8-K: Fortress Biotech Announces Third Quarter 2024 Results and Regulatory Milestone with Emrosi Approval

Fortress Biotech reports its third quarter 2024 financial results, highlighted by the FDA approval of Emrosi for rosacea and progress in its pipeline.

Summary

• Fortress Biotech announced its third quarter 2024 financial results, with a net revenue of $14.6 million, all from marketed dermatology products.
• This is a decrease from $34.8 million in the same quarter of 2023, which included a $19 million upfront license payment.
• The company's net loss attributable to common stockholders was $(15.0) million, or $(0.76) per share, compared to a net loss of $(7.1) million, or $(0.94) per share, in the third quarter of 2023.
• Consolidated cash and cash equivalents totaled $58.9 million as of September 30, 2024, down from $76.2 million at the end of the previous quarter and $80.9 million at the end of 2023.
• The FDA approved Emrosi for the treatment of inflammatory lesions of rosacea in adults, marking the first FDA approval across the Fortress portfolio.
• The company anticipates a potential second FDA approval for cosibelimab by December 28, 2024, for the treatment of metastatic or locally advanced cutaneous squamous cell carcinoma.
• Journey Medical, a partner company, reported net product revenues of $14.6 million for the third quarter of 2024, slightly down from $14.9 million in the previous quarter.
• Fortress reduced its total debt by approximately $15 million by entering into a new loan agreement with Oaktree Capital Management.

Sentiment

Score: 5

Explanation: The document presents mixed signals. While the FDA approval of Emrosi is a significant positive, the financial results show a substantial increase in net loss and a decrease in revenue and cash. The company is also pausing dividends on preferred stock, which is a negative signal. The potential for future FDA approvals is a positive, but the overall financial picture is concerning.

Positives

• The FDA approval of Emrosi is a significant milestone for Fortress and its partner company, Journey Medical.
• Emrosi is expected to be a new treatment paradigm for millions of patients suffering from inflammatory lesions of rosacea.
• The company has a potential second FDA approval for cosibelimab by December 28, 2024.
• Fortress reduced its total debt by approximately $15 million.
• Clinical data presented at the 44th Fall Clinical Dermatology Conference showed that Emrosi provides higher dermal concentration than doxycycline.
• Longer-term data from the pivotal trial of cosibelimab demonstrated a deepening of response over time.

Negatives

• Fortress's consolidated net revenue decreased to $14.6 million in Q3 2024 from $34.8 million in Q3 2023.
• The company's net loss attributable to common stockholders increased to $(15.0) million in Q3 2024 from $(7.1) million in Q3 2023.
• Consolidated cash and cash equivalents decreased to $58.9 million as of September 30, 2024, from $80.9 million at the end of 2023.
• The company paused the payment of dividends on its 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock.

Risks

• The company's growth strategy, financing, and strategic agreements are subject to risks.
• There is a need for substantial additional funds and uncertainties relating to financings.
• The company faces risks related to identifying, acquiring, closing, and integrating product candidates.
• There are risks associated with the early stage of products under development and the results of research and development activities.
• The company's ability to obtain regulatory approval for products under development is uncertain.
• There are risks related to commercializing products and securing third-party manufacturing, marketing, and distribution.
• Government regulation, patent and intellectual property matters, and competition pose risks to the company.

Future Outlook

Fortress anticipates up to two more U.S. FDA approvals in the next nine months, with the next anticipated PDUFA goal date being December 28, 2024, for cosibelimab. The company expects Emrosi to launch late in the first quarter or early in the second quarter of 2025.

Management Comments

• Lindsay A. Rosenwald, M.D., Fortress Chairman, President and Chief Executive Officer, said, 'We are thrilled to have received U.S. Food and Drug Administration (FDA) approval for Emrosi, a potential best-in-class treatment for inflammatory lesions of rosacea in adults, which is a tremendous milestone for Fortress and our partner company, Journey Medical Corporation (Journey Medical).'
• Lindsay A. Rosenwald, M.D., also stated, 'We could achieve up to two more U.S. FDA approvals in the next nine months, and our next anticipated PDUFA goal date is December 28, 2024, for cosibelimab, an anti-PD-L1 antibody, for the treatment of metastatic or locally advanced cutaneous squamous cell carcinoma (cSCC).'
• Management stated, 'We have an exciting late-stage pipeline with many upcoming value creation opportunities, and we are focused on attaining our long-term strategy of building shareholder value, while bringing innovative treatment options to patients with unmet medical needs.'

Industry Context

The approval of Emrosi and the potential approval of cosibelimab position Fortress Biotech as a key player in the dermatology and oncology spaces. The company's focus on in-licensing and developing clinical-stage programs aligns with industry trends of leveraging external innovation to drive growth. The collaboration to explore the combined therapeutic potential of cosibelimab with GC Cells Immuncell-LC also reflects the growing interest in combination therapies.

Comparison to Industry Standards

• Fortress Biotech's revenue of $14.6 million for the third quarter is significantly lower than some of its larger peers in the biopharmaceutical industry, such as Amgen or Gilead, which report billions in quarterly revenue.
• However, Fortress operates on a different model, focusing on acquiring and developing assets, rather than large-scale commercialization of its own products.
• The FDA approval of Emrosi is a positive development, as it demonstrates the company's ability to bring a product through the regulatory process, similar to other successful biotech companies like Regeneron or Vertex.
• The company's net loss of $(15.0) million is not unusual for a development-stage biotech company, as significant investments are required for research and clinical trials. This is comparable to other companies in the sector that are focused on R&D.
• The debt reduction of $15 million is a positive step, as many biotech companies struggle with high debt levels. This is a better result than some of its peers who have increasing debt.
• The cash position of $58.9 million is relatively low compared to larger biotech companies, but it is sufficient for the company's current operations and development plans. This is a common situation for companies of this size.

Stakeholder Impact

• Shareholders may be concerned about the increased net loss and decreased revenue.
• Shareholders may be concerned about the pausing of dividends on the preferred stock.
• Patients with rosacea will benefit from the approval of Emrosi.
• Employees may be impacted by the company's financial performance.
• The company's partners and suppliers may be affected by the company's financial situation.

Next Steps

• The company anticipates a potential second FDA approval for cosibelimab by December 28, 2024.
• Emrosi is expected to launch late in the first quarter or early in the second quarter of 2025 by Journey Medical.
• The Board intends to revisit its decision regarding the monthly dividend regularly and will assess the profitability and cash flow of the Company to determine whether and when the suspension should be lifted.

Key Dates

Keywords

Fortress Biotech, Emrosi, cosibelimab, FDA approval, rosacea, cutaneous squamous cell carcinoma, financial results, biopharmaceutical, drug development, Journey Medical, Checkpoint Therapeutics