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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 
                 
Friday, November 9, 2018 - 07:30