Fortress Biotech(US:FBIO)2023-11-13 16:00PART I. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Fortress Biotech, Inc. and its subsidiaries, including balance sheets, statements of operations, and cash flows, for the three and nine months ended September 30, 2023, and 2022, along with explanatory notes Consolidated Balance Sheet Highlights (Unaudited) | ($ in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $72,307 | $178,266 | | Total current assets | $97,826 | $230,432 | | Total assets | $150,549 | $294,301 | | Liabilities & Equity | | | | Total current liabilities | $97,351 | $127,715 | | Total liabilities | $163,792 | $244,276 | | Total stockholders' equity (deficit) | $(13,243) | $50,025 | Consolidated Statements of Operations Highlights (Unaudited) | ($ in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $34,752 | $16,528 | $64,567 | $59,339 | | Loss from operations | $(13,758) | $(50,734) | $(122,728) | $(148,930) | | Net loss | $(10,724) | $(53,060) | $(125,170) | $(156,468) | | Net loss attributable to common stockholders | $(7,053) | $(24,519) | $(57,382) | $(65,651) | | Net loss per common share - basic and diluted | $(0.94) | $(4.11) | $(7.94) | $(11.15) | - On October 9, 2023, the company effected a 1-for-15 reverse stock split of its common stock, with all share and per-share information retroactively adjusted4648 - Current cash, including proceeds from a November 2023 offering, is believed sufficient to fund operations for at least the next 12 months, though additional funding will be required for further development and commercialization51 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, condition, and liquidity, highlighting recent corporate and clinical developments, a significant Q3 revenue increase, reduced operating expenses, and various financing activities Q3 2023 vs Q3 2022 Operational Results Comparison | ($ in thousands) | Q3 2023 | Q3 2022 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $34,752 | $16,528 | $18,224 | 110% | | Research and development | $20,288 | $29,855 | $(9,567) | (32)% | | Selling, general and administrative | $21,733 | $30,139 | $(8,406) | (28)% | | Loss from operations | $(13,758) | $(50,734) | $36,976 | (73)% | | Net loss attributable to Fortress | $(5,045) | $(22,511) | $17,466 | (78)% | - Net revenue for Q3 2023 increased by 110% year-over-year, primarily due to a $19 million non-refundable upfront payment from Maruho for an expanded Qbrexza® license agreement239259267 - Operating expenses significantly decreased in Q3 2023, with R&D expenses falling by 32% and SG&A expenses dropping by 28%, driven by cost reduction initiatives at Mustang, Checkpoint, and Journey270273276 - Subsequent to quarter-end, Fortress raised approximately $8.9 million net, Avenue raised approximately $5.0 million gross, Mustang raised approximately $4.4 million gross, and Checkpoint raised approximately $11.1 million gross through various offerings and warrant exercises252255 - Key clinical updates include a PDUFA goal date of January 3, 2024, for cosibelimab, ongoing rolling NDA submission for CUTX-101, and an expected NDA submission for DFD-29 in the second half of 2023240242 Quantitative and Qualitative Disclosures About Market Risks As a 'smaller reporting company,' Fortress Biotech, Inc. is exempt from providing quantitative and qualitative disclosures about market risks - The company, as a 'smaller reporting company' under Item 10 of Regulation S-K, is not required to provide quantitative and qualitative disclosures about market risks318 Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures are effective as of September 30, 2023320 - No material changes in internal control over financial reporting occurred during the most recent quarter321 PART II. OTHER INFORMATION Legal Proceedings No material developments occurred in previously disclosed legal proceedings during the quarter, with routine litigation not expected to have a material adverse effect - No material developments occurred in previously disclosed legal proceedings for the quarter ended September 30, 2023323 Risk Factors This section outlines substantial investment risks, including drug development uncertainties, a history of operating losses, reliance on Journey Medical's revenue, dependence on third-party manufacturing, intellectual property protection, and regulatory compliance - The company has a history of operating losses, totaling $203.6 million in 2022, and expects them to continue, necessitating substantial additional funding that may not be available on favorable terms351359 - A majority of operating income is expected from Journey Medical's dermatology products, a revenue stream vulnerable to generic competition, patent challenges, and reimbursement issues364365366 - The company heavily relies on third parties for critical functions, including manufacturing of all clinical and commercial products and conducting clinical trials, which introduces control and operational risks405412 - The debt agreement with Oaktree contains restrictive covenants that may limit the company's ability to finance future operations, make acquisitions, or pursue other business activities350 - Risks related to the business structure include acting as a guarantor for subsidiaries, potential conflicts of interest for officers serving multiple entities, and the complexity of integrating acquisitions391394398 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the period - No unregistered sales of equity securities were reported507 Defaults Upon Senior Securities No defaults upon senior securities occurred during the period - No defaults upon senior securities were reported507 Mine Safety Disclosures This item is not applicable to the company's operations - This item is not applicable to the company507 Other Information No other material information is reported for the period - No other information was reported508 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and CEO/CFO certifications required by the Sarbanes-Oxley Act - Exhibits include corporate governance documents, such as the Amended and Restated Certificate of Incorporation and bylaws, and officer certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act510513