Filing summary
Entity discrepancy: The supplied filing is for Coronado Biosciences, Inc., not Fortress Biotech, Inc. It covers the quarter ended September 30, 2011 and is signed November 14, 2011. The company describes itself as a development-stage biopharmaceutical business; its principal candidates were CNDO-201 and CNDO-109.
Financial performance and position
Amounts are in millions of dollars unless stated otherwise. The company reported no revenue and remained loss-making; margins are therefore not meaningful.
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Research and development expense | 2011: $1.753; 2010: $1.822 | 2011: $5.141; 2010: $6.341 |
| General and administrative expense | 2011: $1.778; 2010: $0.260 | 2011: $3.965; 2010: $0.510 |
| Net loss | 2011: $3.365; 2010: $2.120 | 2011: $29.641; 2010: $8.354 |
| Loss per common share | 2011: $0.48; 2010: $0.44 | 2011: $6.02; 2010: $1.92 |
Nine-month 2011 loss attributable to common stock was $35.502 million, including a $5.861 million Series A preferred-stock dividend. The $20.706 million Asphelia in-process R&D charge was the principal unusual expense and was recorded when the company acquired CNDO-201 assets.
- Cash and cash equivalents were $26.708 million at September 30, 2011, up from $14.862 million at December 31, 2010. Nine-month operating cash use was $7.291 million, investing cash use was $3.843 million, and financing provided $22.980 million.
- Current liabilities were $3.693 million; total liabilities were $4.443 million, including a $0.750 million related-party PCP note due in December 2013. The company also recorded a $1.170 million preferred-warrant liability.
- Stockholders’ deficit was $44.642 million. Preferred stock had stated liquidation values of $54.844 million for Series A, $21.178 million for Series B, and $38.677 million for Series C.
Changes versus the prior comparable period
- Third-quarter net loss increased 37% year over year to $3.365 million, as G&A expense rose substantially; R&D expense was approximately flat.
- Nine-month net loss increased to $29.641 million, largely reflecting the $20.706 million acquired in-process R&D charge. G&A increased by $3.455 million, while R&D decreased by $1.200 million.
- Operating cash use increased to $7.291 million from $4.818 million. The company raised $22.9 million net from its Series C preferred offering in June 2011; common shares outstanding rose to 7,028,060 at quarter-end from 4,791,102 at year-end 2010.
Outlook, risks and other significant items
- Management said cash was expected to fund operations through 2012 under the existing business plan, assuming certain significant expenses could be delayed. The company expected substantial future R&D spending and said further financing would be needed; availability and terms were uncertain.
- Management expected R&D spending to rise as clinical programs commenced and anticipated a $1.5 million CNDO-201 IND-related milestone charge in the quarter ending December 31, 2011.
- CNDO-201 licensing terms include up to approximately $5.45 million in milestones for the first indication, additional milestones for later indications, royalties if commercialized, and annual license fees. CNDO-109 licensing terms include up to approximately $22 million in milestones for the first three indications, plus potential royalties.
- Contractual obligations totaled $6.352 million, excluding contingent milestones; the company also disclosed a $1.3 million October 2011 purchase order for clinical material. Key risks include clinical and regulatory failure, need for additional capital, reliance on collaborators and single-source suppliers, and lack of commercial manufacturing or sales capabilities.
- The company reported no legal proceedings and no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective, but also disclosed historical internal-control material weaknesses and ongoing remediation. The filing states prior weaknesses contributed to audit adjustments for 2008–2010.
Important facts for investors to verify
- Confirm the issuer identity: this source filing names Coronado Biosciences, Inc., despite the request metadata naming Fortress Biotech, Inc.
- Review the terms, conversion mechanics, and liquidation preferences of Series A, B, and C preferred stock, and the resulting potential dilution. The filing lists substantial potentially dilutive securities excluded from loss-per-share calculations.
- Assess the assumptions behind management’s through-2012 cash runway, projected clinical spending, and need for additional financing.
- Verify CNDO-201 and CNDO-109 development status, milestone obligations, supplier arrangements, and the potential commercial economics of their licenses.
- Review internal-control remediation progress and the company’s ability to meet reporting and financing obligations.