Fortress Biotech, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Asset Purchase Agreements

Asset Purchase Agreements	12 Months Ended
Dec. 31, 2023
Collaboration and Stock Purchase Agreements
Collaboration and Stock Purchase Agreements	3. Asset Purchase Agreements Aevitas Agreement with 4DMT On April 21, 2023, Aevitas entered into an Asset Purchase Agreement (the “4DMT APA”) with 4DMT under which 4DMT acquired Aevitas’ proprietary rights to its short-form human complement factor H (“sCFH”) asset for the treatment of complement-mediated diseases. Under the terms of the 4DMT APA, 4DMT will make cash payments totaling up to $140 million if certain late-stage development, regulatory and sales milestones are met with respect to sCFH. A range of single-digit royalties on net sales are also payable. The aforementioned payments are payable solely to Aevitas, and 4DMT will be responsible for license payment obligations to the licensor of sCFH, University of Pennsylvania. 4DMT is not a related party to the Company and has assumed all ongoing and future development costs. The fair value of the interest in Aevitas retained by the Company of $2.6 million was based on the risk-adjusted present value of the aforementioned potential cash payments (see Note 6). In connection with the 4DMT APA, the preferred shares of Aevitas held by the Company converted to Aevitas common shares, at which point the Company no longer maintained voting control of Aevitas. As a result, the Company deconsolidated its holdings in Aevitas. In connection with this transaction, the Company recorded a loss on deconsolidation of Aevitas of $3.4 million during the year ended December 31, 2023 in other expense in the Consolidated Statement of Operations. 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. uBriGene will be obligated to pay to Mustang a contingent amount of $5.0 million less certain severance obligations and payments payable in connection with the transfer of certain contracts related to the transferred assets, if Mustang, within two years of the closing date: (i) completes one or more issuances of equity securities in an aggregate gross amount equal to or greater than $10.0 million after the closing and (ii) obtains consent of the landlord to the proposed lease transfer within two years after the closing date. The Asset Purchase Agreement contemplates that Mustang will seek to procure the consent and approval of the landlord of the Facility, WCS-377 Plantation Street, Inc. (the “Landlord”), and the Landlord informed Mustang that it will not consider the lease transfer request until receipt of the final determination letter from with the U.S. Committee on Foreign Investment in the United States (“CFIUS”), although there can be no guarantee that, even if CFIUS does approve the below-described Facility Transaction, the Landlord will approve the lease transfer. In connection with the sale of its leasehold interest in the Facility and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility (the “Facility Transaction”) to uBriGene and an indirect, wholly owned subsidiary of uBriGene (Jiangsu) Biosciences Co., Ltd., a Chinese contract development and manufacturing organization, Mustang and uBriGene previously submitted a voluntary notice with CFIUS. The current 45-day review period will conclude no later than March 28, 2024. If CFIUS does not conclude its review by March 28, 2024, the proceeding will transition to a subsequent 45-day phase as CFIUS further investigates the Transaction. Unless and until the lease is transferred to uBriGene, Mustang will retain its facility lease and facility personnel, and will continue to occupy the leasehold premises and manufacture there its lead product candidates, including MB-106. As contemplated by the Amended Asset Purchase Agreement, on the Closing Date, Mustang and uBriGene entered into a Manufacturing Services Agreement (the “Manufacturing Services Agreement”). Under the Manufacturing Services Agreement, Mustang contracted uBriGene to manufacture Mustang’s lead product candidates, including MB-106, and Mustang committed to spend at least $8 million over a period of two years after the closing of the transaction to purchase manufacturing and related services (the “Manufacturing Services”) from uBriGene (the “Minimum Commitment”). Mustang paid uBriGene 25% of the Minimum Commitment at the time of signing of the Manufacturing Services Agreement and will pay the remainder of the Minimum Commitment over the following two years. Subject to Mustang’s payment of its Minimum Commitment, uBriGene will provide to Mustang a manufacturing rebate, payable in cash at the end of the second year of the Manufacturing Services Agreement term, for any amounts paid for Manufacturing Services in excess of the Minimum Commitment (but in no event will such rebate exceed $3 million). In connection with the Manufacturing Services Agreement, Mustang will provide uBriGene with the customary licenses to use intellectual property rights specific to Mustang’s cell and gene therapies to the extent reasonably necessary for uBriGene’s performance under the Manufacturing Services Agreement. Mustang intends to expense manufacturing costs under the Manufacturing Services Agreement and the sub-contracting Manufacturing Services Agreement, pursuant to which uBriGene contracted with Mustang to perform the Manufacturing Services to be performed by uBriGene under the Manufacturing Services Agreement and account for reimbursed costs associated with the agreements as an offset to such expense. For the year ended December 31, 2023, Mustang has expensed $4.1 million of manufacturing costs under the Manufacturing Services Agreement. In addition, as contemplated by the Asset Purchase Agreement, on the closing date, Mustang and uBriGene entered into a sub-contracting Manufacturing Services Agreement (the “Sub-Contracting CDMO Agreement”). Under the terms of the Sub-Contracting CDMO Agreement, Mustang will manufacture its lead product candidates, including MB-106, and may from time to time manufacture other products as requested by uBriGene. In addition, under the Sub-Contracting CDMO Agreement, Mustang and uBriGene agreed to establish a joint steering committee comprising two representatives from each of Mustang and uBriGene to review, discuss and decide on operational matters relating to the services to be performed by Mustang under such agreement, including matters relating to expenses. For the year ended December 31, 2023, Mustang received $2.4 million in reimbursed costs and has a receivable of $3.2 million associated with the Sub-Contracting CDMO Agreement. Because the Facility was not assigned to uBriGene within 120 days following July 28, 2023, so long as the lease has not been so assigned, uBriGene may deliver a notice to Mustang indicating its intention to enter into good faith negotiations (the “Repurchase Notice”) to provide for Mustang to repurchase the associated assets relating to the manufacturing and production of cell and gene therapies at the Facility, re-assume the transferred liabilities and resume all transferred operations. Upon receipt of such Repurchase Notice, Mustang and uBriGene have agreed to use our best commercial efforts to negotiate in good faith the terms of any such Repurchase Transaction. Cyprium Agreement with Sentynl On February 24, 2021, Cyprium entered into a development and asset purchase agreement (the “Sentynl APA”) with Sentynl, a U.S.-based specialty pharmaceutical company owned by the Zydus Group. Under the Sentynl APA, Sentynl provided $8.0 million of upfront development funding for Cyprium’s CUTX-101 program, with Cyprium remaining in control of development of such program; upon approval of the NDA for CUTX-101 by the FDA, Cyprium would be obligated to assign the NDA and certain other assets pertaining to the CUTX-101 program to Sentynl, after which point Sentynl would commercialize the drug and owe Cyprium royalties and regulatory and sales milestones. The Sentynl APA contained an alternative “Approval Deadline Transfer” mechanism pursuant to which, in the event that CUTX-101 NDA approval had not been obtained by September 30, 2023, then Sentynl could elect, during the subsequent 45-day period, to assume control over development of CUTX-101 by effecting a Closing under the Sentynl APA. Cyprium received notice of Sentynl’s election to effect the Approval Deadline Transfer during such 45-day period, and the Closing of such transfer occurred in December 2023. The Approval Deadline Transfer obligated Sentynl to pay Cyprium $4.5 million in connection with the Closing, which was received by Cyprium in December 2023 and recorded as collaboration revenue by Fortress in its consolidated statements of operations for the year ended December 31, 2023. There are no further obligations required by Cyprium in regards to the $4.5 million. Following such Closing, Sentynl is obligated to use commercially reasonable efforts to develop and commercialize CUTX-101, including the funding of the same. Additionally, Cyprium remains eligible to receive up to $129 million in aggregate development and sales milestones under the Agreement, and royalties on net sales of CUTX-101 as follows: (i) 3% of annual net sales up to $75 million; (ii) 8.75% of annual net sales between $75 million and $100 million; and (iii) 12.5% of annual net sales in excess of $100 million. Cyprium will retain 100% ownership over any FDA priority review voucher that may be issued at NDA approval for CUTX-101. With respect to the $8.0 million upfront payment from Sentynl received in 2021, the Company recognized revenue over the period in which the development activities occurred using an input method based upon the costs incurred to date in relation to the total estimated costs to complete the development activities. As of the date of the Approval Deadline Transfer, the revenue related to the upfront payment has been fully recognized. For the years ended December 31, 2023 and 2022, the Company recognized revenue from this arrangement of $0.7 million and $1.9 million, respectively. Avenue Agreements with InvaGen In November 2018, Avenue entered into a Stock Purchase and Merger Agreement (the “Avenue SPMA”) with InvaGen Pharmaceuticals Inc. In November 2021, Avenue delivered InvaGen notice of termination of the Avenue SPMA and in July 2022, Avenue entered into a Share Repurchase Agreement (the “Avenue SRA”) with InvaGen which closed in October 2022. In connection with the closing of the Avenue SRA, Avenue repurchased all the common shares of Avenue held by InvaGen, and all of the rights retained by InvaGen pursuant to the Stockholders Agreement entered into by and among Avenue, InvaGen and Fortress on November 12, 2018, were terminated. Under the Avenue SRA, Avenue agreed to pay InvaGen seven and a half percent (7.5%) of the proceeds from future financings, up to $4 million. In connection with the closing of financings that occurred in 2023 and 2022, Avenue made payments totaling $0.5 million to InvaGen.

Asset Purchase Agreements

12 Months Ended

Dec. 31, 2023

Collaboration and Stock Purchase Agreements

Collaboration and Stock Purchase Agreements

3. Asset Purchase Agreements

Aevitas

Agreement with 4DMT

On April 21, 2023, Aevitas entered into an Asset Purchase Agreement (the “4DMT APA”) with 4DMT under which 4DMT acquired Aevitas’ proprietary rights to its short-form human complement factor H (“sCFH”) asset for the treatment of complement-mediated diseases. Under the terms of the 4DMT APA, 4DMT will make cash payments totaling up to $140 million if certain late-stage development, regulatory and sales milestones are met with respect to sCFH. A range of single-digit royalties on net sales are also payable. The aforementioned payments are payable solely to Aevitas, and 4DMT will be responsible for license payment obligations to the licensor of sCFH, University of Pennsylvania. 4DMT is not a related party to the Company and has assumed all ongoing and future development costs. The fair value of the interest in Aevitas retained by the Company of $2.6 million was based on the risk-adjusted present value of the aforementioned potential cash payments (see Note 6).

In connection with the 4DMT APA, the preferred shares of Aevitas held by the Company converted to Aevitas common shares, at which point the Company no longer maintained voting control of Aevitas. As a result, the Company deconsolidated its holdings in Aevitas. In connection with this transaction, the Company recorded a loss on deconsolidation of Aevitas of $3.4 million during the year ended December 31, 2023 in other expense in the Consolidated Statement of Operations.

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. uBriGene will be obligated to pay to Mustang a contingent amount of $5.0 million less certain severance obligations and payments payable in connection with the transfer of certain contracts related to the transferred assets, if Mustang, within two years of the closing date: (i) completes one or more issuances of equity securities in an aggregate gross amount equal to or greater than $10.0 million after the closing and (ii) obtains consent of the landlord to the proposed lease transfer within two years after the closing date.

The Asset Purchase Agreement contemplates that Mustang will seek to procure the consent and approval of the landlord of the Facility, WCS-377 Plantation Street, Inc. (the “Landlord”), and the Landlord informed Mustang that it will not consider the lease transfer request until receipt of the final determination letter from with the U.S. Committee on Foreign Investment in the United States (“CFIUS”), although there can be no guarantee that, even if CFIUS does approve the below-described Facility Transaction, the Landlord will approve the lease transfer. In connection with the sale of its leasehold interest in the Facility and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility (the “Facility Transaction”) to uBriGene and an indirect, wholly owned subsidiary of uBriGene (Jiangsu) Biosciences Co., Ltd., a Chinese contract development and manufacturing organization, Mustang and uBriGene previously submitted a voluntary notice with CFIUS. The current 45-day review period will conclude no later than March 28, 2024. If CFIUS does not conclude its review by March 28, 2024, the proceeding will transition to a subsequent 45-day phase as CFIUS further investigates the Transaction. Unless and until the lease is transferred to uBriGene, Mustang will retain its facility lease and facility personnel, and will continue to occupy the leasehold premises and manufacture there its lead product candidates, including MB-106.

As contemplated by the Amended Asset Purchase Agreement, on the Closing Date, Mustang and uBriGene entered into a Manufacturing Services Agreement (the “Manufacturing Services Agreement”). Under the Manufacturing Services Agreement, Mustang contracted uBriGene to manufacture Mustang’s lead product candidates, including MB-106, and Mustang committed to spend at least $8 million over a period of two years after the closing of the transaction to purchase manufacturing and related services (the “Manufacturing Services”) from uBriGene (the “Minimum Commitment”). Mustang paid uBriGene 25% of the Minimum Commitment at the time of signing of the Manufacturing Services Agreement and will pay the remainder of the Minimum Commitment over the following two years. Subject to Mustang’s payment of its Minimum Commitment, uBriGene will provide to Mustang a manufacturing rebate, payable in cash at the end of the second year of the Manufacturing Services Agreement term, for any amounts paid for Manufacturing Services in excess of the Minimum Commitment (but in no event will such rebate exceed $3 million). In connection with the Manufacturing Services Agreement, Mustang will provide uBriGene with the customary licenses to use intellectual property rights specific to Mustang’s cell and gene therapies to the extent reasonably necessary for uBriGene’s performance under the Manufacturing Services Agreement. Mustang intends to expense manufacturing costs under the Manufacturing Services Agreement and the sub-contracting Manufacturing Services Agreement, pursuant to which uBriGene contracted with Mustang to perform the Manufacturing Services to be performed by uBriGene under the Manufacturing Services Agreement and account for reimbursed costs associated with the agreements as an offset to such expense. For the year ended December 31, 2023, Mustang has expensed $4.1 million of manufacturing costs under the Manufacturing Services Agreement.

In addition, as contemplated by the Asset Purchase Agreement, on the closing date, Mustang and uBriGene entered into a sub-contracting Manufacturing Services Agreement (the “Sub-Contracting CDMO Agreement”). Under the terms of the Sub-Contracting CDMO Agreement, Mustang will manufacture its lead product candidates, including MB-106, and may from time to time manufacture other products as requested by uBriGene. In addition, under the Sub-Contracting CDMO Agreement, Mustang and uBriGene agreed to establish a joint steering committee comprising two representatives from each of Mustang and uBriGene to review, discuss and decide on operational matters relating to the services to be performed by Mustang under such agreement, including matters relating to expenses. For the year ended December 31, 2023, Mustang received $2.4 million in reimbursed costs and has a receivable of $3.2 million associated with the Sub-Contracting CDMO Agreement.

Because the Facility was not assigned to uBriGene within 120 days following July 28, 2023, so long as the lease has not been so assigned, uBriGene may deliver a notice to Mustang indicating its intention to enter into good faith negotiations (the “Repurchase Notice”) to provide for Mustang to repurchase the associated assets relating to the manufacturing and production of cell and gene therapies at the Facility, re-assume the transferred liabilities and resume all transferred operations. Upon receipt of such Repurchase Notice, Mustang and uBriGene have agreed to use our best commercial efforts to negotiate in good faith the terms of any such Repurchase Transaction.

Cyprium

Agreement with Sentynl

On February 24, 2021, Cyprium entered into a development and asset purchase agreement (the “Sentynl APA”) with Sentynl, a U.S.-based specialty pharmaceutical company owned by the Zydus Group. Under the Sentynl APA, Sentynl provided $8.0 million of upfront development funding for Cyprium’s CUTX-101 program, with Cyprium remaining in control of development of such program; upon approval of the NDA for CUTX-101 by the FDA, Cyprium would be obligated to assign the NDA and certain other assets pertaining to the CUTX-101 program to Sentynl, after which point Sentynl would commercialize the drug and owe Cyprium royalties and regulatory and sales milestones.

The Sentynl APA contained an alternative “Approval Deadline Transfer” mechanism pursuant to which, in the event that CUTX-101 NDA approval had not been obtained by September 30, 2023, then Sentynl could elect, during the subsequent 45-day period, to assume control over development of CUTX-101 by effecting a Closing under the Sentynl APA. Cyprium received notice of Sentynl’s election to effect the Approval Deadline Transfer during such 45-day period, and the Closing of such transfer occurred in December 2023. The Approval Deadline Transfer obligated Sentynl to pay Cyprium $4.5 million in connection with the Closing, which was received by Cyprium in December 2023 and recorded as collaboration revenue by Fortress in its consolidated statements of operations for the year ended December 31, 2023. There are no further obligations required by Cyprium in regards to the $4.5 million.

Following such Closing, Sentynl is obligated to use commercially reasonable efforts to develop and commercialize CUTX-101, including the funding of the same. Additionally, Cyprium remains eligible to receive up to $129 million in aggregate development and sales milestones under the Agreement, and royalties on net sales of CUTX-101 as follows: (i) 3% of annual net sales up to $75 million; (ii) 8.75% of annual net sales between $75 million and $100 million; and (iii) 12.5% of annual net sales in excess of $100 million. Cyprium will retain 100% ownership over any FDA priority review voucher that may be issued at NDA approval for CUTX-101.

With respect to the $8.0 million upfront payment from Sentynl received in 2021, the Company recognized revenue over the period in which the development activities occurred using an input method based upon the costs incurred to date in relation to the total estimated costs to complete the development activities. As of the date of the Approval Deadline Transfer, the revenue related to the upfront payment has been fully recognized. For the years ended December 31, 2023 and 2022, the Company recognized revenue from this arrangement of $0.7 million and $1.9 million, respectively.

Avenue

Agreements with InvaGen

In November 2018, Avenue entered into a Stock Purchase and Merger Agreement (the “Avenue SPMA”) with InvaGen Pharmaceuticals Inc. In November 2021, Avenue delivered InvaGen notice of termination of the Avenue SPMA and in July 2022, Avenue entered into a Share Repurchase Agreement (the “Avenue SRA”) with InvaGen which closed in October 2022. In connection with the closing of the Avenue SRA, Avenue repurchased all the common shares of Avenue held by InvaGen, and all of the rights retained by InvaGen pursuant to the Stockholders Agreement entered into by and among Avenue, InvaGen and Fortress on November 12, 2018, were terminated. Under the Avenue SRA, Avenue agreed to pay InvaGen seven and a half percent (7.5%) of the proceeds from future financings, up to $4 million. In connection with the closing of financings that occurred in 2023 and 2022, Avenue made payments totaling $0.5 million to InvaGen.