Fortress Biotech, Inc. — 2013 Q2 Form 10-Q summary
Filing identity: The supplied filing is for Coronado Biosciences, Inc., not Fortress Biotech, Inc. It reports the quarter and six months ended June 30, 2013; financial figures below are in U.S. dollars unless stated otherwise.
Business context and reporting period
Coronado describes itself as a clinical-stage biopharmaceutical company developing TSO (CNDO-201) for autoimmune diseases and CNDO-109 for acute myeloid leukemia. It had not begun planned principal operations or generated revenue and reported as a development-stage enterprise. The interim financial statements are unaudited.
Financial performance and position
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $7.8m | $4.5m | $13.8m | $9.1m |
| General and administrative expense | $2.5m | $1.9m | $5.0m | $3.9m |
| Operating loss | $10.3m | $6.5m | $18.8m | $13.0m |
| Net loss | $10.7m | $6.5m | $19.5m | $13.0m |
| Net loss per share | $0.38 | $0.34 | $0.73 | $0.69 |
- Operating and net margins are not meaningful because the company had no revenue.
- Cash and cash equivalents were $67.9m at June 30, 2013, up from $40.2m at December 31, 2012. Six-month operating cash use was $15.3m; investing cash use was $0.3m; financing provided $43.2m.
- Current assets were $68.1m and current liabilities $9.0m. The filing reports total liabilities of $20.2m and stockholders’ equity of $48.6m.
- The Hercules term loan was $15.0m face amount, presented net of a $0.6m debt discount as $4.6m current and $9.8m noncurrent. The loan bears interest at a minimum of 9.25%; six-month interest expense was $1.0m.
- Accumulated development-stage deficit was $103.7m. The filing reports no off-balance-sheet arrangements.
Material changes versus prior comparable periods
- Q2 R&D expense rose 72% and six-month R&D expense rose 34%, mainly due to TSO Crohn’s disease Phase 2 trial costs, compensation and benefits, and establishing a U.S. manufacturing facility; prior-year Falk milestone payments partly offset the year-over-year increase.
- G&A expense increased 29% for Q2 and 21% for the first half, reflecting higher compensation-related and stock-based compensation costs, among other items.
- Six-month net loss increased $6.5m year over year. Interest expense increased substantially, primarily due to the Hercules loan.
- Operating cash use increased $3.9m year over year. Financing cash inflow increased to $43.2m from $26.5m, primarily reflecting ATM stock sales.
- Shares outstanding increased from 24.4m at year-end 2012 to 29.6m at June 30, 2013. The company reported 31.9m shares outstanding as of August 2, 2013.
Outlook, management commentary, risks and unusual items
- Management said cash on hand was expected to fund operations for at least the next 12 months under its existing business plan, while also stating that substantial additional financing would be needed to advance development and potentially commercialize products. Additional funding may not be available on acceptable terms or at all.
- After quarter-end, the company sold 2.2m additional shares for $18.4m net proceeds under its ATM. It also filed a new shelf registration statement in July 2013 that, upon effectiveness, could permit up to $200m of equity sales; an amended ATM covered up to $70m. Further equity issuance could dilute existing holders.
- In July 2013, the company completed enrollment of 250 patients in TRUST-I, its TSO Phase 2 Crohn’s trial, and expected initial results in Q4 2013. This is forward-looking guidance, not a reported result.
- Management expected R&D and G&A spending to increase as clinical development and business activities expand. No earnings or revenue guidance was provided.
- Key risks include clinical and regulatory uncertainty, continued losses and financing needs, dependence on third-party manufacturers and suppliers (including sole-source TSO supply), reliance on CROs and licensors, and debt covenants and default consequences.
- Unusual items included $0.5m of market-capitalization bonuses earned during the first half and a $0.4m severance liability recorded in Q2 following the president’s resignation. The company also entered into a four-year TSO research agreement with FU Berlin and related intellectual-property arrangements, including potential milestone payments and royalties.
- Management concluded disclosure controls were effective as of June 30, 2013; it reported no material change in internal control over financial reporting during the quarter and no legal proceedings.
Most important facts for investors to verify
- Confirm the filing belongs to the intended issuer: the supplied 10-Q names Coronado Biosciences, not Fortress Biotech.
- Check subsequent TRUST-I results and any changes to clinical timelines, trial plans, or regulatory requirements.
- Assess cash burn against management’s stated 12-month runway and the company’s need and ability to raise additional capital.
- Review post-quarter ATM and shelf issuance, resulting dilution, and remaining authorized offering capacity.
- Verify Hercules loan repayment terms, covenants, interest exposure, and any developments affecting the TSO or CNDO-109 supply chain.