Fortress Biotech Inc. (FBIO:NASDAQ), "significantly undervalued," performed as expected in Q2/23 and has many stock catalysts ahead," reported ROTH Capital Partners analyst Scott Henry in an Aug. 22 research note.
Return remains substantial
ROTH lowered its target price on the Florida-based biopharma company to $2 per share from $2.25 to "reflect depressed valuations for current public/private assets and a likely near-term reverse stock split." Fortress is currently trading at about $0.45 per share, in comparison.
This difference between these prices implies a significant potential return for investors, of 344%.
Fortress is a Buy.
Future successes underestimated
As for Fortress being undervalued, Henry explained the company's current market cap, of about $60 million ($60M), bakes in only two to three future successes despite the biopharma having 20 clinical programs in progress.
"This implies a 10−15% success rate," the analyst added, "which we believe may prove to be 50% or higher."
Key Q2/23 figures
Henry reported that Fortress generated $17.4M in revenue during Q2/23, more than ROTH's estimate of $16.7M. Almost all of the $17.4M came from Journey Medical, which has "turned momentum positive" in terms of operations and the pipeline. Journey is a company Fortress founded and now owns 50% of.
Fortress' operating expenses in Q2/23 were $67.5M, below ROTH's forecast of $69.4M.
The company posted a Q2/23 net earnings per share (EPS) loss of $0.24, slightly higher than ROTH's predicted EPS loss of $0.23.
Well-performing asset
Henry pointed out how well Journey Medical, which sells and markets drugs for dermatological conditions, is doing.
Coming off of a strong Q2/23, Arizona-based Journey is poised to turn adjusted operations cash flow neutral soon, noted Henry. In H2/23 it plans to file a new drug application (NDA) on DFD-29, its investigative rosacea treatment, supported by strong Phase 3 data. ROTH estimated that peak annual revenue from DFD-20 would exceed $250M.
"This asset of Fortress appears pointed in the right direction," Henry commented.
What to watch for
Fortress' pipeline is robust, noted Henry, and numerous stock catalysts are approaching for the biopharma.
Along with submission of an NDA on DFD-29, events expected to happen this year include completion of an NDA on CUTX-101, a treatment for Menkes disease. Fortress initiated the application but needs additional information on manufacturing to proceed.
Early next year, on Jan. 3, 2024, is the PDUFA date for cosibelimab for metastatic or locally advanced cutaneous squamous cell carcinoma.
Also in 2024, potential milestones involving CAEL-101 for AL amyloidosis could occur. The asset is now in Phase 3. Another compound, dotinurad, could move to pivotal trials for gout.
Monetizations on horizon
Additional revenue streams could come online in 2024, wrote Henry, specifically from CUTX-101 and CAEL-101. Once CUTX-101 is approved, sale of a priority voucher, estimated to happen in H2/24, would generate revenue for Fortress in the amount of $50M-plus.
"Monetizations are key," Henry wrote. "We believe that investors will better appreciate the Fortress business model when monetizations become a more regular occurrence."
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