, "significantly undervalued," performed as expected in Q2/23 and has many stock catalysts ahead," reported ROTH Capital Partners analyst Scott Henry in an August 22 research note.
Return Remains Substantial
ROTH lowered its target price on the Florida-based biopharma company to US$2 per share from US$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 US$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 US$60 million (US$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 US$17.4M in revenue during Q2/23, more than ROTH's estimate of US$16.7M. Almost all of the US$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 US$67.5M, below ROTH's forecast of US$69.4M.
The company posted a Q2/23 net earnings per share (EPS) loss of US$0.24, slightly higher than ROTH's predicted EPS loss of US$0.23.
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 US$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 the submission of an NDA on DFD-29, events expected to happen this year include the 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 the Horizon
Additional revenue streams could come online in 2024, wrote Henry, specifically from CUTX-101 and CAEL-101. Once CUTX-101 is approved, the sale of a priority voucher, estimated to happen in H2/24, would generate revenue for Fortress in the amount of US$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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- Doresa Banning wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor.
- This article does not constitute medical advice. Officers, employees and contributors to Streetwise Reports are not licensed medical professionals. Readers should always contact their healthcare professionals for medical advice.
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Disclosures for Roth, Fortress Biosciences Inc., August 22, 2023
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures: An Associated Person owns debt or equity securities of Fortress Biotech, Inc.. An Associated Person owns debt or equity securities of Journey Medical Corporation. Within the last twelve months, ROTH Capital Partners, or an affiliate to ROTH Capital Partners, has received compensation for investment banking services from Fortress Biotech, Inc.. ROTH makes a market in shares of Fortress Biotech, Inc. and Journey Medical Corporation and as such, buys and sells from customers on a principal basis. A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of Fortress Biotech, Inc. and Journey Medical Corporation. Shares of Fortress Biotech, Inc. and Journey Medical Corporation may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months. The material, information and facts discussed in this report other than the information regarding ROTH Capital Partners, LLC and its affiliates, are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. Additional information is available upon request. This is not, however, an offer or solicitation of the securities discussed. Any opinions or estimates in this report are subject to change without notice. An investment in the stock may involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additionally, an investment in the stock may involve a high degree of risk and may not be suitable for all investors. No part of this report may be reproduced in any form without the express written permission of ROTH. Copyright 2023. Member: FINRA/SIPC.