Fortress Biotech (NASDAQ:FBIO) Chairman and CEO Dr. Lindsay A. Rosenwald outlined the company’s portfolio-based strategy and recent monetization activity during a fireside chat hosted by Alliance Global Partners healthcare analyst Scott Henry.
Henry introduced Fortress as a company with an approximately $75 million market capitalization and noted that Alliance Global Partners covers the stock with a buy rating and a $4.50 price target. Rosenwald pushed back on the description of Fortress as an “incubator,” saying the company instead seeks to exploit market inefficiencies around clinical-stage medicines that already have proof of concept in humans.
Recent Approvals and Monetizations
Rosenwald highlighted several recent events that he said demonstrate the company’s business model. He said Fortress received approval in January for a pediatric rare disease drug and sold the associated priority review voucher in March for $205 million.
He also discussed Checkpoint Therapeutics, which he said was sold to Sun Pharma after approval of UNLOXCYT, an anti-PD-L1 checkpoint inhibitor for cutaneous squamous cell carcinoma. Rosenwald said the sale was approximately $355 million, plus a contingent value right of $75 million if achieved, and that Fortress retained “just under 10%” of the proceeds along with a 2.5% royalty on the drug.
Another example was Cyprium’s ZYCUBO, which Rosenwald described as a drug for a uniformly fatal newborn disease. He said Fortress licensed the drug after identifying early human clinical data, later receiving FDA approval and selling the priority review voucher for $205 million. Rosenwald said Sentynl Therapeutics is marketing the drug and Fortress is eligible for royalties that could reach 12.5% annually above $100 million in sales.
Business Model Focused on Royalties and Milestones
Rosenwald said Fortress’ strategy is to license assets that have been clinically de-risked, develop them and structure economics that may include equity, royalties, milestones or some combination of those elements. He said Fortress currently has three FDA approvals in roughly the past 18 months, eight clinical candidates, six preclinical candidates, a dermatology business with eight marketed drugs and nine subsidiaries.
He said the company generally seeks royalty interests ranging from 2.5% to 12.5% on its clinical candidates and receives 2.5% annual equity dividends from six subsidiaries.
Rosenwald also said the company’s recent voucher sale would allow Fortress to repay approximately $30 million in debt, reducing interest expense. He said cash expenses, excluding debt payments, should be “$10 million or less,” though the company may add staff. He added that management does not expect to need to return to equity capital markets if anticipated royalties, milestones and other potential transactions materialize.
AI Used to Screen Drug Opportunities
Asked by Henry about the company’s use of artificial intelligence, Rosenwald said AI has made Fortress more efficient in identifying drug candidates. He said the company historically relied on large teams of physicians and scientists to review opportunities but can now accomplish similar work with a much smaller team.
Rosenwald said Fortress reviews more than 10,000 clinical-stage medicines with proof of concept in humans and approximately 2,500 drug candidates approved outside the U.S. He said AI is helping the company identify assets that may fit its model, including drugs approved in markets such as Japan or Europe where regulatory data packages can be extensive.
Journey Medical and Emrosi
Henry also asked about Fortress’ position in Journey Medical, which trades under the ticker DERM. Rosenwald said Fortress owns approximately 9 million to 10 million Journey shares and described Journey as one of the fewer remaining medical dermatology companies.
Rosenwald said Journey launched Emrosi for rosacea about a year ago. He said the launch has taken time because the company needs physician adoption and insurance reimbursement, but he said reimbursement is now improving. He added that Journey reported what he described as an earnings “surprise to the upside” tied to the drug’s sales.
Pipeline Assets Discussed
Rosenwald also reviewed several pipeline and royalty assets, including dotinurad, Baergic and Helocyte.
- Dotinurad: Rosenwald described dotinurad as a URAT1 inhibitor for hyperuricemia and gout that Fortress licensed from a Japanese company after it had been approved in Japan. He said Fortress has rights in the U.S., EU and Great Britain, and that a $205 million Series A financing is funding two Phase 3 trials.
- Baergic: Rosenwald said Fortress acquired the drug from AstraZeneca and sold it to Axsome Therapeutics for development in epilepsy. He said Fortress retained “a really nice royalty” and that the drug could potentially exceed $500 million in sales.
- Helocyte: Rosenwald said Helocyte is developing a cytomegalovirus vaccine in a 420-patient randomized liver transplant trial, with potential plans for an advanced Phase 3 kidney transplant trial pending financing.
Rosenwald said Fortress has many assets that were not fully covered during the discussion and suggested the company may hold an analyst day in the future to provide a broader portfolio review.
About Fortress Biotech (NASDAQ:FBIO)
Fortress Biotech, Inc is a clinical?stage biopharmaceutical company focused on acquiring, developing and commercializing novel pharmaceutical and biotechnology products. Headquartered in New York, the company operates through a network of majority?owned subsidiaries that target areas of high unmet medical need, including oncology, rare diseases and dermatology. Fortress Biotech’s business model emphasizes in?licensing or acquiring promising drug candidates and coordinating their development through specialized affiliate companies, allowing for flexible capital allocation and focused management of individual programs.
Through its portfolio of subsidiaries, Fortress Biotech advances a diversified pipeline spanning small molecules, biologics and cell therapies.
