Investigator-Initiated Studies and Lifecycle Management

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In addition to our pivotal pediatric studies (SIOPEL6 and COG ACCL0431), we support a number of investigator-initiated and other clinical studies designed to further characterize the use of PEDMARK^® in additional tumor types and patient populations. For example, City of Hope, a U.S. cancer research and treatment organization, is conducting an investigator-initiated clinical trial evaluating PEDMARK^® in adult men with stage II-III metastatic testicular germ cell tumors receiving cisplatin-based chemotherapy. We also engage in medical affairs activities and data-generation initiatives to expand the clinical evidence base for PEDMARK^®, including in AYA and adult populations. These studies are exploratory in nature, and PEDMARK^® is not currently approved for use in metastatic cancers or adult populations outside of its labeled indication. Any potential label expansion will require additional clinical data and regulatory approvals.

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Commercial Infrastructure and Patient Support Programs

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During 2025, we significantly expanded our commercial infrastructure and patient support capabilities. Our Fennec HEARS^® program provides comprehensive education, access, and reimbursement assistance to patients and healthcare providers. The program includes:

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We have achieved formulary adoption at certain large oncology networks and academic institutions, with successful activations in both academic centers and community oncology practices occurring throughout 2025.

Results of Operations

Fiscal 2025 versus Fiscal 2024

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Net cash used in operating activities for the year ended December 31, 2025 was approximately $12,473, compared to net cash provided by operating activities of $26,980 for the year ended December 31, 2024. The decrease in operating cash flows was primarily attributable to the 2024 benefit from the licensing of the Norgine transaction, changes in working capital, including increases in accounts receivable and inventory and increases in accrued liabilities and other operating liabilities, partially offset by non-cash expenses such as stock-based compensation and amortization.

Net cash provided by financing activities for the year ended December 31, 2025 was approximately $22,627, compared to net cash used in financing activities of $13,615 for the year ended December 31, 2024. Cash provided by financing activities in 2025 was primarily attributable to net proceeds from equity financings, partially offset by repayments under the Company's debt arrangements, including amounts due under the Petrichor agreement, and lower proceeds from stock option exercises. Cash used in financing activities in 2024 primarily reflected repayments of debt and related fees, partially offset by proceeds from stock option exercises.

Net cash increased by approximately $10,154 during the year ended December 31, 2025, compared to an increase of approximately $13,365 during the year ended December 31, 2024.

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.

We had cash and cash equivalents of approximately $36,788 as of December 31, 2025. We currently anticipate that our available capital resources, including our existing cash and cash equivalents and the accounts receivable balances will be sufficient to meet our expected working capital and capital expenditure requirements as our business is currently conducted for at least the next 12 months.

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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 December 31, 2025, we had approximately $36,788 in our cash accounts and $33,716 in savings and money market accounts. While we have never experienced any loss or write down of our money market investments since our inception, the amounts we hold in money market accounts are substantially above the $250,000 amount insured by the FDIC and may lose value.

Our investment policy is to manage investments to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment. Investments may be made in U.S. or Canadian obligations and bank securities, commercial paper of U.S. or Canadian industrial companies, utilities, financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carry ratings appropriate to the policy. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The policy also provides for investment limits on concentrations of securities by issuer and maximum-weighted average time to maturity of twelve months. This policy applies to all of our financial resources. The policy risks are primarily the opportunity cost of the conservative nature of the allowable investments. Until the company is cash flow positive from operations, we have chosen to avoid investments of a trading or speculative nature.

We classify investments with original maturities at the date of purchase greater than three months which mature at or less than twelve months as current. We carry investments at their fair value with unrealized gains and losses included in other comprehensive income (loss); however, we have not held any instruments that were classified as short-term investments during the periods presented in this Annual Report.

On November 17, 2025, we completed an underwritten public offering of 5,367 of our common shares (including 700 common shares issued upon the underwriters' full exercise of their option to purchase additional shares) at a public offering price of $7.50 per share, for gross proceeds of approximately $40.25 million, before deducting underwriting discounts and offering expenses. Concurrently with the public offering in the United States, we completed a non-brokered private offering of our common shares in Canada to certain existing institutional shareholders at a price of $7.50 per share, for aggregate gross proceeds of approximately $5.025 million, before offering expenses.

We used a substantial portion of the net proceeds from the offering to redeem our outstanding debt obligations. The remaining net proceeds are intended to be used for working capital and other general corporate purposes.

Off-Balance Sheet Arrangements

Since our inception, we have not had any material off-balance sheet arrangements.

Contractual Obligations and Commitments

None, other than the severance amounts described in notes to our consolidated financial statements contained elsewhere in this Annual Report.

Critical Accounting Policies and Estimates

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

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. The following description of critical accounting policies, judgments and estimates should be read in conjunction with our December 31, 2025 consolidated financial statements.

Credit Losses

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The Company estimates and records a provision for its expected credit losses related to its trade receivables. The Company considers historical collection rates, the current financial status of its customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses. However, because of the short time to the expected receipt of accounts receivable, the Company believes that the carrying value, net of excepted losses, approximates fair value and therefore, relies more on historical and current analysis of its trade receivables.

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To determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of customer, as the Company determined that risk profile of its customers may vary based on certain characteristics such as credit history, past payment history and geography. Each class of customer component is analyzed for estimated credit losses individually. In doing so, the Company establishes a customer profile, based on the previous collections of accounts receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available. Further, the Company considers macroeconomic factors and the status of the life sciences industry to estimate if there are current expected credit losses within its trade receivables based on the trends and the Company's expectation of the future status of such economic and industry-specific factors. Also, specific allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability of default.

In addition to the quantitative information disclosed in Note 2, the allowance for credit losses on trade receivables is closely linked to the estimates and assumptions that underlie our gross-to-net deductions, including expected chargebacks,

rebates, co-pay assistance and other commercial and government discounts. Changes in payer mix and utilization trends could result in meaningful increases or decreases in the allowance for credit losses and related expense in future periods.

Revenue Recognition

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

Product Sales Discounts and Allowances

The Company records U.S. based revenues from product sales at the net sales price (transaction price), which includes estimates of variable consideration for which reserves are established primarily from discounts, chargebacks, rebates, co-pay assistance, returns and other allowances that are offered within contracts between the Company and its Customers, health care providers, payors and other indirect customers relating to the sales of its products. These reserves are based on the amounts to be claimed on the related sales and are classified as a contra-asset or a current liability. Where appropriate, these estimates take into consideration a range of possible outcomes that are probability-weighted for relevant factors such as current contractual and statutory requirements, specific known market events and trends, industry data, forecasted Customer buying and payment patterns, and the Company's historical experience that will develop over time as PEDMARK^® is the Company's first commercial product. Overall, these reserves reflect the Company's best estimates of the amount of consideration to which it is entitled based on the terms of its contracts. The amount of variable consideration that is included in the transaction price may be constrained, and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. Actual amounts of consideration ultimately received may differ from the Company's estimates. If actual results in the future vary from the Company's estimates, the Company will adjust these estimates, which would affect net product revenues and earnings in the period such variances become known.

The Company also utilizes select distributors to introduce its product into global markets. These distributors take on the function of shipping, storage, marketing and other services related to the sale of our product. We record distribution and other fees paid to these distributors as a reduction of revenue, unless the payment is for a distinct good or service from the customer and we can reasonably estimate the fair value of the goods or services received. If both conditions are met, we record the consideration paid to the distributor as an operating expense. These costs are typically known at the time of sale, resulting in minimal adjustments subsequent to the period of sale.

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License Agreements

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

If a license to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes the transaction price allocated to the license as revenue upon transfer of control of the license. All other promised goods or services in the agreement are evaluated to determine if they are distinct. If they are not distinct, they are combined with other promised goods or services to create a bundle of promised goods or services that is distinct. Optional future services where any additional consideration paid to the Company reflects their standalone selling prices do not provide the customer with a material right and, therefore, are not considered

performance obligations. If optional future services are priced in a manner which provides the customer with a significant or incremental discount, they are material rights, and are accounted for as separate performance obligations.

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

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

Stock-based Compensation

The calculation of the fair values of our stock-based compensation plans requires estimates that require management's judgments. Under ASC 718, the fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. The valuation models require assumptions and estimates to determine expected volatility, expected life, expected dividends and expected risk-free interest rates. The expected volatility was determined using historical volatility of our stock based on the contractual life of the award. The risk-free interest rate assumption was based on the yield on zero-coupon U.S. Treasury strips at the award grant date. We also used historical data to estimate forfeiture experience. In valuing options granted in the fiscal years ended December 31, 2025 and 2024, we used the following weighted average assumptions:

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Performance-based units

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For performance share units, the Company also makes significant estimates regarding the probability of achieving specified revenue-based performance milestones and recognizes compensation expense based on the grant-date fair value of the awards over the applicable performance period. The revenue performance milestones for the PSU awards granted in 2025 were achieved during the year, and the related compensation cost has been fully recognized as of December 31, 2025.

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Common shares and warrants

Common shares are recorded as the net proceeds received on issuance after deducting all share issuance costs and the relative fair value of investor warrants. Warrants are recorded at relative fair value and are deducted from the proceeds of common shares and recorded on the consolidated statements of shareholders' equity as additional paid-in capital.

Outstanding Share Information

Our outstanding comparative share data at December 31, 2025 and December 31, 2024 are as follows (in thousands):

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Newly Adopted and Recent Accounting Pronouncements

In December 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. The Company adopted ASU 2023-09 on January 1, 2025, on a prospective basis, and the adoption affected only the Company's income tax disclosures and did not have an impact on its consolidated results of operations, financial position or cash flows.

In November 2024, the FASB issued ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses," which requires disclosure of additional disaggregated information about significant expenses within relevant income statement captions, such as purchases of inventory, employee compensation, depreciation, amortization and depletion. The new guidance is effective for annual periods beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. We are currently evaluating the impact of this standard on our consolidated financial statements.

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In July 2025, the FASB issued ASU No. 2025-05, "Measurement of Credit Losses for Accounts Receivable and Contract Assets" ("ASU 2025-05"). The guidance in ASU 2025-05 amends ASC Topic 326, Financial Instruments-Credit Losses, to provide a practical expedient to simplify estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC Topic 606, Revenue from Contracts with Customers. The practical expedient, if elected, allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. The standard is effective for annual fiscal years beginning after December 15, 2025 and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. Entities that elect the practical expedient should apply the guidance prospectively. The Company is currently evaluating the impact that the adoption of ASU 2025-05 may have on its consolidated financial statements.

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