[10-Q] Fortress Biotech, Inc. Quarterly Earnings Report
Fortress Biotech (FBIO) filed its Q3 2025 10‑Q, showing higher sales and a swing to quarterly profitability aided by non-operating gains. Net revenue was
Year to date, net revenue reached
Total liabilities fell to
- None.
- None.
Insights
Quarterly profit driven by one‑time items; cash up, ops still cash‑consuming.
Fortress Biotech posted Q3 net income of
Key non-recurring drivers include a
Cash ended at
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
FORTRESS BIOTECH, INC.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address including zip code of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class | | Trading Symbol(s) | | Exchange Name |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer | ◻ | Accelerated filer | ◻ |
⌧ | Smaller reporting company | ||
|
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
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Class of Stock |
| Outstanding Shares as of November 10, 2025 |
Common Stock, $0.001 par value | | |
9.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value | |
Table of Contents
FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q
TABLE OF CONTENTS
PART I. | FINANCIAL INFORMATION | 6 |
Item 1. | Unaudited Condensed Consolidated Financial Statements | 6 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 46 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risks | 64 |
Item 4. | Controls and Procedures | 64 |
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PART II. | OTHER INFORMATION | 64 |
Item 1. | Legal Proceedings | 64 |
Item 1A. | Risk Factors | 64 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 102 |
Item 3. | Defaults Upon Senior Securities | 102 |
Item 4. | Mine Safety Disclosures | 102 |
Item 5. | Other Information | 102 |
Item 6. | Exhibits | 103 |
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SIGNATURES |
| 105 |
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Table of Contents
SUMMARY OF RISK FACTORS
Our business is subject to risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face. You should carefully consider these risk factors, the risk factors described in Part 2, Item 1A, and the other reports and documents that we have filed with the Securities and Exchange Commission (“SEC”). As used below and throughout this filing (including in the risk factors described in Item 1A), the words “we”, “us” and “our” may refer to Fortress Biotech, Inc. individually, to one or more of its subsidiaries and/or partner companies, or to all such entities as a group, as dictated by context.
Risks Inherent in Drug Development
| ● | Many of our product candidates are in early development stages and are subject to time and cost intensive regulation and clinical testing, which may result in the identification of safety or efficacy concerns. As a result, our product candidates may never be successfully developed or commercialized. |
| ● | Our competitors may develop treatments for our products’ target indications, which could limit our product candidates’ commercial opportunity and profitability. |
Risks Pertaining to the Need for and Impact of Existing and Additional Financing Activities
| ● | We have a history of operating losses and expect such losses to continue in the future. |
| ● | We have funded our operations in part through the assumption of debt, and our applicable lending agreements may restrict our operations. Further, the occurrence of any default event under an applicable loan document could adversely affect our business. |
| ● | Our research and development (“R&D”) programs will require substantial additional capital, which we may be unable to raise as needed and which may impede our R&D programs, commercialization efforts, or planned acquisitions. |
| ● | Our board of directors has paused payments of dividends on our preferred stock, and there can be no assurance that monthly dividend payments will be resumed in a timely manner, or at all. |
| ● | If we raise additional capital by issuing equity, equity-linked securities or securities convertible into or exercisable for equity securities, our existing stockholders will be diluted. |
Risks Pertaining to Our Existing Revenue Stream from Journey Medical Corporation (“Journey”)
| ● | Our operating income derives primarily from the sale of our partner company Journey’s dermatology products, particularly Emrosi, Qbrexza, Accutane, Amzeeq, Zilxi, Targadox, and Exelderm. Any issues relating to the manufacture, sale, utilization, or reimbursement of Journey’s products (including products liability claims) could significantly impact our operating results. |
| ● | A significant portion of Journey’s sales derive from products that are without patent protection and/or are or may become subject to third party generic competition, the introduction of new competitor products, or an increase in market share of existing competitor products, any of which could have a significant adverse effect on our operating income. Four of Journey’s marketed products, Emrosi, Qbrexza, Amzeeq and Zilxi, currently have patent protection. Four of Journey’s marketed products, Accutane, Targadox, Exelderm, and Luxamend, do not have patent protection or otherwise are not eligible for patent protection. With respect to Journey products that are covered by valid claims of issued patents, such patents may be subject to invalidation, which would harm our operating income. |
| ● | Continued sales and coverage, including formulary inclusion without the need for a prior authorization or step edit therapy, of our products for commercial sale will depend in part on the availability of reimbursement from third-party payors, including government payors. Third-party payors are increasingly examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy, and, accordingly, significant uncertainty exists as to the reimbursement status of current and newly approved therapeutics. |
| ● | The Company’s business may be materially adversely affected by the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures implemented by the U.S. and other governments. |
Risks Pertaining to Our Business Strategy, Structure and Organization
| ● | We have entered, and will likely in the future enter, into certain collaborations or divestitures which may cause a reduction in our business’ size and scope, market share and opportunities in certain markets, or our ability to compete in certain markets and therapeutic categories. |
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| ● | We and our subsidiaries and partner companies have also entered into, and intend in the future to enter into, arrangements under which we and/or they have agreed to contingent dispositions of such companies and/or their assets. The failure to consummate any such transaction may impair the value of such companies and/or assets, and we may not be able to identify or execute alternative arrangements on favorable terms, if at all. The consummation of any such arrangements with respect to certain product candidates may also result in our eligibility to receive a lower portion of sales (if any) of resulting approved products than if we had developed and commercialized such products ourselves. |
| ● | Our growth and success depend on our acquiring or in-licensing products or product candidates and integrating such products into our businesses. |
| ● | We may act as, and are likely to continue acting as, guarantor and/or indemnitor of certain obligations of our subsidiaries and partner companies, which could require us to pay substantial amounts in certain circumstances. |
Risks Pertaining to Reliance on Third Parties
| ● | We rely heavily on third parties for several aspects of our operations, including manufacturing and developing product candidates, conducting clinical trials, and producing commercial product supply. Such reliance on third parties reduces our ability to control every aspect of the drug development process and may hinder our ability to develop and commercialize our products in a cost-effective and timely manner. For instance, we rely heavily on Sentynl Therapeutics and its manufacturer in its efforts to obtain regulatory approval for CUTX-101, which efforts, if unsuccessful or untimely, could compromise our eligibility to receive a Priority Review Voucher (“PRV”). |
Risks Pertaining to Intellectual Property and Potential Disputes with Licensors Thereof
| ● | If we are unable to obtain and maintain patent protection for our technologies and products, or if the scope of the patent protection obtained is not sufficiently broad, our competitors could develop and commercialize technologies and products similar or identical to ours, and our ability to successfully commercialize our technologies and products may be impaired. |
| ● | We or our licensors may be subject to costly and time-consuming litigation for infringement of third-party intellectual property rights or to enforce our or our licensors’ patents. |
| ● | Any dispute with our licensors may affect our ability to develop or commercialize our product candidates. |
Risks Pertaining to Generic Competition and Paragraph IV Litigation
| ● | Generic drug companies may submit applications seeking approval to market generic versions of our products. |
| ● | In connection with these applications, generic drug companies may seek to challenge the validity and enforceability of our patents through litigation and/or with the United States Patent and Trademark Office (“PTO”). Such challenges may subject us to costly and time-consuming litigation and/or PTO proceedings. |
| ● | As a result of the loss of any patent protection from such litigation or PTO proceedings, or the “at-risk” launch by a generic competitor of our products, our products could be sold at significantly lower prices, and we could lose a significant portion of product sales in a short period of time, which could adversely affect our business, financial condition, operating results and prospects. |
Risks Pertaining to the Commercialization of Product Candidates, if Approved
| ● | If our product candidates, if approved, are not broadly accepted by the healthcare community, the revenues from any such products are likely to be limited. |
| ● | We may not obtain the desired product labels or intended uses for product promotion, or favorable scheduling classifications desirable to successfully promote our products. |
| ● | Even if a product candidate is approved, it may be subject to various post-marketing requirements, including studies or clinical trials, the results of which could cause such products to later be withdrawn from the market. |
| ● | Any successful products liability claim related to any of our current or future product candidates may cause us to incur substantial liability and limit the commercialization of such products. |
Risks Pertaining to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries
| ● | We operate in a heavily regulated industry, and we cannot predict the impact that any future legislation or administrative or executive action may have on our operations. If the “Give Kids a Chance Act” or similar legislation is not passed extending the expiration date of the Rare Pediatric Disease PRV program from September 2026 to a later date, we may not receive a PRV. |
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General and Other Risks
| ● | We have previously failed to satisfy certain continued listing rules of The Nasdaq Stock Market LLC (“Nasdaq”), and if we again are unable to meet the continued listing requirements and/or regain compliance with such rules, our Common Stock and Preferred Stock may be subject to delisting from The Nasdaq Capital Market. The delisting of our Securities from the Nasdaq may decrease the market liquidity and market price of our Common Stock and Preferred Stock. |
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PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial Statements
FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($ in thousands except for share and per share amounts)
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| | September 30, | | December 31, | ||
| | 2025 | | 2024 | ||
ASSETS |
| | (Unaudited) |
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Current assets |
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Cash and cash equivalents | | $ | | | $ | |
Accounts receivable, net | |
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Inventory | |
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Other receivables - related party | |
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Prepaid expenses and other current assets | |
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Assets held for sale | |
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Total current assets | |
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Property, plant and equipment, net | |
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Operating lease right-of-use asset, net | |
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Restricted cash | |
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Intangible assets, net | |
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Other assets | |
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Total assets | | $ | | | $ | |
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | |
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Current liabilities | |
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Accounts payable and accrued expenses | | $ | | | $ | |
Income taxes payable | | | | | | |
Common stock warrant liabilities | | | | | | |
Operating lease liabilities, short-term | |
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Partner company notes payable, short-term | | | | | | |
Partner company installment payments - licenses, short-term | | | | | | |
Other current liabilities | | | | | | |
Total current liabilities | |
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Notes payable, long-term, net | |
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Operating lease liabilities, long-term | |
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Other long-term liabilities | |
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Total liabilities | | | | | | |
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Commitments and contingencies (Note 14) |
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Stockholders’ equity (deficit) |
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Cumulative redeemable perpetual preferred stock, $ |
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Common stock, $ |
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Additional paid-in-capital |
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Accumulated deficit |
| | ( |
| | ( |
Total stockholders' equity attributed to the Company |
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Non-controlling interests |
| | |
| | ( |
Total stockholders' equity (deficit) |
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| | ( |
Total liabilities and stockholders' equity (deficit) | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Operations
($ in thousands except for share and per share amounts)
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Revenue |
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Product revenue, net | | $ | | | $ | | | $ | | | $ | |
Revenue - related party | |
| — | |
| — | |
| — | |
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Other revenue | | | | | | — | | | | | | — |
Net revenue | |
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Operating expenses | |
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Cost of goods - (excluding amortization of acquired intangible assets) | |
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Amortization of acquired intangible assets | | | | | | | | | | |
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Research and development | |
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Selling, general and administrative | |
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Asset impairment | | | — | | | — | | | — | | | |
Total operating expenses | |
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Loss from operations | |
| ( | |
| ( | |
| ( | |
| ( |
| | | | | | | | | | | | |
Other income (expense) | |
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Interest income | |
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Interest expense and financing fee | |
| ( | |
| ( | |
| ( | |
| ( |
Gain (loss) on common stock warrant liabilities | |
| ( | |
| | |
| ( | |
| ( |
Gain from deconsolidation of subsidiary | | | — | | | — | | | | | | — |
Other income | | | | | | | | | | | | |
Total other income (expense) | |
| | |
| ( | |
| | |
| ( |
Income (loss) before income tax expense | | | | | | ( | | | ( | | | ( |
| | | | | | | | | | | | |
Income tax expense (refund) | | | | |
| | |
| | |
| ( |
Net income (loss) | |
| | |
| ( | |
| ( | |
| ( |
| | | | | | | | | | | | |
Attributable to non-controlling interests | |
| ( | |
| | |
| | |
| |
Net income (loss) attributable to Fortress | | $ | | | $ | ( | | $ | | | $ | ( |
| | | | | | | | | | | | |
Preferred A dividends declared and paid and/or cumulated, and Fortress' share of subsidiary deemed dividends | | | ( | | | ( | | | ( | | | ( |
Net income (loss) attributable to common stockholders | | $ | | | $ | ( | | $ | | | $ | ( |
| | | | | | | | | | | | |
Net income (loss) per common share attributable to common stockholders - basic | | $ | | | $ | ( | | $ | | | $ | ( |
Net income (loss) per common share attributable to common stockholders - diluted | | $ | | | $ | ( | | $ | | | $ | ( |
| | | | | | | | | | | | |
Weighted average common shares outstanding - basic | |
| | |
| | |
| | |
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Weighted average common shares outstanding - diluted | | | | | | | | | | | | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity
($ in thousands except for share amounts)
For the Three Months Ended September 30, 2025
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | Series A Perpetual | | | | | | | Additional | | | | | | | Total | ||||||
| | Preferred Stock | | Common Stock | | Paid-In | | Accumulated | | Non-Controlling | | Stockholders’ | ||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Interests |
| Equity | ||||||
Balance as of June 30, 2025 |
| |
| $ | |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
Stock-based compensation expense |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Issuance of common stock related to equity plans |
| — | |
| — |
| | |
| — | |
| — | |
| — | |
| — | |
| — |
Partner company's warrant exercises |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Partner company’s at-the-market offering, net |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Issuance of common stock under partner company’s ESPP | | — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | | | |
Partner company’s dividends declared and paid |
| — | |
| — |
| — | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Partner company’s exercise of options for cash |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Exercise of warrants |
| — | |
| — |
| | |
| | |
| | |
| — | |
| — | |
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Shares withheld related to net settlement of warrants | | — | |
| — | | ( | | | — | | | — | | | — | | | — | | | — |
Non-controlling interest in partner companies | | — | |
| — |
| — | |
| — | |
| ( | |
| — | |
| | | | — |
Net loss attributable to non-controlling interest | | — | |
| — |
| — | |
| — | |
| — | |
| — | |
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Net income attributable to common stockholders |
| — | |
| — |
| — | |
| — | |
| — | |
| | |
| — | |
| |
Balance as of September 30, 2025 |
| |
| $ | |
| |
| $ | |
| $ | |
| $ | ( |
| $ | |
| $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
($ in thousands except for share amounts)
For the Three Months Ended September 30, 2024
| | | | | | | | | | | | | | | | | | | | | | |
| | Series A Perpetual | | | | | | | | | | | | | | Total | ||||||
| | Preferred Stock | | Common Stock | | Paid-In | | Accumulated | | Non-Controlling | | Stockholders’ | ||||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Interests |
| Equity (Deficit) | ||||||
Balance as of June 30, 2024 |
| |
| $ | |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( |
Stock-based compensation expense |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Issuance of common stock related to equity plans |
| — | |
| — |
| | |
| — | |
| — | |
| — | |
| — | |
| — |
Issuance of common stock for equity offering, net | | — | | | — | | | | | | | | | | | — | | | — | | | |
Warrants issued in conjunction with debt | | — | | | — | | — | |
| — | | | | |
| — | | | — | | | |
Issuance of common stock for at-the-market offering, net | | — | | | — | | | |
| — | | | | |
| — | | | — | | | |
Partner companies' offerings, net |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Partner company’s at-the-market offering, net |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Issuance of common stock under partner company’s ESPP | | — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | | | |
Partner company’s dividends declared and paid |
| — | |
| — |
| — | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Partner companies' proceeds from options |
| — | |
| — |
| — | |
| — | |
| | |
| — | |
| — | |
| |
Non-controlling interest in partner companies | | — | |
| — |
| — | |
| — | |
| ( | |
| — | |
| | | | — |
Net loss attributable to non-controlling interest | | — | |
| — |
| — | |
| — | |
| — | |
| — | |
| ( | | | ( |
Net loss attributable to common stockholders |
| — | |
| — |
| — | |
| — | |
| — | |
| ( | |
| — | |
| ( |
Balance as of September 30, 2024 |
| |
| $ | |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
($ in thousands except for share amounts)
For the Nine Months Ended September 30, 2025
| | | | | | | | | | | | | | | | | | | | | | |
| | Series A | | | | | | | | | | | | | Total |
| | | ||||
| | Preferred Stock | | Common Stock | | Paid-In | | Accumulated | | Non-Controlling | | Stockholders’ | ||||||||||
| | Shares | | Amount | | Shares | | Amount | | Capital | | Deficit | | Interests | | Equity (Deficit) | ||||||
Balance as of December 31, 2024 |
| |
| $ | |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | ( |
Stock-based compensation expense |
| — | |
| — |
| — | |
| — | | | | |
| — | |
| — | |
| |
Issuance of common stock related to equity plans |
| — | |
| — |
| | |
| | | | ( | |
| — | |
| — | |
| — |
Issuance of common stock under ESPP | | — | |
| — |
| | |
| — | | | | |
| — | |
| — | |
| |
Redemption of partner company preferred shares | | — | | | — | | — | | | — | | | ( | | | — | | | — | | | ( |
Issuance of common stock for at-the-market offering, net | | — | | | — | | | | | | | | | | | — | | | — | | | |
Partner companies' offerings, net and warrant exercises |
| — | |
| — |
| — | |
| — | | | | |
| — | |
| — | |
| |
Partner companies' at-the-market offering, net |
| — | |
| — |
| — | |
| — | | | | |
| — | |
| — | |
| |
Issuance of common stock under partner company’s ESPP |
| — | |
| — |
| — | |
| — | | | | |
| — | | | — | |
| |
Partner company’s dividends declared and paid |
| — | |
| — |
| — | |
| — | | | ( | |
| — | |
| — | |
| ( |
Exercise of warrants |
| — | |
| — |
| | |
| | |
| | |
| — | |
| — | |
| |
Shares withheld related to net settlement of warrants | | — | | | — | | ( | | | — | | | — | | | — | | | — | | | — |
Partner company’s exercise of options for cash | | — | | | — | | — | | | — | | | | | | — | | | — | | | |
Deconsolidation of subsidiary non-controlling interests | | — | | | — | | — | | | — | | | — | | | — | | | ( | | | ( |
Non-controlling interest in partner companies | | — | | | — | | — | | | — | | | ( | | | — | | | | | | — |
Net loss attributable to non-controlling interest | | — | | | — | | — | | | — | | | — | | | — | | | ( | | | ( |
Net income attributable to common stockholders | | — | | | — | | — | | | — | | | — | | | | | | — | | | |
Balance as of September 30, 2025 |
| | | $ | |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
($ in thousands except for share amounts)
For the Nine Months Ended September 30, 2024
| | | | | | | | | | | | | | | | | | | | | | |
| | Series A | | | | | | | | | | | | | Total |
| | | ||||
| | Preferred Stock | | Common Stock | | Paid-In | | Accumulated | | Non-Controlling | | Stockholders’ | ||||||||||
| | Shares | | Amount | | Shares | | Amount | | Capital | | Deficit | | Interests | | Equity (Deficit) | ||||||
Balance as of December 31, 2023 |
| |
| $ | |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
Stock-based compensation expense |
| — | |
| — |
| — | |
| — | | | | |
| — | |
| — | |
| |
Issuance of common stock related to equity plans |
| — | |
| — |
| | |
| — | | | — | |
| — | |
| — | |
| — |
Issuance of common stock under ESPP | | — | |
| — |
| | |
| — | | | | |
| — | |
| — | |
| |
Issuance of common stock for equity offerings, net | | — | |
| — |
| | |
| | | | | |
| — | |
| — | |
| |
Warrants issued in conjunction with debt | | — | |
| — | | — | | | — | | | | | | — | |
| — | |
| |
Issuance of common stock for at-the-market offering, net | | — | | | — | | | | | | | | | | | — | | | — | | | |
Common shares issued for dividend on partner company's convertible preferred shares |
| — | |
| — |
| | |
| — | |
| | |
| — | |
| — | |
| |
Common shares issued for exchange of partner company's convertible preferred shares |
| — | |
| — |
| | |
| | |
| | |
| — | |
| — | |
| |
Warrants issued in conjunction with exchange of partner company's convertible preferred shares | | — | | | — | | — | | | — | | | | | | — | | | — | | | |
Preferred A dividends declared and paid |
| — | |
| — |
| — | |
| — | | | ( | |
| — | |
| — | |
| ( |
Partner companies' offerings, net |
| — | |
| — |
| — | |
| — | | | | |
| — | |
| — | |
| |
Partner companies' at-the-market offering, net |
| — | |
| — |
| — | |
| — | | | | |
| — | |
| — | |
| |
Issuance of common stock under partner company’s ESPP |
| — | |
| — |
| — | |
| — | | | | |
| — | | | — | |
| |
Partner company’s dividends declared and paid |
| — | |
| — |
| — | |
| — | | | ( | |
| — | |
| — | |
| ( |
Exercise of warrants for cash |
| — | |
| — |
| | |
| — | |
| | |
| — | |
| — | |
| |
Exercise of partner company options and warrants for cash, net | | — | | | — | | — | | | — | | | | | | — | | | — | | | |
Non-controlling interest in partner companies | | — | | | — | | — | | | — | | | ( | | | — | | | | | | — |
Net loss attributable to non-controlling interest | | — | | | — | | — | | | — | | | — | | | — | | | ( | | | ( |
Net loss attributable to common stockholders | | — | | | — | | — | | | — | | | — | | | ( | | | — | | | ( |
Balance as of September 30, 2024 |
| | | $ | |
| | | $ | | | $ | | | $ | ( | | $ | ( | | $ | ( |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
($ in thousands)
| | | | | | |
| | Nine Months Ended September 30, | ||||
|
| 2025 |
| 2024 | ||
Cash Flows from Operating Activities: |
| |
|
| |
|
Net income (loss) | | $ | ( | | $ | ( |
Reconciliation of net loss to net cash used in operating activities: | |
|
| |
| |
Depreciation expense | |
| | |
| |
Loss on disposal of property and equipment | | | | | | |
Bad debt (recovery) expense | | | ( | |
| |
Amortization of debt discount | |
| | |
| |
Accretion of partner company convertible preferred shares | |
| | |
| ( |
Gain on termination of partner company lease | | | ( | | | |
Loss on extinguishment of debt | |
| | |
| |
Amortization of acquired intangible assets | |
| | |
| |
Settlement of partner company payables | | | ( | | | |
Reduction in the carrying amount of operating lease right-of-use assets | |
| | |
| |
Stock-based compensation expense | |
| | |
| |
Change in fair value of investment | |
| ( | |
| |
Expense (income) associated with warrant liabilities | |
| | |
| |
Common shares issued for dividend on partner company's convertible preferred shares | | | | | | |
Gain from deconsolidation of subsidiary | | | ( | | | |
Asset impairment loss | | | | | | |
Increase (decrease) in cash and cash equivalents resulting from changes in operating assets and liabilities: | |
|
| |
| |
Accounts receivable | |
| ( | |
| |
Inventory | |
| | |
| ( |
Other receivables - related party | |
| | |
| ( |
Prepaid expenses and other current assets | |
| | |
| |
Other assets | |
| | |
| |
Accounts payable and accrued expenses | |
| ( | |
| ( |
Income taxes payable | | | | | | |
Lease liabilities | |
| ( | |
| ( |
Other liabilities | |
| ( | |
| |
Net cash used in operating activities | |
| ( | |
| ( |
| | | | | | |
Cash Flows from Investing Activities: |
| |
|
| |
|
Proceeds from sale of property and equipment | | | | | | |
Net cash increase upon deconsolidation of subsidiary | | | | | | |
Net cash provided by investing activities |
| | |
| | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
($ in thousands)
| | | | | | |
| | Nine Months Ended September 30, | ||||
| | 2025 | | 2024 | ||
Cash Flows from Financing Activities: |
| |
|
| |
|
Payment of Series A perpetual preferred stock dividends |
| $ | |
| $ | ( |
Proceeds from issuance of common stock for public offering, net | | | | | | |
Proceeds from issuance of common stock for at-the-market offering, net | | | | | | |
Proceeds from issuance of common stock under ESPP | | | | | | |
Exercise of warrants for cash | | | | | | |
Proceeds from partner companies' ESPP | | | |
| | |
Partner company’s dividends declared and paid | | | ( |
| | ( |
Partner company’s redemption of preferred shares | | | ( | | | |
Proceeds from partner companies' equity offerings, options and warrant exercises, net | | | | | | |
Proceeds from partner companies' at-the-market offering, net |
| | |
| | |
Repayment of Oaktree Note | | | ( | | | ( |
Repayment of partner company installment payments - licenses | | | ( | | | ( |
Stock and warrants issued for exchange of partner company preferred shares | | | | | | |
Proceeds from long-term debt, net | | | ( | | | |
Proceeds from partner company's long-term debt, net | | | | | | |
Net cash provided by financing activities |
| | |
| | |
Net increase in cash and cash equivalents and restricted cash |
| | |
| | ( |
Cash and cash equivalents and restricted cash at beginning of period |
| | |
| | |
Cash and cash equivalents and restricted cash at end of period | | $ | | | $ | |
| | | | | | |
Supplemental disclosure of cash flow information: | |
| | |
| |
Cash paid for interest | | $ | | | $ | |
Cash paid for income taxes | | $ | | | $ | |
| | | | | | |
Supplemental disclosure of non-cash financing and investing activities: | |
|
| |
|
|
Exchange of partner company convertible preferred shares for common shares | | $ | | | $ | |
Fair value of assets received by partner company in repurchase transaction | | $ | | | $ | |
Fair value of supplies received by partner company expensed to research and development | | $ | | | $ | |
Partner company accounts receivable write-off related to repurchase transaction | | $ | | | $ | ( |
Partner company accounts payable write-off related to repurchase transaction | | $ | | | $ | |
Partner company's deferred purchase consideration | | $ | | | $ | ( |
Warrants issued in conjunction with debt | | $ | | | $ | |
Unpaid debt offering cost | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization and Description of Business
Fortress Biotech, Inc. (“Fortress” or the “Company”) is a biopharmaceutical company focused on acquiring and advancing assets to enhance long-term value for shareholders through product revenue, equity holding and dividend and royalty revenue streams. Fortress works in concert with its extensive network of key opinion leaders to identify and evaluate promising products and product candidates for potential acquisition. The Company has executed arrangements in partnership with some of the world’s foremost universities, research institutes and pharmaceutical companies, including City of Hope National Medical Center, Dana-Farber Cancer Institute, Nationwide Children’s Hospital, Columbia University, the University of Pennsylvania, AstraZeneca plc, Dr. Reddy’s Laboratories, Ltd., and Sun Pharmaceutical Industries Limited (“Sun Pharma”).
Following the exclusive license or other acquisition of the intellectual property underpinning a product or product candidate, Fortress leverages its business, scientific, regulatory, legal and financial expertise to help its subsidiaries and partner companies achieve their goals. Partner and subsidiary companies then assess a broad range of strategic arrangements to accelerate and provide additional funding to support research and development, including joint ventures, partnerships, out-licensings, sales transactions, and public and private financings. To date,
Our subsidiary and partner companies that are pursuing development and/or commercialization of biopharmaceutical products and product candidates are: Journey Medical Corporation (Nasdaq: DERM, “Journey” or “JMC”), Mustang Bio, Inc. (Nasdaq: MBIO, “Mustang”), Avenue Therapeutics, Inc. (OTC: ATXI, “Avenue”), Cellvation, Inc. (“Cellvation”), Cyprium Therapeutics, Inc. (“Cyprium”), Helocyte, Inc. (“Helocyte”), Oncogenuity, Inc. (“Oncogenuity”) and Urica Therapeutics, Inc. (“Urica”). Checkpoint Therapeutics, Inc. (“Checkpoint”), previously a partner company, was acquired by Sun Pharma in May 2025. Baergic Bio, Inc. (“Baergic”), previously a subsidiary of Avenue, was acquired by Axsome in November 2025.
As used throughout this filing, the words “we”, “us” and “our” may refer to Fortress individually, to one or more of its subsidiaries and/or partner companies, or to all such entities as a group, as dictated by context. Generally, “subsidiary” refers to a private Fortress subsidiary, “partner company” refers to a public Fortress subsidiary, and “partner” refers to an entity with whom one of the foregoing parties has a significant business relationship, such as an exclusive license or an ongoing product-related payment obligation. The context in which any such term is used throughout this document, however, may dictate a different construal from the foregoing.
Liquidity and Capital Resources
Since inception, the Company’s operations have been financed primarily through the sale of equity and debt securities, from the sale of subsidiaries/partner companies, and the proceeds from the exercise of warrants. The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur losses from operations for the next several years as it continues to develop and commercialize its existing and new product candidates. The Company is also required to comply with the financial covenants in its loan agreements as described in Note 9. Current cash and cash equivalents as of September 30, 2025 of $
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.
The unaudited condensed consolidated financial statements and related disclosures have been prepared with the presumption that users of the unaudited condensed consolidated financial statements have read or have access to the audited financial statements for the preceding fiscal year for each of Avenue, Checkpoint, Mustang and Journey. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which was filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2025 (the “2024 Form 10-K”), from which the Company derived the balance sheet data at December 31, 2024, as well as Checkpoint’s Form 10-K, filed with the SEC on March 28, 2025, Mustang’s Form 10-K, filed with the SEC on March 28, 2025, Avenue’s Form 10-K, filed with the SEC on March 31, 2025, and Journey’s Form 10-K, filed with the SEC on March 27, 2025.
The Company’s unaudited condensed consolidated financial statements include the results of the Company’s subsidiaries for which it has voting control but does not own
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period. The Company’s significant estimates include, but are not limited to provisions for coupons, chargebacks, wholesaler fees, specialty pharmacy discounts, managed care rebates, product returns, inventory realization, valuation of intangible assets, useful lives assigned to long-lived assets and amortizable intangible assets, fair value of stock options and warrants, stock-based compensation, common stock issued to acquire licenses, accrued expenses and contingencies. Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.
Reclassification
Certain prior period amounts have been reclassified to conform to the current period classification. The Company has historically included amortization of acquired intangible assets within costs of goods sold on the consolidated statement of operations. For the three and nine-month periods ended September 30, 2025 and 2024, “Costs of goods sold – product revenue” as presented in the consolidated statement of operations was disaggregated into “Costs of goods sold – (excluding amortization of acquired intangible assets)” and “Amortization of acquired intangible assets”. This presentation has been conformed for all previous periods presented and has no impact on previously reported financial results.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Segment Reporting
The Company views its operations and manages its business in segments that align with the Company’s public subsidiaries with Fortress being comprised of the parent entity and the private subsidiaries, including intersegment revenue consisting of various fees paid by the subsidiaries to Fortress that are eliminated in consolidation. Each public subsidiary is a biopharmaceutical company focused on acquiring, developing, and commercializing assets in different therapeutic and disease areas. The Company’s chief operating decision maker (“CODM”) is its chief executive officer.
The CODM reviews profit and loss information for each segment to assess the performance of the Company and each of its public subsidiaries. The accounting policies of the segments are the same as those described in this Note 2. See Note 16 for segment information.
Investment in Equity Securities
The Company invests in certain entities over which it holds significant influence but not control. Generally, such investments would be accounted for using the equity method of accounting. However, for those investments for which the Company has elected the fair value option, the Company measures such investments at fair value on the condensed consolidated balance sheet with subsequent changes in fair value recognized in other (income) expense, net on the Company’s condensed consolidated statement of operations. The Company elected the fair value option for certain investments that would otherwise have been accounted for using the equity method because the Company believes that fair value measurement provides more relevant information for users of its financial statements and is consistent with the Company’s investment strategy.
Restricted Cash
The Company records cash held in trust or pledged to secure certain debt obligations as restricted cash. As of September 30, 2025, the Company had $
The following table provides a reconciliation of cash, cash equivalents, and restricted cash from the unaudited condensed consolidated balance sheets to the unaudited condensed consolidated statements of cash flows as of the dates presented:
| | | | | | |
| | September 30, | ||||
| | 2025 | | 2024 | ||
Cash and cash equivalents |
| $ | |
| $ | |
Restricted cash | |
| | |
| |
Total cash and cash equivalents and restricted cash | | $ | | | $ | |
Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2024 Form 10-K other than the addition of the “Investment in Equity Securities” policy.
Recently Issued Accounting Pronouncements
Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2024. The Company will adopt ASU 2023-09 on December 31, 2025.
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires new financial statement disclosures in tabular format, in the notes to financial statements, of specified information about certain costs and expenses. The amendments in this update do not change or remove current expense disclosure requirements. The amendments in this update are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the new standard on its financial statement disclosures.
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The guidance provides a practical expedient that can be elected to be applied to accounts receivable and contract assets, which would allow entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the assets when estimating expected credit losses for such assets. Entities are required to apply the guidance on a prospective basis. This update will be effective for the interim and annual periods beginning after December 15, 2025. Early adoption is permitted. The Company is currently evaluating the update to determine the impact the adoption will have on its consolidated financial statements.
3. Asset Purchase and Merger Agreements
Checkpoint
On March 9, 2025, Checkpoint entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Sun Pharmaceutical Industries, Inc., a Delaware corporation (“Sun Pharma” or “Parent”), and Snoopy Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”). The Merger Agreement provided that, on the terms and subject to the conditions set forth in the Merger Agreement, Parent, Merger Sub and Checkpoint would effect a merger of Merger Sub with and into Checkpoint (the “Merger”), with Checkpoint continuing as the surviving corporation of the Merger and a wholly owned subsidiary of Parent.
On April 23, 2025, Checkpoint filed a definitive proxy statement relating to the Merger Agreement and established May 28, 2025 as the date for a special meeting of Checkpoint stockholders to vote on the Merger. Following the approval of the Merger by requisite majorities of holders of Checkpoint shares at the special meeting, the transaction closed on May 30, 2025. As a result of the Merger, the Company deconsolidated Checkpoint as of May 2025. The Company received $
Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock and each share of Class A common stock of Checkpoint (collectively, the “Shares”) (including each unvested Checkpoint restricted share) outstanding immediately prior to the Effective Time was canceled and ceased to exist and was converted into the right to receive (i) $
CVR Agreement
Pursuant to the Merger Agreement, Parent and a rights agent (the “Rights Agent”) entered into the CVR Agreement governing the terms of the CVRs issued in connection with the Merger. The Rights Agent will maintain an up-to-date register of the holders of CVRs (the “Holders”). Holders shall not be permitted to transfer the CVRs (subject to certain limited exceptions as set forth in the CVR Agreement).
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Each CVR represents the right to receive one of the following contingent cash payments, without interest, subject to any applicable withholding taxes (such applicable payment, the “Milestone Payment”), conditioned upon the achievement of the corresponding milestone condition within the following specified time periods:
| (i) | $ |
| (ii) | $ |
| (iii) | $ |
| (iv) | $ |
As used in the CVR Agreement, (a) the “Milestone Deadline Date” means the date that is
Parent (directly or through its affiliates) is obligated to use, and to obligate its licensees to use, certain specified commercially reasonable efforts to (i) file a marketing authorization application for cosibelimab with the EMA within 12 months of the Closing Date or, to the extent any feedback or communications from, or expectations or requirements of, the EMA (including additional trial requirements) make it impracticable or inadvisable to file such marketing authorization application within such time period, as promptly thereafter as practicable, and (ii) achieve the Primary Milestone (as defined in the CVR Agreement) in its then-maximum value as promptly as practicable (including timely filing any appeals and curing any deficiencies identified in a relevant marketing authorization application by the relevant regulatory authority). Parent’s obligations to use such commercially reasonable efforts terminates on the earlier of (a) the Milestone Deadline Date and (b) the achievement of the Milestone. There can be no assurance that the Milestone will be achieved on or before the Milestone Deadline Date, or that any Milestone Payments will be made. The Company is treating the CVR as variable consideration that is constrained until the achievement of the specified milestones. As of September 30, 2025, the specified milestones have not been met, and the Company has not recorded any value associated with the CVR.
Warrant Amendment
Additionally, in connection with the Checkpoint’s entry into the Merger Agreement, Checkpoint entered into a letter agreement (the “Warrant Amendment”), dated as of March 9, 2025, with Armistice Capital Master Fund Ltd., a Cayman Islands exempted company (“Armistice”). Pursuant to the Warrant Amendment, Checkpoint and Armistice agreed (i) to, immediately prior to the Effective Time, amend all outstanding Checkpoint Warrants held by or issued to Armistice or any of its affiliates other than the Specified Warrant (the “Armistice Warrants”) to provide that each such Armistice Warrant that remains outstanding and unexercised as of the Effective Time will automatically be converted into the right to receive an amount in cash equal to the product of (a) the number of shares of Checkpoint common stock underlying such Armistice Warrant, multiplied by (b) the excess, if any, of (1) $
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Royalty Agreement
Concurrently with the execution of the Merger Agreement, Checkpoint entered into a Royalty Agreement (the “Royalty Agreement”) with Parent and Fortress pursuant to which Fortress will receive a royalty interest right based on worldwide net sales of certain products of Checkpoint and Parent. The royalty interest right represents the right to receive quarterly cash payments of
Transition Services Agreement
Pursuant to the Merger Agreement, as of the Effective Time, Checkpoint and Fortress entered into a Transition Services Agreement (the “Transition Services Agreement”), pursuant to which, from and after the Effective Time, Fortress will provide Checkpoint with certain transition services as set forth in the Transition Services Agreement, for the period of time and in exchange for the compensation set forth therein. The Transition Services Agreement ended on September 15, 2025.
Urica
On July 15, 2024, Urica entered into an asset purchase agreement (the “APA”), royalty agreement, and related agreements (collectively, the “Transaction Documents”) with Crystalys Therapeutics, Inc. (“Crystalys”). Crystalys is a Delaware corporation incorporated in 2022 and seeded by life sciences institutional investors. Under the Transaction Documents, Urica sold the rights to its URAT1 inhibitor product candidate, dotinurad, which is in development for the treatment of gout, together with related intellectual property, licenses and agreements to Crystalys. In return, Crystalys issued to Urica shares of its common stock equal to
The Transaction Documents also granted Urica a secured three percent (
The APA also gave Urica the right, but not the obligation, to repurchase the sold assets for a repurchase price not to exceed $
In September 2025, Crystalys announced it had sold equity securities in a Series A financing to support the advancement of global Phase 3 clinical studies evaluating dotinurad for the treatment of gout. At September 30, 2025, Urica held approximately
Urica had recorded a liability for the $
With the closing of the Series A financing as referenced above, the repurchase option expired and Urica reversed the related $
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Avenue
Under a share repurchase agreement between Avenue and InvaGen Pharmaceuticals, Inc. (“InvaGen”) under which Avenue repurchased all of InvaGen’s shares in Avenue, Avenue agreed to pay InvaGen an additional amount as a contingent fee, payable in the form of seven and a half percent (
Mustang
Agreements with uBriGene
In 2023, Mustang entered into an Asset Purchase Agreement (together with amendments, the “Prior Asset Purchase Agreement”) with uBriGene (Boston) Biosciences, Inc., a Delaware corporation (“uBriGene”), pursuant to which Mustang agreed to sell its leasehold interest in its cell processing facility (the “Facility”), and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility to uBriGene (the “Transaction”).
In July 2023, pursuant to the Prior Asset Purchase Agreement, Mustang completed the sale of all of its assets that primarily relate to the manufacturing and production of cell and gene therapies at the Facility (such operations, the “Transferred Operations” and such assets, the “Transferred Assets”) to uBriGene for upfront consideration of $
In connection with the Prior Asset Purchase Agreement, Mustang and uBriGene submitted a voluntary joint notice to the U.S. Committee on Foreign Investment in the United States (“CFIUS”). Following CFIUS’s review on May 13, 2024, Mustang, together with uBriGene and CFIUS, executed a National Security Agreement (the “NSA”), pursuant to which Mustang and uBriGene agreed to abandon the transactions related to the Prior Asset Purchase Agreement and the agreements entered into in connection therewith.
June 2024 Repurchase of Assets
On June 27, 2024 (the “Effective Date”), Mustang entered into an Asset Purchase Agreement (the “Repurchase Agreement”) with uBriGene, pursuant to which Mustang agreed, subject to the terms and conditions set forth therein, to repurchase the Transferred Assets, primarily lab equipment and supplies (collectively, the “Repurchased Assets”). Pursuant to the terms of the Repurchase Agreement, Mustang and uBriGene also terminated existing manufacturing and services agreements.
As consideration for the Repurchase Agreement, Mustang agreed to pay to uBriGene a total purchase price (the “Purchase Price”) of $
Mustang allocated the total purchase consideration of $
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
4. Inventory
| | | | | | |
| | September 30, | | December 31, | ||
($ in thousands) | | 2025 | | 2024 | ||
Finished goods | | $ | | | $ | |
Work-in-process | |
| | |
| |
Raw materials | | | | | | |
Inventory at cost | | | | | | |
Inventory reserve | | | ( | | | ( |
Total inventories | | $ | | | $ | |
5. Property and Equipment
| | | | | | | | | |
|
| Useful Life |
| September 30, | | December 31, | |||
($ in thousands) | | (Years) | | 2025 | | 2024 | |||
Computer equipment |
| | | $ | | | $ | | |
Furniture and fixtures |
| | |
| | |
| | |
Leasehold improvements |
| | |
| | |
| | |
Buildings | | | | | | | | | |
Total property and equipment |
| | | | | | |
| |
Impairment - Leasehold Improvements | | | | | | ( | | | ( |
Less: Accumulated depreciation |
| | | | | ( | |
| ( |
Property and equipment, net | | | | | $ | | | $ | |
Fortress' depreciation expense for the three months ended September 30, 2025 and 2024 was approximately $
Asset Impairment - Mustang
In June 2024, Mustang concluded it had a triggering event requiring assessment of impairment for certain leasehold improvements and the related right-of-use asset. Mustang assessed the carrying value of the asset group consisting of the leasehold improvements and right-of-use asset in accordance with ASC 360, given the significant changes to Mustang’s operations, operating cash and the repurchase of equipment. The assessment of the recoverability of the asset group concluded that there was impairment on the carrying value of the asset group of approximately $
In February 2025, Mustang terminated the lease of its manufacturing facility. The remaining lease liability of approximately $
6. Fair Value Measurements
Fair Value of Crystalys
Urica valued its equity holding in Crystalys using an option pricing model backsolve method (level 3 in the fair value hierarchy) to reassess the fair value of its investment in Crystalys after Crystalys announced a Series A financing and recognize additional shares received to maintain its
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Notes to Unaudited Condensed Consolidated Financial Statements
2025. The following inputs were utilized to derive the value: risk free rate of return:
Common Stock Warrant Liabilities
| | | |
| | Warrants | |
($ in thousands) |
| liabilities | |
Balance at December 31, 2024 | | $ | |
Change in fair value of common stock warrants - Avenue | | | ( |
Change in fair value of common stock warrants - Checkpoint | | | |
Deconsolidation of Checkpoint | | | ( |
Balance at September 30, 2025 | | $ | |
Checkpoint
Checkpoint deemed the placement agent warrants it issued in connection with a registered direct offering (the “December 2022 Placement Agent Warrants”) to be classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside its control. The December 2022 Placement Agent Warrants were recorded at the time of closing at a fair value determined by using the Black-Scholes model. Checkpoint revalued the December 2022 Placement Agent Warrants at each reporting period thereafter until the closing date of the transaction with Sun Pharma, May 2025 (see Note 3).
| | | | | | | | |
| | May 31, | | December 31, | | | ||
Checkpoint Warrants | | 2025 | | 2024 | | | ||
Exercise price | | $ | | | $ | | | |
Volatility | | | | % | | | % | |
Expected life in years | | | | | | | | |
Risk-free rate | | | | % | | | % | |
Avenue
Avenue has previously issued freestanding warrants to purchase shares of its common stock in connection with financing activities. Avenue’s outstanding warrants to purchase common stock were originally issued in October 2022 (the “October 2022 Warrants”). The October 2022 Warrants are classified as liabilities on the balance sheet as they contain terms for redemption of the underlying security that are outside of its control. In connection with the Avenue January 2023 registered direct offering in January 2023, the down-round price protection feature was triggered and the exercise price for the October 2022 Warrants was permanently adjusted to $
A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Avenue warrant liability that are categorized within Level 3 of the fair value hierarchy was as follows:
| | | | | | | |
| | September 30, | | | December 31 | | |
| | 2025 | | | 2024 | | |
Stock price | | $ | | | $ | | |
Risk-free interest rate |
| % | | | % | | |
Expected dividend yield |
| — |
| | — |
| |
Expected term in years |
| |
| | |
| |
Expected volatility |
| | % | | | % | |
As of September 30, 2025,
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Notes to Unaudited Condensed Consolidated Financial Statements
7. Intangible Assets, net
The Company’s finite-lived intangible assets consist of intangible assets acquired by Journey. The table below provides a summary of the Journey intangible assets for the periods presented:
| | | | | | | | |
| | Estimated Useful | | September 30, | | December 31, | ||
($ in thousands) |
| Lives (Years) |
| 2025 |
| 2024 | ||
Intangible assets – product licenses | | | $ | | | $ | | |
Accumulated amortization |
|
| |
| ( | |
| ( |
Accumulated Impairment loss | | | | | ( | | | ( |
Net intangible assets |
|
| | $ | | | $ | |
For the three months ended September 30, 2025 and 2024, Journey’s amortization expense related to its product licenses was $
The future amortization of these intangible assets is as follows:
| | | |
| | Total | |
For the years ended: ($ in thousands) |
| Amortization | |
Remainder of 2025 | | $ | |
2026 | |
| |
2027 | | | |
2028 | | | |
2029 | | | |
Thereafter | | | |
Sub-total | | $ | |
Asset not yet placed in service | | | |
Total | | $ | |
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Notes to Unaudited Condensed Consolidated Financial Statements
8. License Agreements
In accordance with ASC 730-10-25-1, Research and Development, costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use. The licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach technological feasibility and have no alternate use. The purchase price of the licenses acquired is classified as research and development-licenses acquired in the unaudited condensed consolidated statement of operations. For the three and nine months ended September 30, 2025 and 2024, there was
Journey
In June 2021, Journey entered a license, collaboration, and assignment agreement (the “Emrosi Agreement”) to obtain global rights for the development and commercialization of EmrosiTM (Minocycline Hydrochloride Extended-Release Capsules, 40mg), formerly known as DFD-29, for the treatment of rosacea with Dr. Reddy’s Laboratories, Ltd (“DRL”); provided, that DRL retained certain rights to the program in select markets, namely in Armenia, Azerbaijan, Belarus, Brazil, Georgia, India Kazakhstan, Kyrgyzstan, Moldova, the People’s Republic of China, Russia, Taiwan, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. Pursuant to the terms and conditions of the Emrosi Agreement, Journey paid $
In January 2022, Journey entered into an Asset Purchase Agreement (the “Vyne APA”) with Vyne Therapeutics, Inc. (“Vyne”) to acquire two FDA approved products, Amzeeq® (minocycline) topical foam, 4%, and Zilxi® (minocycline) topical foam, 1.5%, for an upfront payment of $
Part of the Vyne APA was Journey’s assumption of a license agreement with Cutia Therapeutics (HK) Limited (“Cutia”), a Hong Kong biopharmaceutical company with experience in developing pharmaceutical products in the greater China region (the “Cutia Agreement”). Pursuant to the Cutia Agreement, Cutia was granted an exclusive license to obtain regulatory approval of and commercialize Amzeeq (topical 4% minocycline foam) and Zilxi (topical 1.5% minocycline foam) in mainland China, Taiwan, Hong Kong and Macau. Journey has agreed to supply the finished licensed products to Cutia for clinical and commercial use at an agreed price. Additionally, Journey will earn a royalty in the low single digit percentages on net sales of the licensed products by Cutia.
On November 11, 2024, Cutia received marketing approval for topical 4% minocycline foam from the National Medical Products Administration of the People’s Republic of China. The approval triggered a $
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Notes to Unaudited Condensed Consolidated Financial Statements
Avenue
On February 28, 2023, Avenue entered into a license agreement with AnnJi Pharmaceutical Co. Ltd. (“AnnJi”), whereby Avenue obtained an exclusive license (the “AnnJi License Agreement”) from AnnJi to the intellectual property rights pertaining to the molecule known as JM17, which activates Nrf1 and Nrf2, enhances androgen receptor degradation and underlies AJ201, a clinical product candidate currently in a Phase 1b/2a clinical trial in the U.S. for the treatment of SBMA, also known as Kennedy's Disease. Under the AnnJi License Agreement, in exchange for exclusive rights to the intellectual property underlying the AJ201 product candidates, Avenue paid $
On April 24, 2025 (the “Termination Effective Date”), Avenue and AnnJi entered into a License Termination and Program Transfer Agreement (the “Termination and Transfer Agreement”), pursuant to which: (i) the AnnJi License Agreement and related agreements were terminated with immediate effect; (ii) the parties dismissed all pending dispute resolution proceedings between them and provided mutual releases of claims; (iii) Avenue transferred to AnnJi all of its rights, title and interest to and under the assets arising under the AnnJi License Agreement and otherwise related to AJ201 and (iv) Avenue agreed not to, for
AnnJi agreed to make payments to Avenue of $
| ● | payments totaling up to $ |
| ● | payments totaling up to $ |
| ● | a |
| ● | in the event that AnnJi enters into one or more subsequent licenses of rights to AJ201 with third party licensee(s), |
The Termination and Transfer Agreement also contains customary representations and warranties and provisions related to confidentiality and indemnification.
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Notes to Unaudited Condensed Consolidated Financial Statements
9. Debt and Interest
Debt
Total debt consists of the following:
| | | | | | | | | | |
|
| September 30, | | December 31, |
| Interest rate at |
| | ||
($ in thousands) | | 2025 | | 2024 | | September 30, 2025 | | Maturity | ||
2024 Oaktree Note | | $ | | | $ | |
| | % | |
SWK Term Loan | | | | | | | | | % | |
Less: Discount on notes payable | | | ( | | | ( | | | | |
Current portion of SWK Term Loan | | | ( | | | — | | | | |
Total notes payable, long term, net | | $ | | | $ | |
|
|
|
|
As of September 30, 2025, the carrying value of the notes payable approximates their fair value as the interest rates are variable and approximate the market rates for loans with similar terms and risk characteristics.
2024 Oaktree Note
On July 25, 2024, Fortress entered into the $
Under the terms of the New Oaktree Agreement, the loans have a
The Company may voluntarily prepay, in whole or in part, the amounts due under the New Oaktree Agreement at any time subject to a prepayment fee. Subject to prior written notice by the Company, to repay any amounts due prior to the maturity date, the Company must pay the sum of (A) the aggregate principal amount of the Loans being prepaid, (B) any accrued but unpaid interest on the principal amount of the Loans being prepaid, (C) any applicable Yield Protection Premium (as defined in the New Oaktree Agreement) and (D) if applicable, other unpaid amounts then due and owing pursuant to the New Oaktree Agreement and the other loan documents (such aggregate amount, the “Prepayment Price”); provided that each partial prepayment of the principal amount of the Loans shall be in an aggregate amount of at least $
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Notes to Unaudited Condensed Consolidated Financial Statements
The New Oaktree Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions. In addition, the New Oaktree Agreement contains certain financial covenants, including, (i) a requirement that the Company maintain a minimum liquidity of $
The New Oaktree Agreement contains events of default that are customary for financings of this type, in certain circumstances subject to customary cure periods. In addition, the Company is also required to (i) raise cash proceeds from the sale of common stock, or receive monetizations or distributions, by the end of each calendar year prior to the maturity date, in an aggregate amount equal to the greater of $
In connection with the New Oaktree Agreement, the Company granted a security interest in favor of Oaktree, for the benefit of the lenders, in substantially all of the Company’s assets, subject to customary exceptions, as collateral securing the Company’s obligations under the New Oaktree Agreement. Also in connection with the New Oaktree Agreement, the Company granted warrants to the lenders to purchase up to
The Company was in compliance with all applicable financial covenants under the New Oaktree Agreement as of September 30, 2025.
2020 Oaktree Note
On July 25, 2024, the Company’s $
The Company had entered the Prior Oaktree Agreement in August 2020. The Prior Oaktree Agreement contained customary representations and warranties and customary affirmative and negative covenants as well as certain financial covenants, including, among other things, (i) maintenance of minimum liquidity and (ii) a minimum revenue test that required Journey’s annual revenue to be
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Notes to Unaudited Condensed Consolidated Financial Statements
equal to or to exceed annual revenue projections set forth in the Prior Oaktree Agreement. Failure by the Company or Journey, as applicable, to have complied with the Prior Oaktree Agreement covenants would have resulted in an event of default, subject to certain cure rights of the Company.
The Company was required to make quarterly interest-only payments until the fifth anniversary of the closing date of the 2020 Oaktree Note,
SWK Term Loan
On December 27, 2023 (the “SWK Closing Date”), Journey entered into a credit agreement (the “SWK Credit Agreement”) with SWK Funding LLC (“SWK”). The SWK Credit Agreement provides for a term loan facility (the “SWK Credit Facility”) in the original principal amount of up to $
Pursuant to the terms under the SWK Credit Facility, repayments of principal were to commence in February 2026 in an amount equal to $
On September 25, 2025, Journey entered into the Third Amendment to the SWK Credit Agreement (the “Third Amendment”). The Third Amendment, among other things, extends the maturity date of Journey’s existing SWK Credit Facility from December 27, 2027 to June 27, 2028. The Third Amendment also modifies the Revenue-Based Payment provision, as defined in the SWK Credit Agreement, by lowering the applicable revenue threshold, measured based on the twelve months ended December 31, 2025, from $
Journey may at any time prepay the outstanding principal balance of the Term Loans in whole or in part. Prepayment of the Term Loans is subject to payment of a prepayment premium equal to (i)
Upon repayment in full of the Term Loans, Journey will pay an exit fee equal to
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Notes to Unaudited Condensed Consolidated Financial Statements
The SWK Credit Facility also includes both revenue and liquidity covenants, restrictions as to payment of dividends, and is secured by substantially all assets of Journey. As of September 30, 2025, Journey was in compliance with the financial covenants under the SWK Credit Facility.
Interest Expense
Interest expense includes contractual interest, and fees include amortization of the debt discount and amortization of fees associated with loan transaction costs, amortized over the life of the loan. The following table shows the components of interest expense for all debt arrangements during the periods presented:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | ||||||||||||||||
| | 2025 | | 2024 | ||||||||||||||
($ in thousands) |
| Interest |
| Fees |
| Total |
| Interest |
| Fees |
| Total | ||||||
2024 Oaktree Note | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
2020 Oaktree Note | | | — | | | — | | | — | | | | | | | | | |
Loss on extinguishment of debt | | | — | | | — | | | — | | | — | | | | | | |
Partner company notes payable | | | | | | | | | | | | | | | | | | |
Partner company contingent call option accretion | | | | | | — | | | | | | | | | — | | | |
Other | |
| | |
| — | |
| | |
| | |
| — | |
| |
Total Interest Expense and Financing Fee | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | ||||||||||||||||
| | 2025 | | 2024 | ||||||||||||||
($ in thousands) |
| Interest |
| Fees |
| Total |
| Interest |
| Fees |
| Total | ||||||
2024 Oaktree Note | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
2020 Oaktree Note | | | — | | | — | | | — | | | | | | | | | |
Loss on extinguishment of debt | | | — | | | — | | | — | | | — | | | | | | |
Partner company convertible preferred shares | | | — | | | — | | | — | | | ( | | | | | | ( |
Partner company notes payable | | | | | | | | | | | | | | | | | | |
Partner company contingent call option accretion1 | | | | | | — | | | | | | | | | — | | | |
Other | |
| | |
| — | |
| | |
| | | | — | |
| |
Total Interest Expense and Financing Fee | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Note 1: Relates to Urica’s optional repurchase obligation to Crystalys (see Note 3).
10. Accounts Payable and Accrued Expenses and Partner Company Installment Payments
Accounts payable and accrued expenses consisted of the following:
| | | | | | |
| | September 30, | | December 31, | ||
($ in thousands) |
| 2025 |
| 2024 | ||
Accounts payable | | $ | | | $ | |
Accrued expenses: |
| |
|
| |
|
Professional fees | | | | | | |
Salaries, bonus and related benefits | |
| | |
| |
Research and development | |
| | |
| |
Accrued royalties payable | |
| | |
| |
Accrued coupon and rebates | |
| | |
| |
Return reserve | | | | | | |
Accrued inventory | | | — | | | |
Other | |
| | |
| |
Total accounts payable and accrued expenses | | $ | | | $ | |
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Notes to Unaudited Condensed Consolidated Financial Statements
11. Non-Controlling Interests
The Company’s ownership interests in its consolidated subsidiaries at September 30, 2025 was similar to December 31, 2024, with the exception of Checkpoint, which was deconsolidated due to the sale to Sun Pharma in May 2025 (see Note 3).
12. Net Income (Loss) per Common Share
Basic net income or loss per share attributed to common stockholders is calculated by dividing the net income or loss attributed to Fortress, including the Series A Preferred dividends and subsidiary deemed dividends, by the weighted-average number of shares of Common Stock outstanding during the period, not including unvested restricted stock and other potentially dilutive securities. Diluted net income (loss) per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options, restricted stock units, and restricted stock using the treasury stock method, if dilutive. The impact of these items is anti-dilutive during periods of net loss.
For the three months ended September 30, 2025 and 2024, the effect on the net income (loss) per share calculation from Series A Preferred dividends (paid and cumulated but undeclared) (see Note 13) was $
The following potentially dilutive securities would be excluded from the computation of net loss per common share as of the dates presented if the Company was in a net loss position:
| | | | |
|
| | ||
| | September 30, | ||
| | 2025 |
| 2024 |
Warrants to purchase Common Stock |
| |
| |
Options to purchase Common Stock |
| |
| |
Unvested Restricted Stock and deferred Restricted Stock |
| |
| |
Unvested Restricted Stock units and deferred Restricted Stock units |
| |
| |
Total Potentially Dilutive Securities |
| |
| |
The computation of basic and diluted net income (loss) per common share is as follows:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
($ in thousands, except share and per share amounts) |
| 2025 | | | 2024 | | 2025 | | | 2024 | ||
Net income (loss) attributable to common stockholders | | $ | | | $ | ( | | $ | | | $ | ( |
Weighted average common shares outstanding - basic | | | | | | | | | | | | |
Dilutive effect of potential common shares | | | | | | — | |
| | | | — |
Weighted average common shares outstanding - diluted | | | | | | | | | | | | |
| | | | | | | | | | | | |
Net income (loss) per common share attributable to common stockholders - basic | | $ | | | $ | ( | | $ | | | $ | ( |
Net income (loss) per common share attributable to common stockholders - diluted | | $ | | | $ | ( | | $ | | | $ | ( |
13. Stockholders’ Equity
On July 5, 2024, Fortress announced that the Company’s Board of Directors had decided to pause the monthly dividend of $
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Notes to Unaudited Condensed Consolidated Financial Statements
cumulate until such dividends are authorized or declared. The pausing of these dividends will defer approximately $
During the nine months ended September 30, 2025,
Stock-based Compensation
As of September 30, 2025, the Company had the following equity compensation plans: the Fortress Biotech, Inc. 2013 Stock Incentive Plan, as amended (the “2013 Plan”), the Fortress Biotech, Inc. 2012 Employee Stock Purchase Plan (the “ESPP”) and the Fortress Biotech, Inc. Long Term Incentive Plan (“LTIP”). As of September 30, 2025, approximately
The following table summarizes the stock-based compensation expense from stock option, employee stock purchase programs and restricted Common Stock awards and warrants for the periods presented:
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | ||||||||
($ in thousands) |
| 2025 |
| 2024 |
| | 2025 |
| 2024 | ||||
Fortress: | | | | | | | | | | | | | |
Employee and non-employee awards | | $ | | | $ | | | | $ | | | $ | |
Executive awards | |
| | |
| | | |
| | |
| |
| | | | | | | | | | | | | |
Partner Companies: | |
| | | | | | | | | | | |
Avenue | |
| | |
| | | |
| | |
| |
Checkpoint | |
| — | |
| | | |
| | |
| |
Mustang | |
| | |
| | | |
| | |
| ( |
Journey | | | | | | | | | | | | | |
Other | |
| — | |
| | | |
| — | |
| |
Total stock-based compensation expense | | $ | | | $ | | | | $ | | | $ | |
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | ||||||||
($ in thousands) |
| 2025 |
| 2024 |
| | 2025 |
| 2024 | ||||
Research and development | | $ | | | $ | | | | $ | | | $ | |
Selling, general and administrative | |
| | |
| | | |
| | |
| |
Total stock-based compensation expense | | $ | | | $ | | | | $ | | | $ | |
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Notes to Unaudited Condensed Consolidated Financial Statements
Stock Options
The following table summarizes Fortress stock option activities excluding activity related to Fortress subsidiaries and partner companies:
| | | | | | | | | | |
| | | | | | | | | | Weighted average |
| | | | | | | Total | | remaining | |
| | | | Weighted average | | weighted average | | contractual life | ||
|
| Number of shares |
| exercise price |
| intrinsic value |
| (years) | ||
Options vested and expected to vest at December 31, 2024 |
| | | $ | | | $ | |
| |
Forfeited | | ( | | | | | | — | | — |
Options vested and expected to vest at September 30, 2025 |
| | | $ | | | $ | — |
| |
Options vested and exercisable at September 30, 2025 | | | | $ | | | $ | — |
| |
As of September 30, 2025, Fortress had
Restricted Stock and Restricted Stock Units
The following table summarizes Fortress restricted stock awards and restricted stock units activities, excluding activities related to Fortress subsidiaries and partner companies:
| | | | | |
|
| |
| Weighted | |
| | | | average grant | |
| | Number of shares | | price | |
Unvested balance at December 31, 2024 | | | | $ | |
Restricted stock granted | | | | | |
Restricted stock vested | | ( | | | |
Restricted stock units granted | | | | | |
Restricted stock units forfeited | | ( | | | |
Restricted stock units vested | | ( | | | |
Unvested balance at September 30, 2025 | | | | $ | |
As of September 30, 2025 and 2024, the Company had unrecognized stock-based compensation expense related to restricted stock and restricted stock unit awards of approximately $
Amended and Restated Long-Term Incentive Program (“LTIP”)
On July 15, 2015, the Company’s stockholders approved the LTIP for the Company’s Chairman, President and Chief Executive Officer, Dr. Rosenwald, and Executive Vice Chairman, Strategic Development, Mr. Weiss (amended and restated with stockholder approval on June 7, 2017 and May 23, 2024). The LTIP consists of a program to grant equity interests in the Company and in the Company’s subsidiaries, and a performance-based bonus program that is designed to result in performance-based compensation that is deductible without limit under Section 162(m) of the Internal Revenue Code of 1986, as amended.
On January 1, 2025 and 2024, the Compensation Committee granted
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Notes to Unaudited Condensed Consolidated Financial Statements
July 16, 2025 or the participant’s voluntary separation from service with the Company. The fair value of each grant on the grant date was approximately $
Warrants
The following table summarizes Fortress warrant activities, excluding activities related to Fortress subsidiaries and partner companies:
| | | | | | | | | | |
| | | | | | | Total weighted | | Weighted average | |
| | | | | | | average | | remaining | |
| | Number of | | Weighted average | | intrinsic | | contractual life | ||
|
| shares |
| exercise price |
| value |
| (years) | ||
Outstanding as of December 31, 2024 |
| | | $ | | | $ | |
| |
Exercised | | ( | | | | | | — | | — |
Outstanding as of September 30, 2025 |
| | | $ | | | $ | — |
| |
Exercisable as of September 30, 2025 |
| | | $ | | | $ | — |
| |
During the nine months ended September 30, 2025,
Capital Raises
2024 Shelf
On May 17, 2024, the Company filed a shelf registration statement (File No. 333-279516) on Form S-3, which was declared effective on May 30, 2024 (the “2024 Shelf”). As of September 30, 2025, $
Because the Company is not currently eligible to use Form S-3 due to the failure to pay dividends on the Series A Preferred Stock, on April 1, 2025 the Company filed a post-effective amendment to certain prior Form S-3 registration statements to continue the registration of:
| ● | the offer and sale by certain selling stockholders who were previously holders of shares of |
| ● | the offer and sale of up to |
| ● | the offer and sale of up to |
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Notes to Unaudited Condensed Consolidated Financial Statements
| ● | the offer and sale by certain selling stockholders of up to |
This post-effective amendment was declared effective by the SEC on April 2, 2025.
At the Market Offering
During the nine months ended September 30, 2025, the Company issued and sold approximately
Checkpoint 2025 Warrant Exercises
In January 2025, Checkpoint received approximately $
In March 2025, Checkpoint received approximately $
In April 2025, Checkpoint received approximately $
Pursuant to the Company’s Founders Agreement with Checkpoint, Checkpoint issued to Fortress
Avenue 2021 Shelf Registration Statement
In December 2021, Avenue filed a shelf registration statement (File No. 333-261520) on Form S-3 (the “Avenue 2021 S-3”), which was declared effective on December 10, 2021. Avenue filed a replacement shelf registration on Form S-3 on December 4, 2024 (the "Avenue Replacement Shelf"), which has not yet become effective under the Securities Act of 1933, as amended. However, effective as of July 18, 2025, Avenue was formally delisted from Nasdaq with Nasdaq's filing on that date of a Form 25 with the SEC; Avenue is therefore ineligible to use Form S-3 and unable to use the Avenue 2021 S-3 or the Avenue Replacement Shelf.
Avenue At the Market Offering
In May 2024, Avenue entered into an At-the-Market Offering Agreement (the “Avenue ATM”) under which Avenue was able to offer and sell, from time to time at its sole discretion, up to $
Pursuant to the Company’s Founders Agreement with Avenue, Avenue issued to Fortress
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Notes to Unaudited Condensed Consolidated Financial Statements
Mustang 2024 Shelf Registration Statement and At-the-Market Offering (the “Mustang ATM”)
On May 31, 2024, Mustang filed a shelf registration statement on Form S-3 (File No. 333-279891) (the “Mustang 2024 S-3”), which was declared effective on June 12, 2024. Under the Mustang 2024 S-3, Mustang may sell up to a total of $
On May 31, 2024, Mustang entered into an At-the-Market Offering Agreement (the “Mustang ATM”) relating to the sale of shares of common stock pursuant to the Mustang 2024 S-3. During the nine months ended September 30, 2025, Mustang issued approximately
Mustang February 2025 Equity Offering
In February 2025, Mustang closed on an equity offering of (i)
In July 2025, the remaining approximately
Pursuant to the Company’s Founders Agreement with Mustang, Mustang issued to Fortress
Journey 2022 Shelf Registration Statement and At-the-Market Offering
On December 30, 2022, Journey filed a shelf registration statement on Form S-3 (File No. 333-269079) (the “Journey 2022 S-3”), which was declared effective on January 26, 2023. The Journey 2022 S-3 covers the offering, issuance and sale by Journey of up to an aggregate of $
In August 2025, Journey executed a new At Market Issuance Sales Agreement (the “Journey 2025 ATM Sales Agreement”) with B. Riley Securities, Inc. and Lake Street Capital Markets, LLC (each, an “Agent” and together, the “Agents”). In accordance with the terms
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Notes to Unaudited Condensed Consolidated Financial Statements
of the Sales Agreement, Journey may offer and sell up to
14. Commitments and Contingencies
Leases
Lease Amendment – Mustang
In February 2025, Mustang concurrently exited the lease of its manufacturing facility in Worcester, Massachusetts, relocating its corporate headquarters to 95 Sawyer Road, Waltham, Massachusetts, and divested certain fixed assets including furniture and equipment to AbbVie Bioresearch Center, Inc. for $
During three and nine months ended September 30, 2025 and 2024, the Company recorded the following as lease costs for the periods presented:
| | | | | | | | | | | | | |
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, |
| ||||||||
($ in thousands) | | 2025 | | 2024 | | 2025 | | 2024 | | ||||
Operating lease cost | | $ | | | $ | | | $ | | | $ | | |
Shared lease costs | |
| ( | | | ( | |
| ( | | | ( | |
Variable lease cost | |
| | | | | |
| | | | | |
Total lease expense | | $ | | | $ | | | $ | | | $ | | |
The following tables summarize quantitative information about the Company’s operating leases, under the adoption of ASC Topic 842, Leases:
| | | | | | | | |
|
| Nine Months Ended September 30, |
|
| ||||
($ in thousands) | | 2025 | | 2024 |
| | ||
Operating cash flows from operating leases | | $ | ( | | $ | ( | | |
Weighted-average remaining lease term – operating leases (years) | |
| |
| | | ||
Weighted-average discount rate – operating leases | |
| % |
| | % | | |
| | | |
|
| Future Lease | |
($ in thousands) | | Liability | |
Nine months ended December 31, 2025 | | $ | |
Year ended December 31, 2026 | |
| |
Year ended December 31, 2027 | |
| |
Year ended December 31, 2028 | | | |
Year ended December 31, 2029 | | | |
Other | |
| |
Total operating lease liabilities | |
| |
Less: present value discount | |
| ( |
Net operating lease liabilities, short-term and long-term | | $ | |
Indemnification
In accordance with its certificate of incorporation, bylaws and indemnification agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request
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Notes to Unaudited Condensed Consolidated Financial Statements
in such capacity. There have been no claims to date, and the Company has director and officer insurance to address such claims. The Company and its subsidiaries and partner companies also provide indemnification of contractual counterparties (sometimes without monetary caps) to clinical sites, service providers and licensors.
Legal Proceedings
In the ordinary course of business, the Company and its subsidiaries and partner companies may be subject to both insured and uninsured litigation. Suits and claims may be brought against the Company by customers, suppliers, partners and/or third parties (including tort claims for personal injury arising from clinical trials of the Company’s product candidates and property damage) alleging deficiencies in performance, breach of contract, etc., and seeing resulting alleged damages.
15. Related Party Transactions
Founders Agreement
The Company has entered into Founders Agreements and, in some cases, exchange agreements with certain of its subsidiaries and partner companies as described in the 2024 Form 10-K. The following table summarizes, by partner company/subsidiary, the effective date of the Founders Agreements and Payment-in-Kind (“PIK”) dividend or equity fee payable to the Company in accordance with the terms of the Founders Agreements, exchange agreements, and the subsidiaries' or partner companies’ certificates of incorporation:
| | | | | | |
| | | | PIK Dividend as | | |
| | | | a % of fully | | |
| | | | diluted | | |
| | | | outstanding | | Class of Stock |
Partner Company/Subsidiary |
| Effective Date 1 |
| capitalization |
| Issued |
Avenue | |
| | % | Common Stock | |
Cellvation | |
| | % | Common Stock | |
Checkpoint | |
| — | %2 | Common Stock | |
Cyprium | |
| | % | Common Stock | |
Helocyte | |
| | % | Common Stock | |
Mustang | |
| | % | Common Stock | |
Oncogenuity | | | | % | Common Stock | |
Urica | |
| | % | Common Stock |
Note 1: | Represents the effective date of the Founders Agreement of each subsidiary/partner company. Each PIK dividend and equity fee is payable on the annual anniversary of the effective date of the original Founders Agreement or has since been amended to January 1 of each calendar year. |
Note 2: | Instead of a PIK dividend, Checkpoint paid the Company an annual equity fee in shares of Checkpoint’s common stock equal to |
Note 3: | Represents the Trigger Date, the date that the Fortress partner company/subsidiary first acquires, whether by license or otherwise, ownership rights in a product. |
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Notes to Unaudited Condensed Consolidated Financial Statements
Management Services Agreements
The Company has entered into Management Services Agreements (the “MSAs”) with certain of its partner companies/subsidiaries as described in the 2024 Form 10 K. The following table summarizes the effective date of each MSA and the annual consulting fee payable by the partner company/subsidiary to the Company in quarterly installments:
| | | | | | |
| | | | Annual MSA Fee | | |
Partner Company/Subsidiary |
| Effective Date |
| (Income)/Expense | | |
Avenue | | | $ | | | |
Cellvation | | |
| | | |
Checkpoint1 | | |
| — | | |
Cyprium | | |
| | | |
Helocyte | | | | | | |
Mustang | | |
| | | |
Oncogenuity | | | | | | |
Urica | | | | | | |
Fortress | | | |
| ( | |
Consolidated (Income)/Expense | | | | $ | — | |
Note 1:Checkpoint was acquired by Sun Pharma in May 2025 (see Note 3).
Fees and Stock Grants Received by Fortress
Fees recorded in connection with Fortress’ agreements with its subsidiaries and partner companies are eliminated in consolidation. These include management services fees, issuance of common shares of partner companies in connection with third party raises and annual stock dividend or issuances on the anniversary date of respective Founders Agreements.
Shared Services Agreement with TG Therapeutics, Inc. (“TGTX”)
In July 2015, TGTX and the Company entered into an arrangement to share the cost of certain research and development employees. The Company’s Executive Vice Chairman, Strategic Development, is also Executive Chairman and Chief Executive Officer of TGTX. Under the terms of the Agreement, TGTX reimburses the Company for the salary and benefit costs associated with these employees based upon actual hours worked on TGTX-related projects. In connection with the shared services agreement, for the three months ended September 30, 2025 and 2024 the Company invoiced TGTX $
Desk Share Agreement with TGTX
The Desk Share Agreement between the Company and TGTX, as amended, requires TGTX to pay
Additionally, Fortress allocates a small portion of its rent and office related costs to Mustang on a monthly basis.
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Notes to Unaudited Condensed Consolidated Financial Statements
Board Services Agreement
In December 2016, Checkpoint entered into an advisory agreement effective January 1, 2017 with Caribe BioAdvisors, LLC (“Caribe”), owned by Michael S. Weiss, to provide the advisory services of Mr. Weiss as Chairman of the Board. Pursuant to the agreement, Caribe will be paid an annual cash fee of $
In January 2017, Mustang entered into an advisory agreement effective January 1, 2017 with Caribe to provide the advisory services of Mr. Weiss as Chairman of the Board. Pursuant to the agreement, Caribe will be paid an annual cash fee of $
Shared Services Agreement with Journey
On November 12, 2021, Journey and the Company entered into an arrangement to share the cost of certain legal, finance, regulatory, and research and development employees. The Company’s Executive Chairman and Chief Executive Officer is also the Executive Chairman of Journey. Under the terms of the arrangement, Journey began reimbursing the Company for the salary and benefit costs associated with these employees based upon actual hours worked on Journey-related projects following the completion of its initial public offering in November 2021. In addition, Journey reimburses the Company for various payroll-related costs and selling, general and administrative costs incurred by Fortress for the benefit of Journey. For the three months ended September 30, 2025 and 2024, the Company’s employees have provided services to Journey totaling approximately $
Cyprium
Pursuant to a private placement in August 2020, Cyprium sold
Pursuant to the terms of the Cyprium PPS, shareholders on each record date are entitled to receive a monthly cash dividend of $
If a PRV Sale has not occurred by March 31, 2026 (the “Exchange Date”), the Cyprium PPS will automatically be exchanged for Fortress Series A Preferred Stock or cash, at the discretion of Fortress.
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Notes to Unaudited Condensed Consolidated Financial Statements
16. Segment Information
The Company’s reportable
| | | | | | | | | | | | | | | |
Three Months Ended September 30, 2025 |
| Journey | | Avenue | | Mustang | | Fortress1 | | Consolidated | |||||
Product revenue, net | | $ | | | $ | — | | $ | — | | $ | — | | $ | |
Other revenue | | | | | | — | | | — | | | — | | | |
Net revenue | | | | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | | | |
Cost of goods | |
| | | | — | | | — | | | — | |
| |
Intangible assets amortization | |
| | | | — | | | — | | | — | |
| |
Research and development | | | | | | | | | ( | | | | | | |
Selling, general and administrative | | | | | | | | | | | | | | | |
Total operating expenses | | | | | | | | | | | | | | | |
Loss from operations | | | ( | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | |
Interest expense and financing fee | | | ( | | | — | | | — | | | ( | | | ( |
Loss on common stock warrant liabilities | | | — | | | ( | | | — | | | — | | | ( |
Other income (expense) | | | ( | | | — | | | — | | | | | | |
Total other income (expense) | | | ( | | | | | | | | | | | | |
Income (loss) before income tax expense | | | ( | | | ( | | | ( | | | | | | |
| | | | | | | | | | | | | | | |
Income tax expense | | | — | | | — | | | — | | | | | | |
Segment net income (loss) | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | |
| | | | | | | | | | | | | | | |
Attributable to non-controlling interests | | | | | | | | | | | | | | | ( |
| | | | | | | | | | | | | | | |
Net income attributable to Fortress | | | | | | | | | | | | | | $ | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Intersegment activity2: | | | | | | | | | | | | | | | |
Research and development | | $ | — | | $ | | | $ | | | $ | ( | | $ | — |
Selling, general and administrative | | $ | — | | $ | | | $ | | | $ | ( | | $ | — |
| | | | | | | | | | | | | | | |
Other Significant Items: | | | | | | | | | | | | | | | |
Equity method investment held by Urica | | $ | — | | $ | — | | $ | — | | $ | | | $ | |
Segment assets | | $ | | | $ | | | $ | | | $ | | | $ | |
Stock-based compensation - Research & development | | $ | — | | $ | | | $ | | | $ | | | $ | |
Stock-based compensation - Selling, general and administrative | | $ | | | $ | | | $ | | | $ | | | $ | |
Note 1: Includes Fortress and private subsidiaries primarily funded by Fortress, including Cellvation, Cyprium, Helocyte, Oncogenuity and Urica; and intercompany eliminations.
Note 2: | Segment activity consists of PIK Dividends and MSA and equity fees paid by the subsidiaries to Fortress (see Note 15). |
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Notes to Unaudited Condensed Consolidated Financial Statements
| | | | | | | | | | | | | | | | | | |
Three Months Ended September 30, 2024 | | Journey | | Avenue | | Checkpoint | | Mustang | | Fortress1 | | Consolidated | ||||||
Product revenue, net | | $ | | | $ | — | | $ | — | | $ | — | | $ | — | | $ | |
Revenue - related party | | | — | | | — | | | — | | | — | | | — | | | — |
Net revenue | | | | | | — | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | | | | | | |
Cost of goods | |
| | | | — | | | — | | | — | | | — | |
| |
Intangible assets amortization | |
| | | | — | | | — | | | — | | | — | |
| |
Research and development | | | | | | | | | | | | | | | ( | | | |
Selling, general and administrative | | | | | | | | | | | | | | | | | | |
Total operating expenses | | | | | | | | | | | | | | | | | | |
Loss from operations | | | ( | | | ( | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | | | |
Interest expense and financing fee | | | ( | | | — | | | — | | | ( | | | ( | | | ( |
Gain on common stock warrant liabilities | | | — | | | | | | — | | | — | | | | | | |
Other income (expense) | | | | | | — | | | ( | | | — | | | — | | | |
Total other income (expense) | | | | | | | | | ( | | | | | | ( | | | ( |
Loss before income tax expense | | | ( | | | ( | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | | | | | | | |
Income tax expense | | | — | | | — | | | — | | | — | | | | | | |
Segment net loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | | | | | | | |
Attributable to non-controlling interests | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Net loss attributable to Fortress | | | | | | | | | | | | | | | | | $ | ( |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Intersegment activity2: | | | | | | | | | | | | | | | | | | |
Research and development | | $ | — | | $ | | | $ | — | | $ | | | $ | ( | | $ | — |
Research and development - licenses acquired | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — |
Selling, general and administrative | | $ | — | | $ | | | $ | | | $ | | | $ | ( | | $ | — |
| | | | | | | | | | | | | | | | | | |
Other Significant Items: | | | | | | | | | | | | | | | | | | |
Segment assets | | $ | | | | | | | | | | | | | | | $ | |
Stock-based compensation - Research & development | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
Stock-based compensation - Selling, general and administrative | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Note 1: Includes Fortress and private subsidiaries primarily funded by Fortress, including Cellvation, Cyprium, Helocyte, Oncogenuity and Urica; and intercompany eliminations.
Note 2: Segment activity consists of PIK Dividends and MSA and equity fees paid by the subsidiaries to Fortress (see Note 15).
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| | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2025 |
| Journey | | Avenue | | Checkpoint1 | | Mustang | | Fortress2 | | Consolidated | ||||||
Product revenue, net | | $ | | | $ | — | | $ | — | | $ | — | | $ | — | | $ | |
Other revenue | | | | | | | | | — | | | — | | | — | | | |
Net revenue | | | | | | | | | — | | | — | | | — | | | |
| | | | | | | | | | | | | | | | | | |
Cost of goods | |
| | | | — | | | — | | | — | | | — | |
| |
Intangible assets amortization | |
| | | | — | | | — | | | — | | | — | |
| |
Research and development | | | | | | | | | | | | ( | | | | | | |
Selling, general and administrative | | | | | | | | | | | | | | | | | | |
Total operating expenses | | | | | | | | | | | | | | | | | | |
Loss from operations | | | ( | | | ( | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | | | |
Interest expense and financing fee | | | ( | | | — | | | — | | | — | | | ( | | | ( |
Gain (loss) on common stock warrant liabilities | | | — | | | | | | ( | | | — | | | ( | | | ( |
Gain from deconsolidation of subsidiary | | | — | | | — | | | — | | | — | | | | | | |
Other expense | | | ( | | | — | | | ( | | | — | | | | | | |
Total other income (expense) | | | ( | | | | | | ( | | | | | | | | | |
Income (loss) before income tax expense | | | ( | | | ( | | | ( | | | ( | | | | | | ( |
| | | | | | | | | | | | | | | | | | |
Income tax expense | | | | | | — | | | — | | | — | | | | | | |
Segment net income (loss) | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | | | $ | ( |
| | | | | | | | | | | | | | | | | | |
Attributable to non-controlling interests | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Net income attributable to Fortress | | | | | | | | | | | | | | | | | $ | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Intersegment activity3: | | | | | | | | | | | | | | | | | | |
Research and development | | $ | — | | $ | | | $ | — | | $ | | | $ | ( | | $ | — |
Selling, general and administrative | | $ | — | | $ | | | $ | | | $ | | | $ | ( | | $ | — |
| | | | | | | | | | | | | | | | | | |
Other Significant Items: | | | | | | | | | | | | | | | | | | |
Equity method investment held by Urica | | $ | — | | $ | — | | $ | — | | $ | — | | $ | | | $ | |
Segment assets | | $ | | | $ | | | $ | — | | $ | | | $ | | | $ | |
Stock-based compensation - Research & development | | $ | — | | $ | | | $ | | | $ | ( | | $ | | | $ | |
Stock-based compensation - Selling, general and administrative | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Note 1:Checkpoint results through May 2025 due to deconsolidation as a result of acquisition by Sun Pharma (see Note 3).
Note 2: Includes Fortress and private subsidiaries primarily funded by Fortress, including Cellvation, Cyprium, Helocyte, Oncogenuity and Urica; and intercompany eliminations.
Note 3: | Segment activity consists of PIK Dividends and MSA and equity fees paid by the subsidiaries to Fortress (see Note 15). |
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| | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2024 |
| Journey | | Avenue | | Checkpoint | | Mustang | | Fortress1 | | Consolidated | ||||||
Product revenue, net | | $ | | | $ | — | | $ | — | | $ | — | | $ | — | | $ | |
Revenue - related party | | | — | | | — | | | | | | — | | | — | | | |
Net revenue | | | | | | — | | | | | | — | | | — | | | |
| | | | | | | | | | | | | | | | | | |
Cost of goods | |
| | | | — | | | — | | | — | | | — | |
| |
Intangible assets amortization | |
| | | | — | | | — | | | — | | | — | |
| |
Research and development | | | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | | | | | | | | | | | | | | | | |
Asset impairment | | | — | | | — | | | — | | | | | | — | | | |
Total operating expenses | | | | | | | | | | | | | | | | | | |
Loss from operations | | | ( | | | ( | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | | | | | | | |
Interest income | | | | | | | | | | | | | | | | | | |
Interest expense and financing fee | | | ( | | | — | | | — | | | | | | ( | | | ( |
Gain (loss) on common stock warrant liabilities | | | — | | | ( | | | — | | | — | | | | | | ( |
Other income (expense) | | | | | | | | | ( | | | ( | | | | | | |
Total other income (expense) | | | ( | | | ( | | | | | | | | | ( | | | ( |
Loss before income tax expense | | | ( | | | ( | | | ( | | | ( | | | ( | | | ( |
| | | | | | | | | | | | | | | | | | |
Income tax refund | | | — | | | — | | | — | | | — | | | ( | | | ( |
Segment net loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( | | $ | ( |
| | | | | | | | | | | | | | | | | | |
Attributable to non-controlling interests | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Net loss attributable to Fortress | | | | | | | | | | | | | | | | | $ | ( |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Intersegment activity2: | | | | | | | | | | | | | | | | | | |
Research and development | | $ | — | | $ | | | $ | — | | $ | | | $ | ( | | $ | — |
Selling, general and administrative | | $ | — | | $ | | | $ | | | $ | | | $ | ( | | $ | — |
| | | | | | | | | | | | | | | | | | |
Other Significant Items: | | | | | | | | | | | | | | | | | | |
Segment assets | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Stock-based compensation - Research & development | | $ | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
Stock-based compensation - Selling, general and administrative | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
Note 1: Includes Fortress and private subsidiaries primarily funded by Fortress, including Cellvation, Cyprium, Helocyte, Oncogenuity and Urica; and intercompany eliminations.
Note 2: Segment activity consists of PIK Dividends and MSA and equity fees paid by the subsidiaries to Fortress (see Note 15).
17. Revenues from Contracts and Significant Customers
Disaggregation of Total Revenue
Journey has the following actively marketed products: Emrosi, Qbrexza, Amzeeq, Zilxi, Accutane, Exelderm, Targadox, and Luxamend. All of Journey’s product revenues are recorded in the U.S. Other revenue for the three months ended September 30, 2025 consists of $
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30, 2025, in addition to the Cutia Agreement revenue of $
The table below summarizes the Company’s net revenue for the periods presented:
| | | | | | | | | | | | |
| | Three months ended September 30, | | Nine Months Ended September 30, | ||||||||
($ in thousands) |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Emrosi | | $ | | | $ | — | | $ | | | $ | — |
Qbrexza | | | | | | | | | | | | |
Accutane | | | | | | | | | | | | |
Vyne acquisition products (Amzeeq & Zilxi) | | | | | | | | | | | | |
Other / legacy product revenue | | | | | | | | | | | | |
Revenue – related party | |
| — | |
| — | |
| — | |
| |
Other revenue | | | | | | — | | | | |
| — |
Total net revenue | | $ | | | $ | | | $ | | | $ | |
Significant Customers
For the three and nine month periods ending September 30, 2025 and 2024,
At September 30, 2025,
18. Income taxes
The Company and its subsidiaries are subject to US federal and state income taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.
The Company files a consolidated income tax return with subsidiaries in which the Company holds an
On July 4, 2025, President Donald J. Trump signed the "One Big Beautiful Bill Act" (OBBBA) into law. Key corporate tax provisions include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to interest limitations, and expanded compensation deductibility limits aggregation requirements. As the Company maintains a full valuation allowance on its deferred tax assets, the legislation does not have a material impact on our financial statements for the quarter ended September 30, 2025, and we do not expect it to have a material impact on its 2025 effective income tax rate.
Income tax expense for the three and nine months ended September 30, 2025 and 2024 is based on the estimated annual effective tax rate, and includes interest related to unrecognized tax benefits and estimated state income taxes. The Company expects a net deferred tax asset with a full valuation allowance and
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FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
19. Subsequent Events
In October 2025, the Company amended its lease for its Waltham, MA office space at an average annual rent of $
In November 2025, Avenue announced the acquisition of its subsidiary Baergic by Axsome. Under the terms of the stock purchase agreement, Baergic shareholders will receive a $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q. Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. Statements in this Quarterly Report on Form 10-Q that are not descriptions of historical facts are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). The words “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology are generally intended to identify forward-looking statements. These forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and stock price. Factors that could cause actual results to differ materially from those currently anticipated include those set forth under “Item 1A. Risk Factors” including, in particular, risks relating to:
| ● | our growth strategy; |
| ● | financing and strategic agreements and relationships; |
| ● | our need for substantial additional funds and uncertainties relating to financings; |
| ● | uncertainty related to the timing and amounts expected to be realized from future milestone, contingent value right, royalty or similar future revenue streams, if at all; |
| ● | our ability to identify, acquire, close and integrate product candidates successfully and on a timely basis; |
| ● | our ability to attract, integrate and retain key personnel; |
| ● | the early stage of products under development; |
| ● | the results of research and development activities; |
| ● | uncertainties relating to preclinical and clinical testing; |
| ● | the ability to secure and maintain third-party manufacturing, marketing and distribution of our and our partner companies’ products and product candidates; |
| ● | government regulation; |
| ● | patent and intellectual property matters; and |
| ● | competition. |
We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions or circumstances on which any such statement is based, except as may be required by law, and we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. The information contained herein is intended to be reviewed in its totality, and any stipulations, conditions or provisos that apply to a given piece of information in one part of this Quarterly Report on Form 10-Q should be read as applying mutatis mutandis to every other instance of such information appearing herein.
Overview
Fortress Biotech, Inc. (“Fortress” or the “Company”) is a biopharmaceutical company focused on acquiring and advancing assets to enhance long-term value for shareholders through product revenue, equity holding and dividend and royalty revenue streams. Fortress works in concert with its extensive network of key opinion leaders to identify and evaluate promising products and product candidates for potential acquisition. We have executed such arrangements in partnership with some of the world’s foremost universities, research institutes and pharmaceutical companies, including City of Hope National Medical Center (“COH” or “City of Hope”), Dana-Farber Cancer Institute, Nationwide Children’s Hospital, Columbia University, the University of Pennsylvania, AstraZeneca plc, Dr. Reddy’s Laboratories, Ltd., and Sun Pharmaceutical Industries Limited (“Sun Pharma”).
Following the exclusive license or other acquisition of the intellectual property underpinning a product or product candidate, Fortress leverages its business, scientific, regulatory, legal and finance expertise to help its subsidiaries and partner companies achieve their goals. Partner and subsidiary companies then assess a broad range of strategic arrangements to accelerate and provide additional funding to support research and development, including joint ventures, partnerships, out-licensings, sales transactions, and public and private financings. To date, three partner companies are publicly-traded, and four subsidiaries have consummated strategic partnerships with industry leaders, including AstraZeneca plc as successor-in-interest to Alexion Pharmaceuticals, Inc. (“AstraZeneca”), Sentynl Therapeutics, Inc. (“Sentynl”), Axsome Therapeutics, Inc. (“Axsome”), and Sun Pharma.
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Our subsidiaries and partner companies that are pursuing development and/or commercialization of biopharmaceutical products and product candidates are: Journey Medical Corporation (Nasdaq: DERM, “Journey” or “JMC”), Mustang Bio, Inc. (Nasdaq: MBIO, “Mustang”), Avenue Therapeutics, Inc. (OTC: ATXI, “Avenue”), Cellvation, Inc. (“Cellvation”), Cyprium Therapeutics, Inc. (“Cyprium”), Helocyte, Inc. (“Helocyte”), Oncogenuity, Inc. (“Oncogenuity”) and Urica Therapeutics, Inc. (“Urica”). Checkpoint Therapeutics, Inc. (“Checkpoint”), previously a partner company of ours, was acquired by Sun Pharma in May 2025. Baergic Bio, Inc. (“Baergic”), previously a subsidiary of Avenue, was acquired by Axsome in November 2025.
Recent Events
Revenue
| ● | For the three months ended September 30, 2025 and 2024, net revenue was $17.6 million and $14.6 million, respectively, and is primarily related to the sale of Journey’s marketed products. |
| ● | For the three months ended September 30, 2025, net revenue included $0.6 million related to Journey’s supply of Amzeeq to Cutia Therapeutics (HK) Limited (“Cutia”). |
| ● | For the nine months ended September 30, 2025 and 2024, net revenue was $47.2 million and $42.6 million, respectively, and is primarily related to the sale of Journey’s marketed products. |
| ● | For the nine months ended September 30, 2025, net revenue included $1.4 million related to Avenue’s termination of its license agreement with AnnJi Pharmaceutical Co. Ltd. (“AnnJi”), and $0.6 million related to Journey’s supply of Amzeeq to Cutia. |
Emrosi (Minocycline Hydrochloride Extended-Release Capsules, 40mg, also known as DFD-29, for the treatment of rosacea)
| ● | In July 2025, our partner company Journey announced expanded payer coverage for Emrosi™ (Minocycline Hydrochloride Extended-Release Capsules, 40mg) where 65% of the 187 million commercial lives in the United States now have pharmacy benefit coverage for Emrosi. |
| ● | In November 2024, Journey announced that the FDA approved Emrosi for the treatment of inflammatory lesions of rosacea in adults, and Journey subsequently launched Emrosi in March 2025. |
| ● | Emrosi was developed for the treatment of rosacea at our partner company, Journey, in collaboration with Dr. Reddy’s Laboratories Ltd. |
Late Stage Product Candidates
UNLOXCYT™ (cosibelimab-ipdl, anti-PD-L1 antibody)
| ● | In May 2025, our partner company, Checkpoint, was acquired by Sun Pharmaceutical Industries, Inc. (“Sun Pharma”) for $4.10 per share in cash plus a contingent value right of up to $0.70 per share upon the achievement of EU approval of Checkpoint’s principal drug product candidate. Fortress received $28.0 million and is eligible for a 2.5% royalty on net sales of UNLOXCYT as well as up to $4.8 million upon achievement of the contingent value right. |
| ● | On December 13, 2024, Checkpoint received approval from the FDA for UNLOXCYT (cosibelimab-ipdl), for the treatment of metastatic or locally advanced cutaneous squamous cell carcinoma (“cSCC”) in adults who are not candidates for curative surgery or radiation. |
| ● | Cosibelimab was sourced by Fortress and developed at Checkpoint, which was acquired by Sun Pharma in May 2025. |
Triplex (cytomegalovirus vaccine and immunotherapy)
| ● | Triplex, a potential vaccine and immunotherapy for prevention and control of cytomegalovirus (“CMV”), is currently being studied in a Phase 2 clinical trial for adults co-infected with HIV and CMV that is now fully enrolled with topline data anticipated in early 2026. The study aims to show that vaccination with Triplex can safely elicit a CMV-specific immune response and reduce asymptomatic CMV replication in a population of people with HIV on suppressive antiretroviral therapy. The study will also evaluate whether this intervention might reduce chronic inflammation and immune activation, as compared to placebo, and thus, potentially reduce related mortality and morbidity (NCT05099965). |
| ● | In January 2025, we announced that the first patient was dosed in a multi-center, placebo-controlled, randomized Phase 2 clinical trial to evaluate Triplex when administered to human leukocyte antigen (“HLA”) matched related stem cell donors to reduce CMV events in patients undergoing hematopoietic stem cell transplantation (“HSCT”). The trial is funded by a grant from the National Cancer Institute (“NCI”) (NCT06059391). |
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| ● | Triplex is currently also the subject of multiple other ongoing clinical trials, including: a Phase 1/2 trial for CMV control in pediatric recipients of HSCT (NCT03354728); a Phase 1 trial of Triplex in combination with a bi-specific CMV/CD19 CAR T cell therapy for the treatment of non-Hodgkin lymphoma (NCT05432635); a Phase 2 trial for safety and effectiveness in reducing CMV complications in patients previously infected with CMV and undergoing donor hematopoietic cell transplant (NCT02506933); a Phase 1 trial of Triplex in combination with CAR T cell therapy for adults with non-Hodgkin lymphoma (NCT05801913); and a Phase 1 trial of Triplex in combination with an allogeneic anti-CD19-CAR CMV-specific T cell therapy for adults with high-risk acute lymphoblastic leukemia (NCT06735690). |
| ● | Triplex was sourced by Fortress and is currently in development at our subsidiary, Helocyte. |
CAEL-101 (light chain fibril-reactive monoclonal antibody for AL amyloidosis)
| ● | On October 5, 2021, AstraZeneca acquired Caelum Biosciences, Inc. (“Caelum”), a former subsidiary of Fortress for an upfront payment of approximately $150 million paid to Caelum shareholders, of which approximately $56.9 million was paid to Fortress. The agreement also provides for additional potential payments to Caelum shareholders totaling up to $295 million, payable upon the achievement of regulatory and commercial milestones. Fortress is eligible to receive 42.4% of all potential milestone payments, which, together with the upfront payment, would total up to approximately $182 million. |
| ● | There are two ongoing global Phase 3 pivotal studies of CAEL-101 (also known as anselamimab) for Mayo Stage IIIa and Mayo Stage IIIb amyloid light-chain amyloidosis (“AL amyloidosis”), known as Cardiac Amyloid Reaching for Extended Survival (“CARES”) (ClinicalTrials.gov identifiers: NCT04512235 and NCT04504825). (Information on clinicaltrials.gov does not constitute part of this Quarterly Report on Form 10-Q.). |
| ● | On July 16, 2025, AstraZeneca announced an update from its Cardiac Amyloid Reaching for the CARES Phase 3 clinical program showing that anselamimab did not achieve statistical significance for the primary endpoint compared to placebo in patients with Mayo stages IIIa and IIIb AL amyloidosis. The primary endpoint was defined as a hierarchical combination of time to all-cause mortality (“ACM”) and frequency of cardiovascular hospitalizations (“CVH”). All patients in the clinical program received background standard of care for plasma cell dyscrasia. AstraZeneca stated that anselamimab showed highly clinically meaningful improvement in time to ACM and frequency of CVH in a prespecified subgroup of patients, compared to placebo (although AstraZeneca did not further characterize this subgroup). AstraZeneca also reported that anselamimab was well tolerated, with the majority of events balanced between the anselamimab treatment arm and the placebo arm. AstraZeneca indicated that the company plans to submit the pre-specified subgroup analysis from the CARES trials with regulatory authorities. |
| ● | CAEL-101 was sourced by Fortress and was developed by Caelum (founded by Fortress) until the acquisition by AstraZeneca of Caelum in October 2021. |
CUTX-101 (copper histidinate for Menkes disease)
| ● | In October 2025, Cyprium announced that the FDA had issued a Complete Response Letter (“CRL”) to Sentynl for CUTX-101 (copper histidinate for Menkes disease). The CRL noted cGMP deficiencies had been observed at the facility where CUTX-101 is manufactured, and Sentynl expects to resubmit the CUTX-101 NDA shortly. The CRL did not cite any other approvability concerns, nor did it identify any deficiencies in CUTX-101’s efficacy and safety data. |
| ● | In December 2023, Cyprium completed the asset transfer of CUTX-101 to Sentynl. Sentynl is obligated under the applicable agreement to use commercially reasonable efforts to develop and commercialize CUTX-101, including the funding of the same. Additionally, Cyprium remains eligible to receive up to $129 million in aggregate development and sales milestones under the Agreement and royalties on net sales of CUTX-101 ranging from 3% to 12.5% on tiered annual net sales. Cyprium will retain 100% ownership over any FDA priority review voucher that may be issued at the NDA approval for CUTX-101. |
| ● | CUTX-101 was sourced by Fortress and was developed by Cyprium until the asset transfer in December 2023. |
Early Stage Product Candidates
Dotinurad (urate transporter (URAT1) inhibitor for gout)
| ● | In October 2025, Urica announced that Crystalys Therapeutics, Inc. (“Crystalys”), in which Urica maintains an equity position, announced a $205 million Series A financing to support the advancement of global Phase 3 clinical studies evaluating dotinurad for the treatment of gout. |
| ● | Also in October 2025, Urica announced the first patients were dosed in two randomized, double-blind, multicenter global Phase 3 trials, (ClinicalTrials.gov identifiers: the RUBY study (NCT07089875) and the TOPAZ study (NCT07089888)) evaluating dotinurad, a next-generation, once daily oral, URAT1 inhibitor with potential for best-in-class safety and efficacy for the treatment of gout. |
| ● | In July 2024, Urica entered into an asset purchase agreement, royalty agreement, and related agreements (collectively, the “Transaction Documents”) with Crystalys. Crystalys is a Delaware corporation founded in 2023 and seeded by leading life |
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| sciences institutional investors. Under the Transaction Documents, Urica transferred substantially all intellectual property rights in dotinurad to Crystalys. In return, Crystalys issued to Urica shares of its common stock equal to 35% of Crystalys’ outstanding equity, including certain anti-dilution provisions through the raise of $150 million in equity securities. The Transaction Documents also granted Urica a secured 3% royalty on future net sales of dotinurad. |
| ● | Dotinurad was approved in Japan in 2020 as a once-daily oral therapy for gout and hyperuricemia. |
| ● | Dotinurad was sourced by Fortress and was in development at our Urica subsidiary until the asset was acquired by Crystalys in July 2024. |
MB-109 (IL13Rα2-targeted CAR T Cells (MB-101) + HSV-1 oncolytic virus (MB-108))
| ● | In July 2025, the FDA granted Orphan Drug Designation to Mustang for MB-101 (IL13Ra2-targeted CAR T-cells) for the treatment of recurrent diffuse and anaplastic astrocytoma and glioblastoma. MB-101 received Orphan Drug Designation on time and with a designation that is broader than the indication proposed. |
| ● | We are currently exploring with COH the launch of an investigator-sponsored single-institution trial under the COH IND to treat patients with IL13Rα2+ recurrent refractory glioblastoma (“GBM”) and high-grade astrocytoma with MB-109 that could potentially be initiated in the second quarter of 2026. |
| ● | MB-101 has completed the treatment phase of the Phase 1 study in patients with IL13Rα2 recurrent/refractory malignant glioma sponsored by City of Hope (ClinicalTrials.gov identifier: NCT02208362) and is currently in three ongoing clinical trials sponsored by City of Hope for glioblastoma in adults and children (ClinicalTrials.gov identifiers: NCT04003649, NCT04661384, NCT04510051). |
| ● | MB-108 has completed a Phase 1 clinical trial in patients with recurrent GBM sponsored by the University of Alabama at Birmingham (“UAB”) (ClinicalTrials.gov identifier: NCT03657576) and UAB is planning to initiate a Phase 1b study in early 2026 for the treatment of patients with recurrent malignant glioma (ClinicalTrials.gov identifier: NCT06614855). |
| ● | MB-101, MB-108, and MB-109 are currently in development at our partner company, Mustang. |
MB-106 (CD20-targeted CAR T-cell therapy)
| ● | Mustang is currently pursuing the development of MB-106,in collaboration with the Fred Hutch Cancer Center (“Fred Hutch”), for autoimmune diseases pursuant to a license agreement originally executed with Fred Hutch in 2017 (the “CD20 License”). |
| ● | In September 2025, Mustang received notice from Fred Hutch of its intent to terminate the CD20 License for cause in connection with unpaid patent expenses and maintenance fees. A 90-day cure period is applicable under the CD20 License. Mustang intends to negotiate the terms of an arrangement with Fred Hutch pursuant to which the CD20 License is terminated (together with related agreements) in exchange for potential consideration remunerable to Mustang. |
| ● | MB-106 was sourced by Fortress and is currently in development at our partner company, Mustang. |
BAER-101 (GABAA α2/3 positive allosteric modulator)
| ● | In November 2025, Avenue announced it had entered into an agreement for Baergic to be acquired by Axsome, including the global rights to BAER-101 (also known as AZD7325), a novel oral GABAA α2,3 subtype-selective receptor positive allosteric modulator (PAM). BAER-101 was originally licensed by Baergic from AstraZeneca AB and will be referred to as AXS-17 by Axsome going forward. Axsome intends to evaluate AXS-17 as a potential treatment for epilepsy. |
| ● | BAER-101 was sourced by Fortress and was in development at Baergic, a majority-owned subsidiary of Avenue, until its sale to Axsome in November 2025. |
General Corporate and Other – Public Subsidiaries
| ● | In the quarter ended September 30, 2025, the Company received gross proceeds of $1.7 million from warrant exercises. |
| ● | In the quarter ended September 30, 2025, Journey issued approximately 1.0 million shares of common stock for net proceeds of $6.9 million under the Journey At the Market Offering (“ATM”). |
| ● | In July 2025, Mustang received gross proceeds of $7.1 million from warrant exercises. |
| ● | Due to the receipt of $28 million of proceeds from the sale of Checkpoint in May 2025, the Company made payments to Oaktree comprising: $5.5 million in principal, $0.1 million in interest, and $0.3 million in Yield Protection Premium. At September 30, 2025, the outstanding principal balance of the 2024 Oaktree Note was $29.8 million. |
| ● | In June 2025, Journey Medical joined the small-cap Russell 2000® Index and the broad-market Russell 3000® Index, effective after the close of U.S. equity markets on June 27, 2025, as a result of their 2025 annual Russell Index reconstitution. |
| ● | In March 2025, Avenue received a notice from The Nasdaq Stock Market LLC that Avenue’s common stock would be suspended at the open of trading on March 19, 2025. Avenue’s common stock was subsequently formally delisted from the Nasdaq Capital Market in July 2025. Avenue’s common stock began trading under the symbol “ATXI” on the OTC Markets |
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| system on March 19, 2025. Avenue currently plans to continue to file its required periodic reports and other filings with the SEC. |
| ● | In February 2025, Mustang announced it had concurrently exited the lease for its manufacturing facility in Worcester, Massachusetts and sold certain fixed assets including furniture and equipment to AbbVie Bioresearch Center, Inc. for $1.0 million. |
| ● | In January 2025, Mustang effected a 1-for-50 reverse stock split to achieve compliance with the minimum bid price listing requirement of the Nasdaq Capital Market. |
Critical Accounting Policies and Use of Estimates
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States. Applying these principles requires our judgment in determining the appropriateness of acceptable accounting principles and methods of application in diverse and complex economic activities. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of revenues, expenses, assets and liabilities, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
For a discussion of our critical accounting estimates, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K, which was filed with the United States Securities and Exchange Commission (“SEC”) on March 31, 2025 (the “2024 Form 10-K”). There were no material changes in our critical accounting estimates or accounting policies from December 31, 2024 other than the addition of the “Investment in Equity Securities” policy.
Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies”, to our unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Smaller Reporting Company Status
We are a “smaller reporting company,” meaning that either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (x) the market value of our shares held by non-affiliates is less than $250 million or (y) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. As a smaller reporting company, we chose to present only the two most recent fiscal years of audited financial statements in the 2024 Form 10-K, have reduced disclosure obligations regarding executive compensation and utilize certain other accommodations available to smaller reporting companies.
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The Company’s consolidated financial statements include the results of the Company’s subsidiaries for which it has voting control but does not own 100% of the outstanding equity of the subsidiaries. For consolidated entities where the Company owns less than 100% of the subsidiary, but retains voting control, the Company records net loss attributable to non-controlling interests in its consolidated statements of operations and presents non-controlling interests as a component of stockholders’ equity on its consolidated balance sheets. All intercompany income and/or expense items are eliminated entirely in consolidation prior to the allocation of net gain/loss attributable to non-controlling interest, which is based on ownership interests as calculated quarterly for each subsidiary.
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The following table summarizes the Company’s ownership of the issued and outstanding common and preferred shares in certain consolidated Fortress subsidiaries as of the date indicated:
| | | |
| | September 30, | |
Partner Company/Subsidiary | | 2025 | |
Avenue (OTC: ATXI) | | 10.3 | % |
Cellvation | | 79.6 | % |
Checkpoint1 | | — | % |
Cyprium | | 73.9 | % |
Helocyte | | 83.4 | % |
Journey (Nasdaq: DERM) | | 37.4 | % |
Mustang (Nasdaq: MBIO) | | 4.0 | % |
Oncogenuity | | 73.9 | % |
Urica | | 69.6 | % |
Note 1:Checkpoint was acquired in May 2025 by Sun Pharma.
|
Results of Operations
Comparison of Three Months Ended September 30, 2025 and 2024
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Revenue | | | | | | | | | | | | |
Product revenue, net | | $ | 17,025 | | $ | 14,629 | | $ | 2,396 |
| 16 | % |
Other revenue | | | 606 | | | — | | | 606 |
| 100 | % |
Net revenue | |
| 17,631 | |
| 14,629 | |
| 3,002 |
| 21 | % |
| | | | | | | | | | | | |
Operating expenses | |
| | |
| | |
| |
| | |
Cost of goods sold – (excluding amortization of acquired intangible assets) | |
| 5,755 | |
| 4,471 | |
| 1,284 |
| 29 | % |
Amortization of acquired intangible assets | | | 1,064 | | | 814 | | | 250 |
| 31 | % |
Research and development | |
| 208 | |
| 9,446 | |
| (9,238) |
| (98) | % |
Selling, general and administrative | |
| 17,415 | |
| 21,993 | |
| (4,578) |
| (21) | % |
Total operating expenses | |
| 24,442 | |
| 36,724 | |
| (12,282) |
| (33) | % |
Loss from operations | |
| (6,811) | |
| (22,095) | |
| 15,284 |
| (69) | % |
| | | | | | | | | | | | |
Other income (expense) | |
| | |
| | |
| |
| | |
Interest income | |
| 736 | |
| 589 | |
| 147 |
| 25 | % |
Interest expense and financing fee | |
| (2,742) | |
| (6,209) | |
| 3,467 |
| (56) | % |
Gain (loss) on common stock warrant liabilities | |
| (2) | |
| 19 | |
| (21) |
| (111) | % |
Other income | | | 17,672 | |
| 1,071 | |
| 16,601 |
| 1,550 | % |
Total other income (expense) | |
| 15,664 | |
| (4,530) | |
| 20,194 |
| (446) | % |
Income (loss) before income tax expense | | | 8,853 | |
| (26,625) | |
| 35,478 |
| (133) | % |
| | | | | | | | | | | | |
Income tax expense | |
| 26 | |
| 69 | |
| (43) |
| (62) | % |
Net income (loss) | |
| 8,827 | |
| (26,694) | |
| 35,521 |
| (133) | % |
| | | | | | | | | | | | |
Attributable to non-controlling interests | |
| (2,977) | |
| 13,827 | |
| (16,804) |
| (122) | % |
Net income (loss) attributable to Fortress | | $ | 5,850 | | $ | (12,867) | | $ | 18,717 |
| (145) | % |
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Revenue
| | | | | | | | | | | | |
|
| Three Months Ended September 30, |
| Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Revenue | | | | | | | | | | | | |
Product revenue, net | | $ | 17,025 | | $ | 14,629 | | $ | 2,396 | | 16 | % |
Other revenue | | | 606 | | | — | | | 606 | | 100 | % |
Net revenue | | $ | 17,631 | | $ | 14,629 | | $ | 3,002 | | 21 | % |
For the three months ended September 30, 2025 we generated $17.0 million of net product revenue related to the sale of Journey’s branded and generic products as compared to $14.6 million for the three months ended September 30, 2024. This includes $4.9 million of net product revenue related to the U.S. commercial launch of Emrosi for the three months ended September 30, 2025, offset by a decrease in Accutane revenue as a result of lower sales volume driven by recent market competition. Other revenue for the three months ended September 30, 2025 consists of revenue recognized by Journey related to the supply of Amzeeq to Cutia.
Cost of Goods Sold – (excluding amortization of acquired intangible assets)
| | | | | | | | | | | | |
|
| Three Months Ended September 30, |
| Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Cost of goods sold – (excluding amortization of acquired intangible assets) | | $ | 5,755 | | $ | 4,471 | | $ | 1,284 | | 29 | % |
We incurred $5.8 million and $4.5 million of costs of goods sold in connection with the sale of Journey’s branded and generic products for the quarters ended September 30, 2025 and 2024, respectively. Cost of goods sold increased by $1.3 million, or 29% quarter-over-quarter, due to an increase in product-related cost of goods, including royalties, related to the incremental revenue from Emrosi.
Amortization of acquired intangible assets
Amortization of acquired intangible assets increased by $0.3 million, or 31%, to $1.1 million for the three-month period ended September 30, 2025, from $0.8 million for the three-month period ended September 30, 2024, driven by the addition of the Emrosi acquired intangible asset upon Journey’s payment to DRL of the milestone payment triggered by the FDA’s approval of Emrosi in November 2024.
Research and Development Expenses
Research and development (“R&D”) costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for upfront and milestone license fees, costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings and patents, laboratory costs and other supplies.
The table below provides a summary of research and development by entity, for the periods presented:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Research & development |
| |
|
| |
|
| |
|
|
| |
Fortress1 | | $ | 77 | | $ | (146) | | $ | 223 | | (153) | % |
Avenue | |
| 177 | |
| 2,327 | |
| (2,150) | | (92) | % |
Checkpoint2 | |
| — | |
| 6,366 | |
| (6,366) | | (100) | % |
JMC | | | 287 | | | 842 | | | (555) | | (66) | % |
Mustang | |
| (333) | |
| 57 | |
| (390) | | (684) | % |
Total research and development expense | | $ | 208 | | $ | 9,446 | | $ | (9,238) | | (98) | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint was deconsolidated as of May 2025 due to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
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The decrease in R&D spending of $9.2 million, or 98%, for the quarter ended September 30, 2025 as compared to the quarter ended September 30, 2024 is primarily a result of the decreased R&D spend at Checkpoint of $6.4 million, or 100%, due to the deconsolidation of that entity as of May 2025 as a result of its acquisition by Sun Pharma, and the $2.2 million, or 95%, decrease at Avenue, which is primarily attributable to a decrease in pre-clinical and clinical development costs for AJ201, prior to its sale to AnnJi in April 2025. Journey’s decrease of $0.6 million, or 66%, is due to costs incurred in the quarter ended September 30, 2024 related to the launch and commercialization of Emrosi. The decrease at Mustang of $0.4 million, or 684%, is due to a $0.3 million decrease in rent expense due to the termination of the Worcester facility lease, and a $0.1 million decrease in personnel costs related to reductions in employee headcount. Mustang continues to negotiate settlements of aged payables, and recognized savings of approximately $0.6 million, which resulted in a credit for research and development expenses during the three months ended September 30, 2025. This credit is not indicative of Mustang’s research and development expenses going forward.
The table below provides a summary by entity of noncash, stock-based compensation expense included in R&D expense for the periods presented:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change |
| |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Stock-based compensation - research & development | | | | | | | | | | | | |
Fortress1 | | $ | 120 | | $ | 444 | | $ | (324) | | (73) | % |
Avenue | |
| 31 | |
| 89 | |
| (58) | | (65) | % |
Checkpoint2 | |
| — | |
| 543 | |
| (543) | | (100) | % |
JMC | | | — | | | 150 | | | (150) | | (89) | % |
Mustang | |
| 1 | |
| (10) | |
| 10 | | (103) | % |
Total stock-based compensation expense - research and development | | $ | 152 | | $ | 1,216 | | $ | (1,064) | | (88) | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint was deconsolidated as of May 2025 due to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
The decrease in stock-based compensation of $1.1 million, or 88%, in the quarter ended September 30, 2025 as compared to the quarter ended September 30, 2024 is primarily due to the decrease at Checkpoint of $0.5 million, or 100%, due to the deconsolidation of that entity as of May 2025 as a result of its acquisition by Sun Pharma. The decrease at Fortress and private subsidiaries of $0.3 million, or 73%, is due to $0.4 million recognized by Urica in the quarter ended September 30, 2024 related to the vesting of outstanding equity grants as a result of the transaction with Crystalys.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of personnel-related costs, costs required to support the marketing and sales of our commercialized products, professional fees for legal, consulting, audit and tax services, rent and other general operating expenses not otherwise included in R&D expenses.
The table below provides a summary by entity of selling, general and administrative expenses for the periods presented:
| | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Change | | ||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ | | % |
| |||
Selling, general & administrative | | | | | | | | | | | | |
Fortress1 | | $ | 3,857 | | $ | 5,010 |
| $ | (1,153) | | (23) | % |
Avenue | |
| 547 | |
| 829 |
|
| (282) | | (34) | % |
Checkpoint2 | |
| — | |
| 3,358 |
|
| (3,358) | | (100) | % |
JMC | |
| 12,054 | |
| 11,396 |
|
| 658 | | 6 | % |
Mustang | |
| 957 | |
| 1,400 |
|
| (443) | | (32) | % |
Total selling, general & administrative expense | | $ | 17,415 | | $ | 21,993 |
| $ | (4,578) | | (21) | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint was deconsolidated as of May 2025 due to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
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For the three months ended September 30, 2025, the decrease in selling, general and administrative expenses of $4.6 million, or 21%, is primarily a result of the decreased expense at Checkpoint of $3.4 million, or 100%, due to the deconsolidation of that entity as of May 2025 as a result of its acquisition by Sun Pharma. The decrease at Fortress of $1.2 million, or 23%, is due primarily to decreased stock compensation expense related to the vesting in July of a series of grants made under the Fortress Biotech, Inc. Long Term Incentive Plan.. The increased spend at Journey of $0.7 million, or 6%, is due to the incremental operating activities related to the launch and commercialization of Emrosi.
The table below provides a summary by entity of noncash, stock-based compensation expense included in selling, general and administrative expense for the periods presented:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change |
| |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Stock-based compensation - Selling, general and administrative | | | | | | | | | | | | |
Fortress1 | | $ | 1,037 | | $ | 2,505 | | $ | (1,468) | | (59) | % |
Avenue | |
| 132 | |
| 242 | |
| (110) | | (45) | % |
Checkpoint2 | |
| — | |
| 1,068 | |
| (1,068) | | (100) | % |
JMC | | | 1,854 | | | 1,490 | | | 364 | | 24 | % |
Mustang | |
| 22 | |
| 52 | |
| (30) | | (58) | % |
Total stock-based compensation expense - selling, general and administrative | | $ | 3,045 | | $ | 5,357 | | $ | (2,312) | | (43) | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint was deconsolidated as of May 2025 due to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
The decrease in stock-based compensation of $2.3 million, or 43%, for the quarter ended September 30, 2025 as compared to the quarter ended September 30, 2024 is primarily due to the decrease at Checkpoint of $1.1 million, or 100%, due to the deconsolidation of that entity as of May 2025 as a result of its acquisition by Sun Pharma. The decrease at Fortress of $1.5 million, or 59%, is related to the vesting in July of a series of grants made under the Fortress Biotech, Inc. Long Term Incentive Plan.
Other income (expense)
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Other income (expense) | |
| | |
| | |
|
| | | |
Interest income | | $ | 736 | | $ | 589 | | $ | 147 | | 25 | % |
Interest expense and financing fee | |
| (2,742) | |
| (6,209) | |
| 3,467 | | (56) | % |
Gain (loss) on common stock warrant liabilities | |
| (2) | |
| 19 | |
| (21) | | (111) | % |
Other income | | | 17,672 | |
| 1,071 | |
| 16,601 | | 1550 | % |
Total other income (expense) | | $ | 15,664 | |
| (4,530) | | $ | 20,194 | | (446) | % |
Total other income (expense) increased $20.2 million, or 446%, from expense of $4.5 million for the quarter ended September 30, 2024 to income of $15.7 million for the quarter ended September 30, 2025. The increase is due to an increase in the fair value of Urica’s equity interest in Crystalys of $15.1 million and the reversal of the liability associated with Urica’s repurchase obligation of $2.6 million during the three months ended September 30, 2025 (see Note 3 to the unaudited condensed consolidated financial statements). The decrease in interest expense and financing fee of $3.5 million, or 56%, for the quarter ended September 30, 2025 as compared to the quarter ended September 30, 2024 is attributable to a loss on extinguishment of debt of $3.6 million recognized in the quarter ended September 30, 2024 related to the Company’s extinguishment of the 2020 Oaktree Note.
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Comparison of Nine Months Ended September 30, 2025 and 2024
| | | | | | | | | | | | |
|
| Nine Months Ended September 30, |
| Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Revenue | | | | | | | | | | | | |
Product revenue, net | | $ | 45,173 | | $ | 42,514 | | $ | 2,659 | | 6 | % |
Revenue – related party | |
| — | |
| 41 | |
| (41) | | (100) | % |
Other revenue | | | 2,010 | | | — | | | 2,010 | | 100 | % |
Net revenue | |
| 47,183 | |
| 42,555 | |
| 4,628 | | 11 | % |
| | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | |
Cost of goods - (excluding amortization of acquired intangible assets) | |
| 15,484 | |
| 16,199 | |
| (715) | | (4) | % |
Amortization of acquired intangible assets | | | 3,193 | |
| 2,443 | |
| 750 | | 31 | % |
Research and development | |
| 12,268 | |
| 46,941 | |
| (34,673) | | (74) | % |
Selling, general and administrative | |
| 81,670 | |
| 60,867 | |
| 20,803 | | 34 | % |
Asset impairment | |
| — | | | 2,649 | | | (2,649) | | (100) | % |
Total operating expenses | |
| 112,615 | |
| 129,099 | |
| (16,484) | | (13) | % |
Loss from operations | |
| (65,432) | |
| (86,544) | |
| 21,112 | | (24) | % |
| | | | | | | | | | | | |
Other income (expense) | |
| | |
| | |
|
| | | |
Interest income | |
| 1,848 | |
| 2,157 | |
| (309) | | (14) | % |
Interest expense and financing fee | |
| (8,065) | |
| (10,933) | |
| 2,868 | | (26) | % |
Loss on common stock warrant liabilities | |
| (399) | |
| (578) | |
| 179 | | (31) | % |
Gain from deconsolidation of subsidiary | | | 27,127 | | | — | | | 27,127 | | 100 | % |
Other income | | | 17,599 | |
| 1,334 | |
| 16,265 | | 1219 | % |
Total other income (expense) | |
| 38,110 | |
| (8,020) | |
| 46,130 | | (575) | % |
Loss before income tax expense | | | (27,322) | |
| (94,564) | |
| 67,242 | | (71) | % |
| | | | | | | | | | | | |
Income tax expense (refund) | | | 196 | |
| (24) | |
| 220 | | (917) | % |
Net loss | |
| (27,518) | |
| (94,540) | |
| 67,022 | | (71) | % |
| | | | | | | | | | | | |
Attributable to non-controlling interests | |
| 38,270 | |
| 55,308 | |
| (17,038) | | (31) | % |
Net income (loss) attributable to Fortress | | $ | 10,752 | | $ | (39,232) | | $ | 49,984 | | (127) | % |
| | | | | | | | | | | | |
|
| Nine Months Ended September 30, |
| Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Revenue | | | | | | | | | | | | |
Product revenue, net | | $ | 45,173 | | $ | 42,514 | | $ | 2,659 | | 6 | % |
Revenue – related party | |
| — | |
| 41 | |
| (41) | | (100) | % |
Other revenue | | | 2,010 | | | — | | | 2,010 | | 100 | % |
Net revenue | | $ | 47,183 | |
| 42,555 | | $ | 4,628 | | 11 | % |
For the nine months ended September 30, 2025 we generated $45.2 million of net revenue related to the sale of Journey’s branded and generic products as compared to $42.5 million for the nine months ended September 30, 2024. The nine months of 2025 includes $9.7 million of net product revenue related to the U.S. commercial launch of Emrosi, offset by a decrease in Accutane revenue as a result of lower sales volume driven by recent market competition. Other revenue for the nine months ended September 30, 2025 consists of revenue recognized by Avenue related to the AnnJi license termination and program transfer of $1.4 million and revenue recognized by Journey related to the supply of Amzeeq to Cutia for $0.6 million.
Cost of Goods Sold – (excluding amortization of acquired intangible assets)
| | | | | | | | | | | | |
|
| Nine Months Ended September 30, |
| Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
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Table of Contents
Cost of goods sold – (excluding amortization of acquired intangible assets) | | $ | 15,484 | | $ | 16,199 | | $ | (715) | | (4) | % |
We incurred $15.5 million and $16.2 million of costs of goods sold in connection with the sale of Journey’s branded and generic products for the nine months ended September 30, 2025 and 2024, respectively. Cost of goods sold decreased by $0.7 million, or 4%, year-over-year, related to product sales mix, driven mainly by the decrease in Accutane revenue, which has a higher cost to Journey than Emrosi, as well as lower inventory obsolescence costs in the nine month period ended September 30, 2025.
Amortization of acquired intangible assets
Amortization of acquired intangible assets increased by $0.8 million, or 31%, to $3.2 million for the nine-month period ended September 30, 2025, from $2.4 million for the nine-month period ended September 30, 2024, driven by the addition of the Emrosi acquired intangible asset upon Journey’s payment to DRL of the milestone payment triggered by the FDA’s approval of Emrosi in November 2024.
Research and Development Expenses
Research and development (“R&D”) costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for upfront and milestone license fees, costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings and patents, laboratory costs and other supplies.
The table below provides a summary of research and development by entity, for the periods presented:
| | | | | | | | | | | | |
| | Nine Months Ended | | | | | | | ||||
| | September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Research & development |
| |
|
| |
|
| |
|
|
| |
Fortress1 | | $ | 1,586 | | $ | 3,658 |
| $ | (2,072) | | (57) | % |
Avenue | |
| 780 | |
| 6,080 |
|
| (5,300) | | (87) | % |
Checkpoint2 | |
| 10,775 | |
| 19,343 |
|
| (8,568) | | (44) | % |
Journey | | | 326 | | | 9,639 | | | (9,313) | | (97) | % |
Mustang | |
| (1,199) | |
| 8,221 |
|
| (9,420) | | (115) | % |
Total research & development expense | | $ | 12,268 | | $ | 46,941 |
| $ | (34,673) | | (74) | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint expenses are for the five-month period ending May 2025, due to the deconsolidation of Checkpoint as of May 2025 related to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
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For the nine months ended September 30, 2025, the decrease in R&D expenses of $34.7 million, or 74%, is attributable to a decrease of $9.4 million, or 115%, at Mustang attributed to actions taken in 2024, including the reduction in the workforce, closing the MB-106 clinical trial, and the termination of Mustang’s transaction with uBriGene. These activities resulted in decreased expenses of $3.2 million related to the termination of the transaction with uBriGene and the repurchase of the assets, a $2.4 million decrease in expenses related to outside services, including assay development costs; a $1.4 million reduction in clinical trial related costs, a $1.3 million decrease in sponsored research and license related expenses, a $0.7 million decrease in consulting expenses; a $0.6 million decrease in depreciation expense; offset slightly by a $1.3 million increase in personnel-related costs due to stock compensation expense credits and reversal of accrued bonus due to the April 2024 reduction in workforce, and the $0.4 million gain recognized on the termination of the Worcester facility lease. Additionally Mustang recognized savings of approximately $1.4 million on the settlement of aged payables, which resulted in a credit to research and development expenses during the nine months ended September 30, 2025. This credit is not indicative of Mustang’s research and development expense going forward. Journey R&D expense decreased $9.3 million, or 97%, due to the Emrosi pre-approval expenses, milestones and fees incurred in the nine months ended September 30, 2024. R&D expense at Checkpoint decreased $8.6 million, or 44%, due to the deconsolidation of that entity as of May 2025 as a result of its acquisition by Sun Pharma. R&D expense at Avenue decreased $5.3 million, or 87%, due to a $5.0 million decrease in pre-clinical and clinical development costs for AJ201 prior to entering into the termination agreement with AnnJi, a $0.1 million decrease in IV tramadol supply costs, and a $0.2 million decrease in personnel-related costs. The decrease at Fortress in R&D expenses of $2.1 million, or 57%, is primarily related to the transition of the dotinurad development program at Urica to Crystalys in July 2024.
The table below provides a summary by entity of noncash, stock-based compensation expense included in R&D expense for the periods presented:
| | | | | | | | | | | | |
| | | | | | | |
| ||||
| | Nine Months Ended September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Stock-based compensation - research & development |
| |
|
| |
|
| |
|
|
| |
Fortress1 | | $ | 1,371 | | $ | 1,319 | | $ | 52 |
| 4 | % |
Avenue | |
| 102 | |
| 179 | |
| (77) |
| (43) | % |
Checkpoint2 | |
| 4,782 | |
| 1,629 | |
| 3,153 |
| 194 | % |
Journey | | | — | | | 466 | | | (466) | | (100) | % |
Mustang | |
| (10) | |
| (650) | |
| 640 |
| (98) | % |
Total stock-based compensation expense - research and development | | $ | 6,245 | | $ | 2,943 | | $ | 3,302 |
| 112 | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint expenses are for the five-month period ending May 2025, due to the deconsolidation of Checkpoint as of May 2025 related to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
The increase in stock-based compensation of $3.3 million, or 112%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 is primarily attributed to the increase at Checkpoint of $3.2 million, or 194%, due to the vesting of all outstanding equity awards from the change of control that occurred with the sale to Sun Pharma. Stock compensation expense at Mustang reflects the expense credits due to forfeited grants from the reduction in workforce that occurred in April 2024. The decrease in stock compensation at Journey of $0.5 million, or 100%, is due to employee grants becoming fully vested in the prior year.
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Table of Contents
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist principally of personnel-related costs, costs required to support the marketing and sales of our commercialized products, professional fees for legal, consulting, audit and tax services, rent and other general operating expenses not otherwise included in R&D expenses.
The table below provides a summary by entity of selling, general and administrative expenses for the periods presented:
| | | | | | | | | | | | |
| | Nine Months Ended | | | | | |
| ||||
| | September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ | | % |
| |||
Selling, general & administrative | | | | | | | | | | | | |
Fortress1 | | $ | 13,986 | | $ | 14,715 |
| $ | (729) | | (5) | % |
Avenue | |
| 2,955 | |
| 3,607 |
|
| (652) | | (18) | % |
Checkpoint2 | |
| 27,263 | |
| 8,043 |
|
| 19,220 | | 239 | % |
Journey | |
| 34,505 | |
| 30,144 |
|
| 4,361 | | 14 | % |
Mustang | |
| 2,961 | |
| 4,358 |
|
| (1,397) | | (32) | % |
Total selling, general & administrative expense | | $ | 81,670 | | $ | 60,867 |
| $ | 20,803 | | 34 | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint expenses are for the five-month period ending May 2025, due to the deconsolidation of Checkpoint as of May 2025 related to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
For the nine months ended September 30, 2025, the increase in selling, general and administrative expenses of $20.8 million, or 34%, is primarily attributable to an increase of $19.2 million, or 239%, at Checkpoint due primarily to an increase in increased stock compensation expense of $7.5 million related to the vesting of all outstanding equity awards due to the change of control that occurred with the sale to Sun Pharma, an increase in legal fees of $4.3 million and an increase of $9.5 million in other costs, which includes costs related to the transaction with Sun Pharma, such as fees to financial advisors. The increase at Journey of $4.4 million, or 14%, is due to the costs incurred related to the launch and commercialization of Emrosi. The decrease at Mustang of $1.4 million, or 32%, is due to a $0.4 million decrease in personnel costs, a $0.5 million decrease in legal and patent protection expenses, a $0.4 million decrease in consulting expenses, and a $0.3 million decrease across various other general and administrative expenses, offset by a $0.2 million increase in non-cash stock-based compensation expenses, consisting primarily of the equity fee paid to Fortress.
The table below provides a summary by entity of noncash, stock-based compensation expense included in selling, general and administrative expense for the periods presented:
| | | | | | | | | | | | |
| | | | | | | |
| ||||
| | Nine Months Ended September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Stock-based compensation - Selling, general and administrative |
| |
|
| |
| |
|
| |
| |
Fortress1 | | $ | 5,670 | | $ | 6,685 | | $ | (1,015) | | (15) | % |
Avenue | |
| 421 | |
| 535 | |
| (114) | | (21) | % |
Checkpoint2 | |
| 9,315 | |
| 1,862 | |
| 7,453 | | 400 | % |
Journey | | | 4,513 | | | 4,254 | | | 259 | | 6 | % |
Mustang | |
| 116 | |
| 150 | |
| (34) | | (23) | % |
Total stock-based compensation expense - selling, general and administrative | | $ | 20,035 | |
| 13,486 | | $ | 6,549 | | 49 | % |
Note 1: | Includes Fortress and private subsidiaries primarily funded by Fortress: Cellvation, Cyprium, Helocyte, Oncogenuity and Urica. |
Note 2: Checkpoint expenses are for the five-month period ending May 2025, due to the deconsolidation of Checkpoint as of May 2025 related to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
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The increase in stock-based compensation of $6.6 million, or 49%, for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 is primarily attributed to the increase at Checkpoint of $7.5 million, or 400%, due to the vesting of all outstanding equity awards from the change of control that occurred with the sale to Sun Pharma, partially offset by the decrease at Fortress of $1.0 million, or 15%, due to the vesting in July 2025 of a series of grants made under the Fortress Biotech, Inc. Long Term Incentive Plan.
Asset Impairment
For the nine months ended September 30, 2024, we incurred impairment charges of $2.6 million attributable to Mustang’s assessment of the recoverability of its asset group consisting of leasehold improvements and associated right-of-use asset. No impairment was recorded in the nine months ended September 30, 2025.
Other income (expense)
| | | | | | | | | | | | |
| | Nine Months Ended September 30, | | Change | | |||||||
($ in thousands) |
| 2025 |
| 2024 |
| $ |
| % |
| |||
Other expense | |
| | |
| | |
|
| | | |
Interest income | | $ | 1,848 | | $ | 2,157 | | $ | (309) | | (14) | % |
Interest expense and financing fee | |
| (8,065) | |
| (10,933) | |
| 2,868 | | (26) | % |
Loss on common stock warrant liabilities | |
| (399) | |
| (578) | |
| 179 | | (31) | % |
Gain from deconsolidation of subsidiary | | | 27,127 | | | — | | | 27,127 | | 100 | % |
Other income | | | 17,599 | |
| 1,334 | |
| 16,265 | | 1219 | % |
Total other income (expense) | | $ | 38,110 | |
| (8,020) | | $ | 46,130 | | (575) | % |
Total other income (expense) increased $46.1 million, or 538%, from expense of $8.0 million for the nine months ended September 30, 2024 to income of $35.2 million for the nine months ended September 30, 2025. As a result of the merger of Checkpoint with Sun Pharma, we deconsolidated Checkpoint in May 2025, and recognized a gain from deconsolidation of approximately $27.1 million during the nine months ended September 30, 2025 (see Note 3 to the unaudited condensed consolidated financial statements). We also recognized an increase in the fair value of Urica’s equity interest in Crystalys of $15.1 million and reversed the liability associated with the repurchase obligation of $2.6 million during the nine months ended September 30, 2025 (see Note 3 to the unaudited condensed consolidated financial statements). These gains were partially offset by interest expense and financing fee expenses related to Fortress’ debt outstanding with Oaktree and Journey’s debt outstanding with SWK. The $2.9 million, or 26%, decrease in interest expense and financing fees is attributable to a loss on extinguishment of debt of $3.6 million recognized in the nine months ended September 30, 2024 related to the Company’s extinguishment of the 2020 Oaktree Note in 2024 offset by an increase of $0.4 million in interest and fees recognized in the nine months ended September 30, 2025 associated with the additional payments made to Oaktree for the Checkpoint monetization event.
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Liquidity and Capital Resources
Sources of Liquidity
At September 30, 2025, we had an accumulated deficit of $730.1 million, primarily as a result of R&D expenses, purchases of in-process research and development and selling, general and administrative expenses.
We fund our operations through cash on hand, the sale of debt and equity securities, third-party financings, out-licensing of drug product and drug product candidates and the sale of subsidiaries and partner companies. At September 30, 2025, we had cash and cash equivalents of $86.2 million, of which $38.6 million relates to Fortress and private subsidiaries primarily funded by Fortress, $19.0 million relates to Mustang, $24.9 million relates to Journey, and $3.7 million relates to Avenue. Restricted cash at September 30, 2025, was $1.2 million, which relates to certain office leases held by Fortress.
We may require significant additional financing to fully develop and prepare regulatory filings and obtain regulatory approvals for our existing and new product candidates, fund operating losses, and, if deemed appropriate, establish or secure through third parties manufacturing for our potential products, and sales and marketing capabilities. We have funded our operations to date primarily through the sale of equity and debt securities, third-party financings, out-licensing of drug product and drug product candidates and the sales of subsidiaries and partner companies. We believe that our current cash and cash equivalents are sufficient to fund operations for at least the next twelve months. Our failure to raise capital as and when needed would have a material adverse impact on our financial condition and our ability to pursue our business strategies. We may seek funds through equity or debt financings, joint venture or similar development collaborations, the sale of partner companies, royalty financings, or through other sources of financing. See “Item 1A. Risk Factors—Risks Pertaining to the Need for and Impact of Existing and Additional Financing Activities.”
Stock Offerings and At-The-Market Share Issuances
On May 17, 2024, the Company filed a shelf registration statement (File No. 333-279516) on Form S-3, which was declared effective on May 30, 2024 (the “2024 Shelf”). As of September 30, 2025, $42.1 million of securities were available for sale under the 2024 Shelf, subject to General Instruction I.B.6. of Form S-3, known as the “baby shelf rules,” which limit the number of securities that can be sold under registration statements on Form S-3. However, on July 5, 2024, the board of directors paused the payment of dividends on our Series A Preferred Stock until further notices. As a result, the Company is not currently eligible to use Form S-3 and has lost the ability to use the 2024 Shelf. The Company will regain eligibility to use the 2024 Shelf on the date it files its Annual Report on Form 10-K, so long as it has: (i) by that date, paid all accrued but unpaid dividends at that time and (ii) timely paid all dividends accruing since the end of the fiscal year to which such Form 10-K relates.
Because the Company is not currently eligible to use Form S-3 due to the failure to pay dividends on the Series A Preferred Stock, on April 1, 2025 the Company filed a post-effective amendment to certain prior Form S-3 registration statements to continue the registration of:
| ● | the offer and sale by certain selling stockholders who were previously holders of shares of 8% Cumulative Redeemable Perpetual Class B Preferred Stock of Urica, of an aggregate of up to 1,987,250 shares of the Company’s common stock; |
| ● | the offer and sale of up to 5,885,000 shares underlying warrants originally issued as part of units, each consisting of one share of Common Stock and one warrant, originally registered pursuant to the prospectus filed with the SEC under November 10, 2023; |
| ● | the offer and sale of up to 3,303,305 shares underlying warrants originally issued as part of units, each consisting of one share of Common Stock and one warrant, originally registered pursuant to the prospectus filed with the SEC on December 29, 2023; and |
| ● | the offer and sale by certain selling stockholders of up to 116,637 shares of Common Stock issuable upon the exercise of warrants, as amended, granted to Oaktree and its affiliates under the Prior Oaktree Agreement. |
This post-effective amendment was declared effective by the SEC on April 2, 2025.
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During the nine months ended September 30, 2025, the Company issued and sold approximately 0.5 million shares at an average price of $1.94 per share for gross proceeds of approximately $1.0 million under the Company’s at-the-market offering program.
Journey
On December 30, 2022, Journey filed a shelf registration statement on Form S-3 (File No. 333-269079) (the “Journey 2022 S-3”), which was declared effective on January 26, 2023. The Journey 2022 S-3 covers the offering, issuance and sale by Journey of up to an aggregate of $150.0 million of Journey’s common stock, preferred stock, debt securities, warrants, and units. In connection with the Journey 2022 S-3, Journey entered into a sales agreement relating to the sale of shares of Journey’s common stock in an at-the-market offering (the “Journey ATM Sales Agreement”). In accordance with the terms of the Journey ATM Sales Agreement, Journey may offer and sell up to 4,900,000 shares of its common stock, par value $0.0001 per share, from time to time. For the nine months ended September 30, 2025, Journey issued and sold approximately 1.8 million shares of common stock for net proceeds of $10.9 million under the Journey ATM Sales Agreement.
In August 2025, Journey executed a new At Market Issuance Sales Agreement (the “Journey 2025 ATM Sales Agreement”) with B. Riley Securities, Inc. and Lake Street Capital Markets, LLC (each, an “Agent” and together, the “Agents”). In accordance with the terms of the Sales Agreement, Journey may offer and sell up to 3,750,000 shares of common stock, from time to time through or to the Agents, each acting as sales agent or principal. Journey has not yet issued any shares under the Journey 2025 ATM Sales Agreement.
Checkpoint
In January 2025, Checkpoint received approximately $2.1 million from the exercise of warrants for the issuance of 740,000 shares of common stock with an exercise price of $2.84 per share.
In March 2025, Checkpoint received approximately $36.0 million from the exercise of warrants for the issuance of 21,691,003 shares of common stock with an average exercise price of $1.66 per share.
In April 2025, Checkpoint received approximately $9.2 million from the exercise of warrants for the issuance of 3,256,269 shares of common stock with an average exercise price of $2.82 per share.
Mustang
On May 31, 2024, Mustang filed a shelf registration statement on Form S-3 (File No. 333-279891) (the “Mustang 2024 S-3”), which was declared effective on June 12, 2024. Under the Mustang 2024 S-3, Mustang may sell up to a total of $40.0 million of its securities. As of September 30, 2025, approximately $34.2 million under the Mustang 2024 S-3 remains available for sales of securities, subject to General Instruction I.B.6. of Form S-3.
On May 31, 2024, Mustang entered into an At-the-Market Offering Agreement (the “Mustang ATM”) relating to the sale of shares of common stock pursuant to the Mustang 2024 S-3. During the nine months ended September 30, 2025, Mustang issued and sold approximately 54,000 shares through the Mustang ATM for net proceeds of approximately $0.6 million.
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In February 2025, Mustang closed on an equity offering of (i) 495,000 shares of its common stock, par value $0.0001 per share (the “Shares”), (ii) pre-funded warrants to purchase up to an aggregate of 2,162,807 shares of common stock (the “Pre-Funded Warrant Shares), (iii) Series C-1 warrants (the “Series C-1 Warrants”) to purchase up to 2,657,807 shares of common stock, and (iv) Series C-2 warrants (the “Series C-2 Warrants”)to purchase up to 2,657,807 shares of common stock. Each Share or Pre-Funded Warrant was sold together with one Series C-1 Warrant to purchase one share of common stock and one Series C-2 Warrant to purchase one share of common stock. The combined public offering price for each Share and accompanying Warrants was $3.01, and the combined public offering price for each Pre-Funded Warrant and accompanying Warrants was $3.0099. The Pre-Funded Warrants had an exercise price of $0.0001 per share, were exercisable immediately upon issuance and expired when exercised in full. Each Warrant has an exercise price of $3.01 per share and became exercisable beginning on the effective date of stockholder approval of the issuance of the Warrant Shares (the “Warrant Stockholder Approval”). The Series C-1 Warrants expire five years from the date of stockholder approval and the Series C-2 Warrants expire twenty-four months from the date of stock holder approval. The warrants contain customary anti-dilution adjustments to the exercise price, including share splits, share dividends, rights offerings and pro rata distributions. The net proceeds of the offering, after deducting the fees and expenses of the placement agent in the transaction, and other offering expenses payable by Mustang, but excluding the net proceeds from the exercise of the Warrants, was approximately $6.8 million.
In July 2025, the remaining approximately 0.5 million of the Pre-Funded Warrants and approximately 2.4 million of the Series C-2 Warrants were exercised. In connection with these exercises, Mustang received approximately $7.1 million in proceeds and issued approximately 2.9 million shares of its common stock. As of September 30, 2025, all of the Series C-1 Warrants and 284,452 of the Series C-2 Warrants remain outstanding.
Avenue
In December 2021, Avenue filed a shelf registration statement (File No. 333-261520) on Form S-3 (the “Avenue 2021 S-3”), which was declared effective on December 10, 2021. Avenue filed a replacement shelf registration on Form S-3 on December 4, 2024 (the "Avenue Replacement Shelf"), which has not yet become effective under the Securities Act of 1933, as amended. However, effective as of July 18, 2025, Avenue was formally delisted from Nasdaq with Nasdaq's filing on that date of a Form 25 with the SEC; Avenue is therefore ineligible to use Form S-3 and unable to use the Avenue 2021 S-3 or the Avenue Replacement Shelf.
In May 2024, Avenue entered into an At-the-Market Offering Agreement (the “Avenue ATM”) under which Avenue may offer and sell, from time to time at its sole discretion, up to $3.9 million of shares of its common stock. The offers and sales of the shares are made pursuant the Avenue 2021 S-3, and the related prospectus supplement dated May 10, 2024. During the nine months ended September 30, 2025, Avenue issued 0.9 million shares through the Avenue ATM for net proceeds of $2.1 million. Avenue is no longer able to utilize the Avenue ATM as a result of the delisting of its stock from trading on the Nasdaq.
Cash Flows
Components of cash flows from publicly-traded partner companies comprise:
| | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, 2025 | ||||||||||||||||
($ in thousands) |
| Fortress1 |
| Avenue |
| Checkpoint2 |
| Journey |
| Mustang |
| Total | ||||||
Statement of cash flows data: |
| |
|
| |
|
| |
|
| |
| | |
| | |
|
Total cash (used in)/provided by: |
| |
|
| |
|
| |
|
| |
| | |
| | |
|
Operating activities | | $ | 10,603 | | $ | (979) | | $ | (53,154) | | $ | (6,157) | | $ | (3,546) | | $ | (53,233) |
Investing activities | |
| 8,956 | |
| — | |
| — | |
| — | |
| 1,165 | |
| 10,121 |
Financing activities | |
| (2,995) | |
| 2,094 | |
| 47,310 | |
| 10,800 | |
| 14,526 | |
| 71,735 |
Net increase (decrease) in cash and cash equivalents and restricted cash | | $ | 16,564 | | $ | 1,115 | | $ | (5,844) | | $ | 4,643 | | $ | 12,145 | | $ | 28,623 |
Note 1: | Includes Fortress, non-public subsidiaries and elimination entries. |
Note 2: Checkpoint cash flows are for the five-month period ending May 2025, due to the deconsolidation of Checkpoint as of May 2025 related to the Sun Pharma transaction (see Note 3 to the unaudited condensed consolidated financial statements).
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| | | | | | | | | | | | | | | | | | |
| | For the Nine Months Ended September 30, 2024 | ||||||||||||||||
($ in thousands) |
| Fortress1 |
| Avenue |
| Checkpoint |
| Journey |
| Mustang |
| Total | ||||||
Statement of cash flows data: |
| |
|
| |
|
| |
|
| |
| | |
| | |
|
Total cash (used in)/provided by: |
| |
|
| |
|
| |
|
| |
| | |
| | |
|
Operating activities | | $ | (14,333) | | $ | (8,262) | | $ | (23,924) | | $ | (11,352) | | $ | (9,413) | | $ | (67,284) |
Financing activities | |
| (643) | |
| 9,076 | |
| 23,699 | |
| 6,374 | |
| 6,329 | |
| 44,835 |
Net increase (decrease) in cash and cash equivalents and restricted cash | | $ | (14,976) | | $ | 814 | | $ | (225) | | $ | (4,978) | | $ | (3,084) | | $ | (22,449) |
Note 1: | Includes Fortress, non-public subsidiaries and elimination entries. |
The following table summarizes our consolidated cash flows during the periods indicated:
| | | | | | | | | |
| | Nine Months Ended September 30, | | | | ||||
($ in thousands) |
| 2025 |
| 2024 |
| Change | |||
Total cash (used in)/provided by: |
| |
|
| |
|
| |
|
Operating activities | | $ | (53,233) | | $ | (67,284) | | $ | 14,051 |
Investing activities | |
| 10,121 | |
| — | |
| 10,121 |
Financing activities | |
| 71,735 | |
| 44,835 | |
| 26,900 |
Net increase (decrease) in cash and cash equivalents and restricted cash | | $ | 28,623 | | $ | (22,449) | | $ | 51,072 |
Operating Activities
Net cash used in operating activities decreased $14.1 million from the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2025. The decrease is due to the decrease in net loss of $67.0 million and an increase in stock-based compensation expense of $9.9 million offset by the $27.1 million gain on deconsolidation recognized related to Checkpoint, and the $15.1 million increase in the fair value of investments, as well as the $11.9 million increase resulting from changes in operating assets and liabilities.
Investing Activities
Net cash provided by investing activities for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 increased by $10.1 million, due to the net cash increase of $9.0 million related to the sale of Checkpoint to Sun Pharma, and Mustang’s $1.2 million proceeds from the sale of its held-for-sale assets related to the exit of its manufacturing facility.
Financing Activities
Net cash provided by financing activities was $44.8 million for the nine months ended September 30, 2024, compared to $71.7 million of net cash provided by financing activities for the nine months ended September 30, 2025, an increase of $26.9 million. The increase is attributable to an increase in proceeds from partner companies’ equity offerings and warrant exercises of $24.5 million and the decrease in the payments made to Oaktree of $45.5 million, partially offset by decreased proceeds from the issuance of common stock for equity offerings of the Company in the current period of $17.5 million and the decrease in proceeds from long-term debt of $33.8 million.
Contractual Obligations
We enter into contracts in the normal course of business with licensors, contract research organizations (CROs), contract manufacturing organizations (CMOs) and other third parties for the procurement of various products and services, including without limitation biopharmaceutical development, biologic assay development, commercialization, clinical and preclinical development, clinical trials management, pharmacovigilance and manufacturing and supply. These contracts typically do not contain minimum purchase commitments (although they may) and are generally terminable by us upon written notice. Payments due upon termination or cancelation/delay consist of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation; in certain cases, our contractual arrangements with CROs and CMOs include cancelation and/or delay fees and penalties.
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During the nine months ended September 30, 2025, there were no material changes in our contractual obligations and commitments, including our lease obligations, as described in our 2024 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness, as of September 30, 2025, of the design and operation of our disclosure controls and procedures, as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of such date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
No change in internal control over financial reporting occurred during the most recent quarter, which materially affected, or is reasonable likely to materially affect, our internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There are no reportable events or material developments with respect to previously disclosed proceedings for the quarter ended September 30, 2025. To our knowledge, except as previously disclosed, there are no legal proceedings pending against us, other than routine actions and administrative proceedings and other actions not deemed material, that are expected to have a material adverse effect on our financial condition, results of operations, or cash flows. In the ordinary course of business, however, the Company may be subject to both insured and uninsured litigation. Suits and claims may be brought against the Company by customers, suppliers, partners and/or third parties (including tort claims for personal injury arising from clinical trials of the Company’s product candidates and property damage) alleging deficiencies in performance, breach of contract, etc., and seeking resulting alleged damages.
Item 1A. Risk Factors
Investing in our Common Stock, our 9.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.001 par value (the “Series A Preferred Stock”) or any other type of equity or debt securities we may issue from time to time (together our “Securities”) involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q including the consolidated financial statements and the related notes, as well as the risks, uncertainties and other information set forth in the reports and other materials filed or furnished by our partner companies Avenue, Journey and Mustang with the SEC, before deciding to invest in our Securities. If any of the following risks or the risks included in the public filings of Avenue, Journey or Mustang were to materialize, our business, financial condition, results of operations, and future growth prospects could be materially and adversely affected. In that event, the market price of our Securities could decline, and you could lose part of or all of your investment in our Securities. In addition, you should be aware that the below stated risks should be read as being applicable to our subsidiaries and partner companies such that, if any of the negative outcomes associated with any such risk is experienced by one of our subsidiaries or partner companies, the value of Fortress’ holdings in such entity may decline. As used
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throughout this filing, the words “we”, “us” and “our” may refer to Fortress individually, to one or more subsidiaries and/or partner companies, or to all such entities as a group, as dictated by context.
Risks Inherent in Drug Development
Most of our product candidates are in the early stages of development and may not be successfully developed or commercialized, and the product candidates that do advance into clinical trials may not receive regulatory approval.
Most of our existing product candidates remain in the early stages of development and will require substantial further capital expenditures, development, testing and regulatory approvals prior to commercialization. The development and regulatory approval processes can take many years, and it is unlikely that our product candidates, even if successfully developed and approved by the FDA and/or foreign equivalent regulatory bodies, would be commercially available for several years. Only a small percentage of drugs under development successfully obtain regulatory approval and are successfully commercialized. Accordingly, even if we are able to obtain the requisite financing to fund development programs, we cannot be sure that any of our product candidates will be successfully developed or commercialized, which could result in the failure of our business and a loss of your investment.
Pharmaceutical development has inherent risks. Before we may seek regulatory approval for the commercial sale of any of our product candidates, we will be required to demonstrate, through well-controlled clinical trials, that our product candidates are effective and have a favorable benefit-risk profile for their target indications. Success in early clinical trials is not necessarily indicative of success in later stage clinical trials, during which product candidates may fail to demonstrate sufficient safety or efficacy, despite having progressed through initial clinical testing, which may cause significant setbacks. Further, we may need to conduct additional clinical trials that are not currently anticipated. As a result, product candidates that we advance into clinical trials may never receive regulatory approval.
Even if any of our product candidates are approved, regulatory authorities may approve any such product candidates for fewer or more limited indications than we request, may place limitations on our ability to commercialize products at the intended price points, may grant approval contingent on the product’s performance in costly post-marketing clinical trials, or may approve a label that does not include the claims necessary or desirable for the successful commercialization of that product candidate. The regulatory authority may also require the label to contain warnings, contraindications, or precautions that limit the commercialization of the product. In addition, the Drug Enforcement Agency (“DEA”), or foreign equivalent, may schedule one or more of our product candidates under the Controlled Substances Act, or its foreign equivalent, which could impede such product’s commercial viability. Any of these scenarios could impact the commercial prospects for one or more of our current or future product candidates.
The extensive regulation to which our product candidates are subject may be costly and time consuming, cause anticipated or unanticipated delays, and/or prevent the receipt of the required approvals for commercialization.
The research and clinical development, testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing and distribution of any product candidate, including our product candidates, is subject to extensive regulation by the FDA in the United States and by comparable health authorities in foreign markets. In the United States, we are not permitted to market a product candidate until the FDA approves such product candidate’s BLA or NDA. The approval process is uncertain, expensive, often spans many years, and can vary substantially based upon the type, complexity and novelty of the product candidates involved. In addition to significant and expansive clinical testing requirements, our ability to obtain marketing approval for product candidates depends on the results of required non-clinical testing, including the characterization of the manufactured components of our product candidates and validation of our manufacturing processes.
The FDA may determine that our manufacturing processes, testing procedures or equipment and facilities are inadequate to support approval. Further, the FDA has substantial discretion in the pharmaceutical approval process and may change approval policies or interpretations of regulations at any time, which could delay, limit or preclude a product candidate’s approval.
The FDA and other regulatory agencies may delay, limit or refuse approval of a product candidate for many reasons, including, but not limited to:
| ● | disagreement with the trial design or implementation of our clinical trials, including proper use of clinical trial methods and methods of data analysis; |
| ● | an inability to establish sufficient data and information to demonstrate that a product candidate is safe and/or effective for an indication; |
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| ● | the FDA’s rejection of clinical data from trials conducted by individual investigators or in countries where the standard of care is potentially different from that of the United States; |
| ● | the FDA’s determination that clinical trial results do not meet the statistical significance levels required for approval; |
| ● | a disagreement by the applicable regulator regarding the interpretation of preclinical study or trial data; |
| ● | determination by the FDA that our manufacturing processes or facilities or those of third-party manufacturers with which we or our collaborators contract for clinical supplies or plan to contract for commercial supplies, do not satisfactorily comply with cGMPs; or |
| ● | a change to the FDA’s approval policies or interpretation of regulations rendering our clinical data, product characteristics, or benefit-risk profile insufficient or unfavorable for approval. |
Foreign approval procedures vary by country and may, in addition to the aforementioned risks, involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, rapid drug and biological development during the COVID-19 pandemic has raised questions about the safety and efficacy of certain marketed pharmaceuticals and may result in increased cautiousness by the FDA and comparable foreign regulatory authorities in reviewing new pharmaceuticals based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals may prevent us from commercializing our product candidates.
Additionally, over the last several years, the U.S. government shut down several times and certain regulatory agencies, such as the FDA and the SEC, had to furlough critical employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to review and process our regulatory submissions in a timely matter (including, without limitation, any resubmission of the CUTX-101 NDA that Sentynl may effect), which could have a material adverse effect on our business. Further, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Delays in the commencement of our clinical trials, or suspensions or terminations of such trials, could result in increased costs and/or delay our ability to pursue regulatory approvals.
The commencement or resumption of clinical trials can be delayed for a variety of reasons, including, but not necessarily limited to, delays in:
| ● | obtaining regulatory approval to commence or resume a clinical trial; |
| ● | identifying, recruiting and training suitable clinical investigators; |
| ● | reaching and maintaining agreements on acceptable terms with CROs and trial sites, the terms of which may be subject to extensive negotiation and modification from time to time and may vary significantly among different CROs and trial sites; |
| ● | obtaining sufficient quantities of a product candidate for use in clinical trials; |
| ● | obtaining IRB or ethics committee approval to conduct a clinical trial at a prospective site; |
| ● | developing and validating companion diagnostics on a timely basis, if required; |
| ● | adding new clinical sites once a trial has begun; |
| ● | the death, disability, departure or other change to the principal investigator or other staff overseeing the clinical trial at a given site; |
| ● | identifying, recruiting and enrolling patients to participate in a clinical trial; or |
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| ● | retaining patients who participate in a clinical trial and replacing those who may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process, personal issues, or other reasons. |
Any delays in the commencement of our clinical trials will delay our ability to pursue regulatory approval for product candidates. In addition, many of the factors that cause, or lead to, a delay in the commencement of clinical trials may also ultimately lead to the termination of a given development program or the denial of regulatory approval of a product candidate.
If any of our product candidates causes unacceptable adverse safety events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product, if approved, preventing us from generating revenue from such products’ sale. Alternatively, even if a product candidate is approved for marketing, future adverse events could lead to the withdrawal of such product from the market.
Suspensions or delays in the completion of clinical testing could result in increased costs and/or delay or prevent our ability to complete development of that product candidate or generate product revenues.
Once a clinical trial has begun, patient recruitment and enrollment may be slower than we anticipate due to the nature of the clinical trial plan, the proximity of patients to clinical sites, the eligibility criteria for participation in the study or other factors. Clinical trials may also be delayed as a result of ambiguous or negative interim results or difficulties in obtaining sufficient quantities of product manufactured in accordance with regulatory requirements and on a timely basis. Further, a clinical trial may be modified, suspended or terminated by us, an IRB, an ethics committee or a data safety monitoring committee overseeing the clinical trial, any clinical trial site with respect to that site, or the FDA or other regulatory authorities, due to a number of factors, including, but not necessarily limited to:
| ● | failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols; |
| ● | inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold; |
| ● | stopping rules contained in the protocol; |
| ● | unforeseen safety or chemistry, manufacturing and control issues, or other determination that the clinical trial presents unacceptable health risks; and |
| ● | lack of adequate funding to continue the clinical trial. |
Regulatory requirements and guidance may change, and we may need to amend clinical trial protocols to reflect these changes. Any such change may require us to resubmit clinical trial protocols to IRBs, which may in turn impact a clinical trial’s cost, timing, and likelihood of success. If any clinical trial is delayed, suspended, or terminated, our ability to obtain regulatory approval for that product candidate will be delayed, and the commercial prospects, if any, for the product candidate may suffer. In addition, many of these factors may ultimately lead to the denial of regulatory approval of a product candidate.
If our competitors develop treatments for any of our product candidates’ target indications and those competitor products are approved more quickly, marketed more successfully or demonstrated to be more effective, the commercial opportunity for our product candidates will be reduced or eliminated.
The biotechnology and pharmaceutical industries are subject to rapid and intense technological change. We face, and will continue to face, competition in the development and marketing of our product candidates from academic institutions, government agencies, research institutions and biotechnology and pharmaceutical companies. Furthermore, new developments, including the development of other drug technologies and methods of preventing the incidence of disease, occur in the pharmaceutical industry at a rapid pace. Any of these developments may render one or more of our product candidates obsolete or noncompetitive.
Competitors may seek to develop alternative formulations that do not directly infringe on our in-licensed patent rights. The commercial opportunity for one or more of our product candidates could be significantly harmed if competitors are able to develop alternative formulations outside the scope of our in-licensed patents. Compared to us, many of our potential competitors have substantially greater:
| ● | capital resources; |
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| ● | development resources, including personnel and technology; |
| ● | clinical trial experience; |
| ● | regulatory experience; |
| ● | expertise in prosecution of intellectual property rights; and |
| ● | manufacturing, distribution and sales and marketing capabilities. |
As a result of these factors, our competitors may obtain regulatory approval for their products more rapidly than we are able to, or may obtain patent protection or other intellectual property or exclusivity rights that limit our ability to develop or commercialize one or more of our product candidates. Our competitors may also develop drugs that are more effective, safe, useful and/or less costly than ours and may be more successful than us in manufacturing and marketing their products. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. We will also face competition from these third parties in establishing clinical trial sites, in patient registration for clinical trials, and in identifying and in-licensing new product candidates.
Negative public opinion and increased regulatory scrutiny of the therapies that underpin many of our product candidates may damage public perception of our product candidates or adversely affect our ability to conduct our business or obtain regulatory approvals for our product candidates.
If any of the technologies underpinning our product candidates, including gene therapy, is claimed to be unsafe, such product candidate may not gain the acceptance of the public or the medical community. The success of our gene therapy platforms in particular depends upon physicians who specialize in treating the diseases targeted by our product candidates prescribing treatments involving our product candidates in lieu of, or in addition to, treatments with which they are already familiar and for which greater clinical data may be available. More restrictive government regulations or negative public opinion would have a negative effect on our business or financial condition and may delay or impair the development and commercialization of our product candidates or demand for any products we may develop. Adverse events in our clinical trials, even if not ultimately attributable to our product candidates, and the resulting publicity, could lead to increased governmental regulation, unfavorable public perception, potential regulatory delays in the testing or approval of our potential product candidates, stricter labeling requirements for those product candidates that do obtain approval and/or a decrease in demand for any such product candidates. Concern about environmental spread of our products, whether real or anticipated, may also hinder the commercialization of our products.
The making, use, sale, importation, exportation and distribution of controlled substances are subject to regulation by state, federal and foreign law enforcement and other regulatory agencies.
Controlled substances are subject to state, federal and foreign laws and regulations regarding their manufacture, use, sale, importation, exportation and distribution. Controlled substances are regulated under the Federal Controlled Substances Act of 1970 (“CSA”) and regulations of the DEA. IV tramadol, under development by our partner company Avenue, will be subject to these regulations.
The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have a high potential for abuse and no established medicinal use and may not be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances.
Various states also independently regulate controlled substances. Though state-controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule drugs as well. While some states automatically schedule a drug when the DEA does so, in other states there must be rulemaking or a legislative action. State scheduling may delay commercial sale of any controlled substance drug product for which we obtain federal regulatory approval and adverse scheduling could impair the commercial attractiveness of such product. We or our collaborators must also obtain separate state registrations in order to be able to obtain, handle and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions from the states in addition to those from the DEA or otherwise arising under federal law.
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For any of our products classified as controlled substances, we and our suppliers, manufacturers, contractors, customers and distributors are required to obtain and maintain applicable registrations from state, federal and foreign law enforcement and regulatory agencies and comply with state, federal and foreign laws and regulations regarding the manufacture, use, sale, importation, exportation and distribution of controlled substances. There is a risk that DEA regulations may limit the supply of the compounds used in clinical trials for our product candidates and the ability to produce and distribute our products in the volume needed to both meet commercial demand and build inventory to mitigate possible supply disruptions.
Regulations associated with controlled substances govern manufacturing, labeling, packaging, testing, dispensing, production and procurement quotas, recordkeeping, reporting, handling, shipment and disposal. These regulations increase the personnel needs and the expense associated with development and commercialization of product candidates including controlled substances. The DEA, and some states, conduct periodic inspections of registered establishments that handle controlled substances. Failure to obtain and maintain required registrations or comply with any applicable regulations could delay or preclude us from developing and commercializing our product candidates containing controlled substances and subject us to enforcement action. The DEA may seek civil penalties, refuse to renew necessary registrations or initiate proceedings to revoke those registrations. In some circumstances, violations could lead to criminal proceedings. Because of their restrictive nature, these regulations could limit commercialization of any of our product candidates that are classified as controlled substances, which would have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.
The FDA limits regulatory approval for our product candidates to those specific indications and conditions for which clinical safety and efficacy have been demonstrated.
Any regulatory approval is limited to the indications for use and related treatment of those specific diseases set forth in the approval for which a product is deemed to be safe and effective by the FDA. In addition to the FDA approval required for new formulations, any new indication for an approved product also requires FDA approval. If we are not able to obtain FDA approval for any desired future indications for our products, our ability to effectively market and sell our products may be reduced and our business may be adversely affected.
While physicians may prescribe drugs for uses that are not described in the product’s label or that differ from those tested in clinical studies and approved by the regulatory authorities (“off label uses”), our ability to promote the products is limited to those indications that are specifically approved by the FDA. Such off-label uses are common across medical specialties and may constitute an appropriate treatment for some patients in varied circumstances. Regulatory authorities in the U.S. generally do not regulate the practice of medicine or behavior of physicians in their choice of treatments. Regulatory authorities do, however, restrict communications by pharmaceutical companies regarding the promotion of off-label use.
If our promotional activities fail to comply with these regulations or guidelines, we may be subject to compliance or enforcement actions, including Warning Letters or Untitled Letters, by, these authorities. In addition, our failure to follow FDA laws, regulations and guidelines relating to promotion and advertising may cause the FDA to suspend or withdraw an approved product from the market, request a recall, institute fines, or could result in disgorgement of money, operating restrictions, corrective advertising, injunctions or criminal prosecution, any of which could harm our business.
If the FDA does not conclude that a product candidate satisfies the requirements for the Section 505(b)(2) regulatory approval pathway, or if the requirements for such product candidate under Section 505(b)(2) are not as we expect, the approval pathway for the product candidate will likely take significantly longer, cost significantly more and entail significantly greater complications and risks than anticipated, and in either case may not be successful.
The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, added Section 505(b)(2) to the FDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies that were not conducted by or for the applicant and for which the applicant has not obtained a right of reference. Section 505(b)(2), if applicable to us under the FDCA, would allow an NDA we submit to FDA to rely in part on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of approved compounds, which could expedite the development program for our product candidates by potentially decreasing the amount of clinical data that we would need to generate in order to obtain FDA approval. If the FDA does not allow us to pursue the Section 505(b)(2) regulatory pathway as anticipated, we may need to conduct additional clinical trials, provide additional data and information, and meet additional standards for regulatory approval. If this were to occur, the time and financial resources required to obtain FDA approval for these product candidates, and complications and risks associated with these product candidates, would likely substantially increase. We could need to obtain more additional funding, which could result in significant dilution to the ownership interests of our then existing stockholders to the extent we issue equity
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securities or convertible debt. We cannot assure you that we would be able to obtain such additional financing on terms acceptable to us, if at all. Moreover, inability to pursue the Section 505(b)(2) regulatory pathway would likely result in new competitive products reaching the market more quickly than our product candidates, which would likely materially adversely impact our competitive position and prospects. Even if we are allowed to pursue the Section 505(b)(2) regulatory pathway, we cannot assure you that our product candidates will receive the requisite approvals for commercialization in a timely manner, or at all.
In addition, notwithstanding the approval of a number of products by the FDA under Section 505(b)(2) over the last few years, certain brand-name pharmaceutical companies and others have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s interpretation of Section 505(b)(2) is successfully challenged, the FDA may change its Section 505(b)(2) policies and practices, which could delay or even prevent the FDA from approving any NDA that we submit under Section 505(b)(2). In addition, the pharmaceutical industry is highly competitive, and Section 505(b)(2) NDAs are subject to special requirements designed to protect the patent rights of sponsors of previously approved drugs that are referenced in a Section 505(b)(2) NDA. These requirements may give rise to patent litigation and mandatory delays in approval of our NDAs for up to 30 months or longer depending on the outcome of any litigation. It is not uncommon for a manufacturer of an approved product to file a citizen petition with the FDA seeking to delay approval of, or impose additional approval requirements for, pending competing products. If successful, such petitions can significantly delay, or even prevent, the approval of the new product. However, even if the FDA ultimately denies such a petition, the FDA may substantially delay approval while it considers and responds to the petition. In addition, even if we are able to utilize the Section 505(b)(2) regulatory pathway, there is no guarantee this would ultimately lead to faster product development or earlier approval.
Moreover, even if our product candidates are approved under Section 505(b)(2), the approval may be subject to limitations on the indicated uses for which the products may be marketed or to other conditions of approval, or may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the products.
Risks Pertaining to the Need for and Impact of Existing and Additional Financing Activities
We have historically financed a significant portion of our growth and operations in part through the assumption of debt. Should an event of default occur under any applicable loan documents, our business would be materially adversely affected. Further, our current credit arrangement with Oaktree restricts our and certain of our subsidiaries’ and partner companies’ abilities to take certain actions.
At September 30, 2025, the total amount of debt outstanding, net of the debt discount, was $53.4 million. If we default on our obligations, the holders of our debt may declare the outstanding amounts immediately payable together with accrued interest, and/or take possession of any pledged collateral. If an event of default occurs, we may be unable to cure it within the applicable cure period, if at all. If the maturity of our indebtedness is accelerated, we may not have sufficient funds available for repayment and we may be unable to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us, or at all. In addition, current or future debt obligations may limit our ability to finance future operations, satisfy capital needs, or to engage in, expand or pursue our business activities. Such restrictions may also prevent us from engaging in activities that could be beneficial to our business and our stockholders unless we repay the outstanding debt, which may not be desirable or possible.
On July 25, 2024, we, as borrower, entered into a $50.0 million senior secured credit agreement (the “Oaktree Agreement”) with Oaktree Fund Administration, LLC and the lenders from time-to-time party thereto (collectively, “Oaktree”). We borrowed $35.0 million under the Oaktree Agreement on the date of the agreement and are eligible to draw up to an additional $15.0 million with the lenders’ consent. The Oaktree Agreement contains customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions. In addition, the Oaktree Agreement contains certain financial covenants, including, (i) a requirement that we maintain a minimum liquidity of $7.0 million, which may be reduced or increased as described in the Oaktree Agreement, and (ii) that product net sales of Journey meet a consolidated minimum net sales amount of $50.0 million on a trailing 12-month basis, tested quarterly, which may be reduced or increased as described in the Oaktree Agreement (the “Minimum Net Sales Test”), subject to certain exclusions. Failure by the Company to comply with the financial covenants will result in an event of default, subject to certain cure rights with respect to the Minimum Net Sales Test. The Oaktree Agreement contains events of default that are customary for financings of this type, in certain circumstances subject to customary cure periods. In addition, the Company is also required to (i) raise common equity, or receive in monetizations or distributions, by the end of each calendar year prior to the maturity date, in an aggregate amount equal to the greater of $20 million or 50% of an amount set forth in an annual budget delivered to the lenders and (ii) maintain a specified minimum equity stake in Journey. The breach of any other such provisions (even, potentially, in an immaterial manner) could result in an event of default under the Oaktree Agreement, the announcement and impact of which could have a negative impact on the trading prices of our securities. The restrictions imposed by such provisions may also inhibit our and certain of our subsidiaries and partner
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companies’ ability to enter into certain transactions or arrangements that management otherwise believes would be in our or such partner companies’ best interests, such as dispositions that would result in cash inflows to Fortress and/or our subsidiaries and partner companies, or acquisitions or financings that would promote future growth.
We have a history of operating losses that is expected to continue, and we are unable to predict the extent of future losses, whether we will be able to sustain current revenues or whether we will ever achieve or sustain profitability.
We continue to generate operating losses in all periods including losses from operations of approximately $65.4 million and $86.5 million for the nine months ended September 30, 2025 and 2024, respectively and $110.4 million and $142.3 million for the years ended December 31, 2024 and 2023, respectively. At September 30, 2025, we had an accumulated deficit of approximately $730.1 million. We expect to make substantial expenditures and incur increasing operating costs and interest expense in the future, and our accumulated deficit will increase significantly as we expand development and clinical trial activities for our product candidates and finance investments in certain of our existing and new subsidiaries in accordance with our growth strategy. Our losses have had, and are expected to continue to have, an adverse impact on our working capital, total assets and stockholders’ equity.
Because of the numerous risks and uncertainties associated with developing pharmaceutical products, we are unable to predict the timing or amount of increased expenses or when or if, we will be able to achieve profitability. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially if:
| ● | one or more of our development-stage product candidates is approved for commercial sale and we decide to commercialize such product(s) ourselves, due to the need to establish the necessary commercial infrastructure to launch and commercialize this product without substantial delays, including hiring sales and marketing personnel and contracting with third parties for manufacturing, testing, warehousing, distribution, cash collection and related commercial activities; |
| ● | we are required by the FDA or a foreign regulatory authority to perform studies in addition to those currently expected; |
| ● | there are any delays in completing our clinical trials or the development of any of our product candidates; |
| ● | we execute other collaborative, licensing or similar arrangements, depending on the timing of payments we may make or receive under these arrangements; |
| ● | there are variations in the level of expenses related to our future development programs; |
| ● | we become involved in any product liability or intellectual property infringement lawsuits; and |
| ● | there are any regulatory developments affecting our competitors’ product candidates. |
Our ability to become profitable depends upon our ability to generate revenue. To date, other than from Journey, we have not generated any revenue from our development stage products, and we do not know when, or if, we will generate any revenue from such development-stage products. Our ability to generate revenue from such development-stage products depends on a number of factors, including, but not limited to, our ability to:
| ● | obtain regulatory approval for one or more of our product candidates, or any future product candidate that we may license or acquire in the future; |
| ● | manufacture commercial quantities of one or more of our product candidates or any future product candidate, if approved, at acceptable cost levels; and |
| ● | develop a commercial organization and the supporting infrastructure required to successfully market and sell one or more of our product candidates or any future product candidate, if approved. |
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue our operations, which would have a
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material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline. A decline in the value of our company could also cause you to lose all or part of your investment.
To fund our operations and service our debt securities, which may be deemed to include our Series A Preferred Stock, we will be required to generate a significant amount of cash. Our ability to generate cash depends on a number of factors, some of which are beyond our control, and any failure to meet our debt obligations would have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Common Stock and/or Series A Preferred Stock to decline.
Prevailing economic conditions and financial, business and other factors, many of which are beyond our control, may affect our ability to make payments on our debt. If we do not generate sufficient cash flow to satisfy our debt obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. Alternatively, as we have done in the past, we may also elect to refinance certain of our debt, for example, to extend maturities. Our ability to restructure or refinance our debt will depend on the capital markets and our financial condition at such time. If we are unable to access the capital markets, whether because of the condition of those capital markets or our own financial condition or reputation within such capital markets, we may be unable to refinance our debt. In addition, any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms, or at all, could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.
Repayment of our indebtedness is dependent in part on the generation of cash flow by Journey and its ability to make such cash available to us, by dividend, debt repayment or otherwise. Journey may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each of our subsidiaries and partner companies, including Journey, is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries and partner companies.
Our ability to continue to reduce our indebtedness will depend upon factors including our future operating performance, our ability to access the capital markets to refinance existing debt and prevailing economic conditions and financial, business and other factors, many of which are beyond our control. We can provide no assurance of the amount by which we will reduce our debt, if at all. In addition, servicing our debt will result in a reduction in the amount of our cash flow available for other purposes, including operating costs and capital expenditures that could improve our competitive position and results of operations.
We may need substantial additional funding and may be unable to raise capital when needed, which may force us to delay, curtail or eliminate one or more of our R&D programs, commercialization efforts or planned acquisitions and potentially change our growth strategy.
Our R&D programs will require substantial additional capital for research, preclinical testing and clinical trials, establishing pilot scale and commercial scale manufacturing processes and facilities, and establishing and developing quality control, regulatory, marketing, sales, and administrative capabilities to support these programs. We expect to fund our R&D activities from a combination of cash generated from royalties and milestones from our partners in various past, ongoing, and future collaborations, and through additional equity or debt financings from third parties. These financings could depress the trading prices of our Securities. If additional funds are required to support our operations and such funds cannot be obtained on favorable terms, we may not be able to develop products, which will adversely impact our growth strategy.
Our operations have consumed substantial amounts of cash since inception. During the nine months ended September 30, 2025 and 2024, we incurred R&D expenses of approximately $12.3 million and $46.9 million, respectively, and during the years ended December 31, 2024 and 2023, we incurred R&D expenses of approximately $56.6 million and $101.7 million, respectively. We expect to continue to spend significant amounts on our growth strategy. We believe that our current cash and cash equivalents will enable us to continue to fund operations in the normal course of business for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q. Until such time, if ever, as we can generate a sufficient amount of product revenue and achieve profitability, we expect to seek to finance potential cash needs.
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Our ability to obtain additional funding when needed, changes to our operating plans, our existing and anticipated working capital needs, the acceleration or modification of our planned R&D activities, expenditures, acquisitions and growth strategy, increased expenses or other events may affect our need for additional capital in the future and require us to seek additional funding sooner or on different terms than anticipated. In addition, if we are unable to raise additional capital when needed, we might have to delay, curtail or eliminate one or more of our R&D programs and commercialization efforts and potentially change our growth strategy, which would have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline. The terms of our existing debt arrangements, including that with Oaktree, have and will continue to inhibit our and our subsidiaries’ abilities to raise capital.
We may be unable to generate returns for our investors if our partner companies and subsidiaries, several of which have limited or no operating history, have no commercialized revenue generating products or, if not yet profitable, cannot obtain additional third-party financing.
As part of our growth strategy, we have made and will likely continue to make substantial financial and operational commitments in our subsidiaries, which often have limited or no operating history, have no commercialized revenue generating products, and require additional third-party financing to fund product and services development or acquisitions. Our business depends in large part on the ability of one or more of our subsidiaries and/or partner companies to innovate, in-license, develop or acquire successful biopharmaceutical products and/or acquire companies in increasingly competitive and highly regulated markets. If certain of our subsidiaries and/or partner companies do not successfully obtain additional third-party financing to commercialize products or are not acquired in change-of-control transactions that result in cash distributions, as applicable, the value of our businesses and our ownership stakes in our partner companies may be materially adversely affected, which would have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.
Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.
To the extent that we raise additional capital by issuing Common Stock (or other Securities that are convertible into or exercisable for shares of Common Stock), the share ownership of existing stockholders will be diluted. We have also entered into financing arrangements to raise capital for our subsidiaries under which Common Stock is or may be issuable to investors in lieu of cash, upon certain conditions being met; in the event such issuances take place, they will also be dilutive of the stakes of existing stockholders. Any future debt financings may impose covenants that restrict our operations, including by limiting our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain financial commitments and engage in certain merger, consolidation or asset sale transactions, among other restrictions. In addition, if we raise additional funds through licensing or sublicensing arrangements, it may be necessary to relinquish potentially valuable rights to our product candidates or grant licenses on terms that are not favorable to us.
We have paused dividend payments on our Series A Preferred Stock and may not be able to resume payment of dividends on our Series A Preferred Stock in the future if we have insufficient cash or available “surplus” as defined under Delaware law to make such dividend payments.
On July 5, 2024, our board of directors paused the payment of dividends on our Series A Preferred Stock until further notice. However, dividends on our Series A Preferred Stock accrue daily, are payable monthly and will continue to accrue from the last date of payment. Our board of directors deemed the foregoing to be in the best interests of the Company and its common stockholders in light of the Company’s current and anticipated financial condition and outlook, and after considering its fiduciary duties to the Company’s common stockholders and other relevant factors. Our ability to pay cash dividends on our Series A Preferred Stock in the future requires us to have either net profits or positive net assets (total assets less total liabilities) over our capital, and that we have sufficient working capital in order to be able to pay our debts as they become due in the usual course of business. Our ability to pay dividends may also be impaired if any of the risks described in this report were to occur. Also, payment of our dividends depends upon our financial condition and other factors as our board of directors may deem relevant from time to time. We cannot assure you that we will have sufficient cash or “surplus” to resume payment of the cash dividends on the Series A Preferred Stock in a timely manner, or at all.
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Because we have paused dividend payments on our Series A Preferred Stock, we are currently ineligible to file new short-form registration statements on Form S-3, which may impair our ability to raise capital on terms favorable to us, in a timely manner or at all.
Form S-3 permits eligible issuers to conduct registered offerings using a short-form registration statement that allows the issuer to incorporate by reference its past and future filings and reports made under the Exchange Act. In addition, Form S-3 enables eligible issuers to conduct primary offerings “off the shelf” under Rule 415 of the Securities Act. The shelf registration process, combined with the ability to forward incorporate information, allows issuers to avoid delays and interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a standard registered offering pursuant to a registration statement on Form S-1.
As a result of our decision to pause dividend payments on our Series A Preferred Stock, we will not be eligible to register the offer and sale of our securities using a registration statement on Form S-3 until we pay all accumulated dividends on our Series A Preferred Stock, resume payments of newly accruing dividends on our Series A Preferred Stock and enter a fiscal year during which we missed no such dividend payments. Should we wish to register the offer and sale of our securities to the public prior to the time we are eligible to use Form S-3, both our transaction costs and the amount of time required to complete the transaction could increase, making it more difficult to execute any such transaction successfully and thereby potentially adversely affecting our financial condition.
We have never paid and currently do not intend to pay cash dividends in the near future, except for the dividend we previously paid on our Series A Preferred Stock. As a result, capital appreciation, if any, will be the sole source of gain for our Common Stockholders.
We have never paid cash dividends on our Common Stock, or made stock dividends, except for the dividend we previously paid on shares of our Series A Preferred Stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our businesses, and retain our stock positions. In addition, the terms of existing and future debt agreements may preclude us from paying cash or stock dividends. Equally, each of our subsidiaries and partner companies is governed by its own board of directors with individual governance and decision-making regimes and mandates to oversee such entities in accordance with their respective fiduciary duties. As a result, we alone cannot determine the acts that could maximize value to you of such partner companies and subsidiaries in which we maintain ownership positions, such as declaring cash or stock dividends. As a result, capital appreciation, if any, of our Common Stock will be the sole source of gain for holders of our Common Stock for the foreseeable future.
We have historically relied in part on sales of our common stock and other securities to fund our operations, and our future ability to obtain additional capital through stock sales or other securities offerings may be more costly than in the past, or may not be available to us at all.
We have historically relied in part on sales of our common stock to fund our operations. For example, we raised an aggregate of approximately $36.6 million in net proceeds in fiscal years 2023 and 2024 and $1.0 million in net proceeds through the sale of shares of our common stock in offerings made under a Form S-3 “shelf” registration statement and $2.3 million from warrant exercises in fiscal year 2025 to date. Using a shelf registration statement to conduct an equity offering to raise capital generally takes less time and is less expensive than other means, such as conducting an offering under a Form S-1 registration statement. We are no longer eligible to file any new shelf registration statements due to non-payment of dividends on our Series A Preferred Stock since July 5, 2024 and because we have not resumed payment of dividends on our Series A Preferred Stock or paid all accumulated dividends, we have lost the ability to use our currently effective “shelf” registration statement on Form S-3. Accordingly, we are only able to conduct additional offerings of our securities under an exemption from registration under the Securities Act or under a Form S-1 registration statement. We would expect either of these alternatives to be a more expensive method of raising additional capital and may be more dilutive to our stockholders relative to using a Form S-3 shelf registration statement.
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Risks Pertaining to Our Existing Revenue Stream from Journey Medical Corporation
Future revenue based on sales of our dermatology products, Qbrexza, Accutane, Amzeeq, Zilxi, Targadox, Exelderm, Luxamend and Emrosi, may be lower than expected or lower than in previous periods.
The vast majority of our operating income for the foreseeable future is expected to come from the sale of our dermatology products through our partner company Journey. Any setback that may occur with respect to such products could significantly impair our financial condition, cash flows and/or operating results and/or reduce the value of our Securities. Setbacks for such products could include, but are not limited to, issues related to: supply chain, shipping; distribution; demand; manufacturing; product safety; product quality; marketing; government regulation, including but not limited to pricing or reimbursement; licensing and approval; intellectual property rights; competition with existing or new products, including third-party generic competition; product acceptance by physicians, other licensed medical professionals, and patients; and higher than expected total rebates, returns or recalls. Also, a significant portion of Journey’s sales derive from products that are without patent protection and/or are or may become subject to third party generic competition; the introduction of new competitor products, or increased market share of existing competitor products, could have a significant adverse effect on our operating income.
We face challenges as our products face generic competition and/or losses of exclusivity.
Journey’s products do and may compete with well-established products, both branded and generic, with similar or the same indications. We face increased competition from manufacturers of generic pharmaceutical products, who may submit applications to FDA seeking to market generic versions of our products. In connection with these applications, the generic drug companies may seek to challenge the validity and enforceability of our patents through litigation. When patents covering certain of our products (if applicable) expire or are successfully challenged through litigation or in USPTO proceedings, if a generic company launches a competing product “at risk,” or when the regulatory or licensed exclusivity for our products (if applicable) expires or is otherwise lost, we may face generic competition as a result.
A significant portion of our sales derive from products that are without patent protection and/or are or may become subject to third-party generic competition, the introduction of new competitor products, or an increase in market share of existing competitor products, any of which could have a significant adverse impact on our operating income. Four of our marketed products, Qbrexza, Amzeeq, Zilxi, and Emrosi, for which we recently received FDA approval, currently have patent protection. Four of our marketed products, Accutane, Targadox, Luxamend and Exelderm, do not have patent protection or otherwise are not eligible for patent protection.
Accutane currently competes in the Isotretinoin market with five other therapeutically equivalent A/B rated products. Targadox currently competes with one therapeutically equivalent A/B rated generic product. Exelderm may face A/B rated generic competition in the future.
Generic versions are generally significantly less expensive than branded versions, and, where available, may be required to be utilized before or in preference to the branded version by third-party payors, or substituted by pharmacies. Accordingly, when a branded product loses its market exclusivity, it normally faces intense price competition from generic forms of the product. To successfully compete for business with managed care and pharmacy benefits management organizations, we must often demonstrate that our products offer not only medical benefits, but also cost advantages as compared with other forms of care. Any reduction in sales of our products, or the prices we receive for our products as a result of generic competition could have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.
Any disruptions to the capabilities, composition, size or existence of Journey’s field sales force may have a significant adverse impact on our existing revenue stream. Further, our ability to effectively market and sell any future products that we may develop and for which we receive marketing authorization, will depend on our ability to establish and maintain sales and marketing capabilities or to enter into agreements with third parties to market, distribute and sell any such products.
Journey’s field sales force has been and is expected to continue to be an important contributor to our commercial success. Any disruptions to our relationship with such field sales force or the professional employer organization that employs our field sales force, could materially adversely affect our product sales.
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The establishment, development, and/or expansion of a field sales force, either by us or certain of our partners or vendors, or the establishment of a contract field sales force to market any products for which we may have or receive marketing approval is expensive and time-consuming and could delay any such product launch or compromise the successful commercialization of such products. If we are unable to establish and maintain sales and marketing capabilities or any other non-technical capabilities necessary to commercialize any products that may be successfully developed, we will need to contract with third parties to market and sell such products. We may not be able to establish or maintain arrangements with third parties on commercially reasonable terms, or at all.
If our products are not included in managed care organizations’ formularies or coverage by other organizations, our products’ utilization and market shares may be negatively impacted, which could have a material adverse effect on our business and financial condition.
In the United States, continued sales and coverage, including formulary inclusion without the need for a prior authorization or step edit therapy, of our products for commercial sale will depend in part on the availability of reimbursement from third-party payors, including government health administrative authorities, managed care providers, private health insurers and other organizations. Third-party payors are increasingly examining the medical necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy, and, accordingly, significant uncertainty exists as to the reimbursement status of newly approved therapeutics. Adequate third-party reimbursement may not be available for our products to enable us to realize an appropriate return on our investment of our currently marketed products or those which we may acquire or develop in the future.
Managed care organizations and other third-party payors try to negotiate the pricing of medical services and products to control their costs. Managed care organizations and pharmacy benefit managers typically develop formularies to reduce their cost for medications. Formularies are based on the prices and therapeutic benefits of available products. Due to their lower costs, generic products are often favored. The breadth of the products covered by formularies varies considerably from one managed care organization to another, and many formularies include alternative and competitive products for treatment of particular medical conditions. Failure to be included in such formularies or to achieve favorable formulary status may negatively impact the utilization and market share of our products. If our products are not included within an adequate number of formularies or adequate reimbursement levels are not provided, or if those policies increasingly favor generic products, this could have a material adverse effect on our business and financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.
Reimbursement for our products and product candidates may be limited or unavailable in certain market segments, which could make it difficult for us to sell our products profitably.
We have obtained approval for some products, and intend to seek approval for other product candidates, to commercialize in both the United States and in countries and territories outside the United States. If we obtain approval in one or more foreign countries, we will be subject to rules and regulations in those countries relating to such products. In some foreign countries, particularly in the European Union, the pricing of prescription pharmaceuticals and biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. In addition, market acceptance and sales of our product candidates, if approved, will depend significantly on the availability of adequate coverage and reimbursement from third-party payors for any of our product candidates and may be affected by existing and future healthcare reform measures.
Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which pharmaceuticals they will pay for and establish reimbursement levels. Reimbursement by a third-party payor may depend upon a number of factors, including the third-party payor’s determination regarding whether a product is:
| ● | a covered benefit under its health plan; |
| ● | safe, effective and medically necessary; |
| ● | appropriate for the specific patient; |
| ● | cost-effective; and |
| ● | experimental or investigational. |
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Obtaining coverage and reimbursement approval for a product from a government or other third-party payor is a time consuming and costly process that could require that we provide supporting scientific, clinical and cost-effectiveness data for the use of our products to the payor. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. If reimbursement of our future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability. Additionally, while we may seek approval of our product candidates in combination with each other, there can be no guarantee that we will obtain coverage and reimbursement for any of our products together, or that such reimbursement will incentivize the use of our products in combination with each other as opposed to in combination with other agents which may be priced more favorably to the medical community.
Our products and future product candidates may become subject to unfavorable pricing regulations, third-party coverage and reimbursement practices or healthcare reform initiatives, which could harm our business.
Our ability to successfully commercialize our products, or any product candidate for which we receive marketing authorization, will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the healthcare industry in the United States and elsewhere is cost containment. It is currently unknown what impact, if any, proposed changes by the federal and state governments in the U.S. and similar changes in foreign countries may have on pricing and reimbursement, particularly with respect to government programs such as Medicare and Medicaid.
The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system, including implementing cost-containment programs to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement and requirements for substitution of generic products for branded prescription drugs. In the United States, the Affordable Care Act was intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the healthcare industry and impose additional health policy reforms.
We expect that changes to the Affordable Care Act, the Medicare and Medicaid programs, changes allowing the federal government to directly negotiate drug prices and changes stemming from other healthcare reform measures, especially with regard to healthcare access, financing or other legislation in individual states, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for our products and any future product candidates, if approved. In addition, on May 12, 2025, President Trump issued an executive order implementing the concept of most-favored nation pricing. Under this order, the Department of Health and Human Services, in coordination with other federal agencies, is directed to take actions to ensure that the price of prescription drugs paid by federal health insurers, including Medicare and Medicaid, is in line with the prices paid in comparably developed nations. Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payers.
The Inflation Reduction Act of 2022 (the “IRA”) contains substantial drug pricing reforms, including the establishment of a drug price negotiation program within the U.S. Department of Health and Human Services that would require manufacturers to charge a negotiated "maximum fair price" for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers of certain drugs payable under Medicare Parts B and D to penalize price increases that outpace inflation, and requires manufacturers to provide discounts on Part D drugs. Orphan drugs that treat only one rare disease are exempt from the IRA's drug negotiation program. Substantial penalties can be assessed for noncompliance with the drug pricing provisions in the IRA. The effects of the IRA on the pharmaceutical industry in general are not yet known.
At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that additional federal, state and foreign healthcare reform measures will be adopted in the future.
The implementation of any of the cost containment measures or other healthcare reforms discussed above may prevent us from being able to generate revenue, attain profitability or commercialize our products.
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Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for drugs. It is uncertain whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes may be. In addition, increased Congressional scrutiny of the FDA’s approval process, as well as staffing cuts effected at the FDA in early 2025, may significantly delay or prevent marketing approval, and the industry could become subject to more stringent product labeling and post-marketing testing and other requirements, any of which could have a material adverse impact on the development and commercialization of drug products.
The Company’s business may be materially adversely affected by the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures implemented by the U.S. and other governments.
Recently there have been significant changes to United States trade policies, sanctions and tariffs, including, but not limited to, trade policies and imposition of tariffs affecting products imported from outside of the U.S., including pharmaceutical products. This could have negative impacts on our business operations. These changes to trade policies, sanctions, and tariffs have led to increased trade and political tensions between the U.S. and other countries in the international community. In response to the U.S. tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Currently, we import a large portion of our finished products from countries outside of the U.S., including, most significantly, from India. These tariffs or any new or additional tariffs on goods imported to the U.S. from India, or other countries, could increase the cost of sourcing of our products and therefore reduce our margins, reduce our net sales and/or cause us to increase prices. Further, the continued threats of tariffs, trade restrictions and trade barriers could have a generally disruptive impact on the global economy and, therefore, negatively impact our sales, overall business and results of operations. The impact of any adopted, new or proposed tariffs, trade restrictions or domestic sourcing requirements on our business is subject to a number of factors that we cannot predict, including, but not limited to, the scope, nature, amount, effective date and duration of any such measures. Such tariffs, trade restrictions or domestic sourcing requirements could have a material adverse effect on our business, prospects, financial condition or results of operations.
Risks Pertaining to our Business Strategy, Structure and Organization
We have entered, and will likely in the future enter, into certain collaborations or divestitures which may cause a reduction in our business’ size and scope, market share and opportunities in certain markets, or our ability to compete in certain markets and therapeutic categories. We have also entered into several arrangements under which we have agreed to contingent dispositions of subsidiaries, partner companies and/or their assets. The failure to consummate any such transaction may impair the value of such companies and/or assets, and we may not be able to identify or execute alternative arrangements on favorable terms, if at all.
We have entered into several collaborations and/or contingent sale agreements in respect of certain of our assets and subsidiaries, and the acquisition component of these transactions has been consummated. These arrangements include the acquisition of Checkpoint by Sun Pharma, which closed in May 2025, an equity investment and contingent acquisition between Caelum and AstraZeneca, and a development funding and contingent asset purchase between Cyprium and Sentynl. Each of these arrangements has been time-consuming and has diverted management’s attention. As a result of these consummated/contingent sales, as with other similar transactions that we may complete, we may experience a reduction in the size or scope of our business, our market share in particular markets, our opportunities with respect to certain markets, products or therapeutic categories or our ability to compete in certain markets and therapeutic categories.
In addition, in connection with any transaction involving a (contingent or non-contingent) sale of one of our subsidiaries, partner companies or their assets, we may surrender our ability to realize long-term value from such asset or company, in the form of foregone product sales, royalties, milestone payments, sublicensing revenue or otherwise, in exchange for upfront and/or other payments. In the event, for instance, that a product candidate underpinning any such asset or company is granted FDA approval for commercialization following the execution of documentation governing the sale by us of such asset or company, the transferee of such asset or company may realize tremendous value from commercializing such product, which we would have realized for ourselves had we not executed such sale transaction and been able to achieve applicable approvals independently.
Should we seek to enter into collaborations or divestitures with respect to other assets or companies, we may be unable to consummate such arrangements on satisfactory or commercially reasonable terms within our anticipated timelines. In addition, our ability to identify, enter into and/or consummate collaborations and/or divestitures may be limited by competition we face from other companies in pursuing similar transactions in the biotechnology and pharmaceutical industries.
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Any collaboration or divestiture we pursue, whether we are able to complete it or not, may be complex, time consuming and expensive, may divert from management’s attention, may have a negative impact on our customer relationships, cause us to incur costs associated with maintaining the business of the targeted collaboration or divestiture during the transaction process and also to incur costs of closing and disposing the affected business or transferring the operations of the business to other facilities. In addition, if such transactions are not completed for any reason, the market price of our Common Stock may reflect a market assumption that such transactions will occur, and a failure to complete such transactions could result in a negative perception by the market of us generally and a decline in the market price of our Securities.
We act, and are likely to continue acting, as guarantor and/or indemnitor of the obligations, actions or inactions of certain of our subsidiaries and partner companies. We have also entered into, and may again enter into, certain arrangements with our subsidiaries, partner companies and/or third parties pursuant to which a substantial number of shares of our capital stock may be issued. Depending on the terms of such arrangements, we may be contractually obligated to pay substantial amounts to third parties, or issue a substantially dilutive number of shares of our capital stock, based on the actions or inactions of our subsidiaries and/or partner companies, regulatory agencies or other third parties.
We act, and are likely to continue acting, as indemnitor of potential losses or liabilities that may be experienced by one or more of our subsidiaries, partner companies and/or their partners or investors. If we become obligated to pay all or a portion of such indemnification amounts, our business and the market value of our Common Stock, Preferred Stock and/or debt securities may be materially adversely affected.
Additionally, we have agreed in the past, and may agree in the future, to act as guarantor in connection with equity or debt raises by our partner companies, pursuant to which we may become obligated either to pay what could be a significant amount of cash or issue what could be a significant number of shares of Common Stock or Preferred Stock if certain events occur or do not occur, which could lead to a depletion of resources or dilution to our Common Stock, or both.
Our future growth depends in part on our ability to identify and acquire or in-license products and product candidates, and if we are unable to do so, or to integrate acquired products into our operations, we may have limited growth opportunities.
An important part of our business strategy is to continue to develop a pipeline of product candidates by acquiring or in-licensing products, businesses or technologies. Future in-licenses or acquisitions, however, may entail numerous operational and financial risks, including, but not necessarily limited to:
| ● | exposure to unknown liabilities; |
| ● | disruption of our business and diversion of our management’s time and attention to develop acquired products or technologies; |
| ● | difficulty or inability to secure financing to fund development activities for such acquired or in-licensed technologies in the current economic environment; |
| ● | incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions; |
| ● | higher than expected acquisition and integration costs; |
| ● | increased amortization expenses; |
| ● | difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; |
| ● | impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and |
| ● | inability to retain key employees of any acquired businesses. |
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We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure. In particular, we may compete with larger biopharmaceutical companies and other competitors in our efforts to establish new collaborations and in-licensing opportunities. These competitors may have access to greater financial resources than us and/or may have greater expertise in identifying and evaluating new opportunities. Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts.
Certain of our officers and directors serve in similar roles at our partner companies, subsidiaries, related parties and/or other entities with which we transact business or in which we hold significant minority ownership positions, which could result in conflicts of interests relating to ongoing and future relationships and transactions with these parties.
We share directors and/or officers with certain of our subsidiaries, partner companies, related parties and other entities with which we transact business or in which we hold significant minority ownership positions, and such arrangements could create conflicts of interest in the future, including with respect to the allocation of corporate opportunities. While we believe that we have put in place policies and procedures to identify and mitigate such conflicts, and that any existing agreements that may give rise to such conflicts and any such policies or procedures were negotiated at arm’s length in conformity with fiduciary duties, such conflicts of interest, or the appearance of conflict of interest, may nonetheless arise. The existence and consequences of such potential or perceived conflicts could expose us to lost profits, claims by our investors and creditors, and harm to our financial condition, cash flows and/or results of operations.
Certain of our executives, directors and principal stockholders, whose interests may be adverse to those of our other stockholders, can control our direction and policies.
Certain of our executive officers, directors and stockholders own nearly or more than 10% of our outstanding Common Stock and, together with their affiliates and related persons, beneficially own a significant percentage of our capital stock. If these stockholders were to choose to act together, they would be able to influence our management and affairs and the outcome of matters submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire. In addition, this concentration of ownership might adversely affect the market price of our Common Stock by:
| ● | delaying, deferring or preventing a change of control of us; |
| ● | impeding a merger, consolidation, takeover or other business combination involving us; or |
| ● | discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us. |
If we acquire, enter into joint ventures with or obtain a controlling interest in, companies in the future, our financial condition, operating results and the value of our Securities may be adversely affected, thereby diluting stockholder value, disrupting our business and/or diminishing the value of our holdings in our partner companies.
As part of our growth strategy, we might acquire, enter into joint ventures with, or obtain significant ownership stakes in other companies. Acquisitions of, joint ventures with and investments in other companies involve numerous risks, including, but not necessarily limited to:
| ● | risk of entering new markets in which we have little to no experience; |
| ● | diversion of financial and managerial resources from existing operations; |
| ● | successfully negotiating a proposed acquisition or investment timely and at a price or on terms and conditions favorable to us; |
| ● | the impact of regulatory reviews on a proposed acquisition or investment; |
| ● | the outcome of any legal proceedings that may be instituted with respect to the proposed acquisitions or investment; |
| ● | with respect to an acquisition, difficulties in integrating operations, technologies, services and personnel; and |
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| ● | potential inability to maintain relationships with customers of the companies we may acquire or invest in. |
If we fail to properly evaluate potential acquisitions, joint ventures or other transaction opportunities, we might not achieve the anticipated benefits of any such transaction, we might incur higher costs than anticipated, and management resources and attention might be diverted from other necessary or valuable activities.
Our results of operations could be adversely affected by economic and political conditions and the effects of these conditions on our business activities.
Any terrorist attack, other act of violence or war, including military conflicts, could result in increased volatility in, or damage to, the worldwide financial markets and economy. This includes Russia’s February 2022 invasion of Ukraine, military conflict in the Middle East, attacks by armed groups on cargo ships in the Red Sea, and tensions across the Taiwan Strait. For instance, the United States or other countries may impose sanctions that restrict doing business in the effected countries and increased military conflict may affect third-party vendors and cause delays.
This risk may be magnified in the case of the conflict between Russia and Ukraine. Russia’s invasion and the ensuing response by Ukraine may disrupt our partner companies’ ability to conduct clinical trials in Russia, Ukraine, Belarus, and Georgia, and potentially other neighboring countries. Although the impact of Russia’s military action is highly unpredictable, certain clinical trial sites may be affected. Those clinical trial sites may suspend or terminate trials, and patients could be forced to evacuate or choose to relocate, making them unavailable for initial or further participation in clinical trials. Alternative sites to fully and timely compensate for clinical trial activities in these areas may not be available, and we may need to find other countries to conduct these clinical trials. Clinical trial interruptions may delay our plans for clinical development and approvals for our product candidates, which could increase costs and jeopardize our ability to commence product sales and generate revenues.
Additionally, trade policies and geopolitical disputes and other international conflicts can result in tariffs, sanctions and other measures that restrict international trade, and can materially adversely affect our business, particularly if these measures occur in regions where drug products are manufactured or raw materials are sourced. Under the current presidential administration in the U.S., additional and higher tariffs and sanctions have been imposed on goods imported from China and other countries which could increase the cost of goods needed to commercialize our products and continue development of our current and any future product candidates. Further, such actions by the U.S. could result in retaliatory action by those countries which could impact our ability to profitably commercialize our products in those jurisdictions. As a result, our business, operations, and financial condition could be materially harmed.
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Risks Pertaining to Reliance on Third Parties
We rely predominantly on third parties to manufacture the majority of our preclinical and clinical pharmaceutical supplies, and we expect to continue to rely heavily on such third parties and other contractors to produce commercial supplies of our product candidates and products, if approved. Further, we rely solely on third parties to manufacture Journey’s commercialized products. Such dependence on third-party suppliers could adversely impact our businesses.
We depend heavily on third party manufacturers for product supply. If our contract manufacturers cannot successfully manufacture material that conforms to applicable specifications and FDA regulatory requirements, we will not be able to secure and/or maintain FDA approval for those products. Our third-party suppliers will be required to maintain compliance with cGMPs and will be subject to inspections by the FDA and comparable agencies and authorities in other jurisdictions to confirm such compliance. In the event that the FDA or such other authorities determine that our third-party suppliers have not complied with cGMPs or comparable regulations, the relevant clinical trials could be terminated or subjected to clinical hold until such time as we are able to obtain appropriate replacement material and/or applicable compliance, and commercial product could be unfit for sale, or if distributed, could be recalled from the market. Any delay, interruption or other issues that arise in the manufacture, testing, packaging, labeling, storage, or distribution of our products as a result of a failure of the facilities or operations of our third-party suppliers to comply with regulatory requirements, pass any regulatory agency inspection or otherwise perform under our agreements with them could significantly impair our ability to develop and commercialize our products and product candidates. In addition, several of our currently commercialized products, sold through our partner company Journey, are produced by a single manufacturer, and, although we closely monitor inventory prophylactically, disruptions to such supply arrangements could adversely affect our ability to meet product demand and therefore diminish revenues. Finally, in light of our partner company Mustang’s recent exit from its leased manufacturing facility and reduction in force in April 2024, we may increase our reliance at Mustang on third-party manufacturers or third-party collaborators for the manufacture of commercial supply of one or more product candidates for which our collaborators or we obtain marketing approval. We may be unable to establish any agreements with third-party manufacturers or to do so on acceptable terms, and even if we are able to establish such agreements with third-party manufacturers, reliance entails additional risks.
We also rely on third-party manufacturers to purchase from third-party suppliers the raw materials and equipment necessary to produce product candidates for anticipated clinical trials. There are a small number of suppliers for certain capital equipment and raw materials that are used to manufacture those products. We do not have direct control over the process or timing of the acquisition of these raw materials by our third-party manufacturers. Moreover, we currently do not have any agreements for the commercial production of these raw materials since such agreements are entered into by our third-party manufacturers and their qualified suppliers. Any significant delay in the supply of raw material components related to an ongoing clinical trial could considerably delay completion of our clinical trials, product testing and potential regulatory approval.
We do not expect to have the resources or capacity to engage in our own commercial manufacturing of our product candidates, if they received marketing approval, and would likely continue to be heavily dependent upon third-party manufacturers. Our dependence on third parties to manufacture and supply clinical trial materials, as well as our planned dependence on third party manufacturers for any product candidates that may be approved, may adversely affect our ability to develop and commercialize products in a timely or cost-effective manner, or at all. In addition to the manufacturing and supply functions they provide, third-party manufacturers also play a key role in our efforts to obtain marketing approval for our product candidates, by interacting with, providing important information to, and hosting inspections by, applicable regulatory authorities. If a given contract development and manufacturing organization upon whom we rely in such a capacity is unwilling or unable to perform these activities on our behalf, the successful development and/or approval of the applicable product candidate could be delayed significantly.
In addition, because of the sometimes-limited number of third parties who specialize in the development, manufacture and/or supply of our clinical and preclinical materials, particularly in the development and manufacture of gene therapy products, we are often compelled to accept contractual terms that we deem less than desirable, including without limitation as pertains representations and warranties, supply disruptions/failures, covenants and liability/indemnification. Especially as pertains liability and indemnification provisions, because of the frequent disparities in negotiating leverage, we are often compelled to agree to low caps on counterparty liability and/or indemnification language that could result in outsized liability to us in situations where we have zero or relatively little culpability.
New environmental laws or regulations in the various jurisdictions in which we operate may also impose additional requirements that impact the way our products and product candidates are manufactured or packaged. Complying with such changes could be costly, and a failure to comply in a timely manner could lead to fines, penalties or the inability to pursue our development and commercialization activities in such jurisdictions, materially impacting our business and financial condition.
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We rely heavily on third parties for the development and manufacturing of products and product candidates.
To date, we have engaged primarily in intellectual property acquisitions, and evaluative and R&D activities and have not generated any revenues from product sales (except through Journey). We have incurred significant net losses since our inception. As of
September 30, 2025, we had an accumulated deficit of approximately $730.1 million, and as of December 31, 2024 and 2023, we had an accumulated deficit of approximately $740.9 million and $694.9 million, respectively. We may need to rely on third parties for activities critical to the product candidate development process, including but not necessarily limited to:
| ● | identifying and evaluating product candidates; |
| ● | negotiating, drafting and entering into licensing and other arrangements with product development partners; and |
| ● | continuing to undertake pre-clinical development and designing and executing clinical trials. |
We have also not demonstrated the ability to perform the functions necessary for the successful commercialization of any of our development-stage product candidates, should any of them be approved for marketing. If we were to have any such product candidates approved, the successful commercialization of such products would be dependent on us performing or contracting with third parties for performance, of a variety of critical functions, including, but not necessarily limited to:
| ● | advising and participating in regulatory approval processes; |
| ● | formulating and manufacturing products for clinical development programs and commercial sale; and |
| ● | conducting sales and marketing activities. |
Our operations have been limited to acquiring, developing and securing the proprietary rights for, and undertaking pre-clinical development and clinical trials of, product candidates, both at the Fortress level and via our subsidiaries and partner companies. These operations provide a limited basis for our stockholders and prospective investors to assess our ability to develop and commercialize potential product candidates, as well as for you to assess the advisability of investing in our securities.
We rely on third parties to conduct clinical trials. If these third parties do not meet agreed-upon deadlines or otherwise conduct the trials as required, our clinical development programs could be delayed or unsuccessful, and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.
We rely on third-party contract research organizations and site management organizations to conduct most of our preclinical studies and all of our clinical trials for our product candidates. We expect to continue to rely on third parties, such as contract research organizations, site management organizations, clinical data management organizations, medical institutions and clinical investigators, to conduct some of our preclinical studies and all of our clinical trials. These CROs, investigators, and other third parties will and do play a significant role in the conduct of our trials and the subsequent collection and analysis of data from the clinical trials.
There is no guarantee that any CROs, investigators or other third parties upon which we rely for administration and conduct of our clinical trials will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fails to meet expected deadlines or fails to adhere to our clinical protocols or otherwise perform in a substandard manner, our clinical trials may be extended, delayed or terminated. If any of the clinical trial sites terminates for any reason, we may lose follow-up information on patients enrolled in our ongoing clinical trials unless the care of those patients is transferred to another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisers or consultants to us from time to time and receive cash and/or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site, or the FDA’s willingness to accept such data, may be jeopardized.
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Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of our responsibilities or potential liability. For example, we will remain responsible for ensuring that each of our preclinical studies and clinical trials are conducted in accordance with the general investigational plan and protocols for the trial and for ensuring that our preclinical studies are conducted in accordance with GLPs as appropriate. Moreover, the FDA requires us to comply with GCPs for conducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Regulatory authorities enforce these requirements through periodic inspections of trial sponsors, clinical investigators and trial sites. If we or any of our clinical research organizations fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may refuse to accept such data, or require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP regulations. In addition, our clinical trials must be conducted with products produced under cGMP in strict conformity to cGMP regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.
We also are required to register certain ongoing clinical trials and post the results of completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.
If any of our relationships with these third-party contract research organizations or site management organizations terminates, we may not be able to enter into arrangements with alternative contract research organizations or site management organizations or to do so on commercially reasonable terms. Switching or adding additional contract research organizations or site management organizations involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new contract research organization or site management organization commences work. As a result, delays could occur, which could compromise our ability to meet our desired development timelines. Though we carefully manage our relationships with our contract research organizations or site management organizations, there can be no assurance that we will not encounter similar challenges or delays in the future.
We rely on clinical and pre-clinical data and results obtained from and by third parties that could ultimately prove to be inaccurate or unreliable.
As part of our strategy to mitigate development risk, we generally intend on developing product candidates with previously validated mechanisms of action and seek to assess potential clinical efficacy early in the development process. This strategy necessarily relies upon clinical and pre-clinical data and other results produced or obtained by third parties, which may ultimately prove to be inaccurate or unreliable. If the third-party data and results we rely upon prove to be inaccurate, unreliable, not acceptable by regulatory authorities or not applicable to our product candidates or acquired products, we could make inaccurate assumptions and conclusions about our current or future product candidates and our research and development efforts could be compromised.
Collaborative relationships with third parties could cause us to expend significant resources and/or incur substantial business risk with no assurance of financial return.
We anticipate substantial reliance on strategic collaborations for marketing and commercializing our existing product candidates, if approved, and we may rely even more on strategic collaborations for R&D of other product candidates. We may sell product offerings through strategic partnerships with pharmaceutical and biotechnology companies. If we are unable to establish or manage such strategic collaborations on terms favorable to us in the future, our revenue and drug development may be limited.
If we enter into R&D collaborations during the early phases of drug development, success will, in part, depend on the performance of research collaborators. We may not directly control the amount or timing of resources devoted by research collaborators to activities related to product candidates. Research collaborators may not commit sufficient resources to our R&D programs. If any research collaborator fails to commit sufficient resources, the preclinical or clinical development programs related to the collaboration could be delayed or terminated. Also, collaborators may pursue existing or other development-stage products or alternative technologies in preference to those being developed in collaboration with us. Finally, if we fail to make required milestone or royalty payments to collaborators or to observe other obligations in agreements with them, the collaborators may have the right to terminate or stop performance of those agreements.
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Establishing strategic collaborations is difficult and time-consuming. Our discussions with potential collaborators may not lead to the establishment of collaborations on favorable terms, if at all. Potential collaborators may reject collaboration proposals based upon their assessment of our financial, regulatory or intellectual property positions. Even if we successfully establish new collaborations, these relationships may never result in the successful development or commercialization of product candidates or the generation of sales revenue. To the extent that we enter into collaborative arrangements, the related product revenues that might follow are likely to be lower than if we directly marketed and sold products.
Such collaborators may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on, and such collaborations could be more attractive than the one with us for any future product candidate.
Management of our relationships with collaborators will require:
| ● | significant time and effort from our management team; |
| ● | coordination of our marketing and R&D programs with the respective marketing and R&D priorities of our collaborators; and |
| ● | effective allocation of our resources to multiple projects. |
The contractual provisions we may be forced to agree upon in services, manufacturing, supply and other agreements may be inordinately one-sided, vis-à-vis current or historical standard market terms (especially as pertains contractual liability and indemnification paradigms), and as a result we may be subject to liabilities that are not attributable to our own actions or the actions of our personnel.
There is a finite number of service providers who can perform the services or produce the materials or product candidates that we need, and we therefore often have a limited number of options in choosing such service providers. The standard market terms in many of the agreements into which we customarily enter with such service providers are subject to evolution over time, often-times in favor of our counterparties. Also, some such agreements are “adhesion contracts” under which our contractual counterparties refuse to entertain any modifications to their template documentation. One area where service providers often have and exert leverage over us is the negotiation of liability language – specifically in broadly scoped indemnification by us of service providers and/or the application of liability damages “caps” to certain of such service providers’ indemnification obligations. In any circumstance where we have been compelled to agree to such language, it is conceivable that we will be liable to third parties for liabilities in excess of such caps that are attributable to the actions, forbearances and/or culpability of such service providers and their indemnitees (and not to those of us and our personnel).
Risks Pertaining to Intellectual Property and Potential Disputes with Licensors Thereof
If we are unable to obtain and maintain sufficient patent protection for our technology and products, our competitors could develop and commercialize technology and products similar or identical to ours, and our ability to successfully commercialize our technology and products may be impaired.
Our success depends, in large part, on our ability to obtain patent protection for our product candidates and their formulations and uses. The patent application process is subject to numerous risks and uncertainties, and there can be no assurance that we will be successful in obtaining patents or what the scope of an issued patent may ultimately be. These risks and uncertainties include, but are not necessarily limited to, the following:
| ● | patent applications may not result in any patents being issued, or the scope of issued patents may not extend to competitive product candidates and their formulations and uses developed or produced by others; |
| ● | our competitors, many of which have substantially greater resources than we or our partners do, and many of which have made significant investments in competing technologies, may seek, or may already have obtained, patents that may limit or interfere with our abilities to make, use, and sell potential product candidates, file new patent applications, or may affect any pending patent applications that we may have; |
| ● | there may be significant pressure on the U.S. government and other international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful as a matter of public policy regarding worldwide health concerns; and |
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| ● | countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing products. |
In addition, patents that may be issued or in-licensed may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable, or otherwise may not provide any competitive advantage. Moreover, we may be subject to a third-party pre-issuance submission of prior art to the PTO, or become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others. The costs of these proceedings could be substantial, and it is possible that our efforts to establish priority of invention would be unsuccessful, resulting in a material adverse effect on our US patent positions. An adverse determination in any such submission, patent office trial, proceeding or litigation could reduce the scope of, render unenforceable, or invalidate, our patent rights, allow third parties to commercialize our technologies or products and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates. Third parties are often responsible for maintaining patent protection for our product candidates, at our and their expense. If that party fails to appropriately prosecute and maintain patent protection for a product candidate, our abilities to develop and commercialize products may be adversely affected, and we may not be able to prevent competitors from making, using and selling competing products. Such a failure to properly protect intellectual property rights relating to any of our product candidates could have a material adverse effect on our financial condition and results of operations.
In addition, U.S. patent laws may change, which could prevent or limit us from filing patent applications or patent claims to protect products and/or technologies or limit the exclusivity periods that are available to patent holders, as well as affect the validity, enforceability, or scope of issued patents.
We and our licensors also rely on trade secrets and proprietary know-how to protect product candidates. Although we have taken steps to protect our and their trade secrets and unpatented know-how, including entering into confidentiality and non-use agreements with third parties, and proprietary information and invention assignment agreements with employees, consultants and advisers, third parties may still come upon this same or similar information independently. Despite these efforts, any of these parties may also breach the agreements and may unintentionally or willfully disclose our or our licensors’ proprietary information, including our trade secrets, and we may not be able to identify such breaches or obtain adequate remedies. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. Moreover, if any of our or our licensors’ trade secrets were to be lawfully obtained or independently developed by a competitor, we and our licensors would have no right to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our or our licensors’ trade secrets were to be disclosed to or independently developed by a competitor, our competitive positions would be harmed.
The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify any patentable aspects of our research and development output and methodology, and, even if we do, an opportunity to obtain patent protection may have passed. Given the uncertain and time-consuming process of filing patent applications and prosecuting them, it is possible that our product(s) or process(es) originally covered by the scope of the patent application may have changed or been modified, leaving our product(s) or process(es) without patent protection. If our licensors or we fail to obtain or maintain patent protection or trade secret protection for one or more product candidates or any future product candidate we may license or acquire, third parties may be able to leverage our proprietary information and products without risk of infringement, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and achieve profitability. Moreover, should we enter into other collaborations we may be required to consult with or cede control to collaborators regarding the prosecution, maintenance and enforcement of licensed patents. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.
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The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation. In addition, no consistent policy regarding the breadth of claims allowed in pharmaceutical or biotechnology patents has emerged to date in the US. The patent situation outside the US is even more uncertain. The laws of foreign countries may not protect our rights to the same extent as the laws of the US, and we may fail to seek or obtain patent protection in all major markets. For example, European patent law restricts the patentability of methods of treatment of the human body more than US law does. We might also become involved in derivation proceedings in the event that a third party misappropriates one or more of our inventions and files their own patent application directed to such one or more inventions. The costs of these proceedings could be substantial, and it is possible that our efforts to establish priority of invention (or that a third party derived an invention from us) would be unsuccessful, resulting in a material adverse effect on our US patent position. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain.
Our pending and future patent applications may not result in patents being issued which protect our technology or products, in whole or in part, or which effectively prevent others from commercializing competitive technologies and products. Changes in either the patent laws or interpretation of the patent laws in the US and other countries may diminish the value of our patents or narrow the scope of our patent protection. For example, the federal courts of the US have taken an increasingly dim view of the patent eligibility of certain subject matter, such as naturally occurring nucleic acid sequences, amino acid sequences and certain methods of utilizing same, which include their detection in a biological sample and diagnostic conclusions arising from their detection.
Such subject matter, which had long been a staple of the biotechnology and biopharmaceutical industry to protect their discoveries, is now considered, with few exceptions, ineligible in the first instance for protection under the patent laws of the US. Accordingly, we cannot predict the breadth of claims that may be allowed and remain enforceable in our patents or in those licensed from a third party.
Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to United States patent law. These include changes to transition from a “first-to-invent” system to a “first inventor-to-file” system and to the way issued patents are challenged. The formation of the Patent Trial and Appeal Board now provides a less burdensome, quicker and less expensive process for challenging issued patents. The PTO developed new regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first inventor-to-file provisions, only became effective on March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.
Even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative technologies or products in a non-infringing manner.
We also may rely on the regulatory period of market exclusivity for any of our biologic product candidates that are successfully developed and approved for commercialization. Although this period in the United States is generally 12 years from the date of marketing approval (depending on the nature of the specific product), there is a risk that the U.S. Congress could amend laws to significantly shorten this exclusivity period. Once any regulatory period of exclusivity expires, depending on the status of our patent coverage and the nature of the product, we may not be able to prevent others from marketing products that are biosimilar to or interchangeable with our products, which would materially adversely affect our business.
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If we or our licensors are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.
Our success also depends on our ability, and the abilities of any of our respective current or future collaborators, to develop, manufacture, market and sell product candidates without infringing the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products, some of which may be directed at claims that overlap with the subject matter of our or our licensors’ intellectual property. Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents that our product candidates or proprietary technologies may infringe. Similarly, there may be issued patents relevant to our product candidates of which we or our licensors are not aware. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the US and other jurisdictions are typically not published until 18 months after a first filing, or in some cases not at all. Therefore, we cannot know with certainty whether we or such licensors were the first to make the inventions claimed in patents or pending patent applications that we own or licensed, or that we and our licensors were the first to file for patent protection of such inventions. In the event that a third party has also filed a US patent application relating to our product candidates or a similar invention, depending upon the priority dates claimed by the competing parties, we may have to participate in interference proceedings declared by the PTO to determine priority of invention in the US. The costs of these proceedings could be substantial, and it is possible that our efforts to establish priority of invention would be unsuccessful, resulting in a material adverse effect on our U.S. patent position. As a result, the issuance, scope, validity, enforceability and commercial value of our or any of our licensors’ patent rights are highly uncertain.
There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and biopharmaceutical industries generally. If a third party claims that we or any of our licensors, suppliers or collaborators infringe the third party’s intellectual property rights, we may have to, among other things:
| ● | obtain additional licenses, which may not be available on commercially reasonable terms, if at all; |
| ● | abandon an infringing product candidate or redesign products or processes to avoid infringement, which may demand substantial funds, time and resources and which may result in inferior or less desirable processes and/or products; |
| ● | pay substantial damages, including the possibility of treble damages and attorneys’ fees, if a court decides that the product or proprietary technology at issue infringes on or violates the third party’s rights; |
| ● | pay substantial royalties, fees and/or grant cross-licenses to our product candidates; and/or |
| ● | defend litigation or administrative proceedings which may be costly regardless of outcome, and which could result in a substantial diversion of financial and management resources. |
We may be involved in lawsuits to protect or enforce our patents or the patents of licensors, which could be expensive, time consuming and unsuccessful.
Competitors may infringe our or our licensors’ patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. Any claims we assert against accused infringers could provoke these parties to assert counterclaims against us alleging invalidity of our or our licensors’ patents or that we infringe their patents; or provoke those parties to petition the PTO to institute inter partes review against the asserted patents, which may lead to a finding that all or some of the claims of the patent are invalid. In addition, in a patent infringement proceeding, a court may decide that a patent of ours or our licensor’s is invalid or unenforceable, in whole or in part, construe the patent’s claims narrowly or refuse to stop the other party from using the technology at issue on the grounds that our or our licensors’ patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, found to be unenforceable, or interpreted narrowly and could likewise put pending patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.
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We in-license from third parties a majority of the intellectual property needed to develop and commercialize products and product candidates. As such, any dispute with the licensors or non-performance of such license agreements may adversely affect our ability to develop and commercialize the applicable product candidates.
The patents, patent applications and other intellectual property rights underpinning the vast majority of our existing product candidates were in-licensed from third parties. Under the terms of such license agreements, the licensors generally have the right to terminate such agreements in the event of a material breach. The licenses require us to make annual, milestone or other payments prior to commercialization of any product, and our ability to make these payments depends on the ability to generate cash in the future. These license agreements also generally require the use of diligent and reasonable efforts to develop and commercialize product candidates.
If there is any conflict, dispute, disagreement or issue of non-performance between us or one of our partners, on the one hand, and the respective licensing partner, on the other hand, regarding the rights or obligations under the license agreements, including any conflict, dispute or disagreement arising from a failure to satisfy payment obligations under such agreements, the ability to develop and commercialize the affected product candidate may be adversely affected.
The types of disputes that may arise between us and the third parties from whom we license intellectual property include, but are not necessarily limited to:
| ● | the scope of rights granted under such license agreements and other interpretation-related issues; |
| ● | the extent to which our technologies and processes infringe on intellectual property of the licensor that is not subject to such license agreements; |
| ● | the scope and interpretation of the representations and warranties made to us by our licensors, including those pertaining to the licensors’ right title and interest in the licensed technology and the licensors’ right to grant the licenses contemplated by such agreements; |
| ● | the sublicensing of patent and other rights under our license agreements and/or collaborative development relationships, and the rights and obligations associated with such sublicensing, including whether or not a given transaction constitutes a sublicense under such license agreement; |
| ● | the diligence and development obligations under license agreements (which may include specific diligence milestones) and what activities or achievements satisfy those diligence obligations; |
| ● | whether or not the milestones associated with certain milestone payment obligations have been achieved or satisfied; |
| ● | the applicability or scope of indemnification claims or obligations under such license agreements; |
| ● | the permissibility and advisability of, and strategy regarding, the pursuit of potential third-party infringers of the intellectual property that is the subject of such license agreements; |
| ● | the calculation of royalty, milestone, sublicense revenue and other payment obligations under such license agreements; |
| ● | the extent to which rights, if any, are retained by licensors under such license agreements; |
| ● | whether or not a material breach has occurred under such license agreements and the extent to which such breach, if deemed to have occurred, is or can be cured within applicable cure periods, if any; |
| ● | disputes regarding patent filing and prosecution decisions, as well as payment obligations regarding past and ongoing patent expenses; |
| ● | intellectual property rights resulting from the joint creation or use of intellectual property (including improvements made to licensed intellectual property) by our and our partners’ licensors and us and our partners; and |
| ● | the priority of invention of patented technology. |
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In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations or may conflict in such a way that puts us in breach of one or more agreements, which would make us susceptible to lengthy and expensive disputes with one or more of such third-party licensing partners. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreements, either of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Moreover, if disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse effect on our business, financial conditions, results of operations and prospects.
Risks Pertaining to the Commercialization of Product Candidates, if Approved
If any of our product candidates are successfully developed and receive regulatory approval but do not achieve broad market acceptance among physicians, patients, healthcare payors and the medical community, the revenues that any such product candidates, if approved, generate from sales will be limited.
Even if our product candidates receive regulatory approval, they may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Coverage and reimbursement of our product candidates, if approved by third-party payors, including government payors, generally would also be necessary for commercial success. The degree of market acceptance of any approved products would depend on a number of factors, including, but not necessarily limited to:
| ● | the efficacy and safety as demonstrated in clinical trials; |
| ● | the timing of market introduction of such products as well as competitive products; |
| ● | the clinical indications for which the product is approved; |
| ● | acceptance by physicians, major operators of hospitals and clinics and patients of the product as a safe and effective treatment; |
| ● | the potential and perceived advantages of such products over alternative treatments; |
| ● | the safety of such products in a broader patient group (i.e., based on actual use); |
| ● | the availability, cost and benefits of treatment, in relation to alternative treatments; |
| ● | the availability of adequate reimbursement and pricing by third parties and government authorities; |
| ● | changes in regulatory requirements by government authorities for such products; |
| ● | the product labeling or product insert required by the FDA or regulatory authority in other countries, including any contradictions, warnings, drug interactions, or other precautions; |
| ● | changes in the standard of care for the targeted indications for our product candidate or future product candidates, which could reduce the marketing impact of any labeling or marketing claims that we could make following FDA approval; |
| ● | relative convenience and ease of administration; |
| ● | the prevalence and severity of side effects and adverse events; |
| ● | the effectiveness of our sales and marketing efforts; and |
| ● | unfavorable publicity relating to the product. |
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If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we may not generate sufficient revenue from these products and in turn we may not become or remain profitable. In addition, our efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may never be successful.
Even if approved, any product candidates that we may develop and market may be later withdrawn from the market or subject to promotional limitations.
We may not be able to obtain the desired labeling claims or scheduling classifications necessary or desirable for the promotion of our marketed products (or our product candidates if approved). We may also be required to undertake post-marketing clinical trials. If the results of such post-marketing studies are not satisfactory or if adverse events or other safety issues arise after approval while our products are on the market, the FDA or a comparable regulatory authority in another jurisdiction may withdraw marketing authorization or may condition continued marketing on commitments from us that may be expensive and/or time consuming to complete. In addition, if manufacturing problems occur, regulatory approval may be impacted or withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products and additional marketing applications may be required. Any reformulation or labeling changes may limit the marketability of such products if approved.
We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability for one or more of our product candidates or a future product candidate we may license or acquire and may have to limit their commercialization, if approved.
The use of one or more of our product candidates and any future product candidate we may license or acquire in clinical trials and the sale of any products for which we obtain marketing approval expose us to the risk of product liability claims. For example, we may be sued if any product candidate or product we develop, license, or acquire allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product candidate or product, negligence, strict liability or a breach of warranties. Product liability claims might be brought against us by consumers, health care providers or others using, administering or selling our products. If we cannot successfully defend ourselves against these claims, we will incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:
| ● | withdrawal of clinical trial participants; |
| ● | suspension or termination of clinical trial sites or entire trial programs; |
| ● | decreased demand for any product candidates or products that we may develop, license or acquire; |
| ● | initiation of investigations by regulators; |
| ● | impairment of our business reputation; |
| ● | costs of related litigation; |
| ● | substantial monetary awards to patients or other claimants; |
| ● | loss of revenues; |
| ● | reduced resources of our management to pursue our business strategy; and |
| ● | the ability to commercialize our product candidate or future product candidates. |
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We will obtain limited product liability insurance coverage for all of our upcoming clinical trials. However, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to liability. When needed we intend to expand our insurance coverage to include the sale of commercial products if we obtain marketing approval for one or more of our product candidates in development, but we may be unable to obtain commercially reasonable product liability insurance for any products approved for marketing. On occasion, large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.
Additionally, we have entered into various agreements under which we indemnify third parties for certain claims relating to product candidates. These indemnification obligations may require us to pay significant sums of money for claims that are covered by these indemnifications.
Any product for which we obtain marketing approval could be subject to restrictions or withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with products, when and if any of them are approved.
Any product for which we obtain marketing approval, along with the authorized manufacturing facilities, processes and equipment, post-approval clinical data, labeling, advertising and promotional activities for such product, will remain subject to ongoing regulatory requirements governing drug or biological products, as well as review by the FDA and comparable regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping, and requirements regarding company presentations and interactions with healthcare professionals. Even if we obtain regulatory approval for a product, the approval may be subject to limitations on the indicated uses for which the product may be marketed or subject to conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product.
We also may be subject to state laws and registration requirements covering the distribution of drug products. Later discovery of previously unknown problems with products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in actions such as:
| ● | restrictions on product manufacturing, distribution or use; |
| ● | restrictions on the labeling or marketing of a product; |
| ● | requirements to conduct post-marketing studies or clinical trials; |
| ● | warning letters, untitled letters, or Form 483s; |
| ● | recalls or other withdrawal of the products from the market; |
| ● | refusal to approve pending applications or supplements to approved applications that we submit; |
| ● | fines; |
| ● | suspension or withdrawal of marketing or regulatory approvals; |
| ● | refusal to permit the import or export of products; |
| ● | product seizure or detentions; |
| ● | injunctions or the imposition of civil or criminal penalties; and |
| ● | adverse publicity. |
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If we or our suppliers, third-party contractors, clinical investigators or collaborators are slow to adapt, or are unable to adapt, to changes in existing regulatory requirements or adoption of new regulatory requirements or policies, we or our collaborators may be subject to the actions listed above, including losing marketing approval for product candidates when and if any of them are approved, resulting in decreased revenue from milestones, product sales or royalties, which would have a material adverse effect on our business, financial condition, cash flows and results of operations and could cause the market value of our Securities to decline.
We will need to obtain FDA approval of any proposed product brand names, and any failure or delay associated with such approval may adversely impact our business.
A pharmaceutical product cannot be marketed in the U.S. or other countries until the relevant governmental authority has completed a rigorous and extensive regulatory review process, including approval of a brand name. Any brand names we intend to use for our product candidates in the U.S. will require approval from the FDA regardless of whether we have secured a formal trademark registration from the PTO. The FDA typically conducts a review of proposed product brand names, including an evaluation of potential for confusion with other product names. The FDA may also object to a product brand name if it believes the name inappropriately implies medical claims. If the FDA objects to any of our proposed product brand names, we may be required to adopt an alternative brand name for our product candidates. If we adopt an alternative brand name, we could lose the benefit of our existing trademark applications for such product candidate and may be required to expend significant additional resources in an effort to identify a suitable product brand name that would qualify under applicable trademark laws, not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to commercialize our product candidates.
Risks Pertaining to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries
The draft legislation, “Give Kids a Chance Act,” which would extend the expiration date of the Rare Pediatric Disease Priority Review Voucher (“PRV”) program from September 30, 2026 to September 30, 2029, may not be passed into law, and Sentynl may not obtain FDA approval for CUTX-101 by September 30, 2026, in which case Fortress’ majority-owned subsidiary Cyprium would not receive a PRV.
Under legislation in existence as of the date of this filing, sponsors of drugs treating rare pediatric diseases that obtain FDA approval for such drugs prior to September 30, 2026 are eligible to receive PRVs in connection with such approvals. PRVs can either be redeemed by those sponsors with the FDA in order to ensure priority FDA review of any distinct product candidate, or they can be sold to a third party for subsequent use by that third party, often for significant sums of money.
CUTX-101, a copper histidinate product candidate for the treatment of Menkes disease, was previously in development by Cyprium, and substantially all of the rights in and to such program were sold to Sentynl in December 2023. Under the terms of such sale, however, Sentynl is obligated to transfer to Cyprium any PRV that may issue upon FDA approval of CUTX-101. As previously reported, on October 1, 2025, Cyprium announced that Sentynl had received a Complete Response Letter (“CRL”) relating to the NDA for CUTX-101. The CRL noted cGMP deficiencies had been observed at the facility where CUTX-101 is manufactured and did not cite any other approvability concerns or identify any deficiencies in CUTX-101’s efficacy and safety data. Cyprium expects Sentynl will work expeditiously to address the FDA’s concerns and pursue resubmission promptly. If Sentynl is not able to obtain FDA approval by September 30, 2026, however, and if the provisions of the Give Kids a Chance Act (or any similar legislation) that extend the expiration of the PRV program are not passed into law, then Cyprium will not receive a PRV, which would have a material adverse impact on our business. In addition, even if Sentynl is able to obtain FDA approval by September 30, 2026 (or by a later date in the event that expiration of the PRV program is extended), a PRV still may not issue if the FDA determines that the requisite PRV criteria are not met (which may include, without limitation, a determination that CUTX-101 is not a “new chemical entity”). All of the above concerns may be exacerbated by the ongoing government shutdown, which will delay any government action or approval. Any such failure to obtain FDA approval or a PRV could result in a material adverse effect to our business and future prospects.
Our current and future relationships with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.
Healthcare providers, physicians and third-party payors in the U.S. and elsewhere play a primary role in the recommendation and prescription of our product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, which may constrain the business or financial arrangements and
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relationships through which we sell, market and distribute any product candidates for which we obtain marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by the federal and state governments and by governments in foreign jurisdictions in which we conduct our business. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include, but are not necessarily limited to:
| ● | the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programs, such as Medicare and Medicaid; |
| ● | federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, which impose criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, including the Medicare and Medicaid programs, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters; |
| ● | HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose obligations on covered healthcare providers, health plans, and healthcare clearinghouses, as well as their business associates that create, receive, maintain or transmit individually identifiable health information for or on behalf of a covered entity, with respect to safeguarding the privacy, security and transmission of individually identifiable health information; |
| ● | the federal Open Payments program, which requires manufacturers of certain drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to “payments or other transfers of value” made to “covered recipients,” which include physicians (defined to include doctors, dentists, optometrists, podiatrists, chiropractors, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-midwives and teaching hospitals) and applicable manufacturers. Applicable group purchasing organizations also are required to report annually to CMS the ownership and investment interests held by the physicians and their immediate family members. The SUPPORT for Patients and Communities Act added to the definition of covered recipient practitioners including physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists and certified nurse-midwives effective in 2022; |
| ● | U.S. Foreign Corrupt Practices Act, or FCPA, which prohibit us and third parties working on our behalf from making payments to foreign government officials to assist in obtaining or retaining business. Specifically, the anti- bribery provisions of the FCPA prohibit the willful use of the mails or any means of instrumentality of interstate commerce corruptly in furtherance of any offer, payment, promise to pay, or authorization of the payment of money or anything of value to any person, while knowing that all or a portion of such money or thing of value will be offered, given or promised, directly or indirectly, to a foreign official to influence the foreign official in his or her official capacity, induce the foreign official to do or omit to do an act in violation of his or her lawful duty, or to secure any improper advantage in order to assist in obtaining or retaining business for or with, or directing business to, any person; enforcement actions may be brought by the Department of Justice or the SEC; legislation has expanded the SEC’s power to seek disgorgement in all FCPA cases filed in federal court and extended the statute of limitations in SEC enforcement actions in intent-based claims, such as those under the FCPA, from five years to ten years; and |
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| ● | analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. |
Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, which could have a material adverse effect on our businesses. If any of the physicians or other healthcare providers or entities with whom we expect to do business, including our collaborators, is found not to be in compliance with applicable laws, it may be subject to criminal, civil or administrative sanctions, including exclusions from participation in government healthcare programs, which could also materially affect our businesses.
As we continue to execute our growth strategy, we may be subject to further government regulation which could adversely affect our financial results, including without limitation the Investment Company Act of 1940.
If we engage in business combinations and other transactions that result in holding minority or non-control investment interests in a number of entities, we may become subject to regulation under the Investment Company Act of 1940, as amended (the “Investment Company Act”). If we do become subject to the Investment Company Act, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs in the future.
Recent U.S. Supreme Court decisions could create uncertainty in the life sciences space that could negatively impact our business.
Three decisions from the U.S. Supreme Court in July 2024 may lead to an increase in litigation against regulatory agencies that could create uncertainty and thus negatively impact our business. The first decision overturned established precedent that required courts to defer to regulatory agencies’ interpretations of ambiguous statutory language. The second decision overturned regulatory agencies’ ability to impose civil penalties in administrative proceedings. The third decision extended the statute of limitations within which entities may challenge agency actions. These cases may result in increased litigation by industry against regulatory agencies and impact how such agencies choose to pursue enforcement and compliance actions. However, the specific, lasting effects of these decisions, which may vary within different judicial districts and circuits, is unknown. We also cannot predict the extent to which FDA and SEC regulations, policies, and decisions may become subject to increasing legal challenges, delays, and changes.
General and Other Risks
Our business and operations would suffer in the event of computer system failures, cyber-attacks, or deficiencies in our or third parties’ cybersecurity.
We are increasingly dependent upon information technology systems, infrastructure, and data to operate our business. In the ordinary course of business, we collect, store, and transmit confidential information, including, but not limited to, information related to our intellectual property and proprietary business information, personal information, and other confidential information. It is critical that we maintain such confidential information in a manner that preserves its confidentiality, availability and integrity. Furthermore, we have outsourced elements of our operations to third party vendors, who each have access to our confidential information, which increases our disclosure risk.
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We are in the process of implementing our internal security and business continuity measures and developing our information technology infrastructure. Our internal computer systems and those of current and future third parties on which we rely may fail and are vulnerable to damage from computer viruses and unauthorized access. Our information technology and other internal infrastructure systems, including corporate firewalls, servers, third-party software, data center facilities, lab equipment, and connection to the internet, face the risk of breakdown or other damage or interruption from service interruptions, system malfunctions, natural disasters, terrorism, war, and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyber-attacks by malicious third parties (including the deployment of harmful malware and other malicious code, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information), each of which could compromise our system infrastructure or lead to the loss, destruction, alteration, disclosure, or dissemination of, or damage or unauthorized access to, our data or data that is processed or maintained on our behalf, or other assets.
If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, and could result in financial, legal, business, and reputational harm to us. For example, in 2021, our partner company Journey was the victim of a cybersecurity incident that affected its accounts payable function and led to approximately $9.5 million in wire transfers being misdirected to fraudulent accounts. The details of the incident and its origin were investigated with the assistance of third-party cybersecurity experts working at the direction of legal counsel. The matter was reported to the Federal Bureau of Investigation and does not appear to have compromised any personally identifiable information or protected health information. The federal government was able to trace and seize the fraudulently transferred cryptocurrency associated with the breach. On September 19, 2024, the United Stated District Court Southern District of New York through the United States Marshalls notified the Company that it has recovered and would be returning to the Company a portion of the misappropriated cash, and in December of 2024 Journey received $4.6 million in connection with the recovery of funds related to the cybersecurity incident.
In addition, the loss or corruption of, or other damage to, clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of our drug candidates or any future drug candidates and to conduct clinical trials, and similar events relating to their systems and operations could also have a material adverse effect on our business and lead to regulatory agency actions. The risk of a security breach or disruption, particularly through cyber-attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. Sophisticated cyber attackers (including foreign adversaries engaged in industrial espionage) are skilled at adapting to existing security technology and developing new methods of gaining access to organizations’ sensitive business data, which could result in the loss of proprietary information, including trade secrets. We may not be able to anticipate all types of security threats, and we may not be able to implement preventive measures effective against all such security threats. The techniques used by cyber criminals change frequently, may not be recognized until launched, and can originate from a wide variety of sources, including outside groups such as external service providers, organized crime affiliates, terrorist organizations, or hostile foreign governments or agencies.
Any security breach or other event leading to the loss or damage to, or unauthorized access, use, alteration, disclosure, or dissemination of, personal information, including personal information regarding clinical trial subjects, contractors, directors, or employees, our intellectual property, proprietary business information, or other confidential or proprietary information, could directly harm our reputation, enable competitors to compete with us more effectively, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, or otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information. Each of the foregoing could result in significant legal and financial exposure and reputational damage that could adversely affect our business. Notifications and follow-up actions related to a security incident could impact our reputation or cause us to incur substantial costs, including legal and remediation costs, in connection with these measures and otherwise in connection with any actual or suspected security breach. We expect to incur significant costs in an effort to detect and prevent security incidents and otherwise implement our internal security and business continuity measures, and actual, potential, or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. We may face increased costs and find it necessary or appropriate to expend substantial resources in the event of an actual or perceived security breach.
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The costs related to significant security breaches or disruptions could be material, and our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption in, or failure or security breach of, our systems or third-party systems where information important to our business operations or commercial development is stored or processed. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention. Furthermore, if the information technology systems of our third-party vendors and other contractors and consultants become subject to disruptions or security breaches, we may have insufficient recourse against such third parties and we may have to expend significant resources to mitigate the impact of such an event, and to develop and implement protections to prevent future events of this nature from occurring.
We may not be able to hire or retain key officers or employees needed to implement our business strategy and develop products and businesses.
Our success depends on the continued contributions of our executive officers, financial, scientific, and technical personnel and consultants, and on our ability to attract additional personnel as we continue to implement growth strategies and acquire and invest in companies with varied businesses. During our operating history, many essential responsibilities have been assigned to a relatively small number of individuals. However, as we continue to implement our growth strategy, the demands on our key employees will expand, and we will need to recruit additional qualified employees. The competition for such qualified personnel is intense, and the loss of services of certain key personnel, or our inability to attract additional personnel to fill critical positions, could adversely affect our business.
We currently depend heavily upon the efforts and abilities of our management team and the management teams of our partners. The loss or unavailability of the services of any of these individuals could have a material adverse effect on our business, prospects, financial condition and results. In addition, we have not obtained, do not own, and are not the beneficiary of key-person life insurance for any of our key personnel. We only maintain a limited amount of directors’ and officers’ liability insurance coverage. There can be no assurance that this coverage will be sufficient to cover the costs of the events that may occur, in which case, there could be a substantial impact on our ability to continue operations.
Our employees, consultants, or third-party partners may engage in misconduct or other improper activities, including but not necessarily limited to noncompliance with regulatory standards and requirements or internal procedures, policies or agreements to which such employees, consultants and partners are subject, any of which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees, consultants, or third-party partners could include intentional failures to comply with FDA regulations, provide accurate information to the FDA, comply with cGMPs, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately, comply with internal procedures, policies or agreements to which such employees, consultants or partners are subject, or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee, consultant, or third-party misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation, as well as civil and criminal liability. The precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other civil and/or criminal sanctions.
We receive a large amount of proprietary information from potential or existing licensors of intellectual property and potential acquisition target companies, all pursuant to confidentiality agreements. The confidentiality and proprietary invention assignment agreements that we have in place with each of our employees and consultants prohibit the unauthorized disclosure of such information, but such employees or consultants may nonetheless disclose such information through negligence or willful misconduct. Any such unauthorized disclosures could subject us to monetary damages and/or injunctive or equitable relief. The notes, analyses and memoranda that we have generated based on such information are also valuable to our businesses, and the unauthorized disclosure or misappropriation of such materials by our employees and consultants could significantly harm our strategic initiatives – especially if such disclosures are made to our competitor companies.
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We may be subject to claims that our employees and/or consultants have wrongfully used or disclosed to us alleged trade secrets of their former employers or other clients.
As is common in the biopharmaceutical industry, we rely on employees and consultants to assist in the development of product candidates, many of whom were previously employed at, or may have previously been or are currently providing consulting services to, other biopharmaceutical companies, including our competitors or potential competitors. We may become subject to claims related to whether these individuals have inadvertently or otherwise used, disclosed or misappropriated trade secrets or other proprietary information of their former employers or their former or current clients. Litigation may be necessary to defend against these claims. Even if we are successful in defending these claims, litigation could result in substantial costs and be a distraction to management and/or the employees or consultants that are implicated.
The market price of our securities may be volatile and may fluctuate in a way that is disproportionate to our operating performance.
The stock prices of our securities may experience substantial volatility as a result of a number of factors, including, but not necessarily limited to:
| ● | announcements we make regarding our current product candidates, acquisition of potential new product candidates and companies and/or in-licensing through multiple partners/affiliates; |
| ● | sales or potential sales of substantial amounts of our Common Stock; |
| ● | issuance of debt or other securities; |
| ● | our delay or failure in initiating or completing pre-clinical or clinical trials or unsatisfactory results of any of these trials; |
| ● | announcements about us or about our competitors, including clinical trial results, regulatory approvals or new product introductions; |
| ● | developments concerning our licensors and/or product manufacturers; |
| ● | litigation and other developments relating to our patents or other proprietary rights or those of our competitors; |
| ● | conditions in the pharmaceutical or biotechnology industries; |
| ● | governmental regulation and legislation; |
| ● | unstable regional political and economic conditions; |
| ● | variations in our anticipated or actual operating results; and |
| ● | change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations. |
Many of these factors are beyond our control. The stock markets in general, and the market for pharmaceutical and biotechnological companies in particular, have historically experienced extreme price and volume fluctuations. These fluctuations often have been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors could reduce the market prices of our securities, regardless of our actual operating performance.
Sales or other issuances of a substantial number of shares of our Common Stock, or the perception that such sales or issuances may occur, may adversely impact the price of our Common Stock.
Almost all of our outstanding shares of our Common Stock, inclusive of outstanding equity awards, are available for sale in the public market, either pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), or an effective registration statement. Any sale of a substantial number of shares of our Common Stock or our Series A Preferred Stock could cause a drop in the trading price of our Common Stock or Series A Preferred Stock on the Nasdaq Stock Market.
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We may not be able to manage our anticipated growth, which may in turn adversely impact our business.
We will need to continue to expend capital on improving our infrastructure to address our anticipated growth. Acquisitions of companies or products could place a strain on our management, and administrative, operational and financial systems. In addition, we may need to hire, train, and manage more employees, focusing on their integration with us and corporate culture. Integration and management issues associated with increased acquisitions may require a disproportionate amount of our management’s time and attention and distract our management from other activities related to running our business.
A catastrophic disaster could damage our facilities beyond insurance limits or cause us to lose key data, which could cause us to curtail or cease operations.
We are vulnerable to damage and/or loss of vital data from natural disasters, such as earthquakes, tornadoes, power loss, fire, health epidemics and pandemics, floods and similar events, as well as from accidental loss or destruction. If any disaster were to occur, our ability to operate our businesses could be seriously impaired. We have property, liability and business interruption insurance that may not be adequate to cover losses resulting from disasters or other similar significant business interruptions, and we do not plan to purchase additional insurance to cover such losses due to the cost of obtaining such coverage. Any significant losses that are not recoverable under our insurance policies could seriously impair our business, financial condition and prospects.
Any of the aforementioned circumstances, may also impede our employees’ and consultants’ abilities to provide services in-person and/or in a timely manner; hinder our ability to raise funds to finance our operations on favorable terms or at all; and trigger effectiveness of “force majeure” clauses under agreements with respect to which we receive goods and services, or under which we are obligated to achieve developmental milestones on certain timeframes. Disputes with third parties over the applicability of such “force majeure” clauses, or the enforceability of developmental milestones and related extension mechanisms in light of such business interruptions, may arise and may become expensive and time-consuming.
Our ability to use our pre-change NOLs and other pre-change tax attributes to offset post-change taxable income or taxes may be subject to limitation.
We may, from time to time, carry net operating loss carryforwards (“NOLs”) as deferred tax assets on our balance sheet. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50-percentage- point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period), the corporation’s ability to use all of its pre-change NOLs and other pre-change tax attributes to offset its post-change taxable income or taxes may be limited. We may experience ownership changes in the future as a result of shifts in our stock ownership, some of which changes are outside our control. As a result, our ability to use our pre-change NOLs and other pre-change tax attributes to offset post-change taxable income or taxes may be subject to limitation.
If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We, and/or third parties on our behalf, may use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. Our operations may also produce hazardous waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive, and current or future environmental laws and regulations may impair our product development efforts. In addition, we cannot entirely eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage, and our property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury, we could be held liable for damages or penalized with fines in an amount exceeding our respective resources, and clinical trials or regulatory approvals could be suspended.
Although we maintain workers’ compensation insurance to cover costs and expenses incurred due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted in connection with the storage or disposal of biological or hazardous materials.
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In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations, including climate-related initiatives. These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
The use of artificial intelligence in the healthcare industry and challenges with properly managing its use could adversely affect our business.
We may incorporate artificial intelligence (“AI”) solutions into our business, and applications of AI may become important in our operations over time. Our competitors or other third parties may incorporate AI into their businesses more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. There are also significant risks involved in developing and deploying AI, and there can be no assurance that the usage of AI will enhance our products or the development of our product candidates or be beneficial to our business, including our efficiency or profitability. For example, any AI-related efforts, particularly those related to generative AI, could subject us to risks related to harmful content, inaccuracies, bias, discrimination, intellectual property infringement or misappropriation, defamation, data privacy, cybersecurity, and sanctions and export controls, among others. It is also uncertain how various laws will apply to content generated by AI. We are subject to the risks of new or enhanced governmental or regulatory scrutiny, litigation, or other legal liability, ethical concerns, negative consumer perceptions as to automation and AI, or other complications that could adversely affect our business, reputation, or financial results.
AI’s rapid development is the subject of evolving review by various U.S. governmental and regulatory agencies, and other foreign jurisdictions are applying, or are considering applying, their intellectual property, cybersecurity, data protection and other laws to AI, and/or are considering general legal frameworks on AI. We may not be able to timely comply with these frameworks and, if such regulatory actions are contrary to our use of AI, would require us to expend our limited resources to adjust our use accordingly.
Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business or the business of our partners.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel, ability to accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result and staffing cuts effected at the FDA in early 2025 may significantly delay or prevent marketing approval. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. We do not know what impact any changes by the current presidential administration will have on our business or the business of our partners.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business or the business of our partners. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough nonessential FDA employees and stop routine activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
If the timing of FDA’s review and approval of new products is delayed, the timing of our or our partners’ development process may be delayed, which could result in delayed milestone revenues and materially harm our operations or business.
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We will continue to incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives. Also, if we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our Securities.
As a public company, we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act (“SOX”), as well as rules subsequently implemented by the SEC, and the rules of the Nasdaq Stock Exchange. These rules impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and appropriate corporate governance practices. Our management and other personnel have devoted and will continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
SOX requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. As a result, we are required to periodically perform an evaluation of our internal controls over financial reporting to allow management to report on the effectiveness of those controls, as required by Section 404 of SOX. These efforts to comply with Section 404 and related regulations have required, and continue to require, the commitment of significant financial and managerial resources. While we anticipate maintaining the integrity of our internal controls over financial reporting and all other aspects of Section 404, we cannot be certain that a material weakness will not be identified when we test the effectiveness of our control systems in the future. If a material weakness is identified, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources, costly litigation or a loss of public confidence in our internal controls, which could have an adverse effect on the market price of our stock.
Provisions in our certificate of incorporation, our bylaws and Delaware law might discourage, delay or prevent a change in control of our Company or changes in our management and, therefore, depress the trading price of our Common Stock or other Securities.
Provisions of our certificate of incorporation, our bylaws and Delaware law may have the effect of deterring unsolicited takeovers and/or delaying or preventing a change in control of our Company or changes in our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interests. These provisions include:
| ● | the inability of stockholders to call special meetings; and |
| ● | the ability of our Board of Directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could include the right to approve an acquisition or other change in our control or could be used to institute a rights plan, also known as a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our Board of Directors. |
In addition, the Delaware General Corporation Law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person which together with its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our Common Stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood that you would receive a premium for your ownership of our Securities through an acquisition.
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If we fail to comply with the continuing listing standards of Nasdaq, our common stock could be delisted from the exchange.
We have previously failed to satisfy certain continued listing rules of the Nasdaq, including rules requiring that the minimum trading price of our Common Stock not close below $1.00 per share for 30 consecutive business days. If we again are unable to meet the continued listing requirements, our Common Stock and Preferred Stock may be subject to delisting from The Nasdaq Capital Market if we are unable to regain compliance with such rules. The delisting of our Securities from the Nasdaq may decrease the market liquidity and market price of our Common Stock and Preferred Stock.
Changes in tax laws or regulations that are applied adversely to us may have a material adverse effect on our business, cash flow, financial condition or results of operations.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. For example, the United States recently passed the Inflation Reduction Act, which provides for a minimum tax equal to 15% of the adjusted financial statement income of certain large corporations, as well as a 1% excise tax on certain share buybacks by public corporations that would be imposed on such corporations. In addition, it is uncertain if and to what extent various states will conform to newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
Fluctuations in interest rates may negatively impact the rate of return that we realize on the investment securities that we hold.
We customarily invest a significant portion of our cash in Insured Cash Sweeps (“ICS”) and/or Certificate of Deposit Account Registry Service (“CDARS”) accounts, each of which bear interest income to us that fluctuates according to adjustments in the target federal funds rate effected by the U.S. Federal Reserve’s Federal Open Market Committee (“FOMC”). The FOMC recently lowered the target federal funds rate and is anticipated by some to effect further decreases over the coming weeks and months, actions which have decreased and could further decrease, the amount of interest income that we generate on our ICS, CDARS, and other short-term cash equivalent investment securities that we may hold.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
On July 5, 2024, Fortress announced that the Company’s Board of Directors had decided to pause the monthly dividend of $0.1953125 per share of the Company’s Series A Preferred Stock. In accordance with the terms of the Series A Preferred Stock, dividends on the Series A Preferred Stock will continue to accrue and cumulate until such dividends are authorized or declared. The pausing of these dividends will defer approximately $0.7 million in cash dividend payments each month. 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 pause should be lifted.
During the nine months ended September 30, 2025, no dividends were declared by the Board of Directors. At September 30, 2025, the Company had total undeclared dividends of approximately $10.0 million, which represents the cumulated (but undeclared) dividends due to Series A Preferred shareholders on September 30, 2025.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended September 30, 2025,
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Item 6. Exhibits
Exhibit Index
Exhibit |
| Exhibit Title | |
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3.1 | | Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc. (formerly Coronado Biosciences, Inc.) dated April 21, 2010 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10 (file No. 000-54463) filed with the SEC on July 15, 2011). | |
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3.2 | | First Certificate of Amendment of Amended and Restated Certificate of Incorporation, as amended, of Fortress Biotech, Inc. dated May 20, 2011 (incorporated by reference to Exhibit 3.2 of the Registrant’s Form 10 (file No. 000-54463) filed with SEC on July 15, 2011). | |
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3.3 | | Second Certificate of Amendment of Amended and Restated Certificate of Incorporation, as amended, of Fortress Biotech, Inc. dated October 1, 2013 (incorporated by reference to Exhibit 3.8 of the Registrant’s Annual Report on Form 10-K (file No. 001-35366) filed with SEC on March 14, 2014). | |
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3.4 | | Third Certificate of Amendment of Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc. dated April 22, 2015 (incorporated by reference to Exhibit 3.9 of the Registrant’s Current Report on Form 8-K (file No. 001-35366) filed with SEC on April 27, 2015). | |
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3.5 | | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc. dated June 18, 2020 (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (file No. 001-35366) filed with SEC on June 19, 2020). | |
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3.6 | | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc. dated June 23, 2021 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (file No. 001-35366) filed with SEC on June 23, 2021). | |
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3.7 | | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc. dated July 8, 2022 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (file No. 001-35366) filed with SEC on July 11, 2022). | |
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3.8 | | Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Fortress Biotech, Inc. dated October 9, 2023 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (file No. 001-35366) filed with SEC on October 10, 2023. | |
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3.9 | | Fourth Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K (file No. 001-35366) filed with SEC on June 25, 2024). | |
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31.1 |
| Certification of Chairman, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(*) | |
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31.2 | | Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(*) | |
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32.1 |
| Certification of the Chairman, President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(**) | |
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32.2 |
| Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(**) | |
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101.INS |
| Inline XBRL Instance Document.(*) |
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101.SCH |
| Inline XBRL Taxonomy Extension Schema Document.(*) |
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101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document.(*) |
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101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase Document.(*) |
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101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase Document.(*) |
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101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document.(*) |
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104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 14, 2025 | FORTRESS BIOTECH, INC. | |
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| By: | /s/ Lindsay A. Rosenwald, M.D. |
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| Lindsay A. Rosenwald, M.D., Chairman, President and Chief Executive Officer (Principal Executive Officer) |
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November 14, 2025 | By: | /s/ David Jin |
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| David Jin, Chief Financial Officer (Principal Financial Officer) |
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FAQ
What were Fortress Biotech (FBIO) Q3 2025 revenues and profits?
Net revenue was
How did the Checkpoint sale affect FBIO’s results?
Fortress recorded a
What is FBIO’s cash position as of September 30, 2025?
Cash and cash equivalents were
What were operating cash flows year to date for FBIO?
Net cash used in operating activities was
Did FBIO provide a liquidity outlook for the Parent Entity?
Yes. The filing states Parent Entity cash of
How did FBIO’s balance sheet change in Q3 2025?
Total liabilities declined to
How many FBIO shares were outstanding?
Common shares outstanding were 31,037,937 as of
