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

NEW YORK, Nov. 09, 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 third quarter ended September 30, 2018.

Lindsay A. Rosenwald, M.D., Fortress’ Chairman, President and Chief Executive Officer, said, “Fortress and our subsidiaries continued to achieve important corporate and clinical milestones in the third quarter of 2018. Mustang Bio expanded its pipeline into gene therapy by securing an exclusive worldwide license for the development of a potentially first-in-class ex vivo lentiviral gene therapy for the treatment of X-linked severe combined immunodeficiency (“X-SCID”) from St. Jude Children’s Research Hospital (“St. Jude”). Additionally, Checkpoint Therapeutics announced positive interim safety and efficacy data from its Phase 1/2 clinical trial of CK-101, a third-generation epidermal growth factor receptor (“EGFR”) inhibitor being evaluated in advanced non-small cell lung cancer (“NSCLC”). Finally, Cyprium Therapeutics’ product candidate for patients diagnosed with classic Menkes disease, CUTX-101, was granted Fast Track Designation by the U.S. Food and Drug Administration (“FDA”). We plan to continue to acquire and develop compelling and, in some instances, potentially life-saving product candidates, which could lead to maximizing long-term shareholder value.”

Financial Results:

  • As of September 30, 2018, Fortress’ consolidated cash, cash equivalents, short-term investments (certificates of deposit), cash deposits with clearing organizations and restricted cash totaled $136.1 million, compared to $168.3 million as of December 31, 2017, a decrease of $32.2 million year-to-date.
  • Net revenue totaled $63.7 million for the third quarter of 2018, compared to $46.9 million for the third quarter of 2017. Total revenue as of September 30, 2018 includes $5.2 million of Fortress revenue, primarily from the sale of Journey Medical Corporation products, and $58.5 million of revenue from National Holdings Corporation1 (“National Holdings”). Total revenue as of September 30, 2017 included $2.5 million of Fortress revenue and $44.4 million of revenue from National Holdings.
  • Research and development expenses were $16.1 million for the third quarter of 2018, of which $15.1 million was related to Fortress Companies. This compares to $15.9 million for the third quarter of 2017, of which $14.2 million was related to Fortress Companies. Non-cash, stock-based compensation expenses included in research and development were $1.8 million for the third quarter of 2018, compared to $1.6 million for the third quarter of 2017.
  • Research and development expenses from license acquisitions were $3.7 million for the third quarter of 2018, compared to $0.3 million for the third quarter of 2017.
  • General and administrative expenses were $12.2 million for the third quarter of 2018, of which $7.4 million was related to Fortress Companies. This compares to $15.1 million for the third quarter of 2017, of which $10.5 million was related to Fortress Companies. Non-cash, stock-based compensation expenses included in general and administrative expenses were $2.3 million for the third quarter of 2018, compared to $2.6 million for the third quarter of 2017.
  • National Holdings’ operating expenses totaled $55.2 million for the third quarter of 2018, compared to $47.7 million for the third quarter of 2017.
  • Net loss attributable to common stockholders was $16.6 million, or $0.37 per share, for the third quarter of 2018, compared to a net loss attributable to common stockholders of $27.1 million, or $0.67 per share, for the third quarter of 2017. For the first nine months of 2018, net loss attributable to common stockholders was $59.3 million or $1.36 per share, compared to $56.5 million or $1.39 per share in the first nine months of 2017.

Recent Fortress and Fortress Company Highlights:
             
Aevitas Therapeutics, Inc.

  • In August 2018, Aevitas announced that it entered into a sponsored research agreement with the laboratory of Wenchao Song, Ph.D., at the University of Pennsylvania to evaluate Aevitas’ adeno-associated virus (“AAV”) gene therapy technology in the university’s proprietary animal models of complement-mediated diseases.

Caelum Biosciences, Inc.

  • In November 2018, Caelum announced that global longitudinal strain (“GLS”) data from the Phase 1b study of CAEL-101 (a light chain fibril-reactive monoclonal antibody 11-1F4) in patients with amyloid light chain (“AL”) amyloidosis and imaging data from a pre-clinical study have been selected for two oral presentations at the 60th American Society of Hematology (“ASH”) Annual Meeting, to be held December 1-4, 2018, in San Diego.

Checkpoint Therapeutics, Inc.

  • In September 2018, Checkpoint announced positive interim safety and efficacy data from its Phase 1/2 clinical trial of CK-101, a third-generation EGFR tyrosine kinase inhibitor (“TKI”) being evaluated in advanced NSCLC. The data were presented in an oral presentation at the International Association for the Study of Lung Cancer (“IASLC”) 19th World Conference on Lung Cancer in Toronto. CK-101 was well tolerated across multiple dose groups and safe. Durable anti-tumor activity was observed, particularly in treatment-naïve EGFR mutation-positive NSCLC patients.
  • In October 2018, Checkpoint appointed Christian Béchon to its Board of Directors.

Cyprium Therapeutics, Inc.

  • In July 2018, Cyprium announced that the FDA granted Fast Track Designation to CUTX-101, a product candidate for patients diagnosed with classic Menkes disease who have not demonstrated significant clinical progression.
  • In September 2018, Cyprium announced the publication of preclinical data on AAV-based gene therapy combined with subcutaneous CUTX-101 (“Copper Histidinate”) for Menkes disease in Molecular Therapy: Methods & Clinical Development.

Mustang Bio, Inc.

  • In July 2018, Mustang completed a pre-Investigational New Drug (“pre-IND”) meeting with the FDA for MB-102 (“CD123 CAR T”). Based on the meeting, Mustang expects to file an IND in the fourth quarter of 2018 to support a Phase 1/2 trial of MB-102 in acute myeloid leukemia, blastic plasmacytoid dendritic cell neoplasm and high-risk myelodysplastic syndrome.
  • In August 2018, Mustang announced that it entered into an exclusive worldwide license agreement with St. Jude for the development of a potentially first-in-class ex vivo lentiviral gene therapy for the treatment of X-SCID, also known as bubble boy disease. The therapy is currently being evaluated in a Phase 1/2 multicenter trial in infants under the age of two.  This study is the world’s first lentiviral gene therapy trial for infants with X-SCID. The therapy is also being investigated in patients over the age of two in a second Phase 1/2 trial at the National Institutes of Health (“NIH”).
  • In October 2018, Mustang appointed Martina A. Sersch, M.D., Ph.D., as Chief Medical Officer.
  • Also in October 2018, Mustang announced that a first-of-its-kind Phase 1 clinical trial evaluating the safety and effectiveness of intraventricular delivery of CAR T cells to the brains of patients with HER2-positive breast cancer with brain metastases has been initiated at City of Hope. In addition, Mustang announced that City of Hope has dosed the first patient in a Phase 1 clinical trial of HER2-specific CAR T cells in treating recurrent or refractory grade III-IV glioma. The trial will evaluate the side effects and best dose of HER2-specific CAR T cells in treating patients with grade III-IV glioma that has come back or does not respond to treatment.

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:
Tony Plohoros
6 Degrees
(908) 940-0135
tplohoros@6degreespr.com  

1 Fortress acquired approximately 56 percent of National Holdings in September 2016.

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

    September 30,
2018
    December 31,
2017
 
    (Unaudited)        
ASSETS                
Current assets                
Cash and cash equivalents   $ 95,867     $ 113,915  
Accounts receivable     5,431       7,758  
Short-term investments (certificates of deposit)     22,538       36,002  
Cash deposits with clearing organizations     336       1,041  
Receivables from broker-dealers and clearing organizations     11,884       7,395  
Forgivable loans receivable     1,610       1,616  
Securities owned, at fair value     6,675       1,985  
Inventory     674       171  
Other receivables - related party     414       618  
Prepaid expenses and other current assets     14,089       12,680  
Total current assets     159,518       183,181  
                 
Property and equipment, net     14,642       9,513  
Restricted cash     17,358       17,387  
Long-term investments, at fair value           1,390  
Intangible assets     13,935       15,223  
Goodwill     18,645       18,645  
Other assets     821       611  
Total assets   $ 224,919     $ 245,950  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities                
Accounts payable and accrued expenses   $ 37,345     $ 36,127  
Accounts payable and accrued expenses - related party     153       222  
Accrued commissions and payroll payable     11,974       10,065  
Deferred clearing and marketing credits     629       786  
Securities sold, not yet purchased, at fair value     24       151  
Warrants issued - National           5,597  
Interest payable     613       887  
Interest payable - related party     94       97  
Notes payable, short-term (net of debt discount of $447 and $973 at September 30, 2018 and December 31, 2017, respectively)     9,054       8,528  
Subsidiary convertible note, short-term, at fair value     10,657       4,700  
Deferred revenue     155        
Derivative warrant liability           87  
Other current liabilities     77       181  
Total current liabilities     70,775       67,428  
                 
Notes payable, long-term (net of debt discount of $445 and $62 at September 30, 2018 and December 31, 2017, respectively)     64,546       43,222  
Subsidiary convertible note, long-term, at fair value           10,059  
Other long-term liabilities     4,961       4,739  
Total liabilities     140,282       125,448  
             
Stockholders’ equity                
Preferred stock, $0.001 par value, 15,000,000 authorized, 5,000,000 designated Series A shares, 1,000,000 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively; liquidation value of $25.00 per share     1       1  
Common stock, $0.001 par value, 100,000,000 shares authorized, 56,183,480 and 50,991,285 shares issued and outstanding as of September 30, 2018 and December 31, 2017, respectively     56       51  
Common stock issuable, 347,684 and 158,015 shares as of September 30, 2018 and December 31, 2017, respectively     495       500  
Additional paid-in-capital     408,615       364,148  
Accumulated deficit     (371,394 )     (312,127 )
Total stockholders’ equity attributed to the Company     37,773       52,573  
                 
Non-controlling interests     46,864       67,929  
Total stockholders’ equity     84,637       120,502  
Total liabilities and stockholders’ equity   $ 224,919     $ 245,950  
                 

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

    For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 
    2018     2017     2018     2017  
Revenue                                
Fortress                                
Product revenue, net   $ 5,168     $ 2,170     $ 17,366     $ 8,309  
Revenue - from a related party     5       350       525       1,393  
Net Fortress revenue     5,173       2,520       17,891       9,702  
                                 
National                                
Commissions     28,397       24,881       85,422       73,380  
Net dealer inventory gains     482       1,789       5,601       6,666  
Investment banking     19,271       8,942       43,012       26,595  
Investment advisory     5,281       3,605       15,811       10,480  
Interest and dividends     771       674       2,003       2,065  
Transfer fees and clearing services     1,606       1,649       5,680       5,834  
Tax preparation and accounting     2,444       2,527       6,835       6,527  
Other     268       299       697       1,016  
Total National revenue     58,520       44,366       165,061       132,563  
Net revenue     63,693       46,886       182,952       142,265  
                                 
Operating expenses                                
Fortress                                
Cost of goods sold - product revenue     1,406       505       4,546       1,852  
Research and development     16,082       15,890       58,528       34,683  
Research and development - licenses acquired     3,706       300       3,804       3,394  
General and administrative     12,184       15,104       38,788       36,490  
Total Fortress operating expenses     33,378       31,799       105,666       76,419  
                                 
National                                
Commissions, compensation and fees     48,556       39,963       141,462       118,983  
Clearing fees     451       470       1,772       1,826  
Communications     856       690       2,429       2,094  
Occupancy     738       972       2,834       2,916  
Licenses and registration     861       391       2,028       1,223  
Professional fees     1,076       1,082       3,047       3,336  
Interest     26       5       30       13  
Underwriting costs     43             230        
Depreciation and amortization     871       507       2,587       1,513  
Other administrative expenses     1,726       3,610       5,839       7,315  
Total National operating expenses     55,204       47,690       162,258       139,219  
Total operating expenses     88,582       79,489       267,924       215,638  
Loss from operations     (24,889 )     (32,603 )     (84,972 )     (73,373 )
                                 
Other income (expenses)                                
Interest income     269       204       841       530  
Interest expense and financing fee     (2,228 )     (3,220 )     (6,455 )     (5,298 )
Change in fair value of derivative liabilities     -       (639 )     (7,931 )     5,155  
Change in fair value of subsidiary convertible note     (84 )     (74 )     26       (359 )
Change in fair value of investments     (565 )     270       (1,390 )     (241 )
Other expenses     (146 )     (245 )     (258 )     (232 )
Total other expenses     (2,754 )     (3,704 )     (15,167 )     (445 )
Loss before income taxes     (27,643 )     (36,307 )     (100,139 )     (73,818 )
Income tax expense     944             2,382        
Net loss     (28,587 )     (36,307 )     (102,521 )     (73,818 )
Less: net loss attributable to non-controlling interests     (11,949 )     (9,191 )     (43,254 )     (17,355
Net loss attributable to common stockholders   $ (16,638 )   $ (27,116 )   $ (59,267 )   $ (56,463 )
                                 
Basic and diluted net loss per common share   $ (0.37 )   $ (0.67 )   $ (1.36 )   $ (1.39 )
                                 
Weighted average common shares outstanding-basic and diluted     44,818,186       40,724,115       43,578,763       40,547,364  
                                 

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Source: Fortress Biotech, Inc.