Fortress Biotech, Inc. (FBIO) is an innovative biopharmaceutical company that has been navigating the dynamic healthcare landscape with a steadfast commitment to enhancing long-term value for its shareholders. With a diversified portfolio of product candidates and a strategic focus on acquiring and advancing assets, Fortress Biotech has demonstrated its resilience and adaptability in the face of industry challenges.
Business Overview and History
Fortress Biotech was founded in 2010 as Coronado Biosciences, Inc., with a vision to identify, in-license, and develop promising pharmaceutical and biotechnology products. In 2011, the company changed its name to Fortress Biotech, Inc. to better reflect its evolving business strategy of acquiring and advancing assets to enhance long-term value for shareholders. Over the years, the company has executed a multi-pronged approach, leveraging its expertise in business development, scientific research, regulatory affairs, and financial management to build a robust pipeline of product candidates.
One of Fortress Biotech’s key strengths lies in its collaborative partnerships with renowned academic institutions, research centers, and pharmaceutical companies. By forging these strategic alliances, the company has been able to access cutting-edge technologies, expand its intellectual property portfolio, and accelerate the development of its product candidates. Fortress has executed partnerships and licensing agreements with universities, research institutes, and pharmaceutical companies to acquire the intellectual property rights to product candidates and technologies, allowing it to build a diverse pipeline across multiple therapeutic areas.
A significant milestone in Fortress Biotech’s history was the establishment of its partner company model in 2015. This innovative approach involves providing funding, management, and operational support to subsidiaries and partner companies pursuing development and commercialization of their own product candidates. By leveraging the specialized expertise of its subsidiaries and partner companies, Fortress has maintained a diversified portfolio while enabling focused development efforts.
Throughout its journey, Fortress Biotech has faced various challenges, including delays in clinical development timelines and regulatory approvals for certain product candidates. The company has also had to navigate the competitive and highly regulated biopharmaceutical industry, which requires significant capital to fund research and development activities. Despite these obstacles, Fortress has demonstrated its resilience by leveraging its partnerships and expertise to advance its pipeline and generate revenue from commercialized products through its partner companies.
Financial Performance and Liquidity
Fortress Biotech’s financial performance has been marked by both challenges and progress. As of the most recent quarter ended September 30, 2024, the company reported total revenue of $42.6 million, a decrease from the $64.6 million recorded in the same period of the previous year. This decline was primarily driven by a one-time $19 million payment received in 2023 from Maruho for a license to additional territories in Asia, which was not repeated in 2024.
Despite the revenue decrease, Fortress Biotech has maintained a strong focus on cost optimization and operational efficiency. The company’s net loss for the nine months ended September 30, 2024, was $94.5 million, a 24% improvement from the $125.2 million net loss reported in the same period of 2023.
Fortress Biotech’s liquidity position remains relatively stable, with cash and cash equivalents of $58.9 million as of September 30, 2024, compared to $80.9 million at the end of 2023. The company’s ability to raise capital through various financing activities, including equity offerings and debt financing, has been crucial in supporting its ongoing operations and growth initiatives.
In the most recent fiscal year (2023), Fortress Biotech reported revenue of $84.51 million, with a net income of -$60.64 million. The company’s operating cash flow (OCF) was -$128.23 million, and its free cash flow (FCF) stood at -$136.32 million. For the most recent quarter (Q3 2024), revenue was $14.63 million, with a net income of -$12.87 million. The OCF and FCF for this quarter were both -$20.06 million.
The company’s year-over-year growth has been impacted by the one-time payment from Maruho in 2023. Excluding this payment, the Dermatology Products segment showed growth, primarily driven by increased sales of Qbrexza. However, Journey’s product revenue decreased by $0.70 million, or 4%, primarily due to a $0.90 million decrease in Accutane revenue resulting from increased market competition, and a combined $0.90 million decrease in Amzeeq and Zilxi revenue due to a slight decrease in unit sales volume and an increase in coupon rebates.
Fortress Biotech’s liquidity position is further characterized by a debt-to-equity ratio of 2.54, cash reserves of $58.85 million, and a $25 million credit facility for Journey Medical Corporation, of which $20 million was drawn as of September 30, 2024. The company’s current ratio stands at 1.23, with a quick ratio of 1.06, indicating a reasonable ability to meet short-term obligations.
Product Portfolio and Pipeline
Fortress Biotech’s product portfolio encompasses a diverse range of development-stage and commercially available products. One of the company’s key assets is Cosibelimab, an investigational anti-PD-L1 antibody, which is currently under review by the U.S. Food and Drug Administration (FDA) for the treatment of metastatic or locally advanced cutaneous squamous cell carcinoma. The PDUFA goal date for Cosibelimab is set for December 28, 2024.
Another notable product in Fortress Biotech’s pipeline is Emrosi (Minocycline Hydrochloride Extended-Release Capsules, 40mg), which was recently approved by the FDA for the treatment of inflammatory lesions of rosacea in adults. Emrosi, developed in collaboration with Dr. Reddy’s Laboratories, is expected to be launched in the late first quarter or early second quarter of 2025.
Fortress Biotech’s subsidiaries and partner companies, such as Avenue Therapeutics, Checkpoint Therapeutics, and Journey Medical Corporation, are also making strides in their respective areas of focus, contributing to the overall growth and diversification of the company’s asset portfolio.
The company operates through two main product segments: the Dermatology Products Sales segment and the Pharmaceutical and Biotechnology Product Development segment. The Dermatology Products Sales segment, primarily focused on the sale of products through Journey Medical Corporation, generated $14.63 million in net revenue for the three months ended September 30, 2024, down 4% from the same period in 2023. This segment has been a significant contributor to Fortress Biotech’s overall revenue.
The Pharmaceutical and Biotechnology Product Development segment, which encompasses Fortress’ various subsidiary and partner companies, incurred $9.45 million in research and development expenses for the three months ended September 30, 2024, down from $20.29 million in the prior year period. This decrease was primarily driven by reduced spending at Mustang Bio and Checkpoint Therapeutics, partially offset by increased R&D spending at Avenue Therapeutics related to the development of its AJ201 drug candidate.
Challenges and Risk Factors
Like any biopharmaceutical company, Fortress Biotech faces a range of risks and challenges that could impact its long-term success. The highly regulated nature of the industry, the inherent risks of drug development, and the intense competitive landscape require the company to navigate complex regulatory environments and maintain a robust pipeline of innovative product candidates.
Additionally, the company’s reliance on third-party manufacturers, contract research organizations, and other partners for various aspects of its operations introduces potential supply chain disruptions and operational dependencies that must be carefully managed.
Fortress Biotech has also encountered financial challenges, including a history of operating losses and the need for ongoing capital raises to fund its research and development activities. The company’s ability to secure additional funding and manage its debt obligations will be crucial in determining its future growth and profitability.
Outlook and Conclusion
Despite the various challenges faced by Fortress Biotech, the company has demonstrated its resilience and adaptability. The recent FDA approval of Emrosi, the ongoing review of Cosibelimab, and the progress made by the company’s subsidiaries and partner companies suggest a promising outlook for Fortress Biotech.
As the company continues to navigate the dynamic healthcare landscape, its strategic focus on acquiring and advancing promising assets, fostering collaborative partnerships, and optimizing its operations will be crucial in driving long-term value for its shareholders. Fortress Biotech’s ability to overcome obstacles and capitalize on emerging opportunities will be closely watched by investors and industry observers alike.
The biopharmaceutical industry as a whole has seen a compound annual growth rate (CAGR) of approximately 7-8% over the past 5 years, driven by factors such as an aging population, rising prevalence of chronic diseases, and advancements in drug development technologies. This industry trend provides a favorable backdrop for Fortress Biotech’s continued growth and development efforts.
As Fortress Biotech moves forward, it will need to balance its ongoing research and development initiatives with the need for financial stability and growth. The company’s diverse portfolio and strategic partnerships position it well to capitalize on emerging opportunities in the biopharmaceutical sector, but careful management of resources and a focus on key growth drivers will be essential for long-term success.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.