Business context and reporting period
Entity discrepancy: The request identifies Fortress Biotech, Inc., but the supplied filing is Coronado Biosciences, Inc. and subsidiaries’ unaudited Form 10-Q for the quarter ended June 30, 2014. This summary reflects the supplied filing, not Fortress Biotech.
Coronado was a development-stage biopharmaceutical company pursuing immunotherapy candidates TSO (CNDO-201) and CNDO-109, while also seeking to diversify through product and company investments. It reported no operating revenue.
Financial results and liquidity
- Q2 2014: R&D expense was $2.4 million, down 70% year over year; G&A was $2.4 million, down 5%. Operating loss was $4.8 million and net loss was $4.7 million, or $0.13 per share, compared with a $10.7 million net loss, or $0.38 per share, in Q2 2013.
- First six months of 2014: R&D expense was $6.9 million, down 50%; G&A was $4.5 million, down 10%. Operating loss was $11.3 million and net loss was $12.1 million, or $0.34 per share, compared with a $19.5 million net loss, or $0.73 per share, in the prior-year period. No revenue was reported, so revenue margins are not meaningful.
- Cash flows, six months: Operating cash use was $10.1 million, versus $15.3 million in 2013. Investing cash use was $0.5 million. Financing used $13.1 million, principally reflecting repayment of the Hercules loan and cash pledged against the replacement loan. Cash and cash equivalents fell by $23.7 million to $75.8 million.
- Liquidity and debt at June 30: Current assets were $76.5 million and current liabilities $3.4 million. The company also held $14.0 million of restricted cash pledged to secure the IDB Note; this cash was not freely available. IDB debt outstanding was $14.0 million, due by February 2016, with interest based on the pledge-account rate plus 1.50%. Total liabilities were $18.5 million; accumulated deficit was $133.4 million.
Changes, outlook, and risks
- Lower losses chiefly reflected reduced TSO development spending after the TRUST-I trial was wound down. Management said TRUST-I missed its primary endpoint and TRUST-II was discontinued on an independent monitoring committee’s recommendation for lack of efficacy; no safety concerns were noted. These results adversely affected TSO’s development prospects.
- Management’s current TSO focus included investigator-initiated studies in psoriasis and autism. A Phase 2a autism study in 20 pediatric patients began in May 2014. CNDO-109 remained in development for acute myeloid leukemia.
- Management stated existing cash was sufficient to fund operations for at least the next 12 months, but anticipated continued substantial losses and no assurance of future revenue. Additional financing might be needed; acceptable financing may not be available, potentially forcing delays or cuts to development programs.
- During 2014 the company repaid the Hercules Note and replaced it with the IDB Note, secured by an equal amount in a pledged money-market account. It also abandoned the planned Woburn manufacturing build-out, began subleasing facilities, and closed its New York office. Facility-related impairment and lease charges totaled about $0.8 million for the first half. Termination of a research agreement with Freie Universität Berlin resulted in a one-time charge of about $0.2 million.
- Other investments included a $250,000 investment for a 35% interest in a migraine-device company, a $243,000 option to acquire pharmaceutical-product rights, and a $50,000 secured bridge loan to a specialty-pharmaceutical company. The option expired no later than September 30, 2014; the bridge loan remained outstanding after its stated June 16 due date, and management believed it collectible. The investments were Level 3 fair-value measurements and were carried near cost at quarter-end.
- Other notable items included $2.6 million of first-half stock-based compensation and the February 2014 issuance of substantial restricted-stock awards. Management reported effective disclosure controls and no material quarterly change in internal control. The filing listed no legal proceedings or new risk-factor updates.
Investor verification points
- Confirm the issuer: the supplied filing is for Coronado Biosciences, not Fortress Biotech.
- Track clinical follow-up and development decisions after the negative TRUST-I and TRUST-II results, including progress and outcomes of the autism study.
- Reconcile accessible cash with the $14.0 million pledged balance, IDB Note terms, and the company’s stated 12-month cash runway.
- Check collection and status of the overdue bridge loan, exercise or expiry of the pharmaceutical-product option, and subsequent valuation of the Level 3 investments.
- Assess dilution and compensation implications of the restricted-stock awards and outstanding options, warrants, and unvested shares.