Fortress Biotech(FBIO) - 2020 Q1 - Quarterly Report

Part I. Financial Information Unaudited Condensed Consolidated Financial Statements This chapter presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, statements of changes in stockholders' equity, and cash flow statements, along with detailed notes providing in-depth explanations of business, accounting policies, collaboration agreements, debt, equity, segment information, and customer revenue Condensed Consolidated Balance Sheets Total Assets Change | Metric | March 31, 2020 (Unaudited, $ in thousands) | December 31, 2019 ($ in thousands) | | :------------- | :----------------------------------------- | :--------------------------------- | | Total Assets | 228,759 | 226,422 | | Change | +2,337 | | | % Change | +1.03% | | Total Liabilities Change | Metric | March 31, 2020 (Unaudited, $ in thousands) | December 31, 2019 ($ in thousands) | | :---------------- | :----------------------------------------- | :--------------------------------- | | Total Liabilities | 153,474 | 153,890 | | Change | -416 | | | % Change | -0.27% | | Total Stockholders' Equity Change | Metric | March 31, 2020 (Unaudited, $ in thousands) | December 31, 2019 ($ in thousands) | | :------------------------- | :----------------------------------------- | :--------------------------------- | | Total Stockholders' Equity | 75,285 | 72,532 | | Change | +2,753 | | | % Change | +3.80% | | Condensed Consolidated Statements of Operations Net Revenue Change | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :---------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Net Revenue | 12,918 | 6,477 | 6,441 | 99.45% | Net Loss Change | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Net Loss | (24,068) | (16,255) | (7,813) | 48.07% | Net Income (Loss) Attributable to Common Stockholders Change | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Net Income (Loss) Attributable to Common Stockholders | (12,370) | 1,392 | (13,762) | -988.65% | Condensed Consolidated Statement of Changes in Stockholders' Equity Total Stockholders' Equity Change | Metric | Balance at December 31, 2019 ($ in thousands) | Balance at March 31, 2020 ($ in thousands) | Change ($ in thousands) | | :------------------------- | :-------------------------------------------- | :----------------------------------------- | :---------------------- | | Total Stockholders' Equity | 72,532 | 75,285 | 2,753 | - In Q1 2020, net proceeds from Series A preferred stock issuance were $13,067 thousand, and net proceeds from common stock market offerings were $5,880 thousand, which were the primary factors contributing to the increase in stockholders' equity[18] - Net loss attributable to common stockholders was ($12,370) thousand, and net loss attributable to non-controlling interests was ($11,698) thousand, negatively impacting stockholders' equity[18] Condensed Consolidated Statements of Cash Flows Cash Flow Summary | Activity | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | | :----------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | | Operating Activities | (21,892) | (25,325) | 3,433 | | Investing Activities | (1,776) | 24,148 | (25,924) | | Financing Activities | 22,753 | 52,113 | (29,360) | | Net Change | (915) | 50,936 | (51,851) | Cash and Cash Equivalents and Restricted Cash at Period End | Metric | March 31, 2020 ($ in thousands) | March 31, 2019 ($ in thousands) | | :------------------------------------------------ | :------------------------------ | :------------------------------ | | Cash and cash equivalents and restricted cash at end of period | 152,517 | 132,518 | Notes to Condensed Consolidated Financial Statements 1. Organization and Description of Business - Fortress Biotech is a biopharmaceutical company focused on acquiring, developing, and commercializing pharmaceutical products and product candidates, including through its own operations, majority-owned subsidiaries, joint ventures, and entities in which it holds significant minority interests[29] - The company's operations are primarily financed through proceeds from sales of equity and debt securities, sales by partner companies, and the exercise of warrants and stock options[32] - The company's current cash and cash equivalents are sufficient to support operations for at least the next 12 months, but additional financing is required for full development and regulatory approval[32] 2. Summary of Significant Accounting Policies - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) for interim financial information and should be read in conjunction with the company's Form 10-K filed on March 16, 2020[33][36] - The company consolidates its subsidiaries, and for consolidated entities with less than 100% ownership, net loss attributable to non-controlling interests is recorded in the consolidated statements of operations[37] - The adoption of ASU 2018-13 (Fair Value Measurement) on January 1, 2020, had no material impact on the financial statements; the company is currently evaluating the impact of ASU 2016-13 (Financial Instruments – Credit Losses) and ASU 2019-12 (Income Taxes)[41][42][43] 3. Discontinued Operations Cash Flows from Discontinued Investing Activities | ($ in thousands) Investing activities | March 31, 2019 | | :----------------------------------- | :------------- | | Proceeds from sale of National | $ 13,089 | | Total cash provided by discontinued investing activities | $ 13,089 | - As of March 31, 2020, the company no longer held any ownership interest in National Holdings Corporation[47] 4. Collaboration and Stock Purchase Agreements - Caelum entered into an agreement with Alexion Therapeutics, Inc., where Alexion purchased a 19.9% minority interest in Caelum for $30 million and obtained a contingent exclusive option to acquire the remaining equity for potential payments up to $500 million[48] - In December 2019, Caelum and Alexion amended their agreement, modifying the acquisition option terms and providing an additional $20 million upfront funding and $60 million equity investment upon achieving specific development milestones[49] - Avenue Therapeutics, Inc. entered into an agreement with InvaGen Pharmaceuticals Inc., where InvaGen purchased a 33.3% stake in Avenue for $31.5 million and committed to acquire Avenue for $180 million upon FDA approval of IV Tramadol[50][51] - Avenue's stockholders will receive Contingent Value Rights (CVRs) for cash payments based on IV Tramadol achieving specific sales milestones, such as annual net sales exceeding $325 million or cumulative net sales exceeding $1.5 billion[55][56] 5. Property and Equipment Property and Equipment, Net | Metric | March 31, 2020 (Unaudited, $ in thousands) | December 31, 2019 ($ in thousands) | | :-------------------------- | :----------------------------------------- | :--------------------------------- | | Property and equipment, net | 12,785 | 12,433 | | Change | 352 | | | % Change | 2.83% | | - Depreciation expense for the three months ended March 31, 2020, and 2019, was approximately $0.5 million for both periods, recorded in research and development expenses and general and administrative expenses[58] 6. Fair Value Measurements Fair Value of Investment in Caelum | Metric | March 31, 2020 ($ in thousands) | December 31, 2019 ($ in thousands) | | :-------------------------- | :------------------------------ | :--------------------------------- | | Fair value of investment in Caelum | 11,148 | 11,148 | Cyprium Contingent Warrant Issuance Liability Change | Metric | March 31, 2020 ($ in thousands) | December 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :----------------------------------- | :------------------------------ | :--------------------------------- | :---------------------- | :--------- | | Warrant Liabilities (Ending Balance) | 69 | 27 | 42 | 155.56% | - Key assumptions for the fair value of Cyprium's contingent warrant issuance liability include a risk-free interest rate of 0.70%, an expected term of 10.0 years, expected volatility of 93%, and a warrant issuance probability of 10% as of March 31, 2020[64] 7. Licenses Acquired R&D – Licenses Acquired Expenses | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :----------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Total R&D – Licenses Acquired | 250 | 450 | (200) | -44.44% | - Mustang recorded $250 thousand in R&D expenses for the COH – HER2 (MB-103) license in Q1 2020, compared to $450 thousand for COH – CD123 (MB-102) and Nationwide Children's Hospital – C134 (MB-108) in the same period of 2019[69] 8. Sponsored Research and Clinical Trial Agreements - Aevitas recorded $0.3 million in R&D expenses for sponsored research agreements with the University of Pennsylvania in both Q1 2020 and Q1 2019[70] - Cellvation recorded no sponsored research expenses in Q1 2020, compared to $0.1 million in the same period of 2019[71] Mustang Sponsored Research and Clinical Trial Agreement R&D Expenses | Program | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | | :----------------------- | :------------------------------------------------- | :------------------------------------------------- | | City of Hope (COH) | 500 | 500 | | COH – CD123 (MB-102) | 230 | 303 | | COH – IL13Rα2 (MB-101) | 92 | 342 | | COH – manufacturing | - | 114 | | Fred Hutch-CD20 (MB-106) | 527 | 267 | | BIDMC – CRISPR | - | 69 | | Total | 1,349 | 1,595 | 9. Intangibles, net - Journey Medical Corporation acquired Ximino® in July 2019 for a total consideration of $9.4 million, comprising $2.4 million upfront payment and $7.0 million in future installments[75] - The purchase price of Ximino® was recorded as an intangible asset and will be amortized over seven years[76] Net Intangible Assets Change | Metric | March 31, 2020 (Unaudited, $ in thousands) | December 31, 2019 ($ in thousands) | | :---------------------- | :----------------------------------------- | :--------------------------------- | | Net intangible assets | 7,022 | 7,377 | | Change | (355) | | | % Change | -4.81% | | - Journey's intangible asset amortization expense was $355 thousand in Q1 2020[78] 10. Debt and Interest Total Notes Payable, Net | Metric | March 31, 2020 ($ in thousands) | December 31, 2019 ($ in thousands) | | :---------------------- | :------------------------------ | :--------------------------------- | | Total notes payable, net | 85,388 | 84,656 | | Change | 732 | | | % Change | 0.86% | | - The 2019 Notes (formerly Opus credit facility) were reallocated to DAK Capital Inc. ($3.8 million), Fortress Chairman and CEO Lindsay A. Rosenwald ($2.9 million), and Executive Vice Chairman Michael S. Weiss ($2.3 million) after OPHIF's dissolution, with unchanged terms[83][136] Total Interest Expense and Financing Fee | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :--------------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Total Interest Expense and Financing Fee | 3,125 | 2,469 | 656 | 26.57% | - The increase in interest expense was primarily due to Mustang Horizon Notes (from $11 thousand to $600 thousand) and estimated interest expense related to the Ximino purchase ($150 thousand in 2020, zero in 2019)[86] 11. Accrued Liabilities and other Long-Term Liabilities Total Accrued Expenses | Metric | March 31, 2020 ($ in thousands) | December 31, 2019 ($ in thousands) | | :--------------------- | :------------------------------ | :--------------------------------- | | Total accrued expenses | 25,870 | 25,399 | | Change | 471 | | | % Change | 1.85% | | - The increase in accrued expenses was primarily due to increases in R&D – clinical supplies ($2,055 thousand) and R&D – milestones ($850 thousand)[87] Total Other Long-Term Liabilities | Metric | March 31, 2020 ($ in thousands) | December 31, 2019 ($ in thousands) | | :-------------------------------- | :------------------------------ | :--------------------------------- | | Total other long-term liabilities | 7,229 | 7,126 | | Change | 103 | | | % Change | 1.45% | | 12. Non-Controlling Interests Total Non-controlling Interests | Metric | March 31, 2020 ($ in thousands) | December 31, 2019 ($ in thousands) | | :---------------------------------------- | :------------------------------ | :--------------------------------- | | Total Non-controlling Interests | 38,057 | 46,317 | | Change | (8,260) | | | % Change | -17.83% | | - Net loss attributable to non-controlling interests for the three months ended March 31, 2020, was ($11,698) thousand[92] - As of March 31, 2020, non-controlling interests in Mustang, Checkpoint, and Avenue were $31,632 thousand (69.0% ownership), $12,718 thousand (78.4% ownership), and $4,464 thousand (77.3% ownership), respectively[92] 13. Net Loss per Common Share Net Income (Loss) Attributable to Common Stockholders per Share | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :----- | :-------------------------------- | :-------------------------------- | | Basic | $(0.19) | $0.03 | | Diluted | $(0.19) | $0.02 | - For the three months ended March 31, 2020, both basic and diluted weighted-average common shares outstanding were 63,496,256 shares[15] - As of March 31, 2020, a total of 20,365,504 potentially dilutive securities (including warrants, options, convertible preferred stock, and unvested restricted stock/units) were excluded from the diluted loss per share calculation due to their anti-dilutive effect[98] 14. Stockholders' Equity Total Stock-Based Compensation Expense | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Total stock-based compensation | 3,400 | 3,309 | 91 | 2.75% | - Mustang's stock-based compensation expense increased from $432 thousand in 2019 to $805 thousand in 2020[101] - In Q1 2020, the company received $6.1 million in gross proceeds from common stock market offerings and approximately $14.4 million in gross proceeds from the public offering of Series A preferred stock[110][112] - The company's Board of Directors approved a repurchase program for up to $5 million of preferred stock, with $0.1 million repurchased as of March 31, 2020[120] 15. Commitments and Contingencies - As of March 31, 2020, the company's operating lease liabilities were $23.7 million, and right-of-use assets were $21.1 million[121] Total Lease Cost | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :--------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Total lease cost | 603 | 345 | 258 | 74.78% | - As of March 31, 2020, the weighted-average remaining lease term for operating leases was 6.1 years, with a weighted-average discount rate of 6.2%[125] 16. Related Party Transactions - As of March 31, 2020, Dr. Lindsay A. Rosenwald, Chairman, President, and CEO, beneficially owned 11.9% of the company's outstanding common stock, and Michael S. Weiss, Executive Vice Chairman, beneficially owned 13.0%[130] - The company has a shared services agreement with TGTX for R&D employee costs, invoicing TGTX $0.1 million in both Q1 2020 and Q1 2019[131] - The 2019 Notes (formerly Opus credit facility) were reallocated to DAK Capital Inc. ($3.8 million), Lindsay A. Rosenwald ($2.9 million), and Michael S. Weiss ($2.3 million) after OPHIF's dissolution[136] - The company has management services agreements (MSAs) with several subsidiaries, charging an annual consulting fee of $0.5 million, though Avenue's MSA has been waived and Tamid's MSA terminated[143] 17. Segment Information Segment Net Revenue (Q1 2020) | Segment | Net Revenue ($ in thousands) | | :----------------------------------------- | :--------------------------- | | Dermatology Products Sales | 11,946 | | Pharmaceutical and Biotechnology Product Development | 972 | | Consolidated | 12,918 | Segment Income (Loss) (Q1 2020) | Segment | Segment Income (Loss) ($ in thousands) | | :----------------------------------------- | :------------------------------------- | | Dermatology Products Sales | 2,297 | | Pharmaceutical and Biotechnology Product Development | (26,365) | | Consolidated | (24,068) | Segment Assets (March 31, 2020) | Segment | Total Segment Assets ($ in thousands) | | :----------------------------------------- | :------------------------------------ | | Dermatology Products Sales | 30,572 | | Pharmaceutical and Biotechnology Product Development | 198,187 | | Consolidated | 228,759 | 18. Revenues from Contracts and Significant Customers Net Revenue Breakdown | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :-------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Product revenue, net | 11,946 | 6,125 | 5,821 | 95.03% | | Revenue – related party | 972 | 352 | 620 | 176.14% | | Net Revenue | 12,918 | 6,477 | 6,441 | 99.45% | - In Q1 2020, two dermatology product customers accounted for $7.7 million and $5.1 million of total gross product revenue[149] - As of March 31, 2020, two dermatology product customers accounted for $5.4 million and $2.5 million of the total accounts receivable balance[152] 19. Income Taxes - The company currently does not believe the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) will have a material impact on its 2020 income tax provision[153] - The company files consolidated income tax returns with subsidiaries in which it holds an 80% or greater ownership interest, while other subsidiaries file separately[155] - Income tax expense is calculated based on an estimated annual effective tax rate[156] Management's Discussion and Analysis of Financial Condition and Results of Operations This chapter discusses the company's financial condition and results of operations for the three months ended March 31, 2020, highlighting significant net revenue growth but expanded net loss due to the absence of non-recurring gains from the prior year, with changes in R&D and SG&A expenses, and emphasizing future financing needs and COVID-19 impact assessment Overview - Fortress Biotech is a biopharmaceutical company dedicated to acquiring, developing, and commercializing pharmaceutical products and product candidates through its own operations, majority-owned subsidiaries, joint ventures, and entities in which it holds significant minority interests[159] - The company collaborates with top universities, research institutions, and pharmaceutical companies, such as City of Hope, Fred Hutchinson Cancer Research Center, and AstraZeneca, through its partner companies to license or acquire product and candidate arrangements[159] Recent Events - Journey Medical Corporation generated $11.9 million in net revenue from its marketed products in Q1 2020[161] - Avenue Therapeutics, Inc.'s New Drug Application (NDA) for IV Tramadol has been accepted by the FDA, with a target action date of October 10, 2020[162] - Cyprium Therapeutics, Inc.'s Copper Histidinate (CUTX-101) received FDA Rare Pediatric Disease Designation, potentially qualifying for a Priority Review Voucher[163] - Mustang Bio, Inc.'s MB-107 received Advanced Therapy Medicinal Product (ATMP) classification from the European Medicines Agency (EMA) and an IND application for a Phase 2 clinical trial for XSCID was submitted[165][166] - Checkpoint Therapeutics, Inc.'s Cosibelimab was granted a compound patent by the U.S. Patent and Trademark Office, providing protection until at least May 2038[169] - The company entered into a global exclusive license agreement with Columbia University for the ONCOlogues platform to develop novel oligonucleotides for gene-driven cancers and explore their potential for COVID-19 treatment[171][172] - Fortress completed a public offering of Series A Cumulative Redeemable Perpetual Preferred Stock in February 2020, generating approximately $14.4 million in gross proceeds[174] Critical Accounting Policies and Use of Estimates - Refer to Note 2 of the condensed consolidated financial statements for this section's content[175] Results of Operations Net Revenue Change | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :---------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Net Revenue | 12,918 | 6,477 | 6,441 | 99% | Cost of Goods Sold – Product Revenue Change | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :--------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Cost of goods sold – product revenue | 3,810 | 1,884 | 1,926 | 102% | Research and Development Expense Change | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | Research and development | 14,867 | 23,273 | (8,406) | -36% | - Avenue's R&D expenses decreased by $9.4 million, primarily due to the completion of its abdominoplasty and safety studies; Checkpoint's R&D expenses decreased by $1.9 million, mainly due to reduced Cosibelimab manufacturing costs and CK-101 clinical expenses incurred in 2019[191] - Mustang's R&D expenses increased by $2.0 million, primarily due to higher personnel costs, lab supplies, and consulting and external services[191] General and Administrative Expense Change | Metric | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | Change (%) | | :------------------------------------ | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :--------- | | General and administrative | 15,519 | 13,478 | 2,041 | 15% | - The increase in general and administrative expenses was primarily attributable to higher sales and marketing costs at Journey (due to product portfolio expansion and increased sales personnel) and increased professional service fees, legal, and accounting fees at Fortress[193] - Net loss attributable to common stockholders increased by $13.8 million (989%), primarily due to the absence of the Caelum deconsolidation gain in Q1 2019[195] Liquidity and Capital Resources - The company requires additional financing to fully develop and obtain regulatory approval for existing and new product candidates, fund operating losses, and establish or acquire manufacturing, sales, and marketing capabilities for potential products through third parties[197] - The company believes its current cash and cash equivalents are sufficient to support operations for at least the next 12 months[197] Cash Flow Summary | Activity | Three Months Ended March 31, 2020 ($ in thousands) | Three Months Ended March 31, 2019 ($ in thousands) | Change ($ in thousands) | | :----------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | | Operating Activities | (21,892) | (25,325) | 3,433 | | Investing Activities | (1,776) | 24,148 | (25,924) | | Financing Activities | 22,753 | 52,113 | (29,360) | | Net Change | (915) | 50,936 | (51,851) | - Net cash used in investing activities decreased by $25.9 million, primarily due to $13.1 million from the sale of National in Q1 2019 and a $12.6 million decrease in short-term investment purchases[202] - Net cash provided by financing activities decreased by $29.4 million, with Q1 2020 primarily driven by $13.2 million in net proceeds from Series A preferred stock issuance and $10.8 million in net proceeds from market offerings[203] Off-Balance Sheet Arrangements - The company has no off-balance sheet transactions, guarantees, or other obligations beyond those arising from normal business operations[204] Quantitative and Qualitative Disclosures About Market Risks The company primarily faces market risk from interest rate fluctuations, but a hypothetical 100 basis point increase is not deemed to significantly impact net loss, with all assets and liabilities denominated in USD and no use of foreign exchange contracts or derivatives for speculation or trading - The company's primary quantitative market risk for financial instruments is sensitivity to changes in interest rates[207] - Based on analysis, the impact of a hypothetical 100 basis point increase in interest rates on the value of the company's financial instruments and its net loss is considered insignificant[209] - The company's assets and liabilities are denominated in U.S. dollars, and it does not use foreign exchange contracts or other derivative instruments to manage exchange rate fluctuations[206] Controls and Procedures As of March 31, 2020, the company's management assessed and determined its disclosure controls and procedures to be effective, with no significant changes in internal control over financial reporting during the quarter - As of March 31, 2020, the company's management (including the Chief Executive Officer and Chief Financial Officer) assessed and determined its disclosure controls and procedures to be effective[210] - No significant changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[212] Part II. Other Information 1. Legal Proceedings The company currently has no legal proceedings requiring disclosure - None[215] 1A. Risk Factors Investing in the company's securities involves high risks, including potential adverse impacts of the COVID-19 pandemic on clinical trials and business operations. The company's growth strategy faces challenges in integrating acquisitions, financing, talent retention, and managing expansion. Biopharmaceutical business risks include regulatory approval uncertainties, product liability, intellectual property disputes, and intense competition. Financial risks encompass continuous losses, substantial financing needs, debt obligations, and stock price volatility. Additionally, government regulation and market acceptance pose significant risks - The COVID-19 pandemic may cause delays or adverse impacts on clinical trial programs, including difficulties in clinical site initiation, delayed patient enrollment, missed study visits or procedures, diversion of healthcare resources, and delays in regulatory approvals[217][220][222] - The company's growth strategy involves acquisitions, joint ventures, and investments in other companies, which presents risks of entering new markets, resource dispersion, integration difficulties, financing uncertainties, and failure to realize anticipated benefits[228][229][234] - As an early-stage biopharmaceutical company, the company has a limited operating history, relies heavily on third parties for product development and manufacturing, and has not yet demonstrated its ability to commercialize any pre-market product candidates[261][262][263] - The company relies on intellectual property licensed from third parties, and any disputes with licensors or non-performance of license agreements could adversely affect the development and commercialization of product candidates[307][308][309] - The company faces product liability risks, and successful claims could result in substantial liabilities, disruption of clinical trials, decreased product demand, reputational damage, and limited commercialization[355][356][357] - The company has a history of recurring operating losses and expects to continue incurring significant operating losses and interest expenses in the future, with no predictability as to when profitability might be achieved[411][412] - The company requires substantial additional capital, and failure to raise necessary funds in a timely manner may force it to delay, scale back, or cancel R&D programs, commercialization efforts, or planned acquisitions, potentially altering its growth strategy[434][435] 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds during this reporting period - None[462] 3. Defaults Upon Senior Securities There were no defaults upon senior securities during this reporting period - None[463] 4. Mine Safety Disclosures There were no mine safety disclosures during this reporting period - None[464] 5. Other Information There is no other information requiring disclosure during this reporting period - None[465] 6. Exhibits This section lists the exhibits filed with Form 10-Q, including certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL taxonomy extension files - Exhibits include certifications by the Chairman, President, and Chief Executive Officer, and the Chief Financial Officer, filed pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[467] - Exhibits also include XBRL Instance Document, Taxonomy Extension Schema Document, Calculation Linkbase Document, Definition Linkbase Document, Label Linkbase Document, and Presentation Linkbase Document[467] Signatures - This report was signed on May 11, 2020, by Lindsay A. Rosenwald, M.D., Chairman, President, and Chief Executive Officer, and Robyn M. Hunter, Chief Financial Officer[470][471]