Fortress Biotech, Inc. — Filing Summary
Filing identity discrepancy: The supplied 10-Q identifies the registrant as Coronado Biosciences, Inc., not Fortress Biotech, Inc. The summary below reflects the filing text provided; verify the intended company and filing before relying on it.
Business context and reporting period
Quarter ended March 31, 2014. Coronado describes itself as a development-stage biopharmaceutical company developing TSO (CNDO-201) and CNDO-109, and pursuing potential acquisitions and investments. It reported no operating revenue.
Key financial metrics
| Metric | Q1 2014 | Q1 2013 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $4.487 million | $5.974 million |
| General and administrative expense | $2.095 million | $2.484 million |
| Operating loss | $6.582 million | $8.458 million |
| Net loss | $7.370 million | $8.858 million |
| Net loss per share | $0.21 | $0.35 |
| Net cash used in operations | $6.074 million | $7.492 million |
At March 31, cash and cash equivalents were $79.982 million; restricted cash was $14.009 million, pledged to secure the IDB Note. Total current assets were $80.504 million and current liabilities were $4.335 million. Debt outstanding was $14.009 million, due no later than February 13, 2016, subject to default provisions. The filing does not provide a meaningful operating margin given the absence of revenue.
Material changes and unusual items
- R&D expense declined 25%, primarily reflecting reduced TSO costs as the TRUST-I trial wound down; the decline was partly offset by facility-related charges.
- G&A expense declined 16%, mainly due to lower personnel and consulting costs.
- Interest expense increased to $966,000 from $476,000, including costs associated with early repayment of the Hercules loan.
- Coronado repaid the Hercules Note and replaced it with an IDB facility of up to $15 million. It borrowed $14 million and transferred substantially the same amount into restricted cash as collateral.
- The company recorded approximately $0.8 million of costs related to abandoning its Woburn manufacturing build-out and closing its New York office, including a $373,000 fixed-asset impairment. It also recorded a $235,000 charge for terminating a research agreement with Freie Universität Berlin.
- It invested $250,000 for a 35% stake in Argus Neurooptics and provided Nuro Pharma a $50,000 secured bridge loan at 8% interest, due in 90 days.
- Common shares outstanding increased from 39.65 million at December 31, 2013 to 44.25 million at March 31, 2014. The filing attributes equity changes in part to restricted-stock awards and option exercises.
Outlook, commentary, and risks
Management said existing cash was expected to fund operations for at least the next 12 months, but additional financing may be needed to develop candidates and support operations. It cautioned that financing may not be available on acceptable terms, particularly after negative TSO trial results, and that programs could be delayed, curtailed, or eliminated.
The TRUST-I study did not meet its primary endpoint; a data monitoring committee recommended stopping the TRUST-II study for lack of efficacy, with no safety concerns reported. Management said it was evaluating the data and focusing on investigator-initiated psoriasis and autism studies. An autism study in 20 pediatric patients was expected to begin in mid-2014. The company expected substantial future losses and no assurance of significant revenue. It reported no legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls.
Important facts for investors to verify
- Whether this is the intended issuer: the filing names Coronado Biosciences, while the request names Fortress Biotech.
- Cash availability and operating runway, including the $14.009 million restricted-cash pledge and IDB Note terms.
- Follow-up clinical conclusions and development plans for TSO after TRUST-I and TRUST-II, and progress on the autism study.
- Facility lease and sublease costs, and the accounting and cash consequences of the Woburn and New York closures.
- Share dilution and equity compensation, including the increase in shares outstanding and substantial unvested restricted stock.