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MIAMI - Fortress Biotech, Inc. (NASDAQ:FBIO), a biopharmaceutical company, announced on Thursday that it has entered into agreements for a registered direct offering and concurrent private placements, resulting in expected gross proceeds of approximately $8 million. The transactions involve the sale of common stock and warrants to healthcare-focused institutional investors and an insider purchase by the company's top executive.
According to the agreements dated September 19, 2024, Fortress Biotech will issue 3,939,394 shares of common stock or pre-funded warrants at $1.65 per share. Concurrently, the company agreed to issue warrants for the purchase of an equivalent number of shares, exercisable at $1.84 per share starting six months after issuance, with a five-and-a-half-year expiration.
In a related private placement, the Chairman, CEO, and President of Fortress Biotech purchased 763,359 shares at the consolidated closing bid price of $1.84 per share on September 19, 2024, along with warrants at $0.125 each to purchase up to the same number of shares, featuring identical terms as the institutional investors' warrants.
The offerings, which are expected to close around September 23, 2024, subject to customary closing conditions, will fund operations such as research and development, clinical trials, and potential acquisitions. A.G.P./Alliance Global Partners (NYSE:GLP) is acting as the sole placement agent.
The common stock sale to institutional investors is being conducted under a registration statement on Form S-3, declared effective by the Securities and Exchange Commission (SEC) on May 30, 2024. The private placements rely on an exemption from registration under the Securities Act, making the securities unavailable for public sale in the U.S. without registration or an applicable exemption.
Fortress Biotech specializes in acquiring and advancing pharmaceutical assets to generate long-term shareholder value through product sales, equity holdings, and royalties. The company manages a diverse portfolio, including seven marketed prescription products and over 20 development programs across various therapeutic areas.
This financial move aims to support the company's strategic growth initiatives and maintain its operations. The information for this article is based on a press release statement from Fortress Biotech, Inc.
In other recent news, Fortress Biotech reported a second-quarter revenue of $14.9 million, slightly exceeding the consensus forecast. Analysts at Roth/MKM have increased the company's price target from $10.00 to $13.00, maintaining a Buy rating. The company is expected to see significant developments with three major drug approvals anticipated in the latter half of 2024 and early 2025.
Fortress Biotech has also secured a new $50 million loan agreement with Oaktree Capital Management, enhancing the company's capital flexibility. This comes alongside an equity issuance to former Urica holders, distributing over two million shares of common stock.
Subsidiary Mustang Bio (NASDAQ:MBIO) has announced a stock offering and private placement expected to yield approximately $2.5 million. The company also reported positive results from a Phase 1/2 clinical trial of MB-106, a CAR T-cell therapy for Waldenstrom macroglobulinemia, a rare blood cancer.
Analyst notes from H.C. Wainwright and Roth/MKM highlight the company's 2023 revenue of $84.5 million, an increase from the previous year. These recent developments mark ongoing activities within Fortress Biotech and Mustang Bio.
InvestingPro Insights
As Fortress Biotech, Inc. (NASDAQ:FBIO) embarks on its latest financial endeavor with a registered direct offering and private placements, investors are closely monitoring the company's financial health and market position. The recent deals, intended to raise around $8 million for the biopharmaceutical company, come at a time when the company is navigating through a challenging financial landscape.
InvestingPro data provides a snapshot of Fortress Biotech's current market standing, with a market capitalization of $41.98 million. Despite a notable revenue growth of 31.68% over the last twelve months as of Q2 2024, the company's gross profit margin stands at a concerning -18.27%, indicating that it is spending more on the cost of goods sold than it is earning from its products. Additionally, the company's operating income margin is at -115.07%, suggesting that operational costs far exceed its gross profit.
InvestingPro Tips highlight some critical financial aspects that investors may need to consider. Fortress Biotech is quickly burning through cash and suffers from weak gross profit margins, which could be a red flag for long-term sustainability. Moreover, analysts do not anticipate the company will be profitable this year, which aligns with the company's negative P/E ratio of -0.54, further underscoring its current lack of profitability.
Despite these challenges, the company is trading at a low revenue valuation multiple, which may present an opportunity for investors seeking to capitalize on potential future growth, especially considering the company's significant revenue growth. For those interested in a deeper dive into the company's financials, InvestingPro offers additional tips, with a total of 5 more detailed insights available to help make informed investment decisions.
Given the volatility in Fortress Biotech's stock price and the absence of dividend payouts to shareholders, the company's strategic growth initiatives funded by the recent capital raise will be closely watched by the market to gauge whether these efforts can steer the company towards a more stable and profitable future.
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