FENNEC PHARMACEUTICALS INC.

On August 1, 2023, the Company entered into a second Office Service Agreement (the “Second Office Service Agreement”) with Regus to lease office space in Dublin, Ireland. Per the terms of the Second Office Service Agreement, the monthly rent payments are €2,000. The Company was required to pay a security deposit of €4,000, which is the equivalent of two months rent. The Second Office Service Agreement commenced on August 1, 2023 and terminates on January 31, 2025, thereafter the lease may continue on a month-to-month basis with either party being able to terminate the agreement by providing one months’ advance written notice of termination. This office agreement terminated on January 31, 2025.

• Regulatory approval of our product is time-consuming, expensive and uncertain, and could result in unexpectedly high expenses and delay our ability to sell our product in the U.S. and abroad.
• If our licenses to proprietary technology owned by others are terminated or expire, we may suffer increased development costs and delays, and we may not be able to successfully commercialize our product.
• If we are unable to adequately protect or maintain our patents and licenses related to our product, or if we infringe upon the intellectual property rights of others, we may not be able to successfully maintain commercial status of our product.
• If our third-party manufacturers breach or terminate their agreements with us, or if we are unable to secure arrangements with third party manufacturers on acceptable terms as needed in the future, we may suffer significant production delays and additional costs.
• We conduct our business internationally and are subject to laws and regulations of several countries which may affect our ability to access regulatory agencies and may affect the enforceability and value of our licenses.
• Geopolitical instability and armed conflicts in Turkey and the Middle East could disrupt our product distribution and sales and adversely affect our business.
• Our cash invested in money market funds might be subject to loss.
• With the clinical development process successfully completed in the United States, our ability to derive further revenues from the sale of PEDMARK® will depend upon our obtaining foreign regulatory approvals, which are subject to a number of unique risks and uncertainties.
• We have been in the past and may in the future be the target of securities litigation, which may be costly and time-consuming to defend.
• We have only recently transitioned from a development stage biopharmaceutical company to a commercial stage biopharmaceutical company, which may make it difficult for you to evaluate the success of our business to date and to assess our future viability.
• There are limitations on the liability of our directors, and we may have to indemnify our officers and directors in certain instances.
• Our business and operations could be adversely affected by the effects of health epidemics, like the recent COVID-19 pandemic.
• Natural disasters, epidemic or pandemic disease outbreaks, trade wars, political unrest or other events could disrupt our business or operations or those of our development partners, manufacturers, regulators or other third parties with whom we conduct business now or in the future.
• Because the target patient population for PEDMARK® is small, we must achieve significant market share and obtain relatively high per-patient prices for our product to achieve meaningful gross margins.
• We face a risk of product liability claims and may not be able to obtain adequate insurance.
• Business or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses.
• Risks Related to the Clinical Development and Marketing Approval of Our Product outside the United States
• The marketing approval processes of foreign authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain marketing approval for our product abroad, our business will be substantially harmed.
• Now that we have achieved marketing approval for our product in the United States, it will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Our product could be subject to labeling and other restrictions, and we may be subject to penalties and legal sanctions if we fail to comply with regulatory requirements or experience unanticipated problems with our approved product.
• Agencies like the FDA and national competition regulators in European countries regulate the promotion and uses of drugs not consistent with approved product labeling requirements. If we are found to have improperly promoted PEDMARK® for uses beyond those that are approved, we may become subject to significant liability.
• Our current and future relationships with healthcare professionals, investigators, consultants, collaborators, actual customers, potential customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to sanctions.
• The impact of recent healthcare reform legislation and other changes in the healthcare industry and healthcare spending on us is currently unknown and may adversely affect our business model.
• If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on our business, financial condition or results of operations.
• Our employees, sales agents and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.
• Risks Related to Commercialization of Our Product
• After regulatory approvals in the United States, European Union and other territories, the commercial success of our product will depend on market awareness and acceptance of our product.
• If the market opportunities for our product are smaller than we believe they are, then our revenues may be adversely affected, and our business may suffer.
• Coverage and reimbursement may be limited or unavailable in certain market segments for our product, which could make it difficult for us to sell our product profitably.
• We face substantial competition, which may result in others discovering, developing or commercializing products more successfully, than we do.
• Price controls may be imposed in foreign markets, which may adversely affect our future profitability.
• Rapid technological change could make our product obsolete.
• Risks Related to Government Regulation
• Enacted and future legislation or judicial action may increase the difficulty and cost for us to commercialize PEDMARK®
• In the United States, there have been a number of court cases, legislative and regulatory changes, and other potential changes relating to the healthcare system that restrict or regulate post-approval activities, which may affect our ability to profitably sell PEDMARK® or any other drug candidates for which we obtain marketing approval.
• Additionally, in response to controversies regarding pricing of drug products, there has been a recent push to propose legislation, both on state and federal levels, that would require greater disclosure as to the reasoning behind drug prices and, in some cases, could give state or federal-level commissions the right to impose cost controls on certain drugs. These and other new provisions are likely to continue the pressure on pharmaceutical pricing, may require us to modify our
• business practices with healthcare practitioners, and may also increase our regulatory burdens and operating costs. In that regard, the President and members of Congress in both parties have expressed concerns about high drug prices. However, whether and to what extent any such positions will result in changes of the law, and how any such changes could impact our business, cannot be determined at this time.
• If we fail to obtain or subsequently maintain orphan drug exclusivity or regulatory exclusivity for PEDMARK®, our competitors may sell products to treat the same conditions at greatly reduced prices, and our revenues would be significantly adversely affected.
• Even after an orphan drug is approved, the FDA can subsequently approve a drug for the same condition if the FDA concludes that the later drug is safer, more effective or makes a major contribution to patient care. The FDA can discontinue orphan drug exclusivity after it has been granted if the orphan drug cannot be manufactured in sufficient quantities to meet demand.
• Finally, there can be no assurance that the exclusivity provisions currently in the law may not be changed in the future and the impact of any such changes (if made) on us. The orphan drug exclusivity contained in the Orphan Drug Act has been the subject of recent scrutiny from the press, from some members of Congress and from some in the medical community. There can be no assurance that the exclusivity granted in the Orphan Drug Act to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change might affect our product.
• Changes to the Orphan Drug Act or successful legal challenges to the FDA’s interpretation of the Orphan Drug Act may affect our ability to obtain or subsequently maintain orphan drug exclusivity or affect the scope of orphan drug exclusivity for our product.
• There can be no assurance whether the exclusivity provisions in the Orphan Drug Act may be changed in the future and the impact of such changes, if made on us.
• The orphan drug exclusivity contained in the Orphan Drug Act has been the subject of recent scrutiny from the press, from some members of Congress and from some in the medical community. Furthermore, the FDA’s interpretations of the Orphan Drug Act have been successfully challenged in court and future court decisions could continue that trend. There can be no assurance that the exclusivity granted in the Orphan Drug Act to orphan drugs approved by the FDA will not be modified in the future, and as to how any such change might affect our product, if approved.
• Our operations and relationships with healthcare providers, healthcare organizations, customers and third-party payors are subject to applicable anti-bribery, anti-kickback, fraud and abuse, transparency and other healthcare laws and regulations, which could expose us to, among other things, enforcement actions, criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.
• •HIPAA, which imposes criminal and civil liability, prohibits, among other things, knowingly and willfully executing, or attempting to execute a scheme to defraud any healthcare benefit program, or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
• •the U.S. Foreign Corrupt Practices Act of 1977, as amended, which prohibits, among other things, U.S. companies and their employees and agents from authorizing, promising, offering, or providing, directly or indirectly, corrupt or improper payments or anything else of value to foreign government officials, employees of public international organizations and foreign government owned or affiliated entities, candidates for foreign political office, and foreign political parties or officials thereof;
• •analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, that may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; and
• If we or our collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions, which could affect our ability to develop, market and sell our product successfully and could harm our reputation and lead to reduced acceptance of our product by the market. These enforcement actions include not only civil and criminal penalties, but also exclusion from participation in government-funded healthcare programs, and exclusion from eligibility for the award of government contracts for our product.
• Risks Related to Third Parties
• We rely on third-party suppliers and other third parties for production of our product and our dependence on these third parties may impair the advancement of our research and development programs and the development of our product.
• We plan to rely on third parties to conduct clinical trials for our product. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be unable to obtain marketing approval for or commercialize our product outside of the United States.
• Our reliance on global distributors exposes us to risks related to nonperformance of key services, uncertainty of cash flow timing, and nonpayment for delivered goods.
• Risks Related to Our Intellectual Property
• Our commercial success will rely upon the strength of our patents to exclude competition.
• Our success will depend significantly on our ability to operate without infringing the patents and other proprietary rights of third parties.
• We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights.
• Our proprietary rights may not adequately protect our technologies and product.
• We may not be able to protect our intellectual property rights throughout the world.
• The patent protection for our product may expire before we are able to maximize their commercial value, which may subject us to increased competition and reduce or eliminate our opportunity to generate product revenue.
• Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
• We may become involved in lawsuits to protect our patents or other intellectual property rights, which could be expensive, time-consuming and ultimately unsuccessful.
• Third-party claims of intellectual property infringement or misappropriation may adversely affect our business and could impede our ability to profitably commercialize our product.
• Changes in United States patent law could diminish the value of patents in general, thereby impairing our ability to protect our product.
• Intellectual property rights do not address all potential threats to our competitive advantage.
• Confidentiality agreements with employees, consultants and others may not adequately prevent disclosure of trade secrets and protect other proprietary information.
• We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
• We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
• Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.
• Risks Related to Our Industry