Press Release

Fortress Biotech Reports First Quarter 2018 Financial Results and Recent Corporate Highlights

Company Release - 5/10/2018 4:15 PM ET

NEW YORK, May 10, 2018 (GLOBE NEWSWIRE) -- Fortress Biotech, Inc. (NASDAQ:FBIO) (“Fortress”), a biopharmaceutical company dedicated to acquiring, developing and commercializing novel pharmaceutical and biotechnology products, today announced financial results and recent corporate highlights for the first quarter ended March 31, 2018.

Lindsay A. Rosenwald, M.D., Fortress’ Chairman, President and Chief Executive Officer, said, “We have made significant advancements in the four years since we created and implemented our unique and efficient business model to benefit all stakeholders. The centralization of a number of critical corporate and R&D functions at Fortress allows our subsidiaries, or “Fortress Companies,” to leverage internal synergies and minimize costs, so they can focus on getting drugs into the hands of people who need them. Our focus on continuing to build value through our strong business development engine and R&D team has led to the launch of nine development-stage subsidiaries, one specialty dermatology subsidiary and the in-licensing of more than 25 development-stage therapies since January 2014. The long-term success of our subsidiaries benefits Fortress through modest royalties on sales and annual and event-driven equity grants.”

Dr. Rosenwald added, “By offering investment opportunities to finance specific Fortress Companies, we enable investors to select more concentrated exposure in innovative therapeutic areas, like CAR-T therapy and checkpoint inhibitors. We have done just that in the 18 months since we completed a successful tender offer for the majority of shares in National Holdings Corporation. This unique relationship enables us to offer National Holdings’ clients the opportunity to invest in drug candidates across a range of developmental stages and therapeutic areas. We are pleased with our synergistic collaboration with National Holdings and the significant progress National Holdings has made in the past 18 months to transform its firm culture.”

Accomplishments since launch of Fortress business model in January 2014:

Research and development

  • Established 9 development-stage Fortress Companies in areas including CAR-T therapy, checkpoint inhibitors, gene therapy, rare diseases and pain management
  • Established Journey Medical Corporation, a specialty dermatology company with four marketed products (Targadox®, Ceracade®, Triderm™ and Luxamend®) and a contract sales and marketing operation of more than 30 professionals
  • In-licensed more than 25 development-stage programs across multiple therapeutic areas, which are currently in development at Fortress and the Fortress Companies
  • Established a 27,000 sq. foot CAR-T processing facility at UMass Medicine Science Park in Worcester, Massachusetts, to manufacture Mustang Bio’s CAR-T therapies

Corporate

  • Established a business development / search and evaluate team, and expanded headcount to approximately 20 employees
  • Built a corporate operations team (finance, accounting, legal, investor relations and human resources) of 15 employees and expanded manufacturing, quality, regulatory, clinical and R&D staff to 34 employees

Financial Results:

  • As of March 31, 2018, Fortress’ consolidated cash, cash equivalents, short-term investments (certificates of deposit), cash deposits with clearing organizations and restricted cash totaled $179.4 million, compared to $168.3 million as of December 31, 2017, an increase of $11.1 million for the quarter.
  • Net revenue totaled $55.4 million for the first quarter of 2018, compared to $44.7 million for the first quarter of 2017. Total revenue as of March 31, 2018, includes $5.9 million of Fortress revenue and $49.5 million of revenue from National Holdings. Total revenue as of March 31, 2017, included $2.8 million of Fortress revenue and $41.9 million of revenue from National Holdings.
  • Research and development expenses were $25.0 million for the first quarter of 2018, of which $22.8 million was related to Fortress Companies. This compares to $7.1 million for the first quarter of 2017, of which $5.4 million was related to Fortress Companies. Non-cash, stock-based compensation expenses included in research and development were $2.3 million for the first quarter of 2018, compared to $0.8 million for the first quarter of 2017.
  • Research and development expenses from license acquisitions totaled $0.1 million for the first quarter of 2018, compared to $1.3 million for the first quarter of 2017.
  • General and administrative expenses were $13.5 million for the first quarter of 2018, of which $8.4 million was related to Fortress Companies. This compares to $10.3 million for the first quarter of 2017, of which $6.7 million was related to Fortress Companies. Non-cash, stock-based compensation expenses included in general and administrative expenses were $2.5 million for the first quarter of 2018, compared to $2.1 million for the first quarter of 2017.
  • National Holdings’ operating expenses totaled $50.8 million for the first quarter of 2018, compared to $43.1 million for the first quarter of 2017.
  • Net loss attributable to common stockholders was $21.0 million, or $0.49 per share, for the first quarter of 2018, compared to a net loss attributable to common stockholders of $12.0 million, or $0.30 per share, for the first quarter of 2017.

Recent Fortress and Fortress Company Highlights:

Aevitas Therapeutics, Inc.

  • In January 2018, Aevitas entered into a sponsored research agreement with the laboratory of Guangping Gao, Ph.D., at the University of Massachusetts Medical School to evaluate construct optimization for Aevitas’ AAV gene therapy treatment for complement-mediated diseases.

Avenue Therapeutics, Inc.

  • In March 2018, Avenue received Notices of Allowance from the U.S. Patent and Trademark Office (“USPTO”) for three patent applications covering methods of administration for IV tramadol. Issuance of these patents is expected in the second quarter of 2018. 
  • In April 2018, Avenue completed enrollment in its Phase 3, multicenter, randomized, double-blind, three-arm clinical trial evaluating the efficacy and safety of IV tramadol 50 mg and 25 mg versus placebo for the treatment of moderate to moderately severe pain in patients following bunionectomy surgery. Avenue expects to report topline data in the second quarter of 2018.

Caelum Biosciences, Inc.

  • In March 2018, a new analysis of data from the Phase 1b trial of Caelum’s CAEL-101 (mAb 11-1F4) for the treatment of relapsed or refractory amyloid light chain (“AL”) amyloidosis was presented at the 16th International Symposium on Amyloidosis. The data demonstrated a correlation between a sustained decrease in N-terminal pro-brain natriuretic peptide (NT-proBNP) levels and an improvement in global longitudinal strain (“GLS”) following CAEL-101 treatment in patients with cardiac AL amyloidosis.

Checkpoint Therapeutics, Inc.

  • In March 2018, Checkpoint completed an underwritten public offering that raised net proceeds of $20.8 million.
  • Also in March 2018, Checkpoint completed the dose escalation portion of the ongoing Phase 1 trial of CK-301, a fully human anti-PD-L1 antibody, in selected recurrent or metastatic cancers, and initiated the first dose expansion cohort, which is evaluating an 800 mg dose of CK-301 administered every two weeks.
  • In April 2018, Checkpoint presented preclinical data on BET inhibitor CK-103 at the American Association for Cancer Research Annual Meeting. CK-103 demonstrated combinatorial effects in an in vivo model with anti-PD-1 antibodies, which may support the development of CK-103 as an anti-cancer agent alone and in combination with Checkpoint’s anti-PD-L1 antibody CK-301.

Mustang Bio, Inc.

  • In March 2018, Mustang announced that Sadik Kassim, Ph.D., was appointed Chief Scientific Officer, and Knut Niss, Ph.D., was named Chief Technology Officer.

National Holdings Corporation:

  • Fortress acquired approximately 57% of National Holdings Corporation (“National Holdings”) in September 2016.
  • Accomplishments since closing the tender include:
    • Established new client-focused leadership team at National Holdings and at its wholly-owned operating companies National Securities Corporation and National Asset Management, Inc.;
    • Invested in new technology infrastructure geared toward risk management and improved client performance; and
    • Continued to increase revenues, particularly in investment banking, as described in its Q1 10-Q, filed February 14, 2018.

About Fortress Biotech
Fortress is a biopharmaceutical company dedicated to acquiring, developing and commercializing novel pharmaceutical and biotechnology products. Fortress develops and commercializes products both within Fortress and through certain subsidiary companies, also known as Fortress Companies. In addition to its internal development programs, Fortress leverages its biopharmaceutical business expertise and drug development capabilities and provides funding and management services to help the Fortress Companies achieve their goals. Fortress and the Fortress Companies may seek licensing arrangements, acquisitions, partnerships, joint ventures and/or public and private financings to accelerate and provide additional funding to support their research and development programs. For more information, visit www.fortressbiotech.com.

Forward-Looking Statements
This press release may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include, but are not limited to, any statements relating to our growth strategy and product development programs and any other statements that are not historical facts. Forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and stock price. Factors that could cause actual results to differ materially from those currently anticipated include: risks relating to our growth strategy; our ability to obtain, perform under and maintain financing and strategic agreements and relationships; risks relating to the results of research and development activities; uncertainties relating to preclinical and clinical testing; risks relating to the timing of starting and completing clinical trials; our dependence on third-party suppliers; our ability to attract, integrate and retain key personnel; the early stage of products under development; our need for substantial additional funds; government regulation; patent and intellectual property matters; competition; as well as other risks described in our SEC filings. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as may be required by law.

Company Contact:
Jaclyn Jaffe
Fortress Biotech, Inc.
(781) 652-4500
ir@fortressbiotech.com

Investor Relations Contact:
Jeremy Feffer
Managing Director, LifeSci Advisors, LLC
(212) 915-2568
jeremy@lifesciadvisors.com

Media Relations Contact:
Laura Bagby
6 Degrees
(312) 448-8098
lbagby@6degreespr.com

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 ($ in thousands except for share and per share amounts)

  March 31,  December 31, 
  2018  2017 
  (Unaudited)    
ASSETS        
Current assets        
Cash and cash equivalents $124,020  $113,915 
Accounts receivable  8,314   7,758 
Short-term investments (certificates of deposit)  37,002   36,002 
Cash deposits with clearing organizations  1,041   1,041 
Receivables from broker-dealers and clearing organizations  8,464   7,395 
Forgivable loans receivable  1,534   1,616 
Securities owned, at fair value  4,278   1,985 
Inventory  222   171 
Other receivables - related party  944   618 
Prepaid expenses and other current assets  14,338   12,680 
Total current assets  200,157   183,181 
         
Property and equipment, net  12,278   9,513 
Restricted cash  17,387   17,387 
Long-term investments, at fair value  1,272   1,390 
Intangible assets  14,400   15,223 
Goodwill  18,645   18,645 
Other assets  936   611 
Total assets $265,075  $245,950 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities        
Accounts payable and accrued expenses $44,725  $36,127 
Accounts payable and accrued expenses - related party  124   222 
Accrued commissions and payroll payable  10,713   10,065 
Deferred clearing and marketing credits  733   786 
Securities sold, not yet purchased, at fair value  -   151 
Warrants issued - National  6,671   5,597 
Interest payable  332   315 
Interest payable - related party  657   669 
Notes payable, short-term (net of debt discount of $0 and $973 at March 31, 2018
and December 31, 2017, respectively)
  -   8,528 
Subsidiary convertible note, short-term, at fair value  12,651   4,700 
Deferred revenue  690   - 
Derivative warrant liability  78   87 
Other current liabilities  1,952   181 
Total current liabilities  79,326   67,428 
         
Notes payable, long-term (net of debt discount of $1,047 and $62 at March 31,
2018 and December 31, 2017, respectively)
  73,444   43,222 
Subsidiary convertible note, long-term, at fair value  -   10,059 
Other long-term liabilities  4,759   4,739 
Total liabilities  157,529   125,448 
         
Stockholders' equity        
Preferred stock, $.001 par value, 15,000,000 authorized, 5,000,000 designated
Series A shares 1,000,000 shares issued and outstanding as of March 31, 2018 and
December 31, 2017; liquidation value of $25.00 per share
  1   1 
Common stock, $.001 par value, 100,000,000 shares authorized, 52,686,537 and
50,991,285 shares issued and outstanding as of March 31, 2018 and December 31,
2017, respectively
  52   51 
Common stock issuable, 104,958 and 158,015 shares as of March 31, 2018 and
December 31, 2017, respectively
  489   500 
Additional paid-in-capital  374,254   364,148 
Accumulated deficit  (333,145)  (312,127)
Total stockholders' equity attributed to the Company  41,651   52,573 
         
Non-controlling interests  65,895   67,929 
Total stockholders' equity  107,546   120,502 
Total liabilities and stockholders' equity $265,075  $245,950 
         

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
 ($ in thousands except for share and per share amounts)
(Unaudited)

  Three Months Ended March 31, 
  2018  2017 
Revenue        
Fortress        
Product revenue, net $5,509  $2,085 
Revenue - from a related party  394   693 
Net Fortress revenue  5,903   2,778 
         
National        
Commissions  25,618   24,506 
Net dealer inventory gains  2,190   2,511 
Investment banking  12,704   7,061 
Investment advisory  5,333   3,385 
Interest and dividends  631   716 
Transfer fees and clearing services  2,297   2,498 
Tax preparation and accounting  523   856 
Other  226   371 
Total National revenue  49,522   41,904 
Net revenue  55,425   44,682 
         
Operating expenses        
Fortress        
Cost of goods sold - product revenue  1,472   469 
Research and development  24,958   7,110 
Research and development – licenses acquired  97   1,294 
General and administrative  13,548   10,252 
Total Fortress operating expenses  40,075   19,125 
         
National        
Commissions, compensation and fees  43,561   37,258 
Clearing fees  743   738 
Communications  760   722 
Occupancy  955   1,008 
Licenses and registration  637   405 
Professional fees  1,393   1,263 
Interest  2   4 
Underwriting costs  145   - 
Depreciation and amortization  859   506 
Other administrative expenses  1,781   1,230 
Total National operating expenses  50,836   43,134 
Total operating expenses  90,911   62,259 
Loss from operations  (35,486)  (17,577)
       
Other income (expenses)        
Interest income  284   136 
Interest expense and financing fee  (2,083)  (698)
Change in fair value of derivative liabilities  (1,065)  4,342 
Change in fair value of subsidiary convertible note  250   (97)
Change in fair value of investments  (118)  (668)
Total other income (expenses)  (2,732)  3,015 
         
Net loss  (38,218)  (14,562)
         
Less: net loss attributable to non-controlling interests  (17,200)  (2,580)
Net loss attributable to common stockholders $(21,018) $(11,982)
         
Basic and diluted net loss per common share $(0.49) $(0.30)
         
Weighted average common shares outstanding—basic and diluted  42,518,403   40,357,711 
         

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Source: Fortress Biotech, Inc.