On November 15, 2021 Fortress Biotech, Inc. (NASDAQ: FBIO) ("Fortress"), an innovative biopharmaceutical company focused on acquiring, developing and commercializing or monetizing promising biopharmaceutical products and product candidates cost-effectively, reported financial results and recent corporate highlights for the third quarter ended September 30, 2021 (Press release, Fortress Biotech, NOV 15, 2021, View Source [SID1234595604]).
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Lindsay A. Rosenwald, M.D., Fortress’ Chairman and Chief Executive Officer, said, "Fortress and our partner companies continue to achieve significant clinical and corporate milestones as we develop new treatment options for patients in need and create long-term value for our shareholders. We attained a new quarterly record for net revenue, $21.1 million, which is an increase of 123% year-over-year. Journey Medical Corporation ("Journey"), our partner company, launched its initial public offering ("IPO") of 3,520,000 shares at $10.00 per share for gross proceeds of $35.2 million. Additionally, AstraZeneca’s Alexion acquired Caelum Biosciences, Inc. ("Caelum") a company founded by Fortress, for an upfront payment of approximately $150 million paid to Caelum shareholders, of which approximately $56.9 million was paid to Fortress.1 The agreement also provides for additional contingent payments to Caelum stockholders totaling up to $350 million, payable upon the achievement of regulatory and commercial milestones. Fortress is eligible to receive 42.4% of all proceeds from the transaction, totaling up to approximately $212 million. Our CAR T cell therapy portfolio continues to advance, with a $2 million grant awarded by the National Cancer Institute ("NCI") to partially fund our Mustang Bio, Inc. ("Mustang Bio")-sponsored Phase 1/2 trial of MB-106, a CD20-targeted, autologous CAR T cell therapy for patients with relapsed or refractory B-cell non-Hodgkin lymphomas ("NHL") or chronic lymphocytic leukemia ("CLL"). Finally, we announced positive data from two completed pivotal studies in patients with Menkes disease treated with CUTX-101 at the 2021 American Academy of Pediatrics National Conference & Exhibition."
Dr. Rosenwald continued, "Looking ahead, we anticipate continued regulatory and clinical progress including initiating the rolling submission of the new drug application ("NDA") for CUTX-101 for the treatment of Menkes disease to the U.S. Food and Drug Administration ("FDA") later this quarter and reporting top-line results from the registration-enabling study of cosibelimab in metastatic cutaneous squamous cell carcinoma around year-end. We also look forward to the upcoming data presentations of MB-106 and AL amyloidosis treatment CAEL-101 at the American Society of Hematology (ASH) (Free ASH Whitepaper) Annual Meeting ("ASH2021")."
Recent Corporate Highlights2:
Marketed Dermatology Products and Product Candidates
Journey, our partner company, markets seven prescription dermatology products.
Our products generated net revenues of $19.6 million for the third quarter of 2021, compared to net revenues of $9.4 million for the third quarter of 2020.
In July 2021, Journey completed its final closings under the Cumulative Convertible Class A Preferred Stock Offering (the "Preferred Offering"), issuing an aggregate of 758,680 preferred shares at a price of $25.00 per share, raising approximately $19.0 million in gross proceeds, and after deducting commissions, fees and expenses, receiving approximately $17.0 million in net proceeds. These shares converted into Journey common stock upon the IPO.
On November 12, 2021, Journey launched its IPO of 3,520,000 shares of its common stock at $10.00 per share, totaling $35.2 million in gross proceeds, and, after deducting underwriting discounts, and estimated fees and expenses, is expected to receive approximately $31.4 million in net proceeds. Journey Medical’s common stock began trading on the Nasdaq Capital Market on November 12, 2021, under the ticker symbol "DERM." The IPO is expected to close on November 16, 2021, subject to customary closing conditions.
Journey intends to initiate the Phase 3 clinical program for DFD-29 for the treatment of rosacea in the fourth quarter of 2021.
Journey intends to launch one additional prescription product in the first half of 2022.
CUTX-101 (Copper Histidinate for Menkes disease)
We expect to initiate the rolling submission of the NDA, under its Breakthrough Designation, for CUTX-101 to the FDA this quarter.
In October 2021, we announced positive results from an efficacy and safety analysis of data integrated from two completed pivotal studies in patients with Menkes disease treated with CUTX-101, copper histidinate (CuHis). These data were presented as a virtual poster at the 2021 American Academy of Pediatrics National Conference & Exhibition.
CUTX-101 was sourced by Fortress and is currently in development at our partner company, Cyprium Therapeutics, Inc.
CAEL-101 (Light Chain Fibril-reactive Monoclonal Antibody for AL Amyloidosis)
On October 5, 2021, AstraZeneca’s Alexion acquired Caelum, a company founded by Fortress, for an upfront payment of approximately $150 million paid to Caelum shareholders, of which approximately $56.9 million was paid to Fortress, net of the ten percent, 24-month escrow holdback amount and other miscellaneous transaction expenses. The agreement also provides for additional potential payments to Caelum shareholders totaling up to $350 million, payable upon the achievement of regulatory and commercial milestones. Fortress is eligible to receive 42.4% of all proceeds of the transaction, totaling up to approximately $212 million.
CAEL-101 data were selected for presentation at ASH (Free ASH Whitepaper)2021 scheduled to take place in December of 2021. Abstracts can be viewed online through the ASH (Free ASH Whitepaper)2021 website here.
There are two ongoing Phase 3 studies of CAEL-101 for AL amyloidosis.
CAEL-101 was sourced by Fortress in 2017 and was developed by Caelum until Caelum was acquired by AstraZeneca on October 5, 2021.
Cosibelimab (formerly CK-301, an anti-PD-L1 antibody)
The registration-enabling study in metastatic cutaneous squamous cell carcinoma is fully enrolled, and we are on track to report top-line results around year-end 2021. Upon a successful outcome, Checkpoint Therapeutics, Inc. ("Checkpoint") intends to submit a Biologics License Application ("BLA") for cosibelimab in 2022, followed shortly thereafter by a Marketing Authorization Application submission in Europe. With a potentially favorable safety profile versus anti-PD-1 therapy and a plan to commercialize at a substantially lower price, we believe cosibelimab has the potential to be a market disruptive product in the $25 billion and growing PD-(L)1 class.
A Phase 3 registration-enabling trial is planned to begin in first-line metastatic non-small cell lung cancer ("NSCLC") in the fourth quarter of 2021.
Cosibelimab was sourced by Fortress and is currently in development at our partner company, Checkpoint.
MB-106 (CD20-targeted CAR T Cell Therapy)
In November 2021, we announced that MB-106 data were selected for presentation at ASH (Free ASH Whitepaper)2021 scheduled to take place in December 2021. Dr. Mazyar Shadman of Fred Hutchinson Cancer Research Center will present updated interim data from the ongoing Phase 1/2 clinical trial for NHL and CLL. A copy of the abstract can be viewed online through the ASH (Free ASH Whitepaper)2021 website here.
Also in November 2021, we announced that Mustang Bio was awarded a grant of approximately $2 million from NCI of the National Institutes of Health. This two-year award will partially fund the Mustang-sponsored multicenter trial to assess the safety, tolerability and efficacy of MB-106, a CD20-targeted, autologous CAR T cell therapy for patients with relapsed or refractory B-cell NHL or CLL.
MB-106 was sourced by Fortress and is currently in development at our partner company, Mustang Bio.
MB-101 (IL13Rα2-targeted CAR T Cell Therapy)
In October 2021, Christine Brown, Ph.D., Deputy Director, T Cell Therapeutics Research Laboratory and The Heritage Provider Network Professor in Immunotherapy at City of Hope, presented updated Phase 1 clinical data regarding MB-101 (IL13Rα2‐targeted CAR T cells) for the treatment of glioblastoma at two scientific conferences, the First Annual Conference on CNS Clinical Trials, co-sponsored by the Society for Neuro-Oncology and American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) and the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Virtual Special Conference: Brain Cancer.
MB-101 was sourced by Fortress and is currently in development at our partner company, Mustang Bio.
Novel CAR T Technology
In August 2021, we announced an exclusive license agreement with Mayo Clinic for a novel technology to create in vivo CAR T cells that may be able to transform the administration of CAR T therapies and has the potential to be used as an off-the-shelf therapy.
The novel CAR T technology was sourced by Fortress and is currently in development at our partner company, Mustang Bio.
MB-107 and MB-207 (Lentiviral Gene Therapies for X-linked Severe Combined Immunodeficiency ("XSCID"))
In August 2021, we announced that the European Medicines Agency ("EMA") granted Priority Medicines ("PRIME") designation to MB-107, a lentiviral gene therapy for the treatment of XSCID in newly diagnosed infants, also known as bubble boy disease.
MB-107 and MB-207 were sourced by Fortress and are currently in development at our partner company, Mustang Bio.
Ex Vivo Lentiviral Gene Therapy for RAG1 Severe Combined Immunodeficiency ("RAG1-SCID")
Last week, we announced the execution of an exclusive license agreement with Leiden University Medical Centre for a first-in-class ex vivo lentiviral gene therapy for the treatment of RAG1-SCID.
The ex vivo lentiviral gene therapy was sourced by Fortress and is currently in development at our partner company, Mustang Bio.
Financial Results:
To assist our stockholders in understanding our company, we have prepared non-GAAP financial results for the three months ended September 30, 2021 and 2020. These results exclude the operations of our three partner companies that were public at September 30, 2021: Avenue, Checkpoint and Mustang Bio. The goal in providing these non-GAAP financial metrics is to highlight the financial results of Fortress’ core operations, which comprise our commercial-stage business, our privately held development-stage entities, as well as our business development and finance functions.
As of September 30, 2021, Fortress’ consolidated cash, cash equivalents and restricted cash totaled $254.4 million, compared to $235.0 million as of December 31, 2020, an increase of $19.4 million year-to-date.
On a GAAP basis, Fortress’ net revenue totaled $21.1 million for the third quarter of 2021, which included $19.6 million in net revenue generated from our marketed dermatology products. This compares to net revenue totaling $9.5 million for the third quarter of 2020, which included $9.4 million in net revenue generated from our marketed dermatology products.
On a GAAP basis, consolidated research and development expenses, including license acquisitions of $0.7 million, were $28.1 million for the third quarter of 2021, compared to consolidated research and development expenses, including license acquisitions of $0.5 million, totaling $13.8 million for the third quarter of 2020. On a non-GAAP basis, research and development expenses including license acquisitions were $3.8 million for the third quarter of 2021, compared to research and development expenses including license acquisitions totaling $2.8 million for third quarter of 2020.
On a GAAP basis, consolidated selling, general and administrative expenses were $22.2 million for the third quarter of 2021, compared to $15.4 million for the third quarter of 2020. On a non-GAAP basis, consolidated selling, general and administrative expenses were $17.6 million, of which $10.8 million is attributed to Journey, for the third quarter of 2021, compared to $11.6 million, of which $5.8 million is attributed to Journey, for the third quarter of 2020.
On a GAAP basis, consolidated net loss attributable to common stockholders was $(20.8) million, or $(0.26) per share, for the third quarter of 2021, compared to consolidated net loss attributable to common stockholders of $(15.5) million, or $(0.20) per share for the third quarter of 2020.
Fortress’ non-GAAP income attributable to common stockholders was $43.7 million, which includes the partial realization of Fortress’ investment in Caelum, or $0.54 per share, for the third quarter of 2021, compared to Fortress’ non-GAAP loss attributable to common stockholders of $(5.2) million, or $(0.07) per share, for the third quarter of 2020.
The tables below have more information.
Use of Non-GAAP Measures:
In addition to the GAAP financial measures as presented in our Form 10-Q that will be filed with the Securities and Exchange Commission ("SEC") on November 15, 2021, the Company has, in this press release, included certain non-GAAP measurements. The non-GAAP net income (loss) attributable to common stockholders is defined by the Company as GAAP net income (loss) attributable to common stockholders, less net losses attributable to common stockholders from our public partner companies Avenue, Checkpoint and Mustang Bio. In addition, the Company has also provided a Fortress non-GAAP loss attributable to common stockholders which is a modified EBITDA calculation that starts with the non-GAAP income (loss) attributable to common stockholders and removes stock-based compensation expense, non-cash interest expense, amortization of licenses and debt discount, changes in fair values of investment, changes in fair value of derivative liability, Qbrexza inventory step-up and depreciation expense. The Company included the partial realization of gain in connection with the exercise of the Caelum option.
Management believes use of these non-GAAP measures provide meaningful supplemental information regarding the Company’s performance because (i) it allows for greater transparency with respect to key measures used by management in its financial and operational decision-making, (ii) it excludes the impact of non-cash or, when specified, non-recurring items that are not directly attributable to the Company’s core operating performance and that may obscure trends in the Company’s core operating performance and (iii) it is used by institutional investors and the analyst community to help analyze the Company’s results. However, non-GAAP income (loss) attributable to common stockholders and any other non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Further, non-GAAP financial measures used by the Company and the manner in which they are calculated may differ from the non-GAAP financial measures or the calculations of the same non-GAAP financial measures used by other companies, including the Company’s competitors.
Avenue net loss from their external SEC report for the three months ended September 30, 2021 and 2020 of $0.9 million and $1.0 million, respectively, net of non-controlling interest of $0.7 million and $0.8 million, respectively. Avenue net loss from their external SEC report for the nine months ended September 30, 2021 and 2020 of $2.8 million and $4.2 million, respectively, net of non-controlling interest of $2.2 million and $3.2 million, respectively.
Checkpoint net loss from their external SEC report of $11.3 million net of non-controlling interest of $9.0 million, MSA fee to Fortress of $0.1 million and financing fee to Fortress of approximately $39,000 for the quarter ended September 30, 2021; and net loss of $4.9 million net of non-controlling interest of $3.2 million, less MSA fee to Fortress of $0.1 million and financing fee to Fortress of $0.7 million for the quarter ended September 30, 2020. Checkpoint net loss from their external SEC report of $26.9 million net of non-controlling interest of $20.6 million, MSA fee to Fortress of $0.4 million and financing fee to Fortress of $0.9 million for the nine months ended September 30, 2021; and net loss of $12.9 million net of non-controlling interest of $9.0 million, less MSA fee to Fortress of $0.4 million and financing fee to Fortress of $0.8 million for the nine months ended September 30, 2020.
Mustang net loss from their external SEC report of $17.0 million net of non-controlling interest of $13.7 million, MSA fee to Fortress of $0.1 million and financing fee to Fortress of $0.1 million for the quarter ended September 30, 2021; and net loss of $13.0 million net of non-controlling interest of $9.3 million, MSA fee to Fortress of $0.1 million and financing fee to Fortress of $0.4 million for the quarter ended September 30, 2020. Mustang net loss from their external SEC report of $46.3 million net of non-controlling interest of $35.8 million, MSA fee to Fortress of $0.4 million and financing fee to Fortress of $1.7 million for the nine months ended September 30, 2021; and net loss of $39.4 million net of non-controlling interest of $27.0 million, MSA fee to Fortress of $0.4 million and financing fee to Fortress of $1.6 million for the nine months ended September 30, 2020.
Increase in fair value of investment in Caelum Biosciences for the quarter and nine months ended September 30, 2021.
Increase in fair value of derivative liabilities of Journey Medical Corporation for the quarter and nine months ended September 30, 2021.
Step-up related to FV of Qbrexza inventory recorded in COGS for the quarter and nine months ended September 30, 2021.
Partial realization of gain in connection with the exercise of the Caelum option. The Company backed out of Fortress non-GAAP income (loss) attributable to stockholders until actual realization of gain due to exercise of option.
Reconciliation to non-GAAP research and development and selling, general and administrative costs:
Includes Research and development expense and Research and development – licenses acquired expense for the quarter and nine months ended September 30, 2021 and 2020, respectively.
Excludes $0.1 million and $0.1 million of Fortress MSA expense for the quarter ended September 30, 2021 and 2020, respectively, and $0.2 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively.
Excludes $0.1 million of Fortress MSA expense and approximately 39,000 of Fortress financing fee for the quarter ended September 30, 2021; and $0.1 million of Fortress MSA expense and $0.7 million Fortress financing fee for the quarter ended September 30, 2020. Excludes $0.4 million of Fortress MSA expense and $0.9 million Fortress financing fee for the nine months ended September 30, 2021; and $0.4 million of Fortress MSA expense and $0.8 million Fortress financing fee for the nine months ended September 30, 2020.
Excludes $0.1 million of Fortress MSA expense and $0.1 million Fortress financing fee for the quarter ended September 30, 2021; and $0.1 million of Fortress MSA expense and $0.4 million Fortress financing fee for the quarter ended September 30, 2020. Excludes $0.2 million of Fortress MSA expense and $1.7 million Fortress financing fee for the nine months ended September 30, 2021; and $0.2 million of Fortress MSA expense and $1.6 million Fortress financing fee for the nine months ended September 30, 2020.