UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-35366

FORTRESS BIOTECH, INC.

(Exact name of registrant as specified in its charter)




Delaware	20-5157386
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1111 Kane Concourse Suite 301

Bay Harbor Islands, FL 33154

(Address including zip code of principal executive offices)

(781) 652-4500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Class	Trading Symbol(s)	Exchange Name
Common Stock	FBIO	Nasdaq Capital Market
9.375% Series A Cumulative Redeemable Perpetual Preferred Stock	FBIOP	Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:


Large accelerated filer	◻	Accelerated filer	◻
Non-accelerated filer	⌧	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒



Class of Stock		Outstanding Shares as of May 13, 2024
Common Stock, $0.001 par value		19,916,124
9.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value		3,427,138

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SUMMARY OF RISK FACTORS

Our business is subject to risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face. You should carefully consider these risk factors, the risk factors described in Item 1A, and the other reports and documents that we have filed with the Securities and Exchange Commission (“SEC”). As used below and throughout this filing (including in the risk factors described in Item 1A), the words “we”, “us” and “our” may refer to Fortress Biotech, Inc. individually, to one or more of its subsidiaries and/or partner companies, or to all such entities as a group, as dictated by context.

Risks Inherent in Drug Development

●

Many of our product candidates are in early development stages and are subject to time and cost intensive regulation and clinical testing, which may result in the identification of safety or efficacy concerns. As a result, our product candidates may never be successfully developed or commercialized.

●

Our competitors may develop treatments for our products’ target indications, which could limit our product candidates’ commercial opportunity and profitability.

Risks Pertaining to the Need for and Impact of Existing and Additional Financing Activities

●

We have a history of operating losses and expect such losses to continue in the future.

●

We have funded our operations in part through the assumption of debt, and the applicable lending agreements may restrict our operations. Further, the occurrence of any default event under an applicable loan document could adversely affect our business.

●

Our research and development (“R&D”) programs will require additional capital, which we may be unable to raise as needed and which may impede our R&D programs, commercialization efforts, or planned acquisitions.

●

If we raise additional capital by issuing equity, equity-linked securities or securities convertible into or exercisable for equity securities, our existing stockholders will be diluted.

Risks Pertaining to Our Existing Revenue Stream from Journey Medical Corporation (“Journey”)

●

Our operating income derives primarily from the sale of our partner company Journey’s dermatology products, particularly Qbrexza, Accutane, Amzeeq, Zilxi, Targadox, Luxamend, and Exelderm. Any issues relating to the manufacture, sale, utilization, or reimbursement of Journey’s products (including products liability claims) could significantly impact our operating results.

●

A significant portion of Journey’s sales derive from products that are without patent protection and/or are or may become subject to third party generic competition, the introduction of new competitor products, or an increase in market share of existing competitor products, any of which could have a significant adverse effect on our operating income. Three of Journey’s marketed products, Qbrexza, Amzeeq and Zilxi, as well as DFD-29, a modified release oral minocycline for the treatment of rosacea licensed from Dr. Reddy’s Laboratories, currently have patent protection. Four of Journey’s marketed products, Accutane, Targadox, Luxamend and Exelderm, do not have patent protection or otherwise are not eligible for patent protection. With respect to Journey products that are covered by valid claims of issued patents, such patents may be subject to invalidation, which would harm our operating income.

●

Continued sales and coverage, including formulary inclusion without the need for a prior authorization or step edit therapy, of our products for commercial sale will depend in part on the availability of reimbursement from third-party payors, including government payors. Third-party payors are increasingly examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy, and, accordingly, significant uncertainty exists as to the reimbursement status of current and newly approved therapeutics.

Risks Pertaining to our Business Strategy, Structure and Organization

●

We have entered, and will likely in the future enter, into certain collaborations or divestitures which may cause a reduction in our business’ size and scope, market share and opportunities in certain markets, or our ability to compete in certain markets and therapeutic categories.

●

We and our subsidiaries and partner companies have also entered into, and intend in the future to enter into, arrangements under which we and/or they have agreed to contingent dispositions of such companies and/or their assets. The failure to consummate any such transaction may impair the value of such companies and/or assets, and we may not be able to identify or execute alternative arrangements on favorable terms, if at all. The consummation of any such arrangements with respect to certain

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product candidates may also result in our eligibility to receive a lower portion of sales (if any) of resulting approved products than if we had developed and commercialized such products ourselves.

●

Our growth and success depend on our acquiring or in-licensing products or product candidates and integrating such products into our businesses.

●

We may act as guarantor and/or indemnitor of certain obligations of our subsidiaries and partner companies, which could require us to pay substantial amounts based on the actions or omissions of said entities.

Risks Pertaining to Reliance on Third Parties

●

We rely heavily on third parties for several aspects of our operations, including manufacturing and developing product candidates, conducting clinical trials, and producing commercial product supply. Such reliance on third parties reduces our ability to control every aspect of the drug development process and may hinder our ability to develop and commercialize our products in a cost-effective and timely manner.

Risks Pertaining to Intellectual Property and Potential Disputes with Licensors Thereof

●

If we are unable to obtain and maintain patent protection for our technologies and products, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies and products similar or identical to ours, and our ability to successfully commercialize our technologies and products may be impaired.

●

We or our licensors may be subject to costly and time-consuming litigation for infringement of third-party intellectual property rights or to enforce our or our licensors’ patents.

●

Any dispute with our licensors may affect our ability to develop or commercialize our product candidates.

Risks Pertaining to Generic Competition and Paragraph IV Litigation

●

Generic drug companies may submit applications seeking approval to market generic versions of our products.

●

In connection with these applications, generic drug companies may seek to challenge the validity and enforceability of our patents through litigation and/or with the United States Patent and Trademark Office (“PTO”). Such challenges may subject us to costly and time-consuming litigation and/or PTO proceedings.

●

As a result of the loss of any patent protection from such litigation or PTO proceedings, or the “at-risk” launch by a generic competitor of our products, our products could be sold at significantly lower prices, and we could lose a significant portion of product sales in a short period of time, which could adversely affect our business, financial condition, operating results and prospects.

Risks Pertaining to the Commercialization of Product Candidates

●

If our product candidates, if approved, are not broadly accepted by the healthcare community, the revenues from any such products are likely to be limited.

●

We may not obtain the desired product labels or intended uses for product promotion, or favorable scheduling classifications desirable to successfully promote our products.

●

Even if a product candidate is approved, it may be subject to various post-marketing requirements, including studies or clinical trials, the results of which could cause such products to later be withdrawn from the market.

●

Any successful products liability claim related to any of our current or future product candidates may cause us to incur substantial liability and limit the commercialization of such products.

Risks Pertaining to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries

●

We operate in a heavily regulated industry, and we cannot predict the impact that any future legislation or administrative or executive action may have on our operations.

General and Other Risks

●

We have previously failed to satisfy certain continued listing rules of The Nasdaq Stock Market LLC (“Nasdaq”), and if we again are unable to meet the continued listing requirements, our Common Stock and Preferred Stock may be subject to delisting from The Nasdaq Capital Market if we are unable to regain compliance with such rules. The delisting of our Securities from the Nasdaq may decrease the market liquidity and market price of our Common Stock and Preferred Stock.

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PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

($ in thousands except for share and per share amounts)


	March 31,		December 31,
	2024		2023

ASSETS
Current assets
Cash and cash equivalents	$	83,774	$	80,927
Accounts receivable, net		9,799		15,222
Inventory		10,580		10,206
Other receivables - related party		324		167
Prepaid expenses and other current assets		12,071		10,500
Total current assets		116,548		117,022

Property, plant and equipment, net		6,128		6,505
Operating lease right-of-use asset, net		16,462		16,990
Restricted cash		2,063		2,438
Intangible assets, net		19,473		20,287
Other assets		3,971		4,284
Total assets	$	164,645	$	167,526

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities
Accounts payable and accrued expenses	$	76,379	$	73,562
Income taxes payable		843		843
Common stock warrant liabilities		689		886
Operating lease liabilities, short-term		2,601		2,523
Partner company convertible preferred shares, short-term, net		4,021		3,931
Partner company installment payments - licenses, short-term, net		3,000		3,000
Other short-term liabilities		163		163
Total current liabilities		87,696		84,908

Notes payable, long-term, net		61,420		60,856
Operating lease liabilities, long-term		17,619		18,282
Other long-term liabilities		1,847		1,893
Total liabilities		168,582		165,939

Commitments and contingencies (Note 14)

Stockholders’ equity (deficit)
Cumulative redeemable perpetual preferred stock, $0.001 par value, 15,000,000 authorized, 5,000,000 designated Series A shares, 3,427,138 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively, liquidation value of $25.00 per share		3		3
Common stock, $0.001 par value, 200,000,000 shares authorized, 19,375,343 and 15,093,053 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		19		15
Additional paid-in-capital		733,290		717,396
Accumulated deficit		(710,287)		(694,870)
Total stockholders' equity attributed to the Company		23,025		22,544

Non-controlling interests		(26,962)		(20,957)
Total stockholders' equity (deficit)		(3,937)		1,587
Total liabilities and stockholders' equity (deficit)	$	164,645	$	167,526

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

($ in thousands except for share and per share amounts)


	Three Months Ended March 31,
	2024		2023
Revenue
Product revenue, net	$	13,030	$	12,165
Collaboration revenue		—		181
Revenue - related party		—		35
Other revenue		—		48
Net revenue		13,030		12,429

Operating expenses
Cost of goods sold - product revenue		6,816		6,449
Research and development		24,839		35,276
Research and development - licenses acquired		—		4,230
Selling, general and administrative		17,941		25,341
Total operating expenses		49,596		71,296
Loss from operations		(36,566)		(58,867)

Other income (expense)
Interest income		833		1,036
Interest expense and financing fee		(2,602)		(4,296)
Gain (loss) on common stock warrant liabilities		(667)		6,678
Other income (expense)		(21)		304
Total other income (expense)		(2,457)		3,722
Net loss		(39,023)		(55,145)

Net loss attributable to non-controlling interests		23,606		33,608
Net loss attributable to Fortress	$	(15,417)	$	(21,537)

Net loss attributable to common stockholders	$	(17,731)	$	(23,545)

Net loss per common share attributable to common stockholders - basic and diluted	$	(1.03)	$	(3.47)

Weighted average common shares outstanding - basic and diluted		17,151,945		6,792,376

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

($ in thousands except for share amounts)

For the Three Months Ended March 31, 2024



	Series A Perpetual												Total
	Preferred Stock			Common Stock			Paid-In		Accumulated		Non-Controlling		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Interests		Equity (Deficit)
Balance as of December 31, 2023	3,427,138	$	3	15,093,053	$	15	$	717,396	$	(694,870)	$	(20,957)	$	1,587
Stock-based compensation expense	—		—	—		—		4,857		—		—		4,857
Issuance of common stock related to equity plans	—		—	461,468		—		—		—		—		—
Issuance of common stock for public offering, net				3,303,305		4		10,115						10,119
Issuance of common stock for at-the-market offering, net	—		—	462,200		—		894		—		—		894
Common shares issued for dividend on partner company's convertible preferred shares	—		—	37,817		—		68		—		—		68
Preferred A dividends declared and paid	—		—	—		—		(2,008)		—		—		(2,008)
Partner companies' offerings, net	—		—	—		—		12,636		—		—		12,636
Partner company’s at-the-market offering, net	—		—	—		—		1,484		—		—		1,484
Issuance of common stock under partner company’s ESPP	—		—	—		—		133		—		—		133
Partner company’s dividends declared and paid	—		—	—		—		(176)		—		—		(176)
Partner companies' proceeds from options and warrants, net	—		—	—		—		5,461		—		—		5,461
Exercise of warrants for cash	—		—	17,500		—		30		—		—		30
Non-controlling interest in partner companies	—		—	—		—		(17,600)		—		17,600		—
Net loss attributable to non-controlling interest	—		—	—		—		—		—		(23,605)		(23,605)
Net loss attributable to common stockholders	—		—	—		—		—		(15,417)		—		(15,417)
Balance as of March 31, 2024	3,427,138	$	3	19,375,343	$	19	$	733,290	$	(710,287)	$	(26,962)	$	(3,937)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity

($ in thousands except for share amounts)

For the Three Months Ended March 31, 2023


	Series A Perpetual												Total
	Preferred Stock			Common Stock			Paid-In		Accumulated		Non-Controlling		Stockholders’
	Shares	Amount		Shares	Amount		Capital		Deficit		Interests		Equity
Balance as of December 31, 2022	3,427,138	$	3	7,366,283	$	7	$	675,944	$	(634,233)	$	8,304	$	50,025
Stock-based compensation expense	—		—	—		—		4,731		—		—		4,731
Issuance of common stock related to equity plans	—		—	178,341		—		—		—		—		—
Issuance of common stock for public offering, net	—		—	1,109,526		1		13,193		—		—		13,194
Issuance of common stock for at-the-market offering, net	—		—	40,326		—		447		—		—		447
Preferred A dividends declared and paid	—		—	—		—		(2,008)		—		—		(2,008)
Partner company’s offering, net	—		—	—		—		7,518		—		—		7,518
Partner company’s dividends declared and paid	—		—	—		—		(186)		—		—		(186)
Issuance of partner company’s common shares for research and development expenses	—		—	—		—		1,230		—		—		1,230
Non-controlling interest in partner companies	—		—	—		—		(7,314)		—		7,314		—
Net loss attributable to non-controlling interest	—		—	—		—		—		—		(33,608)		(33,608)
Net loss attributable to common stockholders	—		—	—		—		—		(21,537)		—		(21,537)
Balance as of March 31, 2023	3,427,138	$	3	8,694,476	$	8	$	693,555	$	(655,770)	$	(17,990)	$	19,806

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

($ in thousands)


	Three Months Ended March 31,
	2024		2023
Cash Flows from Operating Activities:
Net loss	$	(39,023)	$	(55,145)
Reconciliation of net loss to net cash used in operating activities:
Depreciation expense		377		844
Bad debt expense		6		126
Amortization of debt discount		609		644
Accretion of partner company convertible preferred shares		45		198
Non-cash interest		—		91
Amortization of acquired intangible assets		814		1,069
Reduction in the carrying amount of operating lease right-of-use assets		528		524
Stock-based compensation expense		4,857		4,731
Loss on partner company warrant issuance		574		—
Common shares issued for dividend on partner company's convertible preferred shares		68		—
Change in fair value of partner companies' warrant liabilities		93		(6,678)
Research and development - licenses acquired, expense		—		4,230
Increase (decrease) in cash and cash equivalents resulting from changes in operating assets and liabilities:
Accounts receivable		5,417		466
Inventory		(374)		881
Other receivables - related party		(157)		(498)
Prepaid expenses and other current assets		(1,571)		1,199
Other assets		313		30
Accounts payable and accrued expenses		2,668		4,774
Deferred revenue		—		(181)
Lease liabilities		(585)		(478)
Other long-term liabilities		(46)		(47)
Net cash used in operating activities		(25,387)		(43,220)

Cash Flows from Investing Activities:
Acquisition of VYNE products		—		(5,000)
Net cash used in investing activities		—		(5,000)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

($ in thousands)


	Three Months Ended March 31,
	2024		2023
Cash Flows from Financing Activities:
Payment of Series A perpetual preferred stock dividends	$	(2,008)	$	(2,008)
Proceeds from issuance of common stock for public offering, net		10,119		13,325
Proceeds from issuance of common stock for at-the-market offering, net		894		447
Exercise of warrants for cash		30		—
Proceeds from partner companies' ESPP		133		—
Partner company’s dividends declared and paid		(176)		(186)
Proceeds from partner companies' sale of stock and warrants, net		12,786		9,905
Proceeds from partner companies' at-the-market offering, net		1,484		—
Proceeds from partner company convertible preferred shares, net		—		652
Proceeds from exercise of partner companies’ options and warrants, net		4,597		—
Proceeds from partner company's line of credit		—		28,000
Repayment of partner company's line of credit		—		(27,948)
Net cash (used in) provided by financing activities		27,859		22,187
Net increase (decrease) in cash and cash equivalents and restricted cash		2,472		(26,033)
Cash and cash equivalents and restricted cash at beginning of period		83,365		180,954
Cash and cash equivalents and restricted cash at end of period	$	85,837	$	154,921

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,658	$	2,885
Cash paid (refunded) for income taxes	$	—	$	(104)

Supplemental disclosure of non-cash financing and investing activities:
Settlement of restricted stock units into common stock	$	—	$	3
Unpaid fixed assets	$	—	$	18
Unpaid partner company’s offering cost	$	150	$	156
Partner company derivative warrant liability associated with partner company convertible preferred shares	$	—	$	33
Prepaid public offering cost	$	—	$	94
Unpaid public offering cost	$	—	$	37

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

1. Organization and Description of Business

Fortress Biotech, Inc. (“Fortress” or the “Company”) is a biopharmaceutical company focused on acquiring and advancing assets to enhance long-term value for shareholders through product revenue, equity holding and dividend and royalty revenue streams. Fortress works in concert with its extensive network of key opinion leaders to identify and evaluate promising products and product candidates for potential acquisition. The Company has executed such arrangements in partnership with some of the world’s foremost universities, research institutes and pharmaceutical companies, including City of Hope National Medical Center (“COH” or “City of Hope”), Fred Hutchinson Cancer Center, Dana-Farber Cancer Institute, Nationwide Children’s Hospital, Cincinnati Children’s Hospital Medical Center, Columbia University, the University of Pennsylvania, AstraZeneca plc and Dr. Reddy’s Laboratories, Ltd.

Following the exclusive license or other acquisition of the intellectual property underpinning a product or product candidate, Fortress leverages its business, scientific, regulatory, legal and finance expertise to help the partners achieve their goals. Partner and subsidiary companies then assess a broad range of strategic arrangements to accelerate and provide additional funding to support research and development, including joint ventures, partnerships, out-licensings, sales transactions, and public and private financings. To date, four partner companies are publicly-traded, and three have consummated strategic partnerships with industry leaders, including AstraZeneca plc as successor-in-interest to Alexion Pharmaceuticals, Inc. (“AstraZeneca”) and Sentynl Therapeutics, Inc. (“Sentynl”).

Our subsidiaries and partner companies that are pursuing development and/or commercialization of biopharmaceutical products and product candidates are: Avenue Therapeutics, Inc. (Nasdaq: ATXI, “Avenue”), Baergic Bio, Inc. (“Baergic”, a subsidiary of Avenue), Cellvation, Inc. (“Cellvation”), Checkpoint Therapeutics, Inc. (Nasdaq: CKPT, “Checkpoint”), Cyprium Therapeutics, Inc. (“Cyprium”), Helocyte, Inc. (“Helocyte”), Journey Medical Corporation (Nasdaq: DERM, “Journey” or “JMC”), Mustang Bio, Inc. (Nasdaq: MBIO, “Mustang”), Oncogenuity, Inc. (“Oncogenuity”) and Urica Therapeutics, Inc. (“Urica”).

As used throughout this filing, the words “we”, “us” and “our” may refer to Fortress individually, to one or more of its subsidiaries and/or partner companies, or to all such entities as a group, as dictated by context. Generally, “subsidiary” refers to a private Fortress subsidiary, “partner company” refers to a public Fortress subsidiary, and “partner” refers to an entity with whom one of the foregoing parties has a significant business relationship, such as an exclusive license or an ongoing product-related payment obligation. The context in which any such term is used throughout this document, however, may dictate a different construal from the foregoing.

Liquidity and Capital Resources

Since inception, the Company’s operations have been financed primarily through the sale of equity and debt securities, from the sale of subsidiaries/partner companies, and the proceeds from the exercise of warrants. The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur substantial losses for the next several years as it continues to fully develop and prepare regulatory filings and obtain regulatory approvals for its existing and new product candidates. The parent Company’s current cash and cash equivalents of $43.9 million are sufficient to fund the parent entity and private subsidiary operations for at least the next 12 months. However, the Company will need to raise additional funding through strategic relationships, public or private equity or debt financings, sale of partner companies, grants or other arrangements to develop and prepare regulatory filings and obtain regulatory approvals for the existing and new product candidates, fund operating losses, and, if deemed appropriate, establish or secure through third parties manufacturing for the potential products, sales and marketing capabilities. If such funding is not available or not available on terms acceptable to the Company, the Company’s current development plans and plans for expansion of its general and administrative infrastructure may be curtailed. Fortress also has the ability, subject to limitations imposed by Rule 144 of the Securities Act of 1933 and other applicable laws and regulations, to raise money from the sale of common stock of the public companies in which it has ownership positions.

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FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

The following table provides a reconciliation of cash, cash equivalents, and restricted cash from the unaudited condensed consolidated balance sheets to the unaudited condensed consolidated statements of cash flows as of the dates presented:


	March 31,
	2024		2023
Cash and cash equivalents	$	83,774	$	152,483
Restricted cash		2,063		2,438
Total cash and cash equivalents and restricted cash	$	85,837	$	154,921

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2023 Form 10-K.

Recently Issued Accounting Pronouncements

Accounting Standards Note Yet Adopted

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires that an entity report segment information in accordance with Topic 280, Segment Reporting. The amendment in the ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact of the new standard on its financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that this guidance will have on its financial statements and disclosures.

3. Asset Purchase Agreements

Mustang

Agreements with uBriGene (Boston) Biosciences, Inc. (“uBriGene”)

On May 18, 2023, Mustang entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with uBriGene, as amended by a first amendment thereto, dated June 29, 2023, and further amended by a second amendment thereto, dated as of July 28, 2023 (collectively the “Amended Asset Purchase Agreement”), pursuant to which Mustang agreed, subject to the terms and conditions therein, to sell its leasehold interest in its cell processing facility located in Worcester, MA (the “Facility”) and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility to uBriGene. On July 28, 2023, the closing date, pursuant to the terms and conditions of the Amended Asset Purchase Agreement, Mustang completed the sale of Mustang’s assets primarily relating to the manufacturing and production of cell and gene therapies to uBriGene for base consideration of $6.0 million. Mustang recorded a gain of $1.5 million in connection with the sale of the assets, and recorded approximately $0.3 million of the base consideration as deferred income, to be recognized upon the transfer of the lease. Certain assets, including Mustang’s lease of the Facility and related contracts did not transfer to uBriGene on the Closing date.

Table of Contents

FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Avenue

InvaGen Pharmaceuticals Inc. (“InvaGen”) Share Repurchase

Under the Share Repurchase Agreement between Avenue and InvaGen Pharmaceuticals, Inc. (“InvaGen”) under which Avenue repurchased all of InvaGen’s shares in Avenue, Avenue agreed to pay InvaGen an additional amount as a contingent fee, payable in the form of seven and a half percent (7.5%) of the proceeds of future financings, until $4.0 million in the aggregate is paid to InvaGen. In connection with the closing of the January 2024 Warrant Inducement (as defined below, see Note 6), Avenue made a payment of $0.3 million to InvaGen. In connection with the May 2024 Warrant Inducement (as defined below, see Note 19), Avenue made a payment of $0.3 million to InvaGen.

4. Inventory


	March 31,		December 31,
($ in thousands)	2024		2023
Raw materials	$	4,180	$	4,640
Work-in-process		805		884
Finished goods		5,865		4,987
Inventory reserve		(270)		(305)
Total inventories	$	10,580	$	10,206

5. Property and Equipment


	Useful Life		March 31,		December 31,
($ in thousands)	(Years)		2024		2023


Computer equipment		3	$	595	$	595
Furniture and fixtures		5		1,017		1,017
Machinery & equipment		5		—		—
Leasehold improvements		15		13,175		13,175
Buildings		40		581		581
Construction in progress		N/A		29		29
Total property and equipment				15,397		15,397
Less: Accumulated depreciation				(9,269)		(8,892)
Property and equipment, net			$	6,128	$	6,505

Fortress' depreciation expense for the three months ended March 31, 2024 and 2023 was approximately $0.4 million and $0.8 million, respectively. Fortress’ depreciation expense is recorded in both research and development expense and general and administrative expense in the condensed consolidated statement of operations.

6. Fair Value Measurements

Common Stock Warrant Liabilities


	Warrants
($ in thousands)	liabilities
Balance at December 31, 2023	$	886
Change in fair value of common stock warrants - Avenue		116
Change in fair value of common stock warrants - Checkpoint		—
Change in fair value of placement agent warrants - Urica		(24)
Exercise of common stock warrants - Avenue		(289)
Balance at March 31, 2024	$	689

Table of Contents

FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Notes to Unaudited Condensed Consolidated Financial Statements

Checkpoint

At March 31, 2024 and December 31, 2023, the Checkpoint warrant liability relates to the placement agent warrants from a registered direct offering completed in December 2022 (the “December 2022 Placement Agent Warrants”). Checkpoint deemed the December 2022 Placement Agent Warrants to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control. The December 2022 Placement Agent Warrants were recorded at the time of closing at a fair value determined by using the Black-Scholes model. Checkpoint will revalue the December 2022 Placement Agent Warrants at each reporting period thereafter for as long as they remain outstanding. At March 31, 2024 and December 31, 2023, the liability associated with the December 2022 Placement Agent Warrants was $0.1 million.

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:


	March 31,			December 31,
Checkpoint Warrants	2024			2023
Exercise price	$	5.41		$	5.41
Volatility		107.5	%		96.4	%
Expected life		3.7			4.0
Risk-free rate		4.2	%		3.8	%

Avenue

Avenue had previously issued freestanding warrants to purchase shares of its common stock in connection with financing activities in October 2022 (the “October 2022 Warrants”) and January 2023 (the “January 2023 Warrants”, and together with the October 2022 Warrants, the “Avenue Warrants”). The Avenue Warrants are classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside of its control. The Black-Scholes model was used to value the Avenue Warrants, at the time of issuance and when re-measured at each financial reporting date, up to exercise or expiration of the warrants, with any changes in fair value being recognized in change in fair value of warrant liabilities, a component of other income (expense) in the unaudited condensed consolidated statements of operations.

In January 2024, Avenue entered in a warrant inducement for the immediate exercise of certain outstanding warrants, including the January 2023 Warrants (see Note 13). Avenue revalued the January 2023 Warrants on January 5, 2024, resulting in a fair value of $0.3 million. Since no October 2022 Warrants were exercised or amended in the January 2024 warrant inducement transaction, they were revalued at March 31, 2024, and the $0.1 million increase in the fair value of the common stock warrant liability resulted in an offsetting loss on common stock warrant liabilities in the unaudited condensed consolidated statements of operations.


	Avenue
	Warrant
($ in thousands)	Liability
Common Stock Warrant liabilities at December 31, 2023	$	586
Exercise of Avenue common warrants		(289)
Change in fair value of common stock warrant liabilities		116
Common Stock Warrant liabilities at March 31, 2024	$	413


PART I.	FINANCIAL INFORMATION	5
Item 1.	Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	45
Item 4.	Controls and Procedures	45

PART II.	OTHER INFORMATION	45
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	80

SIGNATURES		83


	March 31,		December 31
	2024		2023
Stock price	$ 11.10		$ 12.00
Risk-free interest rate	4.21	%	3.84	%
Expected dividend yield	—