10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

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 001-35366

FORTRESS BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware	20-5157386
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2 Gansevoort Street, 9th Floor

New York, New York 10014

(Address including zip code of principal executive offices)

(781) 652-4500

(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
Common Stock	FBIO	Nasdaq Capital Market
9.375% Series A Cumulative Redeemable Perpetual Preferred Stock	FBIOP	Nasdaq Capital Market

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. Yes   x   No   ¨

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). Yes   x   No   ¨

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	x
Non-accelerated filer	¨	Smaller reporting company	x
		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   ¨   No   x

As of August 6, 2019, there were 69,042,411 shares of Common Stock of the issuer outstanding. 

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Quarterly Report on Form 10-Q

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	1
Item 1.	Unaudited Condensed Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	48
Item 4.	Controls and Procedures	48
PART II.	OTHER INFORMATION	49
Item 1.	Legal Proceedings	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3.	Defaults Upon Senior Securities	77
Item 4.	Mine Safety Disclosures	77
Item 5.	Other Information	77
Item 6.	Exhibits	77
SIGNATURES		78

PART I.         FINANCIAL INFORMATION

Item 1. Unaudited Condensed Financial Statements

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
($ in thousands except for share and per share amounts)

	June 30,			December 31,
	2019			2018
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	149,407		$	65,508
Accounts receivable (net of allowance of $250 and $0 at June 30, 2019 and December 31, 2018, respectively)		3,104			5,498
Short-term investments (certificates of deposit)		5,000			17,604
Inventory		732			678
Other receivables - related party		1,850			2,095
Prepaid expenses and other current assets		3,418			6,735
Current assets held for sale		-			13,089
Total current assets		163,511			111,207
Property and equipment, net		12,023			12,019
Operating lease right-of-use asset, net		22,255			-
Restricted cash		16,074			16,074
Long-term investment, at fair value		11,193			-
Intangible asset		971			1,417
Other assets		1,237			276
Total assets	$	227,264		$	140,993
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	24,260		$	34,067
Accounts payable and accrued expenses - related party		-			149
Interest payable		1,022			1,232
Interest payable - related party		94			97
Notes payable, short-term - related party (net of debt discount of $104 and $336 at June 30, 2019 and December 31, 2018, respectively)		9,396			9,164
Partner company convertible note, short-term, at fair value		-			9,914
Operating lease liabilities - short-term		1,626			-
Derivative warrant liability		-			991
Total current liabilities		36,398			55,614
Notes payable, long-term (net of debt discount of $6,435 and $4,567 at June 30, 2019 and December 31, 2018, respectively)		74,307			60,425
Operating lease liabilities - long-term		24,510			-
Other long-term liabilities		2,229			5,211
Total liabilities		137,444			121,250
Commitments and contingencies
Stockholders' equity
Preferred stock, $.001 par value, 15,000,000 authorized, 5,000,000 designated Series A shares, 1,000,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018; liquidation value of $25.00 per share		1			1
Common stock, $.001 par value, 100,000,000 shares authorized, 68,138,203 and 57,845,447 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively		68			58
Common stock issuable, 317,804 and 744,322 shares as of June 30, 2019 and December 31, 2018, respectively		490			659
Additional paid-in-capital		439,295			397,408
Accumulated deficit		(407,980	)		(396,274	)
Total stockholders' equity attributed to the Company		31,874			1,852
Non-controlling interests		57,946			17,891
Total stockholders' equity		89,820			19,743
Total liabilities and stockholders' equity	$	227,264		$	140,993

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

1

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
($ in thousands except for share and per share amounts)
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenue
Product revenue, net	$	8,199		$	6,689		$	14,324		$	12,198
Revenue - from a related party		1,051			126			1,403			520
Net revenue		9,250			6,815			15,727			12,718
Operating expenses
Cost of goods sold - product revenue		2,386			1,668			4,270			3,140
Research and development		18,511			17,488			41,784			42,446
Research and development – licenses acquired		200			1			650			98
General and administrative		13,443			13,056			26,921			26,604
Total operating expenses		34,540			32,213			73,625			72,288
Loss from operations		(25,290	)		(25,398	)		(57,898	)		(59,570	)
Other income (expense)
Interest income		779			294			1,217			572
Interest expense and financing fee		(3,106	)		(2,590	)		(5,575	)		(4,993	)
Change in fair value of derivative liability		-			79			-			102
Change in fair value of subsidiary convertible note		-			(140	)		-			110
Change in fair value of investments		-			(707	)		-			(825	)
Other loss		-			(333	)		-			(333	)
Gain on deconsolidation of Caelum		137			-			18,521			-
Total other income (expense)		(2,190	)		(3,397	)		14,163			(5,367	)
Loss from continuing operations		(27,480	)		(28,795	)		(43,735	)		(64,937	)
Discontinued operations:
Loss from discontinued operations, net of tax		-			(6,921	)		-			(8,997	)
Total loss from discontinued operations		-			(6,921	)		-			(8,997	)
Net loss		(27,480	)		(35,716	)		(43,735	)		(73,934	)
Less: net loss attributable to non-controlling interests		14,382			14,105			32,029			31,305
Net loss attributable to common stockholders	$	(13,098	)	$	(21,611	)	$	(11,706	)	$	(42,629	)
Loss from continuing operations per common share - basic and diluted	$	(0.51	)	$	(0.66	)	$	(0.86	)	$	(1.51	)
Loss from discontinued operations per common share - basic and diluted	$	-		$	(0.16	)	$	-		$	(0.21	)
Net loss per common share attributable to common stockholders - basic and diluted	$	(0.24	)	$	(0.50	)	$	(0.23	)	$	(0.99	)
Weighted average common shares outstanding - basic and diluted		53,726,125			43,377,629			51,130,977			42,948,780

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders’ Equity
($ in thousands)
(Unaudited)

Three Months Ended June 30, 2019

	Series A Preferred Stock				Common Stock				Shares			Paid-In			Accumulated			Non-Controlling			Total Stockholders'
	Shares		Amount		Shares		Amount		Issuable			Capital			Deficit			Interests			Equity
Balance at March 31, 2019		1,000,000	$	1		63,126,521	$	63	$	765		$	414,870		$	(394,882	)	$	29,892		$	50,709
Stock-based compensation expense		-		-		-		-		-			3,373			-			-			3,373
Issuance of restricted stock		-		-		55,417		-		-			-			-			-			-
Issuance of common stock under ESPP		-		-		54,221		-		-			60			-			-			60
Issuance of common stock for at-the-market offering, net		-		-		4,463,399		5		-			7,720			-			-			7,725
Preferred A dividends declared and paid		-		-		-		-		-			(586	)		-			-			(586	)
Partner company’s offering, net		-		-		-		-		-			29,485			-			-			29,485
Partner company’s at-the-market offering, net		-		-		-		-		-			25,984			-			-			25,984
Common shares issuable for 2017 Subordinated Note Financing interest expense		-		-		-		-		490			-			-			-			490
Common shares issued for 2017 Subordinated Note Financing interest expense		-		-		268,324		-		(484	)		484			-			-			-
Common shares issued for Opus interest expense		-		-		170,321		-		(281	)		341			-			-			60
Non-controlling interest in subsidiaries		-		-		-		-		-			(42,436	)		-			42,436			-
Net loss attributable to non-controlling interest		-		-		-		-		-			-			-			(14,382	)		(14,382	)
Net loss attributable to common stockholders		-		-		-		-		-			-			(13,098	)		-			(13,098	)
Balance at June 30, 2019		1,000,000	$	1		68,138,203	$	68	$	490		$	439,295		$	(407,980	)	$	57,946		$	89,820

Six Months Ended June 30, 2019

									Common			Additional
	Series A Preferred Stock				Common Stock				Shares			Paid-In			Accumulated			Non-Controlling			Total Stockholders'
	Shares		Amount		Shares		Amount		Issuable			Capital			Deficit			Interests			Equity
Balance at December 31, 2018		1,000,000	$	1		57,845,447	$	58	$	659		$	397,408		$	(396,274	)	$	17,891		$	19,743
Stock-based compensation expense		-		-		-		-		-			6,682			-			-			6,682
Issuance of restricted stock		-		-		1,664,742		2		-			(2	)		-			-			-
Issuance of common stock under ESPP		-		-		54,221		-		-			60			-			-			60
Issuance of subsidiaries' common shares for license expenses		-		-		-		-		(164	)		164			-			-			-
Issuance of common stock for at-the-market offering, net		-		-		7,390,826		8		-			13,859			-			-			13,867
Preferred A dividends declared and paid		-		-		-		-		-			(1,172	)		-			-			(1,172	)
Partner company’s offering, net		-		-		-		-		-			60,984			-			-			60,984
Partner company’s at-the-market offering, net		-		-		-		-		-			26,339			-			-			26,339
Issuance of partner company warrants in conjunction with Horizon Notes		-		-		-		-		-			888			-			-			888
Common shares issuable for 2017 Subordinated Note Financing interest expense		-		-		-		-		490			-			-			-			490
Common shares issued for 2017 Subordinated Note Financing interest expense		-		-		1,012,646		-		(495	)		979			-			-			484
Common shares issuable for Opus interest expense		-		-		-		-		281			-			-			-			281
Common shares issued for Opus interest expense		-		-		170,321		-		(281	)		341			-			-			60
Non-controlling interest in subsidiaries		-		-		-		-		-			(67,235	)		-			67,235			-
Deconsolidation of Caelum non-controlling interest		-		-		-		-		-			-			-			4,849			4,849
Net loss attributable to non-controlling interest		-		-		-		-		-			-			-			(32,029	)		(32,029	)
Net loss attributable to common stockholders		-		-		-		-		-			-			(11,706	)		-			(11,706	)
Balance at June 30, 2019		1,000,000	$	1		68,138,203	$	68	$	490		$	439,295		$	(407,980	)	$	57,946		$	89,820

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders’ Equity
($ in thousands)
(Unaudited)

Three Months Ended June 30, 2018

									Common			Additional
	Series A Preferred Stock				Common Stock				Shares			Paid-In			Accumulated			Non-Controlling			Total Stockholders'
	Shares		Amount		Shares		Amount		Issuable			Capital			Deficit			Interests			Equity
Balance at March 31, 2018		1,000,000	$	1		52,686,537	$	52	$	489		$	374,254		$	(333,145	)	$	65,895		$	107,546
Stock-based compensation expense		-		-		-		-		-			3,152			-			-			3,152
Issuance of restricted stock		-		-		85,834		1		-			(1	)		-			-			-
Issuance of common stock under ESPP		-		-		43,707		-		-			128			-			-			128
Issuance of subsidiaries' common shares for license expenses		-		-		-		-		-			1			-			-			1
Subsidiary's offering cost		-		-		-		-		-			1,813			-			-			1,813
Exercise of subsidiary's warrants for cash		-		-		-		-		-			85			-			-			85
Issuance of common stock for at-the-market offering		-		-		1,066,038		1		-			3,751			-			-			3,752
At-the-market offering cost		-		-		-		-		-			(135	)		-			-			(135	)
Common shares issuable for Opus interest expense		-		-		-		-		287			-			-			-			287
Common shares issuable for 2017 Subordinated Note Financing interest expense		-		-		-		-		489			-			-			-			489
Common shares issued for2017 Subordinated Note Financing interest expense		-		-		104,958		-		(489	)		489			-			-			-
Preferred A dividends declared and paid		-		-		-		-		-			(586	)		-			-			(586	)
2017 Preferred A offering cost adjustment		-		-		-		-		-			1,297			-			-			1,297
Disposal of NHLD		-		-		-		-		-			14,152			-			-			14,152
Non-controlling interest in subsidiaries		-		-		-		-		-			(542	)		-			542			-
Net loss attributable to non-controlling interest		-		-		-		-		-			-			-			(14,105	)		(14,105	)
Net loss attributable to common stockholders		-		-		-		-		-			-			(21,611	)		-			(21,611	)
Balance at June 30, 2018		1,000,000	$	1		53,987,074	$	54	$	776		$	397,858		$	(354,756	)	$	52,332		$	96,265

Six Months Ended June 30, 2018

									Common			Additional
	Series A Preferred Stock				Common Stock				Shares			Paid-In			Accumulated			Non-Controlling			Total Stockholders'
	Shares		Amount		Shares		Amount		Issuable			Capital			Deficit			Interests			Equity
Balance at December 31, 2017		1,000,000	$	1		50,991,285	$	51	$	500		$	364,148		$	(312,127	)	$	67,929		$	120,502
Stock-based compensation expense		-		-		-		-		-			7,947			-			-			7,947
Issuance of restricted stock		-		-		1,558,274		2		-			(2	)		-			-			-
Issuance of common stock under ESPP		-		-		43,707		-		-			128			-			-			128
Issuance of subsidiaries' common shares for license expenses		-		-		-		-		-			23			-			-			23
Subsidiary's offering, net		-		-		-		-		-			22,657			-			-			22,657
Exercise of subsidiary's warrants for cash		-		-		-		-		-			181			-			-			181
Issuance of common stock for at-the-market offering		-		-		1,130,835		1		-			4,069			-			-			4,070
At-the-market offering cost		-		-		-		-		-			(141	)		-			-			(141	)
Common shares issuable for Opus interest expense		-		-		-		-		287			-			-			-			287
Common shares issuable for 2017 Subordinated Note Financing  interest expense		-		-		-		-		489			-			-			-			489
Common shares issued for 2017 Subordinated Note Financing  interest expense		-		-		262,973		-		(500	)		989			-			-			489
Preferred A dividends declared and paid		-		-		-		-		-			(1,172	)		-			-			(1,172	)
2017 Preferred A offering cost adjustment		-		-		-		-		-			1,297			-			-			1,297
Disposal of NHLD		-		-		-		-		-			13,442			-			-			13,442
Non-controlling interest in subsidiaries		-		-		-		-		-			(15,708	)		-			15,708			-
Net loss attributable to non-controlling interest		-		-		-		-		-			-			-			(31,305	)		(31,305	)
Net loss attributable to common stockholders		-		-		-		-		-			-			(42,629	)		-			(42,629	)
Balance at June 30, 2018		1,000,000	$	1		53,987,074	$	54	$	776		$	397,858		$	(354,756	)	$	52,332		$	96,265

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(Unaudited)

	Six Months Ended June 30,
	2019			2018
Cash Flows from Operating Activities:
Net loss	$	(43,735	)	$	(73,934	)
Net loss on discontinued operations		-			(8,997	)
Loss from continuing operations		(43,735	)		(64,937	)
Reconciliation of net loss to net cash used in operating activities:
Depreciation expense		938			503
Bad debt expense		250			-
Amortization of debt discount		1,521			1,247
Amortization of product revenue license fee		446			266
Amortization of operating lease right-of-use assets		771			-
Stock-based compensation expense		6,682			7,947
Common shares issuable for 2017 Subordinated Note Financing interest expense		490			489
Common shares issued for 2017 Subordinated Note Financing interest expense		484			489
Common shares issuable for Opus interest expense		281			287
Common shares issued for Opus interest expense		60			-
Change in fair value of investments		-			825
Change in fair value of derivative liability		-			(102	)
Change in fair value of partner company convertible note		-			(110	)
Gain on deconsolidation of Caelum		(18,521	)		-
Research and development-licenses acquired, expense		650			98
Increase (decrease) in cash and cash equivalents resulting from changes in operating  assets and liabilities:
Accounts receivable		2,144			2,437
Inventory		(54	)		(128	)
Other receivables - related party		245			(157	)
Prepaid expenses and other current assets		3,346			(740	)
Other assets		(961	)		(343	)
Current assets held for sale		-			(5,029	)
Noncurrent assets held for sale		-			956
Current liabilities held for sale		-			11,980
Accounts payable and accrued expenses		(8,646	)		1,442
Accounts payable and accrued expenses - related party		(149	)		(99	)
Interest payable		(12	)		256
Interest payable - related party		(3	)		(3	)
Lease liabilities		(713	)		-
Other long-term liabilities		841			248
Net cash used in continuing operating activities		(53,645	)		(42,178	)
Net cash used in discontinued operating activities		-			(9,748	)
Net cash used in operating activities		(53,645	)		(51,926	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

FORTRESS BIOTECH, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
($ in thousands)
(Unaudited)

	Six Months Ended June 30,
	2019			2018
Cash Flows from Investing Activities:
Purchase of research and development licenses		-			(75	)
Purchase of property and equipment		(955	)		(4,613	)
Purchase of short-term investment (certificates of deposit)		(5,000	)		(35,000	)
Redemption of short-term investment (certificates of deposit)		17,604			36,002
Security deposits paid		-			(343	)
Deconsolidation of Caelum		(1,201	)		-
Net cash provided by (used in) continuing investing activities		10,448			(4,029	)
Net cash provided by discontinued investing activities		13,089			-
Net cash provided by (used in) investing activities		23,537			(4,029	)
Cash Flows from Financing Activities:
Payment of Preferred A dividends		(1,172	)		(1,172	)
Inter-company costs related to the issuance of Series A preferred stock		-			1,297
Proceeds from issuance of common stock under ESPP		60			128
Proceeds from at-the-market offering		14,120			4,070
Payment of cost related to at-the-market offering		(253	)		(141	)
Proceeds from partner companies' sale of stock		66,623			23,011
Payment of costs related to partner companies' sale of stock		(5,397	)		(354	)
Proceeds from partner companies' at-the-market offering		26,998			-
Payment of costs related to partner companies' at-the-market offering		(604	)		-
Proceeds from exercise of partner company's warrants		-			181
Payment of debt issuance costs associated with 2017 Subordinated Note Financing		(23	)		(404	)
Proceeds from 2018 Venture Notes		-			21,707
Payment of debt issue costs associated with 2018 Venture Notes		(115	)		(1,863	)
Proceeds from partner company's Horizon Notes		15,000			-
Payment of debt issuance costs associated with partner company's Horizon Notes		(1,230	)		-
Payment of partner company's Convertible Notes		-			(4,076	)
Net cash provided by financing activities		114,007			42,384
Net increase (decrease) in cash and cash equivalents and restricted cash		83,899			(13,571	)
Cash and cash equivalents and restricted cash at beginning of period		81,582			110,958
Cash and cash equivalents and restricted cash at end of period	$	165,481		$	97,387
Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,538		$	1,819
Cash paid for interest - related party	$	227		$	281
Supplemental disclosure of non-cash financing and investing activities:
Settlement of restricted stock units into common stock	$	2		$	2
Unpaid debt offering cost	$	211		$	5
Unpaid partner company’s offering cost	$	242		$	-
Unpaid partner company’s at-the-market offering cost	$	55		$	-
Common shares issuable for license acquired	$	164		$	-
Issuance of partner company warrants in conjunction with Horizon Notes	$	888		$	-
Fixed assets acquired but not paid	$	183		$	818

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

FORTRESS BIOTECH, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Fortress Biotech, Inc. (“Fortress” or the “Company”) is a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical and biotechnology products and product candidates, which the Company does at the Fortress level, at its majority-owned and majority-controlled subsidiaries and joint ventures, and at entities the Company founded and in which it maintains significant minority ownership positions. Fortress has a talented and experienced business development team, comprising of scientists, doctors and finance professionals, who identify and evaluate promising products and product candidates for potential acquisition by new or existing partner companies. Fortress, through its partner companies, has 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, St. Jude Children’s Research Hospital, Dana-Farber Cancer Institute, Nationwide Children’s Hospital, and the University of Pennsylvania.

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 the partners achieve their goals. Partner 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, and public and private financings; to date, three partner companies are publicly-traded, and two have consummated strategic partnerships with industry leaders Alexion Pharmaceuticals, Inc. and InvaGen Pharmaceuticals, Inc. (a subsidiary of Cipla Limited).

As of June 30, 2019, several of the Fortress partner companies maintain licenses to product candidate intellectual property, including Aevitas Therapeutics, Inc. (“Aevitas”), Avenue Therapeutics, Inc. (“Avenue”), Caelum Biosciences, Inc. (“Caelum”), Cellvation, Inc. (“Cellvation”), Checkpoint Therapeutics, Inc. (“Checkpoint”), Cyprium Therapeutics, Inc. (“Cyprium”), Helocyte, Inc. (“Helocyte”), Journey Medical Corporation (“Journey” or “JMC”), Mustang Bio, Inc. (“Mustang”), and Tamid Bio, Inc. (“Tamid”).

Liquidity and Capital Resources

Since inception, the Company’s operations have been financed primarily through the sale of equity and debt securities and proceeds from the exercise of warrants and stock options. The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur substantial losses for the next several years as it continues to fully develop and prepare regulatory filings and obtain regulatory approvals for its existing and new product candidates. The Company’s current cash and cash equivalents are sufficient to fund operations for at least the next 12 months. However, the Company will need to raise additional funding through strategic relationships, public or private equity or debt financings, sale of a partner company, grants or other arrangements to fully develop and prepare regulatory filings and obtain regulatory approvals for the existing and new product candidates, fund operating losses, and, if deemed appropriate, establish or secure through third parties manufacturing for the potential products, sales and marketing capabilities.  If such funding is not available or not available on terms acceptable to the Company, the Company’s current development plan and plans for expansion of its general and administrative infrastructure will be curtailed.

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 10 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.

7

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 the companies: Avenue, Checkpoint and Mustang. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Form 10-K, which was filed with the United States Securities and Exchange Commission (“SEC”) on March 18, 2019, from which the Company derived the balance sheet data at December 31, 2018, as well as Checkpoint’s Form 10-K filed with the SEC on March 18, 2019, Mustang’s Form 10-K, filed with the SEC on March 18, 2019, and Avenue’s Form 10-K, filed with the SEC on March 12, 2019.

The Company’s unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries: Avenue, Aevitas, CB Securities Corporation, Cellvation, Coronado SO Co., Checkpoint, Cyprium, Escala Therapeutics, Inc., GeneXion Oncology, Inc., Helocyte, Immune Limited, JMC, Mustang, Tamid, Fortress Biotech China, Inc., FBIO Acquisition Corp. IV, FBIO Acquisition Corps. VI - XIV, and JG Pharma, Inc., a subsidiary of JMC. All intercompany balances and transactions have been eliminated.

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.

Use of Estimates

The Company’s unaudited condensed consolidated financial statements include certain amounts that are based on management’s best estimates and judgments. The Company’s significant estimates include, but are not limited to, useful lives assigned to long-lived and intangible assets, fair value measurements, stock-based compensation, common stock issued to acquire licenses, investments, accrued expenses, derivative warrant liabilities, revenue with customers, provisions for income taxes and contingencies. Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.

Discontinued Operations

At December 31, 2018, the Company determined that its National segment met the discontinued operations criteria set forth in Accounting Standards Codification (ASC) Subtopic 205-20-45, Presentation of Financial Statements. As such, the National segment results have been classified as discontinued operations in the accompanying Condensed Consolidated financial statements. See Note 3 for more information relating to the Company’s discontinued operations.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2018 Annual Report other than the adoption of the Financial Accounting Standards Board (FASB) Accounting Standard Updates (ASU) ASU 2016-02, Leases, and 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.

Leases

Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the condensed consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

8

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components. The Company continues to account for leases in the prior period financial statements under previous lease guidance ASC Topic 840, Leases.

Stock-Based Compensation

The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates.

For stock-based compensation awards to non-employees, prior to the adoption of ASU 2018-07 on January 1, 2019, the Company remeasured the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes in the estimated fair value of these non-employee awards were recognized as compensation expense in the period of change. Subsequent to the adoption of ASU 2018-07, the Company recognizes non-employees compensation costs over the requisite service period based on a measurement of fair value for each stock award.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model or 409A valuations, as applicable. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Recently Adopted Accounting Pronouncements

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule became effective on November 5, 2018. The Company included the required presentation of changes in stockholders’ equity in this Form 10-Q.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted ASU No. 2018-07 as of January 1, 2019. As a result of the adoption of ASU 2018-07, the grant date fair value of non-employee awards will be fixed as of December 31, 2018, rather than the prior methodology that recognized a variable cost based on the fair value of such shares as of their vesting dates. The Company recorded non-employees’ awards as of January 1, 2019 prospectively. The Company’s implementation of this standard as of January 1, 2019 did not have a material impact on its condensed consolidated financial statements.

9

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The adoption of this ASU on January 1, 2019 did not have a material impact on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. For public companies, ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted.  In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP.   In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented.  The Company adopted Topic 842 on January 1, 2019, using the optional transition method by recording a right of use asset of $23.0 million, a lease liability of $26.8 million and eliminated deferred rent of approximately $3.8 million; there was no effect on opening retained earnings, and the Company continues to account for leases in the prior period financial statements under ASC Topic 840. In adopting the new standard, the Company elected to apply the practical expedients regarding the identification of leases, lease classification, indirect costs, and the combination of lease and non-lease components.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires that expected credit losses relating to financial assets are measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The new standard will be effective on January 1, 2020 and may be adopted earlier. The Company is currently evaluating the impact, if any, that ASU 2016-13 will have on its condensed consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

10

3. Discontinued Operations

The following is a summary of revenue and expenses of National for the three and six months ended June 30, 2018. The Company had no activity related to National in 2019.

	Three Months Ended			Six Months Ended
($ in thousands)	June 30, 2018			June 30, 2018
Revenue	$	57,019		$	106,541
Operating expenses
Commissions, compensation and fees		49,345			92,906
Clearing fees		578			1,321
Communications		813			1,573
Occupancy		1,141			2,096
Licenses and registration		530			1,167
Professional fees		578			1,971
Interest		2			4
Underwriting costs		42			187
Depreciation and amortization		857			1,716
Other administrative expenses		2,332			4,113
Total operating expenses		56,218			107,054
Loss from operations		801			(513	)
Other income (expenses)
Interest income		-			6
Interest expense and financing fees		446			766
Change in fair value of derivative liabilities		(6,945	)		(8,033	)
Other income		215			215
Total other expenses		(6,284	)		(7,046	)
Loss from discontinued operations before income taxes		(5,483	)		(7,559	)
Income tax expense		1,438			1,438
Loss from discontinued operations		(6,921	)		(8,997	)
Gain from disposal of National		-			-
Total loss from discontinued operations, net of tax	$	(6,921	)	$	(8,997	)

During the six months ended June 30, 2019, the Company received $13.1 million or $3.25 per share, for its remaining ownership of National, as such as of June 30, 2019, the Company had no asset available for sale on its condensed consolidated balance sheets. In connection with this sale, the Company classified the assets and liabilities related to National, included on its condensed consolidated balance sheet as of December 31, 2018, as held for sale as presented in the table below:

	December 31,
($ in thousands)	2018
ASSETS
Current assets
Current assets held for sale	$	13,089
Total current assets held for sale		13,089
Total assets held for sale	$	13,089

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The table below depicts the cash flows from the transaction for the six months ended June 30, 2019 and 2018, respectively:

	Six Months Ended June 30,
($ in thousands)	2019		2018
Operating activities
Effect of elimination entry with discontinued operations presentation	$	-	$	(751	)
Net loss on discontinued operations		-		(8,997	)
Total cash used in discontinued operating activities	$	-	$	(9,748	)
Investing activities
Proceeds from sale of National	$	13,089	$	-
Total cash provided by discontinued investing activities	$	13,089	$	-

4. Collaboration and Stock Purchase Agreements

Caelum

Agreement with Alexion

In January 2019, the Company’s partner company, Caelum, signed an agreement with Alexion Pharmaceuticals, Inc. (“Alexion”) to advance the development of CAEL-101. Under the terms of the agreement, Alexion purchased a 19.9% minority equity interest in Caelum for $30 million. Additionally, Alexion has agreed to make potential payments to Caelum upon the achievement of certain developmental milestones, in exchange for which Alexion obtained a contingent exclusive option to acquire the remaining equity in the company for pre-negotiated economics.

In connection with the Alexion agreement, the Company deconsolidated its holdings in Caelum immediately prior to the execution of the agreement. The following table provides a summary of the assets and liabilities of Caelum impacted by the deconsolidation:

	January
($ in thousands)	2019
ASSETS
Current assets
Cash and cash equivalents	$	1,201
Prepaid expenses and other current assets		6
Total current assets	$	1,207
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	$	2,246
Interest payable		198
Interest payable - related party		106
Note payable - related party		929
Note payable		9,914
Warrant liability		991
Total current liabilities		14,384
Net liability impacted by deconsolidation	$	13,177

12

In connection with this transaction the Company recorded a gain resulting from the deconsolidation of Caelum on its condensed consolidated financial statements for the six months ended June 30, 2019:

	Gain on deconsolidation of Caelum
($ in thousands)
Fair value of Caelum	$	11,193
Net liabilities deconsolidated		13,177
Non-controlling interest share		(4,849	)
Write off of MSA fees due Fortress		(1,000	)
Gain on deconsolidation of Caelum	$	18,521

Avenue

Agreement with InvaGen

On November 12, 2018, the Company’s partner company Avenue entered into a Stock Purchase and Merger Agreement (“SPMA”) with InvaGen Pharmaceuticals Inc. (“InvaGen”) and Madison Pharmaceuticals Inc., a newly-formed, wholly-owned subsidiary of InvaGen. Pursuant to the SPMA, and following approval by Avenue’s stockholders on February 8, 2019, InvaGen purchased a number of shares of Avenue common stock representing 33.3% of Avenue’s fully-diluted capital stock for net proceeds to Avenue of $31.5 million (after deducting fees and other offering-related costs).

Upon the achievement of certain closing conditions (including most notably U.S. Food and Drug Administration approval for IV Tramadol, Avenue’s product candidate), InvaGen will be obligated to acquire Avenue via reverse triangular merger (the “Merger Transaction”). Under the Merger Transaction, InvaGen will pay $180 million (subject to certain potential reductions) to the holders of Avenue’s capital stock (other than InvaGen itself).

Subject to the terms and conditions described in the SPMA, InvaGen may also provide interim financing to Avenue in an amount of up to $7.0 million during the time period between February 8, 2019 and the Merger Transaction. Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable to Company stockholders by virtue of the Merger Transaction.

Prior to the closing of the Merger Transaction, Avenue will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with a trust company as rights, pursuant to which holders of common shares of Avenue, other than InvaGen (each, a “Holder”), will be entitled to receive on Contingent Value Right (“CVR”) for each share held immediately prior to the Merger Transaction.

Each CVR represents the right of its holder to receive a contingent cash payment pursuant to the CVR Agreement upon the achievement of certain milestones. If, during the period commencing on the day following the closing of the Merger Transaction until December 31, 2028, IV Tramadol generates at least $325 million or more in Net Sales (as defined in the CVR Agreement) in a calendar year, each Holder shall be entitled to receive their pro rata share of (i) if the product generated less than $400 million in Net Sales during such calendar year, 10% of Gross Profit (as defined in the CVR Agreement), (ii) if the product generated between $400 million and $500 million in Net Sales during such calendar year, 12.5% of Gross Profit, or (iii) if the product generated more than $500 million in Net Sales during such calendar year, 15% of Gross Profit. Additionally, at any time beginning on January 1, 2029 that IV Tramadol has generated at least $1.5 billion in aggregate Net Sales, then with respect to each calendar year in which IV Tramadol generates $100 million or more in Net Sales, each Holder shall be entitled to receive their pro rata share of an amount equal to 20% of the Gross Profit generated by IV Tramadol. These additional payments will terminate on the earlier of December 31, 2036 and the date (which may be extended by up to 6 months) that any person has received approval from the FDA for an Abbreviated New Drug Application or an FDA AP-rated 505(b)(2) NDA using IV Tramadol.

13

5. Property and Equipment

Fortress’ property and equipment consisted of the following:

	Useful Life	June 30,			December 31,
($ in thousands)	(Years)	2019			2018
		(Unaudited)
Computer equipment	3	$	648		$	648
Furniture and fixtures	5		1,153			1,128
Machinery & equipment	5		3,666			3,143
Leasehold improvements	5-15		9,359			9,271
Construction in progress (1)	N/A		699			393
Total property and equipment			15,525			14,583
Less: Accumulated depreciation			(3,502	)		(2,564	)
Property and equipment, net		$	12,023		$	12,019

Note 1: Relates to the Mustang cell processing facility.

Fortress' depreciation expense for the three months ended June 30, 2019 and 2018, was approximately $0.5 million and $0.3 million, respectively, and was recorded in both research and development expense and general and administrative expense in the Condensed Consolidated Statements of Operations.

Fortress' depreciation expense for the six months ended June 30, 2019 and 2018, was approximately $0.9 million and $0.5 million, respectively, and was recorded in both research and development expense and general and administrative expense in the Condensed Consolidated Statements of Operations.

6. Fair Value Measurements

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

Fair Value of Caelum

The Company valued its investment in Caelum in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, and estimated the fair value to be $11.2 million based on a per share value of $1.549. The following inputs were utilized to derive the value: risk free rate of return of 2.24%, volatility of 70% and a discount for lack of marketability of 27.9%.

In connection with the Development Option and Share Purchase Agreement (“DOSPA”) between Caelum and Alexion Therapeutics, Inc., Caelum’s convertible notes automatically converted into common shares of Caelum and the warrant liability payable to the placement agent in connection with the placement of the convertible notes was also issued.

Caelum Warrant Liability

The Caelum warrant liability and convertible notes did not exist as of June 30, 2019. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s warrant liability that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 is as follows:

	December 31, 2018
Risk-free interest rate		2.905% - 2.909	%
Expected dividend yield		-	%
Expected term in years		3.84 - 3.96
Expected volatility		70	%

14

($ in thousands)	Fair Value of Derivative Warrant Liability
Beginning balance at January 1, 2019	$	991
Issuance of warrant due to conversion of note		(991	)
Ending balance at June 30, 2019	$	-

Caelum Convertible Notes

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s convertible notes that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 is as follows:

	December 31, 2018
Risk-free interest rate		2.302	%
Expected dividend yield		-	%
Expected term in years		0.32
Expected volatility		67	%

($ in thousands)	Caelum Convertible Notes, at fair value
Beginning balance at January 1, 2019	$	9,914
Conversion of the convertible notes		(9,914	)
Ending balance at June 30, 2019	$	-

The following tables classify into the fair value hierarchy of Fortress’ financial instruments, measured at fair value as of June 30, 2019 and December 31, 2018:

	Fair Value Measurement as of June 30, 2019
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets
Fair value of investment in Caelum	$	-	$	-	$	11,193	$	11,193
Total	$	-	$	-	$	11,193	$	11,193

	Fair Value Measurement as of December 31, 2018
($ in thousands)	Level 1		Level 2		Level 3		Total
Liabilities
Caelum warrant liability	$	-	$	-	$	991	$	991
Caelum convertible notes, at fair value		-		-		9,914		9,914
Total	$	-	$	-	$	10,905	$	10,905

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The table below provides a roll-forward of the changes in fair value of Level 3 financial instruments as of June 30, 2019:

($ in thousands)	Investment in Caelum		Caelum Convertible Note			Warrant liabilities			Total
Balance at December 31, 2018	$	-	$	9,914		$	991		$	10,905
Conversion of convertible notes		-		(9,914	)		-			(9,914	)
Issuance of warrant		-		-			(991	)		(991	)
Fair value of investment		11,193		-			-			11,193
Balance at June 30, 2019	$	11,193	$	-		$	-		$	11,193

As of June 30, 2019, no transfers occurred between Level 1, Level 2 and Level 3 instruments.

7. Licenses Acquired

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 Fortress, Aevitas, Avenue, Cellvation, Checkpoint, Cyprium, Helocyte, Mustang and Tamid require substantial completion of research and development, and regulatory and marketing approval efforts in order to reach technological feasibility. As such, for the three and six months ended June 30, 2019 and 2018, the purchase price of licenses acquired was classified as research and development-licenses acquired in the Condensed Consolidated Statements of Operations as reflected in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Fortress Companies:
Helocyte	$	-	$	-	$	-	$	21
Mustang		200		-		650		75
Aevitas		-		1		-		1
Cellvation		-		-		-		1
Total	$	200	$	1	$	650	$	98

Mustang

In May 2017, the Company entered into an exclusive license agreement with the City of Hope National Medical Center (“COH”) for the use of CS1-specific chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) technology. Pursuant to this agreement, the Company paid an upfront fee of $0.6 million and pays an annual maintenance fee of $50,000. Additional payments are due for the achievement of ten development milestones totaling $14.9 million and royalty payments in the mid-single digits are due on net sales of licensed products.

In May 2019 the Company expensed a non-refundable milestone payment of $0.2 million upon the first patient dosed in a Phase 1 clinical study of CS1.

In February 2019, Mustang announced that it partnered and entered into an exclusive worldwide license agreement with Nationwide Children’s Hospital (“Nationwide”) to develop the C134 oncolytic virus (MB-108) for the treatment of glioblastoma multiforme (“GBM”). Mustang intends to combine MB-108 with MB-101 (IL13R2-specific CART) to potentially enhance efficacy in treating GBM. Mustang paid $0.2 million in consideration for the license for exclusive, worldwide rights to develop and commercialize products that incorporate data, know-how and/or C134 virus that were developed at Nationwide. Additional payments are due to Nationwide upon achievement of development and commercialization milestones totaling $152.8 million. Royalty payments in the low-single digits are due on net sales of licensed products.

For the three and six months ended June 30, 2019 and 2018, Mustang recorded the following expense in research and development for licenses acquired:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
City of Hope (COH) - CD123 (MB-102)	$	-	$	-	$	250	$	-
Nationwide Children’s Hospital - C134 (MB-108)		-		-		200		-
CSI City of Hope Milestone (MB-104)		200				200
Manufacturing License		-		-		-		75
Total licenses acquired expense	$	200	$	-	$	650	$	75

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8. Sponsored Research and Clinical Trial Agreements

Aevitas

In 2018, Aevitas entered into a Sponsored Research Agreement (“SRA”) with the University of Massachusetts (“UMass SRA”) for certain continued research and development activities related to the development of adeno-associated virus (“AAV”) gene therapies in complement-mediated diseases and with the Trustees of the University of Pennsylvania (“UPenn SRA”) for certain continued research and development activities related to the development of AAV gene therapies in complement-mediated diseases. For the three and six months ended June 30, 2019 and 2018, Aevitas recorded the following expense in research and development for sponsored research and clinical trial agreements:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
UMass - AAV	$	-	$	300	$	-	$	400
UPenn - AAV		250		-		500		-
Total	$	250	$	300	$	500	$	400

Cellvation

For the three and six months ended June 30, 2019 and 2018, respectively, Cellvation recorded expense of $0.1 million and $0.1 million and $0.1 million and $0.1 million, respectively in connection with its sponsored research arrangement with the University of Texas. The expense was recorded in research and development expense in the Condensed Consolidated Statements of Operations.

Mustang

For the three and six months ended June 30, 2019 and 2018, Mustang recorded the following expense in research and development for sponsored research and clinical trial agreements:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
COH CAR T	$	500	$	500	$	1,000	$	1,000
COH - CD123		456		114		759		264
COH - IL13Ra2		225		143		567		503
City of Hope - Manufacturing		115		115		229		229
BIDMC - CRISPR		-		-		69		-
Fred Hutch - CD20		374		418		641		684
Total	$	1,670	$	1,290	$	3,265	$	2,680

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9. Intangibles, net

The table below provides a summary of the JMC intangible asset as of June 30, 2019 and December 31, 2018, respectively:

	Estmated Useful	June 30,			December 31,
($ in thousands)	Lives (Years)	2019			2018
		(Unaudited)
Ceracade®	3	$	300		$	300
Luxamend®	3		50			50
Targadox®	3		1,250			1,250
Exelderm®	3		1,200			1,200
Total			2,800			2,800
Accumulated amortization			(1,829	)		(1,383	)
Net intangible assets		$	971		$	1,417

The table below provides a summary for the six months ended June 30, 2019, of JMC recognized expense related to its product licenses, which was recorded in costs of goods sold on the Condensed Consolidated Statement of Operations:

($ in thousands)	Intangible Assets
Beginning balance at January 1, 2019	$	1,417
Amortization expense		(446	)
Ending balance at June 30, 2019	$	971

The future amortization of these intangible assets is as follows:

					Total
($ in thousands)	Targadox®		Exelderm®		Amortization
For the six-months ending December 31, 2019	$	104	$	200	$	304
December 31, 2020		-		400		400
December 31, 2021		-		267		267
Total	$	104	$	867	$	971

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10. Debt and Interest

Debt

Total debt consists of the following as of June 30, 2019 and December 31, 2018:

	June 30,		December 31,
	2019		2018		Interest rate			Maturity
($ in thousands)	(Unaudited)
IDB Note	$	14,929	$	14,929		2.25	%	Aug - 2020
2017 Subordinated Note Financing		3,254		3,254		8.00	%	March – 2020(3)
2017 Subordinated Note Financing		13,893		13,893		8.00	%	May - 2020(3)
2017 Subordinated Note Financing		1,820		1,820		8.00	%	June - 2020(3)
2017 Subordinated Note Financing		3,018		3,018		8.00	%	August - 2020(3)
2017 Subordinated Note Financing		6,371		6,371		8.00	%	September - 2020(3)
2018 Venture Notes		6,517		6,517		8.00	%	February - 2021(3)
2018 Venture Notes		15,190		15,190		8.00	%	March - 2021(3)
Opus Credit Facility(1)		9,500		9,500		12.00	%	September - 2019(3)
Mustang Horizon Notes(2)		15,750		-		9.00	%	October - 2022
Caelum Convertible Note, at fair value		-		1,000		8.00	%	January - 2019
Caelum Convertible Note, at fair value		-		6,800		8.00	%	February - 2019
Caelum Convertible Note, at fair value		-		2,114		8.00	%	March - 2019
Total notes payable		90,242		84,406
Less: Discount on notes payable		6,539		4,903
Total notes payable	$	83,703	$	79,503

Note 1: Classified as short-term on the Company’s Consolidated Balance Sheet as of December 31, 2018.

Note 2: Interest rate is 9.0% plus one-month LIBOR Rate in excess of 2.5%.

Note 3: Maturity date extended (see Note 21)

Mustang Horizon Notes

On March 29, 2019 (“Closing Date”), Mustang entered into a $20.0 million venture debt financing agreement (the “Loan Agreement”) with Horizon Technology Finance Corporation (“Horizon”), the proceeds of which will provide Mustang with additional working capital to continue development of its gene and cell therapies. In accordance with the Loan Agreement, $15.0 million of the $20.0 million loan was funded on the Closing Date, with the remaining $5.0 million fundable upon Mustang achieving certain predetermined milestones.

Each advance under the Horizon Loan Agreement will mature 42 months from the first day of the month following the funding of the advance. The first three advances will mature on October 1, 2022 (the “Loan Maturity Date”). Each advance accrues interest at a per annum rate of interest equal to 9.00% plus the amount by which the one-month LIBOR Rate, as reported in the Wall Street Journal, exceeds 2.5%. The Loan Agreement provides for interest-only payments commencing May 1, 2019 through and including October 1, 2020. The interest-only period may be extended to April 1, 2021 if Mustang satisfies the Interest Only Extension Milestone (as defined in the Loan Agreement). Thereafter, commencing May 1, 2021, amortization payments will be payable monthly in eighteen installments of principal and interest. At its option, upon ten business days’ prior written notice to Horizon, Mustang may prepay all or any portion greater than or equal to $500,000 of each of the outstanding advances by paying the entire principal balance (or portion thereof) and all accrued and unpaid interest, subject to a prepayment charge of 4.0% of the then outstanding principal balance of each advance if such advance is prepaid on or before the Loan Amortization Date (as defined in the Loan Agreement), 3% if such advance is prepaid after the Loan Amortization Date applicable to such Loan, but on or prior to twelve months following the Loan Amortization Date, and 2% thereafter. In addition, a final payment equal to $0.3 million for each advance (i.e., $0.8 million in aggregate with respect to the initial $15.0 million) is due on the maturity date or other date of payment in full. Amounts outstanding during an event of default shall be payable on demand and shall accrue interest at an additional rate of 5.0% per annum of the past due amount outstanding.

Each advance of the loan is secured by a lien on substantially all of the assets of Mustang, other than Intellectual Property and Excluded Collateral (in each case as defined in the Loan Agreement), and contains customary covenants and representations, including a liquidity covenant, financial reporting covenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.

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The events of default under the Loan Agreement include, among other things, without limitation, and subject to customary grace periods, (1) Mustang’s failure to make any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) Mustang’s breach or default in the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse change, (4) Mustang making a false or misleading representation or warranty in any material respect, (5) Mustang’s insolvency or bankruptcy, (6) certain attachments or judgments on the Mustang’s assets, (7) the occurrence of any material default under certain agreements or obligations of Mustang involving indebtedness in excess of $0.3 million or (8) failing to maintain minimum monthly cash balances which range from approximately $8.0 million to $13.0 million over the term of the loan. If an event of default occurs, Horizon is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

The Loan Agreement also contains warrant coverage of 5% of the total amount of the facility. Four warrants (the “Warrants”) were issued by Mustang to Horizon to purchase a combined 288,184 shares of Mustang’s common stock with an exercise price of $3.47 and a fair value of $0.9 million. The Warrant is exercisable for ten years from the date of issuance. Horizon may exercise the Warrant either by (a) cash or check or (b) through a net issuance conversion. The shares of Mustang’s common stock will, upon request by Horizon, be registered and freely tradeable following a period of six months after issuance.

Mustang paid Horizon an initial commitment fee of $0.2 million and reimbursed Horizon for $30,000 of legal fees in connection with the Loan Agreement. Mustang incurred approximately $1.2 million of legal and other direct costs incurred in connection with the Loan Agreement.

All fees, warrants, and costs paid to Horizon and all direct costs incurred by Mustang are recognized as a debt discount to the funded loans and are amortized to interest expense using the effective interest method over the term of the Loan Agreement. 

Interest Expense

The following table shows the details of interest expense for all debt arrangements during the periods presented. Interest expense includes contractual interest and amortization of the debt discount and amortization of fees represents fees associated with loan transaction costs, amortized over the life of the loan:

	Three Months Ended June 30,
	2019						2018
($ in thousands)	Interest		Fees( 1)		Total		Interest			Fees ( 1)		Total
IDB Note	$	85	$	-	$	85	$	85		$	-	$	85
2017 Subordinated Note Financing		1,048		392		1,440		1,049			357		1,406
Opus Credit Facility		284		119		403		284			101		385
2018 Venture Notes		432		156		588		429			128		557
LOC Fees		16		-		16		9			-		9
Helocyte Convertible Note		-		-		-		19			-		19
Caelum Convertible Note		-		-		-		195			-		195
Mustang Horizon Notes		342		232		574		-			-		-
Other		-		-		-		(66	)		-		(66	)
Total Interest Expense and Financing Fee	$	2,207	$	899	$	3,106	$	2,004		$	586	$	2,590

Note 1: Amortization of fees

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	Six Months Ended June 30,
	2019						2018
($ in thousands)	Interest		Fees ( 1)		Total		Interest			Fees ( 1)		Total
IDB Note	$	168	$	-	$	168	$	169		$	-	$	169
2017 Subordinated Note Financing		2,076		755		2,831		2,097			682		2,779
Opus Credit Facility		565		232		797		565			420		985
2018 Venture Notes		861		302		1,163		485			145		630
LOC Fees		31		-		31		16			-		16
Helocyte Convertible Note		-		-		-		87			-		87
Caelum Convertible Note		-		-		-		391			-		391
Mustang Horizon Notes		353		232		585		-			-		-
Other		-		-		-		(64	)		-		(64	)
Total Interest Expense and Financing Fee	$	4,054	$	1,521	$	5,575	$	3,746		$	1,247	$	4,993

Note 1: Amortization of fees

11. Leases

On October 3, 2014, the Company entered into a 15-year lease for office space at 2 Gansevoort Street, New York, NY 10014, at an average annual rent of $2.7 million. The Company took possession of this space, which serves as its principal executive offices, in December 2015, and took occupancy in April 2016. Total rent expense, over the full term of the lease for this space will approximate $40.7 million. In conjunction with the lease, the Company entered into Desk Space Agreements with two related parties: OPPM and TGTX, to occupy 10% and 45%, respectively, of the office space that requires them to pay their share of the average annual rent of $0.3 million and $1.1 million, respectively. The total net rent expense will approximate $16.0 million over the lease term. These initial rent allocations will be adjusted periodically for each party based upon actual percentage of the office space occupied. Additionally, the Company has reserved the right to execute desk space agreements with other third parties and those arrangements will also affect the cost of the lease actually borne by us.

In October 2015, the Company entered into a 5-year lease for approximately 6,100 square feet of office space in Waltham, MA at an average annual rent of approximately $0.2 million. The Company took occupancy of this space in January 2016.

Journey

In June 2017, Journey extended its lease for 2,295 square feet of office space in Scottsdale, AZ by one year, at an average annual rent of approximately $55,000. Journey originally took occupancy of this space in November 2014. In August 2018, Journey amended their lease and entered into a new two-year extension for 3,681 square feet of office space in the same location in Scottsdale, AZ at an annual rate of approximately $94,000. The term of this amended lease commenced on December 1, 2018 and will expire on November 30, 2020.

Mustang

On October 27, 2017, Mustang entered into a lease agreement with WCS - 377 Plantation Street, Inc., a Massachusetts nonprofit corporation (“Landlord”). Pursuant to the terms of the lease agreement, Mustang agreed to lease 27,043 square feet from the Landlord, located at 377 Plantation Street in Worcester, MA (the “Facility”), through November 2026, subject to additional extensions at Mustang’s option. Base rent, net of abatements of $0.6 million over the lease term, totals approximately $3.6 million, on a triple-net basis.

The Facility initiated cell processing operations for both personalized CAR T and gene therapies in late 2018.

The Company leases copiers under agreements classified as operating leases that expire on various dates through 2021.

21

Most of the Company’s lease liabilities result from the lease of its New York City, NY office, which expires in 2031 and Mustang’s Worcester, MA cell processing facility lease, which expires in 2026. Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees.  Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options.  The Company does not act as a lessor or have any leases classified as financing leases. At June 30, 2019, the Company had operating lease liabilities of $26.1 million and right of use assets of $22.3 million, which were included in the condensed balance sheet.

During the three and six months ended June 30, 2019, the Company recorded $0.8 million and $1.6 million, respectively, as lease expense to current period operations.

($ in thousands)	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Lease cost
Operating lease cost	$	803		$	1,599
Shared lease costs		(452	)		(929	)
Variable lease cost		337			415
Total lease cost	$	688		$	1,085

The following tables summarize quantitative information about the Company’s operating leases, under the adoption of Topic 842:

($ in thousands)	Six Months Ended June 30, 2019
Operating cash flows from operating leases	$	(1,540	)
Weighted-average remaining lease term – operating leases		6.5
Weighted-average discount rate – operating leases		6.2	%

	Future Lease
($ in thousands)	Liability
Six months ended December 31, 2019	$	1,098
Year Ended December 31, 2020		3,351
Year Ended December 31, 2021		3,114
Year Ended December 31, 2022		3,084
Year Ended December 31, 2023		3,137
Other		23,463
Total		37,247
Less: present value discount		(11,111	)
Operating lease liabilities	$	26,136

At December 31, 2018, the total future minimum lease payments under all leases were:

($ in thousands)
2019	$	3,070
2020		3,289
2021		3,084
2022		3,084
2023		3,137
Beyond		23,466
Total minimum lease payments	$	39,130

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12. Accrued Liabilities and other Long-Term Liabilities

Accrued expenses and other long-term liabilities consisted of the following:

	June 30,		December 31,
	2019		2018
($ in thousands)	(Unaudited)
Accrued expenses:
Professional fees	$	1,051	$	1,434
Salaries, bonuses and related benefits		4,479		5,843
Research and development		3,527		3,805
Research and development – manufacturing		946		826
Research and development – clinical supplies		160		160
Research and development - license maintenance fees		409		519
Research and development -milestones		200		200
Dr. Falk Pharma milestone		-		300
Accrued royalties payable		1,641		1,108
Accrued coupon expense		981		838
Other		1,401		1,327
Total accrued expenses	$	14,795	$	16,360
Other long-term liabilities:
Deferred rent and long-term lease abandonment charge(1)		2,229		5,211
Total other long-term liabilities	$	2,229	$	5,211

Note 1: As of June 30, 2019, balance consists of deferred charges related to build-out of the New York facility, and as of December 31, 2018, balance consists of deferred rent and deferred build out charges.

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13. Non-Controlling Interests

Non-controlling interests in consolidated entities are as follows:

	As of June 30, 2019
($ in thousands)	NCI equity share			Net loss attributable to non-controlling interests			Non-controlling interests in consolidated entities			Non- controlling ownership
Aevitas	$	(1,169	)	$	(301	)	$	(1,470	)		36.1	%
Avenue(2)		23,900			(13,172	)		10,728			77.2	%
Cellvation		(697	)		(90	)		(787	)		21.1	%
Checkpoint(1)		12,042			(7,069	)		4,973			69.0	%
Coronado SO		(290	)		-			(290	)		13.0	%
Cyprium		(292	)		(73	)		(365	)		10.6	%
Helocyte		(4,136	)		(79	)		(4,215	)		19.3	%
JMC		(223	)		83			(140	)		6.9	%
Mustang(2)		61,361			(11,263	)		50,098			70.1	%
Tamid		(521	)		(65	)		(586	)		23.4	%
Total	$	89,975		$	(32,029	)	$	57,946

	As of December 31, 2018
($ in thousands)	NCI equity share			Net loss attributable to  non-controlling interests			Non-controlling interests in consolidated entities			Non- controlling ownership
Aevitas	$	(474	)	$	(606	)	$	(1,080	)		36.1	%
Avenue(2)		13,326			(13,735	)		(409	)		64.8	%
Caelum(3)		(2,436	)		(2,413	)		(4,849	)		36.8	%
Cellvation		(457	)		(185	)		(642	)		21.1	%
Checkpoint(1)		31,648			(23,470	)		8,178			69.3	%
Coronado SO		(290	)		-			(290	)		13.0	%
Cyprium		(210	)		(62	)		(272	)		10.8	%
Helocyte		(3,372	)		(684	)		(4,056	)		19.8	%
JMC		(475	)		245			(230	)		6.9	%
Mustang(2)		38,631			(16,628	)		22,003			60.5	%
Tamid		(211	)		(251	)		(462	)		23.4	%
Total	$	75,680		$	(57,789	)	$	17,891

Note 1: Checkpoint is consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Checkpoint’s Class A Common Shares which provide super-majority voting rights.

Note 2: Avenue and Mustang are consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Preferred Class A Shares which provide super-majority voting rights.

Note 3: Effective January 30, 2019, Caelum ceased to be a controlled Fortress entity and as such is no longer consolidated.

14. Net Loss per Common Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common stock and common stock equivalents outstanding for the period.

24

The Company’s common stock equivalents, including unvested restricted stock, options, and warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average common stock outstanding used to calculate both basic and diluted net loss per share is the same.

The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding, as the effect of including such securities would be anti-dilutive at the end of the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019		2018
Warrants to purchase Common Stock		874,189		894,189
Opus warrants to purchase Common Stock		1,880,000		1,880,000
Options to purchase Common Stock		1,148,347		1,085,502
Convertible preferred stock		1,000,000		1,000,000
Unvested Restricted Stock		12,623,290		11,023,682
Unvested Restricted Stock Units		840,845		1,864,980
Total		18,366,671		17,748,353

15. Stockholders’ Equity

Stock-based Compensation

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 three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Employee awards	$	920	$	1,121	$	1,855	$	2,063
Executive awards of Fortress Companies' stock		355		444		707		962
Non-employee awards		71		23		69		46
Fortress Companies:
Avenue		535		322		1,286		671
Checkpoint		813		72		1,611		1,209
Mustang		622		972		1,054		2,966
Other		57		198		100		30
Total stock-based compensation expense	$	3,373	$	3,152	$	6,682	$	7,947

For the three months ended June 30, 2019 and 2018, approximately $0.8 million and $0.8 million, respectively, of stock-based compensation expense was included in research and development expenses in connection with equity grants made to employees and consultants and approximately $2.6 million and $2.4 million, respectively, was included in general and administrative expenses in connection with grants made to employees, members of the board of directors and consultants.

For the six months ended June 30, 2019 and 2018, approximately $1.4 million and $3.1 million, respectively, of stock-based compensation expense was included in research and development expenses in connection with equity grants made to employees and consultants and approximately $5.3 million and $4.8 million, respectively, was included in general and administrative expenses in connection with grants made to employees, members of the board of directors and consultants.

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Stock Options

The following table summarizes Fortress stock option activities excluding activity related to Fortress partner companies:

	Number of shares		Weighted average exercise price		Total weighted average intrinsic value		Weighted average remaining contractual life (years)
Options vested and expected to vest at December 31, 2018		1,285,501	$	3.75	$	-		2.93
Granted		125,000	$	1.18		40,000		-
Options vested and expected to vest at June 30, 2019		1,410,501	$	4.30	$	89,249		2.83
Options vested and exercisable		1,285,501	$	4.60	$	49,249		2.67

As of June 30, 2019, Fortress had no unrecognized stock-based compensation expense related to options.

Restricted Stock and Restricted Stock Units

The following table summarizes Fortress restricted stock awards and restricted stock units activities, excluding activities related to Fortress Companies:

	Number of shares			Weighted average grant price
Unvested balance at December 31, 2018		12,645,982		$	2.72
Restricted stock granted		1,516,408			0.86
Restricted stock forfeited		-			-
Restricted stock vested		(220,000	)		3.16
Restricted stock units granted		40,000			1.63
Restricted stock units forfeited		(185,106	)		4.45
Restricted stock units vested		(148,334	)		3.41
Unvested balance at June 30, 2019		13,648,950		$	2.47

As of June 30, 2019, the Company had unrecognized stock-based compensation expense related to restricted stock and restricted stock unit awards of approximately $13.6 million and $2.1 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 5.2 years and 2.2 years, respectively.

Warrants

The following table summarizes Fortress warrant activities, excluding activities related to Fortress Companies:

	Number of shares		Weighted average exercise price		Total intrinsic value		Weighted average remaining contractual life (years)
Outstanding as of December 31, 2018		2,754,189	$	3.28	$	7,800		3.49
No activity		-		-		-		-
Outstanding as of June 30, 2019		2,754,189	$	3.28	$	7,800		3.00
Exercisable as of June 30, 2019		849,189	$	3.92	$	7,800		2.64

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Employee Stock Purchase Plan

Eligible employees can purchase the Company’s Common Stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end of the offering period. The ESPP is compensatory and results in stock-based compensation expense.

As of June 30, 2019, 410,728 shares have been purchased and 589,272 shares are available for future sale under the Company’s ESPP. Share-based compensation expense recorded was approximately $19,000 and $43,000, respectively for the three months ended June 30, 2019 and 2018, and was approximately $39,000 and $81,000, respectively, for the six months ended June 30, 2019 and 2018.

Capital Raises

At-the-Market Offering

Pursuant to the terms of the Company’s Amended and Restated At Market Issuance Sales Agreement, or Sales Agreement, with B. Riley FBR, Inc. (“B. Riley,” f/k/a MLV & Co. LLC, and FBR Capital Markets & Co.) (the “ATM”), for the three and six month periods ended June 30, 2019, the Company issued approximately 4.5 million and 7.4 million shares of common stock at an average price of $1.72 and $1.88 per share for gross proceeds of $7.7 million and $14.0 million, respectively. In connection with these sales, the Company paid aggregate fees of approximately $0.3 million. The Sales Agreement terminates on August 17, 2019.

These shares were sold pursuant to the current shelf registration statement on Form S-3; approximately $6.8 million of the shelf remains available for sale at June 30, 2019.

2019 At-the-Market Offering

On June 28, 2019, the Company entered into an At Market Issuance Sales Agreement (“2019 ATM”), with Cantor Fitzgerald & Co., Oppenheimer & Co., Inc., H.C. Wainwright & Co. Inc., Jones Trading Institutional Services LLC and B. Riley FBR, Inc., (each an "Agent" and collectively, the "Agents"). Also June 28, 2019, the Company filed the Second Amendment to Registration Statement No. 333-226089 on Form S-3 (the “Registration Statement”) which, upon effectiveness, will permit the Company to issue and sell shares of its common stock having an aggregate offering price of up to $50.0 million from time to time through the Agents under the 2019 ATM. Under the 2019 ATM, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

The 2019 ATM terminates on the earlier of three years from the date of effectiveness of the Form S-3 or the sale of all shares of common stock registered on the Registration Statement. The Company was notified by the SEC that the S-3 was declared effective on July 23, 2019.

Checkpoint Therapeutics, Inc.

Checkpoint At-the-Market Offering

In November 2017, Checkpoint filed a shelf registration statement on Form S-3 (the "Checkpoint S-3"), which was declared effective in December 2017. Under the Checkpoint S-3, Checkpoint may sell up to a total of $100 million of its securities. In connection with the Checkpoint S-3, Checkpoint entered into an At-the-Market Issuance Sales Agreement (the "Checkpoint ATM") with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each an "Agent" and collectively, the "Agents"), relating to the sale of shares of common stock. Under the Checkpoint ATM, Checkpoint pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

During the three and six months ended June 30, 2019, Checkpoint sold a total of 997,957 and 1,088,226 of its common stock, respectively, under the Checkpoint ATM for aggregate total gross proceeds of approximately $4.1 million and $4.5 million at an average selling price of $4.12 per share. Pursuant to the Founders Agreement, Checkpoint issued 24,941 and 27,195 shares of common stock to Fortress during the three and six months ended June 30, 2019, respectively, for the ATM offering noted above. No sales were made during the three and six months ended June 30, 2018 under the Checkpoint ATM.

In July 2019, Checkpoint was added to the Russell 2000® Index.

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Approximately $61.5 million of the shelf remains available for sale under the Checkpoint S-3, following the offerings noted above. Checkpoint may offer the securities under the Checkpoint S-3 from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best interests of its stockholders.

Mustang Bio, Inc.

Mustang At-the-Market Offering

On July 13, 2018, Mustang filed a shelf registration statement No. 333-226175 on Form S-3, as amended on July 20, 2018 (the "Mustang S-3"), which was declared effective in August 2018. Under the Mustang S-3, Mustang may sell up to a total of $75.0 million of its securities. In connection with the Mustang S-3, Mustang entered into an At-the-Market Issuance Sales Agreement (the "Mustang ATM") with B. Riley FBR, Inc., Cantor Fitzgerald & Co., National Securities Corporation, and Oppenheimer & Co. Inc. (each an "Agent" and collectively, the "Agents"), relating to the sale of shares of common stock. Under the Mustang ATM, Mustang pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

During the three months and six months ended June 30, 2019, Mustang issued approximately 3.5 million shares of common stock at an average price of $6.42 per share for gross proceeds of $22.5 million. In connection with these sales, Mustang paid aggregate fees of approximately $0.5 million, for net proceeds of approximately $22.0 million. No sales where made under the Mustang ATM in 2018.

Mustang Public Offering of Common Stock

In May 2019, Mustang announced the pricing of an underwritten public offering, whereby it sold 6,875,000 shares of its common stock, (plus a 30-day option to purchase up to an additional 1,031,250 shares of common stock, which was exercised in May 2019) at a price of $4.00 per share for gross proceeds of approximately $31.6 million, before deducting underwriting discounts and commissions and offering expenses. The shares were sold under the Mustang S-3. Mustang paid aggregate fees of approximately $2.1 million and received approximately $29.5 million of net proceeds.

As of June 30, 2019, approximately $20.9 million of the Mustang S-3 remains available for sales of securities.

16. Commitments and Contingencies

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 in such capacity. There have been no claims to date, and the Company has director and officer insurance to address such claims. Pursuant to agreements with clinical trial sites, the Company provides indemnification to such sites in certain conditions.

Legal Proceedings

In the ordinary course of business, the Company and its subsidiaries 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.

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17. Related Party Transactions

Other Related Parties

The Company’s Chairman, President and Chief Executive Officer, individually and through certain trusts over which he has voting and dispositive control, beneficially owned approximately 12.1% of the Company’s issued and outstanding Common Stock as of June 30, 2019. The Company’s Executive Vice Chairman, Strategic Development owns approximately 13.8% of the Company’s issued and outstanding Common Stock at June 30, 2019.

Shared Services Agreement with TGTX

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 Executive Chairman and Interim Chief Executive Officer of TGTX. Under the terms of the Agreement, TGTX will reimburse the Company for the salary and benefit costs associated with these employees based upon actual hours worked on TGTX related projects. For the three months ended June 30, 2019 and 2018, the Company invoiced TGTX $0.1 million and $0.7 million, respectively. For the six months ended June 30, 2019 and 2018, the Company invoiced TGTX $0.2 million and $1.0 million, respectively. At June 30, 2019, the amount receivable from TGTX related to this arrangement approximated $0.1 million.

Desk Space Agreements with TGTX and OPPM

In connection with the Company’s Desk Space Agreements with TGTX and Opus Point Partners Management, LLC (“OPPM”), for the three months ended June 30, 2019, the Company had paid $0.7 million in rent under the Desk Space Agreements, and invoiced TGTX and OPPM approximately $0.3 million and $0.1 million, respectively, for their prorated share of the rent base. At June 30, 2019, the amount due related to this arrangement from TGTX approximated $0.1 million and the amount due from OPPM approximated $0.3 million.

Opus Credit Facility

On March 12, 2018, the Company and OPHIF amended and restated the Opus Credit Facility (the “A&R Opus Credit Facility”) extending the maturity date of the notes issued under the Opus Credit Facility from September 14, 2018 by one year to September 14, 2019. On August 7, 2019, the maturity date of the notes was extended to September 14, 2020 (see Note 21). The A&R Opus Credit Facility also permits the Company to make portions of interest and principal repayments in the form of shares of the Company’s common stock and/or in common stock of the Company’s publicly-traded subsidiaries, subject to certain conditions. Fortress retains the ability to prepay the Notes at any time without penalty. The notes payable under the A&R Opus Credit Facility continue to bear interest at 12% per annum. For the six months ended June 30, 2019 and 2018, the Company paid $0.2 million and $0.3 million, respectively. Subsequent to June 30, 2019, the Company prepaid $500,000 of outstanding debt under the Opus Credit Facility in the form of common shares of the Company (see Note 21).

Founders Agreements

The Company has entered into Founders Agreements and, in some cases, Exchange Agreements with certain of its subsidiaries as described in the Company’s Form 10-K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. The following table summarizes, by subsidiary, the effective date of the Founders Agreements and PIK dividend or equity fee payable to the Company in accordance with the terms of the Founders Agreements, Exchange Agreements and the subsidiaries’ certificates of incorporation.

Fortress Partner Company	Effective Date (1)	PIK Dividend as a % of fully diluted outstanding capitalization			Class of Stock Issued
Helocyte	March 20, 2015		2.5	%	Common Stock
Avenue	February 17, 2015		0.0	%(2)	Common Stock
Mustang	March 13, 2015		2.5	%	Common Stock

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Fortress Partner Company	Effective Date (1)	PIK Dividend as a % of fully diluted outstanding capitalization			Class of Stock Issued
Checkpoint	March 17, 2015		0.0	%(3)	Common Stock
Cellvation	October 31, 2016		2.5	%	Common Stock
Caelum	January 1, 2017		0.0	%(4)	Common Stock
Cyprium	March 13, 2017		2.5	%	Common Stock
Aevitas	July 28, 2017		2.5	%	Common Stock
Tamid	November 30, 2017 (5)		2.5	%	Common Stock

Note 1: Represents the effective date of each subsidiary’s Founders Agreement. 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: Concurrently with the execution and delivery of the Stock Purchase and Merger Agreement (“SPMA”) entered into between Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement to the termination of InvaGen’s rights under the SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time.

Note 3: Instead of a PIK dividend, Checkpoint pays the Company an annual equity fee in shares of Checkpoint’s common stock equal to 2.5% of Checkpoint’s fully diluted outstanding capitalization.

Note 4: Effective January 31, 2019 the Caelum Founders Agreement and MSA with Fortress were terminated in conjunction with the execution of the DOSPA between Caelum and Alexion Therapeutics, Inc. (See Note 4).

Note 5: Represents the Trigger Date, the date that the Fortress partner company first acquires, whether by license or otherwise, ownership rights in a product.

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Management Services Agreements

The Company has entered in Management Services Agreements (the “MSAs”) with certain of its subsidiaries as described in the Company’s Form 10-K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. The following table summarizes, by subsidiary, the effective date of the MSA and the annual consulting fee payable by the subsidiary to the Company in quarterly installments:

Fortress partner company	Effective Date	Annual MSA Fee (Income)/Expense
Helocyte	March 20, 2015	$	500
Avenue (1)	February 17, 2015		-
Mustang	March 13, 2015		500
Checkpoint	March 17, 2015		500
Cellvation	October 31, 2016		500
Caelum(2)	January 1, 2017		-
Cyprium	March 13, 2017		500
Aevitas	July 28, 2017		500
Tamid	November 30, 2017		500
Fortress			(3,500	)
Consolidated (Income)/Expense		$	-

Note 1: Concurrently with the execution and delivery of the SPMA entered into between, Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement to the termination of InvaGen’s rights under the SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time. (See Note 4).

Note 2: Effective January 31, 2019 the Caelum Founders Agreement and MSA with Fortress were terminated in conjunction with the execution of a DOSPA between Caelum and Alexion Therapeutics, Inc. and $1.0 million of fees accrued under the MSA were written off (See Note 4).

18. Segment Information

The Company operates in two reportable segments, Dermatology Product Sales and Pharmaceutical and Biotechnology Product Development. The accounting policies of the Company’s segments are the same as those described in Note 2. Prior to the sale of National the Company operated in three segments, one of which included National, see Note 3. The following tables summarize, for the periods indicated, operating results, from continued operations by reportable segment:

	Dermatology			Pharmaceutical and Biotechnology
($ in thousands)	Products			Product
Three Months Ended June 30, 2019	Sales			Development			Consolidated
Net Revenue	$	8,199		$	1,051		$	9,250
Direct cost of goods		(2,386	)		-			(2,386	)
Sales and marketing costs		(4,202	)		-			(4,202	)
Research and development(1)		-			(18,711	)		(18,711	)
General and administrative		(747	)		(8,494	)		(9,241	)
Segment income (loss) from operations	$	864		$	(26,154	)	$	(25,290	)
Segment assets	$	9,313		$	217,951		$	227,264

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($ in thousands) Three Months Ended June 30, 2018	Dermatology Products Sales			Pharmaceutical and Biotechnology Product Development			Consolidated
Net Revenue	$	6,689			126		$	6,815
Direct cost of goods		(1,668	)		-			(1,668	)
Sales and marketing costs		(2,910	)		-			(2,910	)
Research and development(1)		-			(17,489	)		(17,489	)
General and administrative		(383	)		(9,763	)		(10,146	)
Segment income (loss) from operations		1,728			(27,126	)		(25,398	)
Segment assets	$	11,307		$	159,763		$	171,070
Assets held for sale								65,796
Total consolidated								236,866

	Dermatology			Pharmaceutical and Biotechnology
($ in thousands)	Products			Product
Six Months Ended June 30, 2019	Sales			Development			Consolidated
Net Revenue	$	14,324		$	1,403		$	15,727
Direct cost of goods		(4,270	)		-			(4,270	)
Sales and marketing costs		(7,695	)		-			(7,695	)
Research and development(1)		-			(42,434	)		(42,434	)
General and administrative		(1,139	)		(18,087	)		(19,226	)
Segment income (loss) from operations	$	1,220		$	(59,118	)	$	(57,898	)
Segment assets	$	9,313		$	217,951		$	227,264

($ in thousands) Six Months Ended June 30, 2018	Dermatology Products Sales			Pharmaceutical and Biotechnology Product Development			Consolidated
Net Revenue	$	12,198		$	520		$	12,718
Direct cost of goods		(3,140	)		-			(3,140	)
Sales and marketing costs		(5,670	)		-			(5,670	)
Research and development(1)		-			(42,544	)		(42,544	)
General and administrative		(783	)		(20,151	)		(20,934	)
Segment loss from operations	$	2,605			(62,175	)	$	(59,570	)
Segment assets	$	11,307			159,763		$	171,070
Assets held for sale								65,796
Total consolidated								236,866

Note 1: Research and development includes the cost of licenses acquired.

19. Revenues from Contracts and Significant Customers

Disaggregation of Total Revenues

The Company has seven marketed products, with the majority of sales from Targadox®, Luxamend®, Ceracade® and Exelderm®. Substantially all of the Company’s product revenues are recorded in the U.S. Substantially all of the Company’s collaboration revenues are from its collaboration with TGTX. Revenues by product and collaborator are summarized as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Targadox®	$	7,230	$	6,363	$	12,930	$	11,861
Other branded revenue		969		326		1,394		337
Total product revenues		8,199		6,689		14,324		12,198
TGTX		1,051		126		1,403		520
Total Revenue	$	9,250	$	6,815	$	15,727	$	12,718

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Significant Customers

Commencing in the second quarter of 2018, the majority of our dermatology products are sold under a third party logistics (“3PL”) Title Model, and as such, one customer consistently accounts for over 80% of gross product revenue and AR.  Under a 3PL Title Model, the company sells product to a 3PL, who in turn, manages distribution and collections. 

For the three and six months ended June 30, 2019, gross product revenue under the 3PL Title Model accounted for approximately 84.0% and 86.0%, respectively.

For the three months ended June 30, 2018, two of the Company’s Dermatology Products customers each accounted for approximately 53.0% and 11.0% of total gross product revenue.

For the six months ended June 30, 2018, three of the Company’s Dermatology Products customers each accounted for approximately 27%, 16% and 12% of  total gross product revenue.

At June 30, 2019, one of the Company’s Dermatology Products customers accounted for approximately 77.0% of total gross accounts receivable.  At December 31, 2018, one of the Company’s Dermatology Products customers accounted for approximately 80% of total gross accounts receivable.

20. Incomes 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 for which the Company has an 80% or greater ownership interest. Subsidiaries for which the Company does not have an 80% or more ownership are not included in the Company’s consolidated income tax group and file their own separate income tax return. As a result, certain corporate entities included in these financial statements are not able to combine or offset their taxable income or losses with other entities’ tax attributes.

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Income tax expense for the six months ended June 30, 2019 and 2018 is based on the estimated annual effective tax rate.

21. Subsequent Events

On July 18, 2019, Dr. Rosenwald acquired 396,825 common shares of the Company at $1.26 per share. The shares were acquired as a result of the prepayment by the Company of $500,000 of debt owed to Dr. Rosenwald that was held in the name of Opus Point Healthcare Innovations Fund, LP (“Opus”), an investment fund co-owned by Dr. Rosenwald, in the form of the Company’s common stock (measured at the closing price on July 18, 2019), under that certain Amended & Restated Credit Facility Agreement , dated as of March 12, 2018, by and between the Company and Opus (the “Opus Credit Agreement”).

On August 7, 2019, the Company provided notice to NAM Biotech Fund II, LLC (“NAMBF”) and NAM Special Situations Fund I QP, LLC (“NAMSS”) of extension by one year of the maturity dates under the 2017 Subordinated Note Financing totaling $28.4 million, of which $12.3 million in the aggregate pertains to NAMBF and $16.1 million in the aggregate pertains to NAMSS.

On August 7, 2019, the Company provided notice to NSC Biotech Opportunities Fund, LLC (“NSCBOF”) and NSC Biotech Opportunities QP Fund, LLC (“NSCBOQPF”) of extension by six months of the maturity dates of the 2018 Venture Notes totaling $21.7 million of which $5.1 million in the aggregate pertains to NSCBOF and $16.6 million in the aggregate pertains to NSCBOQPF.

On August 7, 2019, the Company and Opus executed an amendment to the Opus Credit Agreement, extending the maturity date of $5.2 million owing thereunder by one year.

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 consolidated financial statements and the related notes included elsewhere in this Form 10-Q. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains 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”), including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” “may,” “plan”, “seek” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially, from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” herein and in our Annual Report on Form 10-K for the year ended December 31, 2018.

Overview

We are a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical and biotechnology products and product candidates, which we do at the Fortress level, at our majority-owned and majority-controlled subsidiaries and joint ventures, and at entities we founded and in which we maintain significant minority ownership positions. We have a talented and experienced business development team, comprising of scientists, doctors and finance professionals, who identify and evaluate promising products and product candidates for potential acquisition by new or existing partner companies. We have executed such arrangements in collaboration with some of the world’s foremost universities, research institutes and pharmaceutical companies, including City of Hope National Medical Center, St. Jude Children’s Research Hospital, Dana-Farber Cancer Institute, Nationwide Children’s Hospital, and the University of Pennsylvania.

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 the partners achieve their goals. Partner 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, and public and private financings; to date, three partner companies are publicly-traded, and two have consummated strategic partnerships with industry leaders Alexion Pharmaceuticals, Inc. and InvaGen Pharmaceuticals, Inc. (a subsidiary of Cipla Limited).

Recent Events

Marketed Dermatology Products

During the three and six months ended June 30, 2019, through our partner company Journey Medical Corporation (“Journey” or “JMC”), our seven marketed products generated net revenue of $8.2 million and $14.3 million, respectively.

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IV tramadol

IV tramadol is currently in development with our partner company, Avenue Therapeutics, Inc. (“Avenue”). In June 2019, Avenue announced that its second pivotal Phase 3 trial of IV tramadol achieved the primary endpoint of a statistically significant improvement in Sum of Pain Intensity Difference over 24 hours (SPID24) compared to placebo in patients with postoperative pain following abdominoplasty surgery. In addition, the trial met all of its key secondary endpoints. The study also included a standard-of-care IV opioid as an active comparator: IV morphine 4 mg. In this study, IV tramadol also demonstrated similar efficacy and safety to that of IV morphine.

Avenue plans to submit a new drug application, or an NDA, for IV tramadol to treat moderate to moderately severe postoperative pain pursuant to Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act (FDCA) by the end of 2019.

MB-107 (XSCID gene therapy)

In April 2019, our partner company, Mustang Bio, Inc. (“Mustang”), announced that the New England Journal of Medicine published data from St. Jude Children’s Research Hospital’s (“St. Jude”) Phase 1/2 clinical trial of a lentiviral gene therapy, being developed for commercial use as MB-107, for the treatment of newly diagnosed infants under two years old with X-linked severe combined immunodeficiency (“XSCID”). The data demonstrated that the lentiviral gene therapy achieved normalization of T-cell numbers in all eight newly diagnosed infants with XSCID to date and disseminated infections resolved completely in all affected infants. Seven of the eight infants treated have developed normal IgM levels to date. Four of those seven infants have discontinued monthly infusions of intravenous immunoglobulin (IVIG) therapy to date. Three of those four infants who discontinued monthly IVIG infusions have responded to vaccines to date.

MB-104 (CS1 CAR T Cell Therapy)

In May 2019, Mustang announced that City of Hope (“COH”) had begun enrolling patients with relapsed or treatment-resistant multiple myeloma in an innovative CS1 chimeric antigen receptor (CAR) T cell therapy (MB-104) trial.

MB-108 (Oncolytic Virus C134)

In May 2019, Mustang and Nationwide Children’s Hospital (“Nationwide Children’s”) announced that the U.S. Food and Drug Administration (“FDA”) granted Orphan Drug Designation to MB-108 for the treatment of malignant glioma, a type of brain cancer with a median survival of less than 18 months. Nationwide Children’s exclusively licensed oncolytic virus C134 to Mustang in February 2019.

MB-102 (CD123 CAR T)

In July 2019, Mustang announced that the FDA had granted Orphan Drug Designation to MB-102 for the treatment of acute myeloid leukemia.

On August 5, 2019, Mustang announced that the FDA has approved its IND application to initiate a multi-center Phase 1/2 clinical trial of MB-102 (CD123 CAR T) in acute myeloid leukemia (“AML”), blastic plasmacytoid dendritic cell neoplasm (“BPDCN”) and high-risk myelodysplastic syndrome (“MDS”). Mustang will initiate an MB-102 clinical trial later in 2019 and process patient cells in their manufacturing facility, which opened in June 2018.

MB-103 (HER2)

In July 2019, the California Institute for Regenerative Medicine announced that it has awarded a $9.3 million grant to Dr. Saul Priceman at COH to conduct a Phase 1 clinical trial evaluating the safety and effectiveness of intraventricular delivery of CAR T cells to the brains of patients with HER2-positive breast cancer with brain metastases. City of Hope has exclusively licensed HER2 to us. 

Cosibelimab (formerly CK-301, an anti-PD-L1 antibody)

In May 2019, our partner company, Checkpoint Therapeutics, Inc. (“Checkpoint”), announced interim results from its ongoing multicenter Phase 1 clinical trial of Cosibelimab. There were >40% objective response rates observed in first-line non-small cell lung cancer and cutaneous squamous cell carcinoma, and the antibody was well-tolerated.

Mustang Capital Raises

Horizon Notes

In April 2019, Mustang announced that it had entered into a $20 million debt financing agreement with Horizon Technology Finance Corporation (NASDAQ: HRZN) (“Horizon”), a leading specialty finance company that provides capital in the form of secured loans to venture-backed companies in the technology, life sciences, healthcare information and services and cleantech industries. $15 million of the $20 million loan funded upon closing, and the remaining $5 million may be funded upon the achievement by Mustang of certain predetermined milestones. Each advance of the loan will be repaid in 42 monthly payments consisting of 18 monthly payments of interest only, followed by 24 monthly payments of principal and accrued interest, payable monthly in arrears. The interest-only period may be extended to 24 months contingent upon Mustang achieving certain milestones. In connection with the debt financing, Mustang issued Horizon warrants to purchase up to 288,184 of its common shares at an exercise price of $3.47 per share.

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At-the-Market Offering

During the three and six months ended June 30, 2019, pursuant to the terms of Mustang’s At-the-Market Issuance Sales Agreement (the "Mustang ATM") with B. Riley FBR, Inc., Cantor Fitzgerald & Co., National Securities Corporation, and Oppenheimer & Co. Inc. (each an "Agent" and collectively, the "Agents"), relating to the sale of shares of common stock, in April 2019, Mustang issued approximately 3.5 million shares of common stock at an average price of $6.42 per share for gross proceeds of $22.5 million. In connection with these sales, Mustang paid aggregate fees of approximately $0.5 million.

Public Offering of Common Stock

In April 2019, Mustang announced the pricing of an underwritten public offering, whereby it sold 6,875,000 shares of its common stock, (plus a 30-day option to purchase up to an additional 1,031,250 shares of common stock, which was exercised in full) at a price of $4.00 per share for gross proceeds of approximately $31.6 million, before deducting underwriting discounts and commissions and offering expenses, totaling approximately $2.1 million. As of June 30, 2019, approximately $20.9 million of the Mustang S-3 remains available for sales of securities.

Reportable Business Segments

For presentation purposes, Results of Operations is presented on a detailed revenue and expense basis rather than on a reportable business segment basis. Our operations are subject to wide fluctuations due to our early stage of development. The following provides a summary of revenues and expenses for the periods presented.

Results of Operations

General

For the three and six months ended June 30, 2019, we generated $9.3 million and $15.7 million, respectively, of net revenue, of which $1.1 million and 1.4 million, respectively, of revenue relates to Checkpoint’s collaborative agreements with TG Therapeutics Inc. (“TGTX”) and $8.2 million and $14.3 million, respectively, of revenue relates primarily to the sale of Journey branded products. At June 30, 2019, we had an accumulated deficit of $408.0 million. While we may in the future generate revenue from a variety of sources, including license fees, milestone payments, research and development payments in connection with strategic partnerships and/or product sales, our and our subsidiaries’ current product candidates are at an early stage of development and may never be successfully developed or commercialized. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenues.

For the three and six months ended June 30, 2019, we had $2.4 million and $4.3 million, respectively, of costs of goods sold in connection with the sale of Journey’s marketed products, compared to $1.7 million and $3.1 million, respectively, for the three and six months ended June 30, 2018. The increase can be attributed to the increase in sales as well as a diversification of product mix.

Research and Development Expenses

Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone 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.

For the three months ended June 30, 2019 and 2018, research and development expenses were approximately $18.5 million and $17.5 million, respectively. Additionally, during the three months ended June 30, 2019 and 2018, we expensed approximately $0.2 million and nil, respectively, in costs related to the acquisition of licenses. Noncash, stock-based compensation expense included in research and development for the three months ended June 30, 2019 and 2018, was $0.8 million and $0.8 million, respectively.

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Research and development costs associated with the development of our licenses, net of noncash stock-based compensation expenses, for the three months ended June 30, 2019 and 2018, by entity, are as follows:

	Three Months Ended June 30,				% of total
($ in millions)	2019		2018		2019			2018
Research & Development
Fortress	$	362	$	2,037		2	%		12	%
Partner Companies:
Avenue		6,209		3,539		35	%		21	%
Checkpoint		3,935		5,783		22	%		35	%
Mustang		6,471		2,916		37	%		17	%
Other(1)		755		2,444		4	%		15	%
Total Research & Development	$	17,732	$	16,719		100	%		100	%

Note 1: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Helocyte and Tamid

Noncash stock-based compensation expense for the three months ended June 30, 2019 and 2018, by entity is as follows:

	Three Months Ended June 30,					% of total
($ in millions)	2019		2018			2019			2018
Research & Development
Noncash stock-based compensation
Fortress	$	122	$	338			16	%		44	%
Partner Companies:
Avenue		183		103			23	%		13	%
Checkpoint		184		(392	)		24	%		-51	%
Mustang		289		578			37	%		75	%
Other(1)		1		142			-			19	%
Total stock-based compensation	$	779	$	769			100	%		100	%

Note 1: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Helocyte and Tamid

37

Research and development costs associated with the development of our licenses, net of noncash stock-based compensation expenses, for the six months ended June 30, 2019 and 2018, by entity, are as follows:

	Six Months Ended June 30,				% of total
($ in millions)	2019		2018		2019			2018
Research & Development
Fortress	$	905	$	3,934		2	%		10	%
Partner Companies:
Avenue		16,268		12,733		40	%		32	%
Checkpoint		8,321		11,972		21	%		30	%
Mustang		13,273		5,694		33	%		14	%
Other(1)		1,594		4,996		4	%		14	%
Total Research & Development	$	40,361	$	39,329		100	%		100	%

Note 1: Includes the following subsidiaries: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Helocyte and Tamid

Noncash stock-based compensation expense for the six months ended June 30, 2019 and 2018, by entity is as follows:

	Six Months Ended June 30,					% of total
($ in millions)	2019		2018			2019			2018
Research & Development
Noncash stock-based compensation
Fortress	$	289	$	643			20	%		21	%
Partner Companies:
Avenue		365		236			26	%		8	%
Checkpoint		380		288			27	%		9	%
Mustang		385		2,030			27	%		65	%
Other(1)		4		(80	)		-			-3	%
Total stock-based compensation	$	1,423	$	3,117			100	%		100	%

Note 1: Includes the following subsidiaries: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Helocyte and Tamid

General and Administrative Expenses

General and administrative expenses consist principally of sales and marketing costs, personnel-related costs, professional fees for legal, consulting, audit and tax services, rent and other general operating expenses not otherwise included in research and development expenses. For the three months ended June 30, 2019 and 2018, general and administrative expenses were approximately $13.4 million and $13.1 million, respectively. Noncash, stock-based compensation expense included in general and administrative expenses for the three months June 30, 2019 and 2018, was $2.6 million and $2.4 million, respectively.

38

Included in the remaining $10.8 million and $10.7 million figures for the three months ended June 30, 2019 and 2018, respectively are the following partner company expenses:

	Three Months Ended June 30,				% of Total
($ in thousands)	2019		2018		2019			2018
General & Administrative
Fortress	$	2,942	$	4,114		27	%		39	%
Partner Companies:
Avenue		364		695		3	%		6	%
Checkpoint		907		825		8	%		8	%
JMC(1)		4,949		3,293		46	%		31	%
Mustang		1,527		1,227		14	%		11	%
Other(2)		160		519		2	%		5	%
Total General & Administrative	$	10,849	$	10,673		100	%		100	%

Note 1: Includes cost of outsourced sales force

Note 2: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

Noncash stock-based compensation expense included in general and administrative expense for the three months ended June 30, 2019 and 2018, by entity is as follows:

	Three Months Ended June 30,				% of Total
($ in thousands)	2019		2018		2019			2018
General & Administrative
Non cash stock-based compensation
Fortress	$	1,224	$	1,252		47	%		53	%
Partner Companies:
Avenue		352		219		14	%		9	%
Checkpoint		629		464		24	%		19	%
Mustang		333		393		13	%		17	%
Other(1)		56		55		2	%		2	%
Total General & Administrative	$	2,594	$	2,383		100	%		100	%

Note 1: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

For the six months ended June 30, 2019 and 2018, general and administrative expenses were approximately $26.9 million and $26.6 million, respectively. Noncash stock-based compensation expense included in general and administrative expenses for the six months ended June 30, 2019 and 2018, was $5.3 million and $4.8 million, respectively.

39

Included in the remaining $21.7 million and $21.8 million figures for the six months ended June 30, 2019 and 2018, respectively are the following subsidiary level expenses:

	Six Months Ended June 30,				% of Total
($ in thousands)	2019		2018		2019			2018
General & Administrative
Fortress	$	6,419	$	8,066		30	%		37	%
Partner Companies:
Avenue		914		1,453		4	%		6	%
Checkpoint		1,874		1,858		9	%		9	%
JMC(1)		8,834		6,454		41	%		30	%
Mustang		3,078		2,732		14	%		13	%
Other(2)		543		1,211		2	%		5	%
Total General & Administrative	$	21,662	$	21,774		100	%		100	%

Note 1: Includes cost of outsourced sales force

Note 2: Includes the following subsidiaries: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

Noncash stock-based compensation expense included in general and administrative expense for the six months ended June 30, 2019 and 2018, by entity is as follows:

	Six Months Ended June 30,				% of Total
($ in thousands)	2019		2018		2019			2018
General & Administrative
Non cash stock-based compensation
Fortress	$	2,342	$	2,428		45	%		50	%
Partner Companies:
Avenue		921		435		18	%		9	%
Checkpoint		1,231		921		23	%		19	%
Mustang		669		936		13	%		19	%
Other(1)		96		110		1	%		3	%
Total General & Administrative	$	5,259	$	4,830		100	%		100	%

Note 1: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

40

Comparison of three months ended June 30, 2019 and 2018

	Three Months Ended June 30,						Change
($ in thousands, except per share amounts)	2019			2018			$			%
Revenue
Product revenue, net	$	8,199		$	6,689		$	1,510			23	%
Revenue – from a related party		1,051			126			925			734	%
Net revenue		9,250			6,815			2,435			36	%
Operating expenses
Cost of goods sold – product revenue		2,386			1,668			718			43	%
Research and development		18,511			17,488			1,023			6	%
Research and development – licenses acquired		200			1			199			19900	%
General and administrative		13,443			13,056			387			3	%
Total operating expenses		34,540			32,213			2,327			7	%
Loss from operations		(25,290	)		(25,398	)		108			0	%
Other expense
Interest income		779			294			485			165	%
Interest expense and financing fee		(3,106	)		(2,590	)		(516	)		20	%
Change in fair value of derivative liabilities		-			79			(79	)		-100	%
Change in fair value of subsidiary convertible note		-			(140	)		140			-100	%
Change in fair value of investments		-			(707	)		707			-100	%
Other loss		-			(333	)		333			-100	%
Gain from deconsolidation of Caelum		137			-			137			100	%
Total other expense		(2,190	)		(3,397	)		1,207			-36	%
Loss from continuing operations		(27,480	)		(28,795	)		1,315			-5	%
Discontinued operations:
Loss from discontinued operations, net of tax		-			(6,921	)		6,921			-100	%
Total loss from discontinued operations		-			(6,921	)		6,921			-100	%
Net loss		(27,480	)		(35,716	)		8,236			-23	%
Less: net loss attributable to non-controlling interest		14,382			14,105			277			2	%
Net loss attributable to common stockholders	$	(13,098	)	$	(21,611	)	$	8,513			-39	%

Net revenues increased $2.4 million or 36% from the three months ended June 30, 2018 to the three months ended June 30, 2019. The increase in net revenue is related to an increase in product revenue of $1.5 million associated with Journey’s marketed products, and an increase of $0.9 million in collaboration revenue between Checkpoint and TGTX.

Cost of goods sold increased by $0.7 million or 43% from the three months ended June 30, 2018 to the three months ended June 30, 2019 due to the increase in Journey marketed products revenue in the 2019 period as compared to the 2018 period.

41

Research and development expenses increased $1.0 million or 6% from the three months ended June 30, 2018 to the three months ended June 30, 2019. The following table shows the change in research and development spending by Fortress and its partner companies:

	Three Months Ended June 30,					Change
($ in millions)	2019		2018			$			%
Research & Development
Stock-based compensation
Fortress	$	122	$	338		$	(216	)		-64	%
Partner Companies:
Avenue		183		103			80			78	%
Checkpoint		184		(392	)		576			-147	%
Mustang		289		578			(289	)		-50	%
Other(1)		1		142			(141	)		-99	%
Sub-total stock-based compensation		779		769			10			1	%
Other Research & Development
Fortress		362		2,037			(1,675	)		-82	%
Partner Companies:
Avenue		6,209		3,539			2,670			75	%
Checkpoint		3,935		5,783			(1,848	)		-32	%
Mustang		6,471		2,916			3,555			122	%
Other(1)		755		2,444			(1,689	)		-69	%
Total Research & Development	$	18,511	$	17,488		$	1,023			6	%

Note 1: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

The increase in stock-based compensation is due to the adoption of ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, of which no longer requires marking to market grants held by non-employees. For the quarter ended June 30, 2018, stock price decreases led to Checkpoint’s net negative stock compensation expense due to marking to market grants held by non-employees.

The decrease in Fortress research and development spending is due to the lower research and development headcount subsequent to the transfer of Fortress research and development employees to TGTX, a related party, in the quarter ended September 30, 2018. Checkpoint’s decrease in research and development spending is attributable to the manufacturing costs related to the PD-L1 GMP batch incurred in the three months ended June 30, 2018 and not replicated in the current quarter. Mustang’s increase in research and development spending is attributable to the fitting out of the cell processing facility, the purchase of laboratory supplies, increased headcount, and increased costs incurred under sponsored research agreements with City of Hope. The decrease in “Other” is attributable to Caelum’s deconsolidation and Helocyte’s sponsored research activities with City of Hope not replicated in 2019.

42

General and administrative expenses increased $0.4 million, or 3%, from the three months ended June 30, 2018 to the three months ended June 30, 2019. The following table shows the change in general and administrative spending by Fortress and its partner companies:

	Three Months Ended June 30,				Change
($ in thousands)	2019		2018		$			%
General & Administrative
Stock-based compensation
Fortress	$	1,224	$	1,252	$	(28	)		-2	%
Partner Companies:
Avenue		352		219		133			61	%
Checkpoint		629		464		165			36	%
Mustang		334		394		(60	)		-15	%
Other(2)		55		54		1			2	%
Sub-total stock-based comp.		2,594		2,383		211			9	%
Other General & Administrative
Fortress		2,942		4,114		(1,172	)		-28	%
Partner Companies:
Avenue		364		695		(331	)		-48	%
Checkpoint		907		825		82			10	%
JMC(1)		4,949		3,293		1,656			50	%
Mustang		1,527		1,227		300			24	%
Other(2)		160		519		(359	)		-69	%
Total General & Administrative	$	13,443	$	13,056		387			3	%

Note 1: Includes cost of outsourced sales force

Note 2: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

For the quarter ended June 30, 2019, the increase in general and administrative expenses of $0.4 million or 3% is primarily attributable to Journey’s sales and marketing cost increases offset by Fortress’ decreased headcount and travel costs, and Avenue’s decrease in investor relations and marketing costs.

Total other expense decreased $1.2 million, or 36%, from an expense of $3.4 million for the three months ended June 30, 2018 to $2.2 million for the three months ended June 30, 2019, primarily due to the increase in interest expense and financing fees due to Mustang’s new debt financing with Horizon offset by the increase in interest income due to higher cash balances and a more favorable interest rate on account balances. The 2018 period was also impacted by the change in fair value.

Net loss attributable to common stockholders decreased $8.5 million, or 39%, from the three months ended June 30, 2018 to the three months ended June 30, 2019. This decrease is primarily due to the loss from discontinued operations of $6.9 million from the three months ended June 30, 2018 related to the sale of National.

43

Comparison of six months ended June 30, 2019 and 2018

	Six Months Ended June 30,						Change
($ in thousands, except per share amounts)	2019			2018			$			%
Revenue
Product revenue, net	$	14,324		$	12,198		$	2,126			17	%
Revenue – from a related party		1,403			520			883			170	%
Net revenue		15,727			12,718			3,009			24	%
Operating expenses
Cost of goods sold – product revenue		4,270			3,140			1,130			36	%
Research and development		41,784			42,446			(662	)		-2	%
Research and development – licenses acquired		650			98			552			563	%
General and administrative		26,921			26,604			317			1	%
Total operating expenses		73,625			72,288			1,337			2	%
Loss from operations		(57,898	)		(59,570	)		1,672			-3	%
Other income (expense)
Interest income		1,217			572			645			113	%
Interest expense and financing fee		(5,575	)		(4,993	)		(582	)		12	%
Change in fair value of derivative liabilities		-			102			(102	)		-100	%
Change in fair value of subsidiary convertible note		-			110			(110	)		-100	%
Change in fair value of investments		-			(825	)		825			-100	%
Other loss		-			(333	)		333			-100	%
Gain from deconsolidation of Caelum		18,521			-			18,521			100	%
Total other income (expense)		14,163			(5,367	)		19,530			-364	%
Loss from continuing operations		(43,735	)		(64,937	)		21,202			-33	%
Discontinued operations:
Loss from discontinued operations, net of tax		-			(8,997	)		8,997			-100	%
Total loss from discontinued operations		-			(8,997	)		8,997			-100	%
Net loss		(43,735	)		(73,934	)		30,199			-41	%
Less: net loss attributable to non-controlling interest		32,029			31,305			724			2	%
Net loss attributable to common stockholders	$	(11,706	)	$	(42,629	)	$	30,923			-73	%

Net revenues increased $3.0 million or 24% from the six months ended June 30, 2018 to the six months ended June 30, 2019. The increase in net revenue is related to an increase in product revenue of $2.1 million associated with Journey’s marketed products, and an increase of $0.9 million in collaboration revenue between Checkpoint and TGTX.

Cost of goods sold increased by $1.1 million or 36% from the six months ended June 30, 2018 to the six months ended June 30, 2019 due to the increase in Journey marketed products revenue in the 2019 period as compared to the 2018 period.

44

Research and development expenses decreased $0.7 million or 2% from the six months ended June 30, 2018 to the six months ended June 30, 2019. The following table shows the change in research and development spending by Fortress and its partner companies:

	Six Months Ended June 30,					Change
($ in millions)	2019		2018			$			%
Research & Development
Stock-based compensation
Fortress	$	289	$	643		$	(354	)		-55	%
Partner Companies:
Avenue		365		236			129			55	%
Checkpoint		380		288			92			32	%
Mustang		385		2,030			(1,645	)		-81	%
Other(1)		4		(80	)		84			-105	%
Sub-total stock-based compensation		1,423		3,117			(1,694	)		-54	%
Other R&D
Fortress		905		3,934			(3,029	)		-77	%
Partner Companies:
Avenue		16,268		12,733			3,535			28	%
Checkpoint		8,321		11,972			(3,651	)		-30	%
Mustang		13,273		5,694			7,579			133	%
Other(1)		1,594		4,996			(3,402	)		-68	%
Total Research & Development	$	41,784	$	42,446			(662	)		-2	%

Note 1: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

The decrease in stock-based compensation is due to overall vesting of grants for Mustang, as well as the decrease in value attributed to marking to grants held by non employees due to stock price decreases.

The decrease in Fortress research and development spending is due to the lower research and development headcount subsequent to the transfer of Fortress research and development employees to TGTX, a related party, in the quarter ended September 30, 2018. Checkpoint’s decrease in research and development spending is attributable to the manufacturing costs related to the PD-L1 GMP batches incurred in the six months ended June 30, 2018 and not replicated in the current period. Mustang’s increase in research and development spending is attributable to the fitting out of the cell processing facility, the purchase of laboratory supplies, increased headcount, and increased costs incurred under sponsored research agreements with City of Hope. The decrease in “Other” is attributable to Caelum’s deconsolidation and Helocyte’s sponsored research activities with City of Hope not replicated in 2019.

45

General and administrative expenses increased $0.3 million, or 1%, from the six months ended June 30, 2018 to the six months ended June 30, 2019. The following table shows the change in general and administrative spending by Fortress and its partner companies:

	Six Months Ended June 30,				Change
($ in thousands)	2019		2018		$			%
General & Administrative
Stock-based compensation
Fortress	$	2,342	$	2,428	$	(86	)		-4	%
Partner Companies:
Avenue		921		435		486			112	%
Checkpoint		1,231		921		310			34	%
Mustang		669		937		(268	)		-29	%
Other(2)		96		109		(13	)		-12	%
Sub-total stock-based compensation		5,259		4,830		429			9	%
Other General & Administrative
Fortress		6,419		8,066		(1,647	)		-20	%
Partner Companies:
Avenue		914		1,453		(539	)		-37	%
Checkpoint		1,874		1,858		16			1	%
JMC(1)		8,834		6,454		2,380			37	%
Mustang		3,078		2,731		347			13	%
Other(2)		543		1,212		(669	)		-55	%
Total General & Administrative	$	26,921	$	26,604		317			1	%

Note 1: Includes cost of outsourced sales force

Note 2: Includes the following partner companies: Aevitas, Caelum (2018 only), Cellvation, Cyprium, Escala, Helocyte and Tamid

For the six months ended June 30, 2019, the increase in general and administrative expenses of $0.3 million or 1% is primarily attributable to Journey’s sales and marketing cost increases offset by Fortress’ decreased headcount and travel costs and Avenue’s decrease in investor relations and marketing costs.

Total other income or expense increased $19.5 million, or 364%, from a loss of $5.4 million for the six months ended June 30, 2018 to income of $14.2 million for the six months ended June 30, 2019, primarily due to the gain on the deconsolidation of Caelum of $18.5 million for the six months ended June 30, 2019.

Net loss attributable to common stockholders decreased $30.9 million, or 73%, from the three months ended June 30, 2018 to the three months ended June 30, 2019. This decrease is primarily due to the loss from discontinued operations of $9.0 million related to the sale of National for the six months ended June 30, 2018, and the gain on the deconsolidation of Caelum of $18.5 million for the six months ended June 30, 2019.

Liquidity and Capital Resources

We will require 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. We believe that our current cash and cash equivalents is 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, collaborative or other arrangements with corporate sources, sales of stakes in partner companies, the contingent acquisitions of Avenue and Caelum, or through other sources of financing.

46

Cash Flows for the Six Months Ended June 30, 2019 and 2018

	Six Months Ended June 30,
($ in thousands)	2019			2018
Statement of cash flows data:
Total cash provided by/(used in):
Operating activities	$	(53,645	)	$	(51,926	)
Investing activities		23,537			(4,029	)
Financing activities		114,007			42,384
Net increase (decrease) in cash and cash equivalents and restricted cash	$	83,899		$	(13,571	)

Components of cash flows from publicly-traded partner companies are comprised of:

	For the Six Months Ended June 30, 2019
	Fortress(1)			Avenue			Checkpoint			Mustang			Total
($ in thousands)
Statement of cash flows data:
Total cash (used in)/provided by:
Operating activities	$	(5,677	)	$	(19,549	)	$	(13,158	)	$	(15,261	)	$	(53,645	)
Investing activities		12,338			(5,000	)		-			16,199			23,537
Financing activities		12,079			32,333			4,368			65,227			114,007
Net increase in cash and cash equivalents and restricted cash	$	18,740		$	7,784		$	(8,790	)	$	66,165		$	83,899

	For the Six Months Ended June 30, 2018
	Fortress(1)			Avenue			Checkpoint			Mustang			Total
($ in thousands)
Statement of cash flows data:
Total cash (used in)/provided by:
Operating activities	$	(18,425	)	$	(12,842	)	$	(11,738	)	$	(8,921	)	$	(51,926	)
Investing activities		462			10,000			-			(14,491	)		(4,029	)
Financing activities		21,386			-			20,817			181			42,384
Net increase in cash and cash equivalents and restricted cash	$	3,423		$	(2,842	)	$	9,079		$	(23,231	)	$	(13,571	)

Note 1: Includes Fortress and non-public subsidiaries

Operating Activities

Net cash used in operating activities decreased $1.7 million from the six months ended June 30, 2018, compared to the six months ended June 30, 2019. The decrease is due to the decrease of $21.2 million in net loss from continuing operations, primarily offset by the gain from the deconsolidation of Caelum of $18.5 million, a decrease in the fair value of investment of $0.8 million, a decrease in stock-based compensation expense of $1.3 million, and a $1.7 million increase in depreciation and amortization expense.

Investing Activities

Net cash provided by investing activities increased $27.6 million from the six months ended June 30, 2018, compared to the six months ended June 30, 2019. The increase is primarily due to $13.1 million received from the sale of National, a decrease in the purchase of short-term investments of $30.0 million, offset by the $18.4 million redemption of certificates of deposit held by Mustang, a decrease of $3.7 million in the purchase of property and equipment as the build-out of the cell processing facility in Worcester, Massachusetts by Mustang slows, $1.2 million decrease in cash due to deconsolidation of Caelum, as well as a decrease of $0.1 million in funds used to purchase research and development licenses.

47

Financing Activities

Net cash provided by financing activities was $115.0 million for the six months ended June 30, 2018, compared to $42.4 million of net cash provided by financing activities for the six months ended June 30, 2019. During the six months ended June 30, 2019, net proceeds from partners’ offerings were $61.2 million, and net proceeds from Mustang’s Horizon Notes was $14.8 million. Additionally, $1.2 million was paid in Preferred A dividends, and $13.9 million was received in net proceeds from the Company’s at-the-market offering and $26.4 million was received in net proceeds from partner companies’ at-the-market offerings.

Off-Balance Sheet Arrangements

We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

Market risk represents the risk of loss that may result from the change in value of financial instruments due to fluctuations in their market price. Market risk is inherent in all financial instruments. Market risk may be exacerbated in times of trading illiquidity when market participants refrain from transacting in normal quantities and/or at normal bid-offer spreads. Our exposure to market risk is directly related to derivatives, debt and equity linked instruments related to our financing activities.

Our assets and liabilities are denominated in U.S. dollars. Consequently, we have not considered it necessary to use foreign currency contracts or other derivative instruments to manage changes in currency rates. We do not now, nor do we plan to, use derivative financial instruments for speculative or trading purposes. However, these circumstances might change.

The primary quantifiable market risk associated with our financial instruments is sensitivity to changes in interest rates. Interest rate risk represents the potential loss from adverse changes in market interest rates. We use an interest rate sensitivity simulation to assess our interest rate risk exposure. For purposes of presenting the possible earnings effect of a hypothetical, adverse change in interest rates over the 12-month period from our reporting date, we assume that all interest rate sensitive financial instruments will be impacted by a hypothetical, immediate 100 basis point increase in interest rates as of the beginning of the period. The sensitivity is based upon the hypothetical assumption that all relevant types of interest rates that affect our results would increase instantaneously, simultaneously and to the same degree. We do not believe that our cash and equivalents have significant risk of default or illiquidity.

The sensitivity analyses of the interest rate sensitive financial instruments are hypothetical and should be used with caution. Changes in fair value based on a 1% or 2% variation in an estimate generally cannot be extrapolated because the relationship of the change in the estimate to the change in fair value may not be linear. Also, the effect of a variation in a particular estimate on the fair value of financial instruments is calculated independent of changes in any other estimate; in practice, changes in one factor may result in changes in another factor, which might magnify or counteract the sensitivities. In addition, the sensitivity analyses do not consider any action that we may take to mitigate the impact of any adverse changes in the key estimates.

Based on our analysis, for the years ended December 31, 2017, December 31, 2018 and for the interim period through June 30, 2019, we determined the effect of a 100+1- basis point change in interest rates on the value of our financial instruments and the resultant effect on our net loss to be immaterial.

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 June 30, 2019, 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.

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Changes in Internal Control over Financial Reporting

No change in internal control over financial reporting occurred during the most recent quarter with respect to our operations, which materially affected, or is reasonable likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Investing in our Common Stock, Series A Preferred Stock or any other type of equity or debt securities (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 Annual Report on Form 10-K 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 partners and affiliates Checkpoint, Mustang, and Avenue 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 Checkpoint, Mustang or Avenue 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 partners and affiliates such that, if any of the negative outcomes associated with any such risk is experienced by one of our partners or affiliates, the value of Fortress’ holdings in such partner or affiliate (if any) may decline.

Risks Related to our Growth Strategy

If we acquire, enter into joint ventures with or obtain a controlling interest in companies in the future, it could adversely affect our operating results and the value of our Securities, 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 investments, 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.

If we or certain of our partner companies cannot innovate and develop products and services and/or commercialize biopharmaceutical products or grow our and their respective businesses, we may not be able to generate revenue.

Our growth strategy also depends on our ability to generate revenue. If we cannot innovate and develop products and services or commercialize future biopharmaceutical products or grow their respective businesses, we may not be able to generate revenue growth as anticipated.

We may not be able to generate returns for our investors if certain of our partners or affiliates, several of which have limited or no operating history, no commercialized revenue generating products, and are 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 affiliated partners, which at the time of investment often have limited or no operating history, 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 partner companies to innovate, in-license, acquire or invest in successful biopharmaceutical products, develop financial services and/or acquire companies in increasingly competitive and highly regulated markets. If certain of our partner companies do not successfully obtain additional third-party financing to commercialize products, successfully acquire companies, as applicable, the value of our businesses and our ownership stakes in our partner companies may be materially adversely affected.

If we cannot continue to fund our research and development programs, we may be required to reduce product development, which will adversely impact our growth strategy.

Our research and development (“R&D”) programs will require substantial additional capital to conduct research, preclinical testing and clinical trials, establish pilot scale and commercial scale manufacturing processes and facilities, and establish and develop 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 stock 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.

Collaborative relationships with third parties could cause us to expend significant resources and incur substantial business risk with no assurance of financial return.

We anticipate substantial reliance upon strategic collaborations for marketing and commercializing our existing product candidates 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 collaborations based upon their assessment of our financial, regulatory or intellectual property positions. In addition, there has been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. 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.

As we continue to execute our growth strategy, we may be subject to further government regulation which would adversely affect our operations.

If we engage in business combinations and other transactions that result in holding passive 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.

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.

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.

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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 current good manufacturing practices (“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 off 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.

Certain of our officers and directors serve in similar roles at our partners, affiliates, related parties and/or other entities with which we transact business or in which we hold significant minority ownership positions; ongoing and future relationships and transactions between these parties could result in conflicts of interest.

We share directors and/or officers with certain of our partners, affiliates, related parties and/or 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 may nonetheless arise. The existence and consequences of such potential conflicts could expose us to lost profits, claims by our investors and creditors, and harm to our results of operations.

Risks Related to Our Biopharmaceutical Business and Industry

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We are an early-stage company with limited operating history on which stockholders can base an investment decision, and we rely heavily on third parties for the development and manufacturing of their products and product candidates.

We are primarily an early-stage biopharmaceutical company and certain of our partners and affiliates, on whose successes we largely rely, are also early-stage biopharmaceutical companies with limited operating histories. To date, we have engaged primarily in acquisition, evaluative and R&D activities and have not generated any revenues from product sales (except through Journey Medical Corporation). We have incurred significant net losses since our inception. As of June 30, 2019, we had an accumulated deficit of approximately $408.0 million. 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 pre-commercial 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 require us to perform or contract 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 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. Each of these requirements will require substantial time, effort and financial resources.

If we are unable to establish or maintain sales and marketing capabilities or fail to enter into agreements with third parties to market, distribute and sell products that may be successfully developed, we may not be able to effectively market and sell products and generate product revenue.

We do not currently have the infrastructure for the sales, marketing and distribution of any of our product candidates (except for that which exists through Journey Medical Corporation), and we must build and maintain such infrastructures or make arrangements with third parties to perform these functions in order to commercialize any products that we may successfully develop. The establishment and development of a sales force, either by us or certain of our partners, or the establishment of a contract sales force to market any products for which we may 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 arrangements with third parties on commercially reasonable terms, or at all.

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If any of our product candidates that are successfully developed do not achieve broad market acceptance among physicians, patients, healthcare payors and the medical community, the revenues that any such product candidates generate from sales will be limited.

Even if our product candidates receive regulatory approval, which may not occur, they may not gain market acceptance among physicians, patients, healthcare payors and the medical community. Coverage and reimbursement of our product candidates by third-party payors, including government payors, generally is also 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 product candidate 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 product candidates over alternative treatments;

• the safety of product candidates seen in a broader patient group, including its use outside the approved indication;

• the cost 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 our product candidates;

• 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.

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.

Reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our products profitably.

We intend to seek approval to market our future products 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 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 that use of a product is:

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• a covered benefit under its health plan;

• safe, effective and medically necessary;

• appropriate for the specific patient;

• cost-effective; and

• experimental or investigational.

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 products 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.

In both the United States and certain foreign countries, there have been a number of legislative and regulatory changes to the healthcare system that could impact our ability to sell our products profitably. In particular, the Medicare Modernization Act of 2003 revised the payment methodology for many products reimbursed by Medicare, resulting in lower rates of reimbursement for many types of drugs, and added a prescription drug benefit to the Medicare program that involves commercial plans negotiating drug prices for their members. Since 2003, there have been a number of other legislative and regulatory changes to the coverage and reimbursement landscape for pharmaceuticals.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, collectively, the “ACA,” was enacted in 2010 and made significant changes to the United States’ healthcare system. The ACA and any revisions or replacements of that Act, any substitute legislation, and other changes in the law or regulatory framework could have a material adverse effect on our business.

Among the provisions of the ACA of importance to our potential product candidates are:

• an annual, nondeductible fee on any entity that manufactures, or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

• an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13.0% of the average manufacturer price for branded and generic drugs, respectively;

• expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for non-compliance;

• a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;

• extension of a manufacturer’s Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

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• expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 138% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;

• expansion of the entities eligible for discounts under the 340B Drug Pricing Program;

• the new requirements under the federal Open Payments program and its implementing regulations;

• a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;

• a new regulatory pathway for the approval of biosimilar biological products, all of which will impact existing government healthcare programs and will result in the development of new programs; and

• a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

The Supreme Court upheld the ACA in the main challenge to the constitutionality of the law in 2012. Specifically, the Supreme Court held that the individual mandate and corresponding penalty was constitutional because it would be considered a tax by the federal government. The Supreme Court also upheld federal subsidies for purchasers of insurance through federally facilitated exchanges in a decision released in June 2015.

President Trump ran for office on a platform that supported the repeal of the ACA, and one of his first actions after his inauguration was to sign an Executive Order instructing federal agencies to waive or delay requirements of the ACA that impose economic or regulatory burdens on states, families, the health-care industry and others. Modifications to or repeal of all or certain provisions of the ACA have been attempted in Congress as a result of the outcome of the recent presidential and congressional elections, consistent with statements made by the incoming administration and members of Congress during the presidential and congressional campaigns and following the election.

In January 2017, Congress voted to adopt a budget resolution for fiscal year 2017, or the Budget Resolution, that authorizes the implementation of legislation that would repeal portions of the ACA. The Budget Resolution is not a law. However, it is widely viewed as the first step toward the passage of legislation that would repeal certain aspects of the ACA. In March 2017, following the passage of the budget resolution for fiscal year 2017, the United States House of Representatives passed legislation known as the American Health Care Act of 2017, which, if enacted, would amend or repeal significant portions of the ACA. Attempts in the Senate in 2017 to pass ACA repeal legislation, including the Better Care Reconciliation Act of 2017, so far have been unsuccessful. At the end of 2017, Congress passed the Tax Cuts and Jobs Act, which repealed the penalty for individuals who fail to maintain minimum essential health coverage as required by the ACA. Following this legislation, Texas and 19 other states filed a lawsuit alleging that the ACA is unconstitutional as the individual mandate was repealed, undermining the legal basis for the Supreme Court’s prior decision. On December 14, 2018, Texas federal district court judge Reed O’Connor issued a ruling declaring that the ACA in it is entirety is unconstitutional. While this decision has no immediate legal effect on the ACA and its provisions, this lawsuit is ongoing and the outcome through the appeals process may have a significant impact on our business.

The Bipartisan Budget Act of 2018, the “BBA,” which set government spending levels for Fiscal Years 2018 and 2019, revised certain provisions of the ACA. Specifically, beginning in 2019, the BBA increased manufacturer point-of-sale discounts off negotiated prices of applicable brand drugs in the Medicare Part D coverage gap from 50% to 70%, ultimately increasing the liability for brand drug manufacturers. Further, this mandatory manufacturer discount applied to biosimilars beginning in 2019.

The 116th Congress has explored legislation intended to address the cost of prescription drugs. Notably, the major committees of jurisdiction in the Senate (Finance Committee, Health, Education, Labor and Pensions Committee, and Judiciary Committee), have marked up legislation intended to address various elements of the prescription drug supply chain. Proposals include a significant overhaul of the Medicare Part D benefit design, addressing patent “loopholes”, and efforts to cap the increase in drug prices. The House Energy and Commerce Committee approved drug-related legislation intended to increase transparency of drug prices and also curb anti-competitive behavior in the pharmaceutical supply chain. In addition, the House Ways & Means Committee approved legislation intended to improve drug price transparency, including for drug manufacturers to justify certain price increases. While we cannot predict what proposals may ultimately become law, the elements under consideration could significantly change the landscape in which the pharmaceutical market operates.

The Trump Administration has also taken several regulatory steps to redirect ACA implementation. The Department of Health and Human Services (“HHS”) finalized Medicare fee-for-service hospital payment reductions for Part B drugs acquired through the 340B Drug Pricing Program. HHS also has signaled its intent to pursue reimbursement policy changes for Medicare Part B drugs as a whole that likely would reduce hospital and physician reimbursement for these drugs.

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HHS has made numerous other proposals aimed at lowering drug prices for Medicare beneficiaries and increasing price transparency. These proposals include giving Medicare Advantage and Part D plans flexibility in the availability of drugs in “protected classes,” more transparency in the cost of drugs, including the beneficiary’s financial liability, and less costly alternatives and permitting the use of step therapy as a means of prior authorization. HHS has also proposed requiring pharmaceutical manufacturers disclose the prices of certain drugs in direct-to-consumer television advertisements. The proposal related to protected classes has been withdrawn and the disclosure requirements have been rejected by the courts. In addition, a proposed rule that would have passed drug rebates to consumers at the point of sale also has been withdrawn. However, it appears the Trump Administration will continue to explore its authority to make regulatory changes to the pharmaceutical industry. For example, the Trump Administration released an Advance Notice of Proposed Rulemaking related to an international price index model. It is unclear what eventually will be proposed, but the President has alluded to the concept of “most favored nation” pricing with regards to U.S. drug purchasing. In addition, HHS, in conjunction with the FDA, announced that it will be exploring a reimportation pathway in certain instances and for certain drugs.

HHS also has taken steps to increase the availability of cheaper health insurance options, typically with fewer benefits and less generous coverage. The Administration has also signaled its intention to address drug prices and to increase competition, including by increasing the availability of biosimilars and generic drugs. As these are regulatory actions, a new administration could undo or modify these efforts.

There likely will continue to be legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare products and services. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

• the demand for any products for which we may obtain regulatory approval;

• our ability to set a price that we believe is fair for our products;

• our ability to generate revenues and achieve or maintain profitability;

• the level of taxes that we are required to pay; and

• the availability of capital.

In addition, governments may impose price controls, which may adversely affect our future profitability.

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 US and elsewhere will play a primary role in the recommendation and prescription of any 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 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;

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• 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 and chiropractors, 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. Data collection began on August 1, 2013 with requirements for manufacturers to submit reports to CMS by March 31, 2014 and 90 days after the end each subsequent calendar year. Disclosure of such information was made by CMS on a publicly available website beginning in September 2014; and

• 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.

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Failure to be included in formularies developed by managed care organizations and coverage by other organizations may negatively impact the utilization of our products, which could harm our market shares and could have a material adverse effect on our business and financial condition.

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 can be based on the prices and therapeutic benefits of the 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.

Most of our product candidates are at early stages of development and may not be successfully developed or commercialized.

Most of our existing product candidates remain in the early stages of development and will require substantial further capital expenditures, development, testing and regulatory clearances/approvals prior to commercialization. The development and regulatory approval processes take several years, and it is not likely that our product candidates, even if successfully developed and approved by the FDA, would be commercially available for several years. Of the large number of drugs in development, only a small percentage successfully completes the FDA regulatory approval process and is commercialized. Accordingly, even if we are able to obtain the requisite financing to fund development programs, we cannot assure you 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 in our Company.

Because we in-license the intellectual property needed to develop and commercialize products and product candidates from third parties, any dispute with the licensors or the 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 all 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;

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• 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.

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.

Product candidates that we advance into clinical trials may not receive regulatory approval.

Pharmaceutical development has inherent risks. We will be required to demonstrate through well-controlled clinical trials that product candidates are effective with a favorable benefit-risk profile for use in their target indications before seeking regulatory approvals for their commercial sale. Success in early clinical trials does not mean that later clinical trials will be successful, as product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through initial clinical testing. Also, we may need to conduct additional clinical trials that are not currently anticipated. Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results. As a result, product candidates that we advance into clinical trials may not receive regulatory approval.

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In addition, even if our product candidates were to obtain approval, regulatory authorities may approve any such product candidates or any future product candidate for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of these scenarios could compromise the commercial prospects for one or more of our current or future product candidates. The regulatory authority may also require the label to contain warnings, contraindications, or precautions that limit the commercialization of the product.

Any product candidates we advance into clinical development are subject to extensive regulation, which can be costly and time consuming, cause unanticipated delays or prevent the receipt of the required approvals to commercialize product candidates.

The clinical development, 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 such product candidate’s Biologics License Application (“BLA”) or New Drug Application (“NDA”) is approved by the FDA. The process of obtaining approval is expensive, often takes many years, and can vary substantially based upon the type, complexity and novelty of the products involved. In addition to significant clinical testing requirements, our ability to obtain marketing approval for product candidates depends on obtaining the final results of required non-clinical testing, including characterization of the manufactured components of our product candidates and validation of our manufacturing processes. The FDA may determine that our product manufacturing processes, testing procedures or facilities are insufficient to justify approval. Approval policies or regulations may change, and the FDA has substantial discretion in the pharmaceutical approval process, including the ability to delay, limit or deny approval of a product candidate for many reasons. Despite the time and expense invested in the clinical development of product candidates, regulatory approval is never guaranteed.

The FDA and other regulatory agencies can delay, limit or deny approval of a product candidate for many reasons, including, but not limited to:

• the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

• our inability to demonstrate to the satisfaction of the FDA that a product candidate is safe and effective for an indication;

• the FDA may not accept 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 results of clinical trials may not meet the level of statistical significance required by the FDA for approval;

• the FDA may disagree with the interpretation of data from preclinical studies or clinical trials;

• the FDA may not approve the manufacturing processes or facilities or those of third-party manufacturers with which we or our respective collaborators currently contract for clinical supplies and plan to contract for commercial supplies; or

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• the approval policies or regulations of the FDA may significantly change in a manner rendering the clinical data insufficient for approval or the product characteristics or benefit-risk profile unfavorable for approval.

With respect to foreign markets, approval procedures vary among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative review periods and agreements with pricing authorities. In addition, recent events raising questions about the safety of certain marketed pharmaceuticals 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 would prevent us from commercializing our product candidates.

Any product candidate we advance into clinical trials may cause unacceptable adverse events or have other properties that may delay or prevent their regulatory approval or commercialization or limit their commercial potential.

Unacceptable adverse events caused by any of our product candidates that we advance into clinical trials could cause regulatory authorities to interrupt, delay or stop clinical trials and could result in the denial of regulatory approval by the FDA or other regulatory authorities for any or all targeted indications and markets. This, in turn, could prevent us from commercializing the affected product candidate and generating revenues from its sale. For example, in Phase 1/2 oncology trials, dose limiting toxicity (“DLT”) stopping rules are commonly applied.

We have not completed testing for any of our product candidates for the indications for which we intend to seek product approval in humans, and we currently do not know the extent of the adverse events, if any, that will be observed in patients who receive any of our product candidates. If any of our product candidates causes unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such products, or, if such product candidates are approved for marketing, future adverse events could cause us to withdraw such products from the market.

Delays in the commencement of our clinical trials could result in increased costs and delay our ability to pursue regulatory approval.

The commencement of clinical trials can be delayed for a variety of reasons, including, but not necessarily limited to, delays in:

• obtaining regulatory clearance/approval to commence a clinical trial;

• identifying, recruiting and training suitable clinical investigators;

• reaching agreements on acceptable terms with prospective clinical research organizations (“CROs”) and trial sites, the terms of which can be subject to extensive negotiation, may be subject to 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 Institutional Review Board (“IRB”) or ethics committee approval to conduct a clinical trial at a prospective site;

• identifying, recruiting and enrolling patients to participate in a clinical trial; or

• retaining (or replacing) patients who have initiated a clinical trial but who may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process, personal issues, or other reasons.

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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 denial of regulatory approval of a product candidate.

Suspensions or delays in the completion of clinical testing could result in increased costs and delay or prevent our ability to complete development of that product or generate product revenues.

Once a clinical trial has begun, patient recruitment and enrollment may be slower than we anticipate. 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 issues or any determination that the clinical trial presents unacceptable health risks; and

• lack of adequate funding to continue the clinical trial.

Changes in regulatory requirements and guidance also may occur, and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit clinical trial protocols to IRBs for re-examination, which may in turn impact the costs and timing of, and the likelihood of successfully completing, a clinical trial. If we experience delays in the completion of, or if we must suspend or terminate, any clinical trial of any product candidate, 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 as a result. In addition, many of these factors may also ultimately lead to the denial of regulatory approval of a product candidate.

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 labeling claims necessary or desirable for the promotion of 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, 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 we or others identify adverse side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be 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 currently rely predominantly on third parties to manufacture our preclinical and clinical pharmaceutical supplies and expect to continue to rely heavily on them and other contractors to produce commercial supplies of our products, and our 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 with 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 a 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 or pass any regulatory agency inspection could significantly impair our abilities to develop and commercialize our products and product candidates.

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We also rely on third-party manufacturers to purchase from third-party suppliers the materials 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 any 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. 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 commercially manufacture our products internally, if approved, 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 products that may be approved, may adversely affect our abilities to develop and commercialize products in a timely or cost-effective manner, or at all.

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 do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves. We intend to, and do, use CROs to conduct planned clinical trials and will, and do, rely upon such CROs, as well as medical institutions, clinical investigators and consultants, to conduct our trials in accordance with specified clinical protocols. 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 and 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, 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 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.

We rely on clinical and pre-clinical data and results obtained by third parties that could ultimately prove to be inaccurate or unreliable.

As part of the strategy we implement to mitigate development risk, we seek to develop product candidates with well-studied mechanisms of action, and we intend to utilize biomarkers 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 or not applicable to our product candidates, we could make inaccurate assumptions and conclusions about our product candidates, and our research and development efforts could be compromised or called into question during the review of any marketing applications that we submit.

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If our competitors develop treatments for any of the target indications for which our product candidates are being developed and those competitor products are approved more quickly, marketed more successfully or demonstrated to be more effective, the commercial opportunity with respect to that product candidate will be reduced or eliminated.

We operate in highly competitive segments of the biopharmaceutical market and face competition from many different sources, including commercial pharmaceutical enterprises, academic institutions, government agencies, and private and public research institutions. Our product candidates, if successfully developed and approved, will compete with established therapies, as well as new treatments that may be introduced by our competitors. Many of our competitors have significantly greater financial, product development, manufacturing and marketing resources than we do. Large pharmaceutical companies have extensive experience in clinical testing and obtaining regulatory approval for drugs. In addition, many universities and private and public research institutes are active in clinical and pre-clinical research, some in direct competition with us. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. New developments, including the development of other biological and pharmaceutical technologies and methods of treating disease, occur in the pharmaceutical and life sciences industries at a rapid pace. Developments by competitors may render our product candidates obsolete or noncompetitive. 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.

We may incur substantial product liability or indemnification claims relating to the clinical testing of product candidates.

We face an inherent risk of product liability exposure related to the testing of product candidates in human clinical trials, and claims could be brought against us if use or misuse of one of our product candidates causes, or merely appears to have caused, personal injury or death. While we have and/or intend to maintain product liability insurance relating to clinical trials, that coverage may not be sufficient to cover potential claims, and we may be unable to maintain such insurance. Any claims against us, regardless of their merit, could severely harm our financial condition, strain management and other resources or destroy the prospects for commercialization of the product which is the subject of any such claim. We are unable to predict if we will be able to obtain or maintain product liability insurance for any products that may be approved for marketing. 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.

We may use biological materials and hazardous materials, and any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly.

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. 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.

Our success depends upon our abilities to obtain and maintain intellectual property rights and take advantage of certain regulatory market exclusivity periods.

Our success depends, in large part, on our ability to obtain patent protection for 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 or our partners 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 us or our partners, 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

• 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. For example, on September 16, 2011, the Leahy-Smith America Invents Act (the “Leahy-Smith Act”), was signed into law, and includes a number of significant changes to U.S. patent law. These include changes to transition from a “first-to-invent” system to a “first-to-file” system and to the way issued patents are challenged. The formation of the Patent Trial and Appeal Board now provides a quicker and less expensive process for challenging issued patents. These changes may favor larger and more established companies that have more resources to devote to patent application filing and prosecution. The USPTO implemented the America Invents Act on March 16, 2013.

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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 licensor’ 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.

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, as initially proposed by President Obama. 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.

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/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;

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• abandon an infringing product candidate or redesign products or processes to avoid infringement;

• 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 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 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.

We may be subject to claims that our consultants or independent contractors have wrongfully used or disclosed to us alleged trade secrets of their other clients or former employers.

As is common in the biopharmaceutical industry, we engage the services of consultants to assist in the development of product candidates. Many of these consultants were previously employed at, or may have previously been or are currently providing consulting services to, other pharmaceutical companies, including our competitors or potential competitors. We may become subject to claims related to whether these consultants have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. 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.

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 is approved.

Any product for which we obtain marketing approval, along with the manufacturing processes and facilities, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of and 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 of a product, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to the 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:

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• 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;

• withdrawal of the products from the market;

• refusal to approve pending applications or supplements to approved applications that we submit;

• recalls;

• 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.

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 lose marketing approval for products when and if any of them are approved, resulting in decreased revenue from milestones, product sales or royalties.

We rely on information technology, and any internet or internal computer system failures, inadequacies, interruptions or compromises of our systems or the security of confidential information could damage our reputation and harm our business.

Although a significant portion of our business is conducted using traditional methods of contact and communications such as face-to-face meetings, our business is increasingly dependent on critical, complex and interdependent information technology systems, including internet-based systems, to support business processes as well as internal and external communications. We could experience system failures and degradations in the future. We also rely on space and office-sharing arrangements that impose additional burdens on our ability to maintain the security of confidential information. We cannot assure you that we will be able to prevent an extended and/or material system failure or the unintentional disclosure of confidential information if any of the following or similar events occurs:

• human error;

• subsystem, component, or software failure;

• a power or telecommunications failure;

• hacker attacks, cyber-attacks, software viruses, security breaches, unauthorized access or intentional acts of vandalism; or

• terrorist acts or war.

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If any of the foregoing events were to occur, our business operations could be disrupted in ways that would require the incurrence of substantial expenditures to remedy. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data and applications, or inappropriate/unauthorized disclosure of confidential or proprietary information (including trade secrets), we could incur liability and our business and financial condition could be harmed.

The occurrence of a catastrophic disaster could damage our facilities beyond insurance limits or we could 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, floods and similar events, as well as from accidental loss or destruction. If any disaster were to occur, our ability to operate our business could be seriously impaired. We have property, liability and business interruption insurance which 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.

We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad.

We cannot predict the likelihood, nature or extent of how government regulation that may arise from future legislation or administrative or executive action taken by the U.S. presidential administration may impact our business and industry. In particular, the U.S. President has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. Notably, on January 23, 2017, President Trump ordered a civilian hiring freeze for all executive departments and agencies, including the FDA, which prohibits the FDA from filling employee vacancies or creating new positions. Under the terms of the order, the freeze was to remain in effect until implementation of a plan to be recommended by the Director for the Office of Management and Budget (“OMB”) in consultation with the Director of the Office of Personnel Management, to reduce the size of the federal workforce through attrition. An under-staffed FDA could result in delays in FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance or implement or enforce regulatory requirements in a timely fashion or at all. This hiring freeze was lifted later in 2017. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA, which requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. It is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

In addition on October 12, 2017, the President released an Executive Order intended to promote health care choices and competition and on June 24, 2019, the President released an Executive Order intended to improve price transparency and quality transparency. These may push HHS, FDA, and other relevant agencies to engage in rulemaking that may impact the pharmaceutical industry.

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 and 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. 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.

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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 critical FDA employees and stop critical 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 would result in delayed milestone revenues and materially harm our operations of business.

Risks Relating to our Finances, Capital Requirements and Other Financial Matters

We are an early-stage company with a history of operating losses that is expected to continue, and we are unable to predict the extent of future losses, whether we will generate significant or any revenues or whether we will achieve or sustain profitability. We have also historically financed 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.

We are an early-stage company and our prospects must be considered in light of the uncertainties, risks, expenses and difficulties frequently encountered by companies in their early stages of operations. We continue to generate operating losses in all periods including losses from continuing operations of approximately $130.8 million and $97.5 million for the years ended December 31, 2018 and 2017, respectively. At June 30, 2019, we had an accumulated deficit of approximately $408.0 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 partners and affiliates 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 risks and uncertainties associated with product development, we are unable to predict the extent of any future losses, whether we will ever generate significant or any revenues or if we will ever achieve or sustain profitability.

At June 30, 2019, the total amount of debt outstanding was $83.7 million. If we default on our obligations, the holders of our debt may declare the outstanding amounts immediately payable together with accrued interest. If an event of default occurs, we may not be able to cure it within any applicable cure period, if at all. If the maturity of our indebtedness is accelerated, we may not have sufficient funds available for repayment or we may not have the ability 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 or satisfy capital needs or to engage in, expand or pursue our business activities. Such restrictive covenants 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.

To service our debt securities, which includes series of 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 debt securities 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 common stock and/or debt securities to decline.

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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, 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.

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 have in the past acted, do currently act, and are likely to continue in the future to act as guarantor and/or indemnitor of the obligations, actions or inactions of certain of our subsidiaries and affiliated companies; depending on the terms of such arrangements, we may be contractually obligated to pay substantial amounts to third parties based on the actions or inactions of our subsidiaries and/or affiliates.

We have in the past acted, do currently act, and are likely to continue in the future to act as guarantor of the debt obligations of several of our subsidiaries and/or affiliates, including Aevitas, Cellvation, Cyprium and Tamid. Depending on the terms of such guaranty arrangements, we may be contractually obligated to pay substantial amounts to third parties lenders based on the actions or inactions of such subsidiaries and/or affiliates, which would result in a reduction of the amount of our cash available for other purposes and may have a material adverse effect on the price of our Securities.

We also have in the past acted, do currently act, and are likely to continue in the future to act as indemnitor of potential losses that may be experienced by one or more of our affiliated companies and/or their partners or investors. In particular, under that certain Indemnification Agreement, dated as of November 12, 2018 (the “Indemnification Agreement”), we indemnify InvaGen Pharmaceuticals Inc. (“InvaGen”) and its affiliates for any losses they may sustain in connection with inaccuracies that may appear in the representations and warranties that our partner company Avenue made to InvaGen in that certain Stock Purchase and Merger Agreement, dated as of November 12, 2018 (the “Avenue SPMA”). The maximum amount of indemnification we may have to provide under the Indemnification Agreement is $35 million, and such obligation terminates upon the consummation of the Merger Transaction (as defined in the Avenue SPMA). In the event of payment by us of any such indemnification amount, we would be able to recoup such amounts (other than our pro rata share of the indemnification as a shareholder in Avenue) from the Merger Transaction proceeds, but if the Merger Transaction never occurs, we would have no means of recouping such previously-paid indemnification amounts. If we become obligated to pay all or a portion of such indemnification amounts (regardless of whether or not we are partially reimbursed out of the proceeds of the Merger Transaction), our business and the market value of our common stock and/or debt securities may be materially adversely impacted.

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We have in the past and are likely in the future to undergo collaborations and/or divestitures with respect to certain of our assets and subsidiaries, some of which may be material and/or transformative, which could adversely affect our business, prospects and opportunities for growth.

We have in the past completed a number of partnerships and/or contingent sales of our assets and subsidiaries, including an equity investment and contingent sale between Avenue and InvaGen and an equity investment and option transaction between Caelum and Alexion Pharmaceuticals, Inc. Each of these transactions has been time-consuming and has diverted management’s attention. As a result of these contingent sales (and other similar transactions we may in the future 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. For example, in connection with execution of the Avenue SPMA, we signed a Restrictive Covenant Agreement, which prohibits us from, directly or indirectly, engaging in the business of hospital administered pain management anywhere in the world other than Canada, Central America or South America for a period of five years after the earlier of the termination of the Avenue SPMA or consummation of the Merger Transaction (as defined in the Avenue SPMA).

In addition, in connection with any such transaction that involves a (contingent or non-contingent) sale of one of our assets or subsidiaries, we may surrender our ability to realize long-term value from such asset or subsidiary, in the form of foregone 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 subsidiary is granted FDA approval for commercialization following the execution of documentation governing the sale by us of such asset or subsidiary, the transferee of such asset or subsidiary 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 subsidiaries, 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. Any collaboration or divestiture we pursue, whether we are able to complete it or not, may be complex, time consuming and expensive, may divert the management’s attention, 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 common stock.

As a result of these factors, any collaboration or divestiture (whether or not completed) 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 common shares and/or debt securities to decline.

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 and 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. 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.

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 critical FDA employees and stop critical 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 would result in delayed milestone revenues and materially harm our operations of business.

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The occurrence of a catastrophic disaster could damage our facilities beyond insurance limits or we could 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, floods and similar events, as well as from accidental loss or destruction. If any disaster were to occur, our ability to operate our business could be seriously impaired. We have property, liability and business interruption insurance which 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.

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 operations have consumed substantial amounts of cash since inception. During the years ended December 31, 2018 and 2017 we incurred R&D expenses of approximately $83.3 million and $48.3 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. 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. 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.

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 equity securities, the share ownership of existing stockholders will be diluted. Any future debt financings may involve covenants that restrict our operations, including limitations on 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.

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.

Pursuant to Section 404 of the Sarbanes Oxley Act of 2002 and related rules, our management is required to report on, and our independent registered public accounting firm is required to attest to, the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, we may need to further upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. If material weaknesses or deficiencies in our internal controls exist and go undetected, our financial statements could contain material misstatements that, when discovered in the future could cause us to fail to meet our future reporting obligations and cause the price of our Securities to decline.

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Future revenue based on sales of our dermatology products, especially Targadox and Exelderm®, 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 dermatology products through our partner company Journey Medical Corporation. Any setback that may occur with respect to such products, in particular Targadox and Exelderm®, could significantly impair our operating results and/or reduce our revenue and the market prices of our Securities. Setbacks for such products could include, but are not necessarily limited to problems with shipping, distribution, demand, manufacturing, product safety, marketing, government regulation or reimbursement, licenses and approvals, intellectual property rights, competition with existing or new products, physician or patient acceptance of the products, as well as higher than expected total rebates, returns or rebates. These products also are or may become subject to third party generic competition.

Risks Associated with our Capital Stock

Some of our executives, directors and principal stockholders can control our direction and policies, and their interests may be adverse to the interests of our other stockholders.

At June 30, 2019, Lindsay A. Rosenwald, M.D. our Chairman, President and Chief Executive Officer, beneficially owned 12.1% of our issued and outstanding capital stock, including 98,164 shares of our Series A Stock. At June 30, 2019, Michael S. Weiss, our Executive Vice Chairman, Strategic Development, beneficially owned 13.8% of our issued and outstanding capital stock. By virtue of their holdings and membership on our Board of Directors, Dr. Rosenwald and Mr. Weiss may individually influence our management and our affairs and may make it difficult for us to consummate corporate transactions such as mergers, consolidations or the sale of all or substantially all of our assets that may be favorable from our standpoint or that of our other stockholders.

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, such as those caused by the U.S. presidential administration change;

• variations in our anticipated or actual operating results; and

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• 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 of a substantial number of shares of our Common Stock, or the perception that such sales may occur, may adversely impact the price of our Common Stock.

Almost all of the 71.1 million outstanding shares of our Common Stock, inclusive of outstanding equity awards, as of June 30, 2019 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. In addition, pursuant to our current shelf registration statement on Form S-3, from time to time we may issue and sell shares of our Common Stock having an aggregate offering price of up to $6.8 million as of June 30, 2019. Any sale of a substantial number of shares of our Common Stock could cause a drop in the trading price of our Common Stock on the Nasdaq Stock Market.

We have never paid and currently do not intend to pay cash dividends in the near future, except for the dividend we pay on shares of our Series A Preferred Stock. As a result, capital appreciation, if any, will be your sole source of gain.

We have never paid cash dividends on any of our or their common stock, or made stock dividends, except for the dividend we pay 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 of stock dividends. Equally, each of our affiliates and partners 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 affiliates/partners 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 your sole source of gain for the foreseeable future.

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 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.

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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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Index

Exhibit Number	Exhibit Title
10.1	At Market Issuance Sales Agreement, among the Company and Cantor Fitzgerald & Co., Oppenheimer & Co. Inc., H.C. Wainwright & Co., LLC, JonesTrading Institutional Services LLC and B. Riley FBR, Inc. dated June 28, 2019, incorporated by reference herein from the Company’s Form S-3/A (Registration No. 333-226089) filed on June 28, 2019.
31.1	Certification of Chairman, President and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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.
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.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

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101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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.

August 9, 2019	FORTRESS BIOTECH, INC.
	By:	/s/ Lindsay A. Rosenwald, M.D.
		Lindsay A. Rosenwald, M.D., Chairman, President and Chief Executive Officer (Principal Executive Officer)
August 9, 2019	By:	/s/ Robyn M. Hunter
		Robyn M. Hunter Chief Financial Officer (Principal Financial Officer)

78

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lindsay A. Rosenwald, M.D., certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q of Fortress Biotech, Inc. (the “Registrant”);

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

(4) The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

(5) The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Dated: August 9, 2019	By:	/s/ Lindsay A. Rosenwald, M.D.
		Lindsay A. Rosenwald, M.D.
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robyn M. Hunter, certify that:

(1) I have reviewed this Quarterly Report on Form 10-Q of Fortress Biotech, Inc. (the “Registrant”);

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

(4) The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15 (f)) for the Registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

(5) The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls over financial reporting.

Dated: August 9, 2019	By:	/s/ Robyn M. Hunter
		Robyn M. Hunter
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Fortress Biotech, Inc. (the “Company”) for the quarterly period ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Lindsay A. Rosenwald, M.D., Chairman, President, and Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for, the periods presented in the Report.

Dated: August 9, 2019	By:	/s/ Lindsay A. Rosenwald, M.D.
		Lindsay A. Rosenwald, M.D.
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Fortress Biotech, Inc. (the “Company”) for the quarterly period ended June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robyn M. Hunter, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for, the periods presented in the Report.

Dated: August 9, 2019	By:	/s/ Robyn M. Hunter
		Robyn M. Hunter
		Chief Financial Officer
		(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Aug. 06, 2019
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	Fortress Biotech, Inc.
Entity Central Index Key	0001429260
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Trading Symbol	FBIO
Entity Common Stock, Shares Outstanding		69,042,411
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents	$ 149,407	$ 65,508
Accounts receivable (net of allowance of 4250 and $0 at June 30,2019 and December 31,2018, respectively)	3,104	5,498
Short-term investments (certificates of deposit)	5,000	17,604
Inventory	732	678
Other receivables - related party	1,850	2,095
Prepaid expenses and other current assets	3,418	6,735
Current assets held for sale		13,089
Total current assets	163,511	111,207
Property and equipment, net	12,023	12,019
Operating lease right-of-use asset, net	22,255
Restricted cash	16,074	16,074
Long-term investment, at fair value	11,193
Intangible asset	971	1,417
Other assets	1,237	276
Total assets	227,264	140,993
Current liabilities
Accounts payable and accrued expenses	24,260	34,067
Accounts payable and accrued expenses - related party		149
Interest payable	1,022	1,232
Interest payable - related party	94	97
Notes payable, short-term - related party (net of debt discount of $104 and $336 at June 30, 2019 and December 31, 2018, respectively)	9,396	9,164
Partner company convertible note, short-term, at fair value		9,914
Operating lease liabilities - short-term	1,626
Derivative warrant liability		991
Total current liabilities	36,398	55,614
Notes payable, long-term (net of debt discount of $6,435 and $4,567 at June 30, 2019 and December 31, 2018, respectively)	74,307	60,425
Operating lease liabilities - long-term	24,510
Other long-term liabilities	2,229	5,211
Total liabilities	137,444	121,250
Stockholders' equity
Preferred stock, $.001 par value, 15,000,000 authorized, 5,000,000 designated Series A shares, 1,000,000 shares issued and outstanding as of June 30, 2019 and December 31, 2018; liquidation value of $25.00 per share	1	1
Common stock, $.001 par value, 100,000,000 shares authorized, 68,138,203 and 57,845,447 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively	68	58
Common stock issuable, 317,804 and 744,322 shares as of June 30, 2019 and December 31, 2018, respectively	490	659
Additional paid-in-capital	439,295	397,408
Accumulated deficit	(407,980)	(396,274)
Total stockholders' equity attributed to the Company	31,874	1,852
Non-controlling interests	57,946	17,891
Total stockholders' equity	89,820	19,743
Total liabilities and stockholders' equity	$ 227,264	$ 140,993

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Condensed Consolidated Balance Sheets
Allowance for Doubtful Accounts Receivable, Current	$ 250	$ 0
Debt Instrument, Unamortized Discount, Current	104	336
Debt Instrument, Unamortized Discount, Noncurrent	$ 6,435	$ 4,567
Preferred Stock, par value	$ 0.001	$ 0.001
Preferred Stock, shares authorized	15,000,000	15,000,000
Preferred Stock Shares Designated	5,000,000	5,000,000
Preferred Stock, shares issued	1,000,000	1,000,000
Preferred Stock, shares outstanding	100,000	100,000
Preferred Stock, Liquidation Preference Per Share	$ 25.00	$ 25.00
Common Stock, par value	$ 0.001	$ 0.001
Common Stock, shares authorized	100,000,000	100,000,000
Common Stock, shares issued	68,138,203	68,138,203
Common Stock, shares outstanding	57,845,447	57,845,447
Common Stock, Shares Subscribed but Unissued	317,804	744,322

XML

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenue
Product revenue, net	$ 8,199	$ 6,689	$ 14,324	$ 12,198
Revenue - from a related party	1,051	126	1,403	520
Net revenue	9,250	6,815	15,727	12,718
Operating expenses
Cost of goods sold - product revenue	2,386	1,668	4,270	3,140
Research and development	18,511	17,488	41,784	42,446
Research and development - licenses acquired	200	1	650	98
General and administrative	13,443	13,056	26,921	26,604
Total operating expenses	34,540	32,213	73,625	72,288
Loss from operations	(25,290)	(25,398)	(57,898)	(59,570)
Other income (expense)
Interest income	779	294	1,217	572
Interest expense and financing fee	(3,106)	(2,590)	(5,575)	(4,993)
Change in fair value of derivative liability		79		102
Change in fair value of subsidiary convertible note		(140)		110
Change in fair value of investments		(707)		(825)
Other loss		(333)		(333)
Gain on deconsolidation of Caelum	137		18,521
Total other income (expense)	(2,190)	(3,397)	14,163	(5,367)
Loss from continuing operations	(27,480)	(28,795)	(43,735)	(64,937)
Discontinued operations:
Loss from discontinued operations		(6,921)		(8,997)
Total loss from discontinued operations		(6,921)		(8,997)
Net loss	(27,480)	(35,716)	(43,735)	(73,934)
Less: net loss attributable to non-controlling interests	14,382	14,105	32,029	31,305
Net loss attributable to common stockholders	$ (13,098)	$ (21,611)	$ (11,706)	$ (42,629)
Loss from continuing operations per common share - basic and diluted	$ (0.51)	$ (0.66)	$ (0.86)	$ (1.51)
Loss from discontinued operations per common share - basic and diluted		(0.16)		(0.21)
Net loss per common share attributable to common stockholders - basic and diluted	$ (0.24)	$ (0.50)	$ (0.23)	$ (0.99)
Weighted average common shares outstanding - basic and diluted	53,726,125	43,377,629	51,130,977	42,948,780

XML

Condensed Consolidated Statement of Changes in Stockholders' Equity - USD ($) $ in Thousands	Series A Preferred Stock [Member]	Common Stock [Member]	Shares Issuable [Member]	Paid-In Capital [Member]	Accumulated Deficit [Member]	Non-Controlling Interests [Member]	Total
Balance at Dec. 31, 2017	$ 1	$ 51	$ 500	$ 364,148	$ (312,127)	$ 67,929	$ 120,502
Balance (in shares) at Dec. 31, 2017	1,000,000	50,991,285
Stock-based compensation expense				7,947			7,947
Issuance of restricted stock		$ 2		(2)
Issuance of restricted stock (in shares)		1,558,274
Issuance of common stock under ESPP				128			128
Issuance of common stock under ESPP (in shares)		43,707
Issuance of subsidiaries' common shares for license expenses				23			23
Issuance of common stock for at-the-market offering, net		$ 1		4,069			4,070
Issuance of common stock for at-the-market offering, net (in shares)		1,130,835
Preferred A dividends declared and paid				(1,172)			(1,172)
Partner company's offering, net				22,657			22,657
Common shares issuable for 2017 Subordinated Note Financing interest expense			489				489
Common shares issued for 2017 Subordinated Note Financing interest expense			(500)	989			489
Common shares issued for 2017 Subordinated Note Financing interest expense (in shares)		262,973
Common shares issued for Opus interest expense			287				287
Exercise of subsidiary's warrants for cash				181			181
At-the-market offering cost				(141)			(141)
2017 Preferred A offering cost adjustment				1,297			1,297
Disposal of National				13,442			13,442
Non-controlling interest in subsidiaries				(15,708)		15,708
Net loss attributable to non-controlling interest						(31,305)	(31,305)
Net income (loss) attributable to common stockholders					(42,629)		(42,629)
Balance at Jun. 30, 2018	$ 1	$ 54	776	397,858	(354,756)	52,332	96,265
Balance (in shares) at Jun. 30, 2018	1,000,000	53,987,074
Balance at Dec. 31, 2017	$ 1	$ 51	500	364,148	(312,127)	67,929	120,502
Balance (in shares) at Dec. 31, 2017	1,000,000	50,991,285
Net loss attributable to non-controlling interest							(57,789)
Balance at Dec. 31, 2018	$ 1	$ 58	659	397,408	(396,274)	17,891	19,743
Balance (in shares) at Dec. 31, 2018	1,000,000	57,845,447
Balance at Mar. 31, 2018	$ 1	$ 52	489	374,254	(333,145)	65,895	107,546
Balance (in shares) at Mar. 31, 2018	1,000,000	52,686,537
Stock-based compensation expense				3,152			3,152
Issuance of restricted stock		$ 1		(1)
Issuance of restricted stock (in shares)		85,834
Issuance of common stock under ESPP				128			128
Issuance of common stock under ESPP (in shares)		43,707
Issuance of subsidiaries' common shares for license expenses				1			1
Issuance of common stock for at-the-market offering, net		$ 1		3,751			3,752
Issuance of common stock for at-the-market offering, net (in shares)		1,066,038
Preferred A dividends declared and paid				(586)			(586)
Partner company's offering, net				1,813			1,813
Common shares issuable for 2017 Subordinated Note Financing interest expense			489				489
Common shares issued for 2017 Subordinated Note Financing interest expense			(489)	489
Common shares issued for 2017 Subordinated Note Financing interest expense (in shares)		104,958
Common shares issued for Opus interest expense			287				287
Exercise of subsidiary's warrants for cash				85			85
At-the-market offering cost				(135)			(135)
2017 Preferred A offering cost adjustment				1,297			1,297
Disposal of National				14,152			14,152
Non-controlling interest in subsidiaries				(542)		542
Net loss attributable to non-controlling interest						(14,105)	(14,105)
Net income (loss) attributable to common stockholders					(21,611)		(21,611)
Balance at Jun. 30, 2018	$ 1	$ 54	776	397,858	(354,756)	52,332	96,265
Balance (in shares) at Jun. 30, 2018	1,000,000	53,987,074
Balance at Dec. 31, 2018	$ 1	$ 58	659	397,408	(396,274)	17,891	19,743
Balance (in shares) at Dec. 31, 2018	1,000,000	57,845,447
Stock-based compensation expense				6,682			6,682
Issuance of restricted stock		$ 2		(2)
Issuance of restricted stock (in shares)		1,664,742
Issuance of common stock under ESPP				60			60
Issuance of common stock under ESPP (in shares)		54,221
Issuance of subsidiaries' common shares for license expenses			(164)	164
Issuance of common stock for at-the-market offering, net		$ 8		13,859			13,867
Issuance of common stock for at-the-market offering, net (in shares)		7,390,826
Preferred A dividends declared and paid				(1,172)			(1,172)
Partner company's offering, net				60,984			60,984
Partner company's at-the-market offering, net				26,339			26,339
Issuance of partner company warrants in conjunction with Horizon Notes				888			888
Common shares issuable for 2017 Subordinated Note Financing interest expense			490				490
Common shares issued for 2017 Subordinated Note Financing interest expense			(495)	979			484
Common shares issued for 2017 Subordinated Note Financing interest expense (in shares)		1,012,646
Common shares issuable for Opus interest expense			281				281
Common shares issued for Opus interest expense			(281)	341			60
Common shares issued for Opus interest expense (in shares)		170,321
Non-controlling interest in subsidiaries				(67,235)		67,235
Deconsolidation of Caelum non-controlling interest						4,849	4,849
Net loss attributable to non-controlling interest						(32,029)	(32,029)
Net income (loss) attributable to common stockholders					(11,706)		(11,706)
Balance at Jun. 30, 2019	$ 1	$ 68	490	439,295	(407,980)	57,946	89,820
Balance (in shares) at Jun. 30, 2019	1,000,000	68,138,203
Balance at Mar. 31, 2019	$ 1	$ 63	765	414,870	(394,882)	29,892	50,709
Balance (in shares) at Mar. 31, 2019	1,000,000	63,126,521
Stock-based compensation expense				3,373			3,373
Issuance of restricted stock (in shares)		55,417
Issuance of common stock under ESPP				60			60
Issuance of common stock under ESPP (in shares)		54,221
Issuance of common stock for at-the-market offering, net		$ 5		7,720			7,725
Issuance of common stock for at-the-market offering, net (in shares)		4,463,399
Preferred A dividends declared and paid				(586)			(586)
Partner company's offering, net				29,485			29,485
Partner company's at-the-market offering, net				25,984			25,984
Common shares issuable for 2017 Subordinated Note Financing interest expense			490				490
Common shares issued for 2017 Subordinated Note Financing interest expense			(484)	484
Common shares issued for 2017 Subordinated Note Financing interest expense (in shares)		268,324
Common shares issued for Opus interest expense			(281)	341			60
Common shares issued for Opus interest expense (in shares)		170,321
Non-controlling interest in subsidiaries				(42,436)		42,436
Net loss attributable to non-controlling interest						(14,382)	(14,382)
Net income (loss) attributable to common stockholders					(13,098)		(13,098)
Balance at Jun. 30, 2019	$ 1	$ 68	$ 490	$ 439,295	$ (407,980)	$ 57,946	$ 89,820
Balance (in shares) at Jun. 30, 2019	1,000,000	68,138,203

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash Flows from Operating Activities:
Net loss	$ (43,735)	$ (73,934)
Net loss on discontinued operations		(8,997)
Loss from continuing operations	(43,735)	(64,937)
Reconciliation of net loss to net cash used in operating activities:
Depreciation expense	938	503
Bad debt expense	250
Amortization of debt discount	1,521	1,247
Amortization of product revenue license fee	446	266
Amortization of operating lease right-of-use assets	771
Stock-based compensation expense	6,682	7,947
Common shares issuable for 2017 Subordinated Note Financing interest expense	490	489
Common shares issued for 2017 Subordinated Note Financing interest expense	484	489
Common shares issuable for Opus interest expense	281	287
Common shares issued for Opus interest expense	60
Change in fair value of investments		825
Change in fair value of derivative liability		(102)
Change in fair value of partner company convertible note		(110)
Gain on deconsolidation of Caelum	(18,521)
Research and development-licenses acquired, expense	650	98
Increase (decrease) in cash and cash equivalents resulting from changes in operating assets and liabilities:
Accounts receivable	2,144	2,437
Inventory	(54)	(128)
Other receivables - related party	245	(157)
Prepaid expenses and other current assets	3,346	(740)
Other assets	(961)	(343)
Current assets held for sale		(5,029)
Noncurrent assets held for sale		956
Current liabilities held for sale		11,980
Accounts payable and accrued expenses	(8,646)	1,442
Accounts payable and accrued expenses - related party	(149)	(99)
Interest payable	(12)	256
Interest payable - related party	(3)	(3)
Lease liabilities	(713)
Other long-term liabilities	841	248
Net cash used in continuing operating activities	(53,645)	(42,178)
Net cash used in discontinued operating activities		(9,748)
Net cash used in operating activities	(53,645)	(51,926)
Cash Flows from Investing Activities:
Purchase of research and development licenses		(75)
Purchase of property and equipment	(955)	(4,613)
Purchase of short-term investment (certificates of deposit)	(5,000)	(35,000)
Redemption of short-term investment (certificates of deposit)	17,604	36,002
Security deposits paid		(343)
Deconsolidation of Caelum	(1,201)
Net cash provided by (used in) continuing investing activities	10,448	(4,029)
Net cash provided by discontinued investing activities	13,089
Net cash provided by (used in) investing activities	23,537	(4,029)
Cash Flows from Financing Activities:
Payment of Preferred A dividends	(1,172)	(1,172)
Inter-company costs related to the issuance of Series A preferred stock		1,297
Proceeds from at-the-market offering	14,120	4,070
Proceeds from issuance of common stock under ESPP	60	128
Payment of cost related to at-the-market offering	(253)	(141)
Proceeds from partner companies' sale of stock	66,623	23,011
Payment of costs related to partner companies' sale of stock	(5,397)	(354)
Proceeds from partner companies' at-the-market offering	26,998
Payment of costs related to partner companies' at-the-market offering	(604)
Proceeds from exercise of partner companies' warrants		181
Payment of debt issuance costs associated with 2017 Subordinated Note Financing	(23)	(404)
Proceeds from 2018 Venture Notes		21,707
Payment of debt issue costs associated with 2018 Venture Notes	(115)	(1,863)
Proceeds from partner company's Horizon Notes	15,000
Payment of debt issuance costs associated with partner company's Horizon Notes	(1,230)
Payment of partner company's Convertible Notes		(4,076)
Net cash provided by financing activities	114,007	42,384
Net increase (decrease) in cash and cash equivalents and restricted cash	83,899	(13,571)
Cash and cash equivalents and restricted cash at beginning of period	81,582	110,958
Cash and cash equivalents and restricted cash at end of period	165,481	97,387
Supplemental disclosure of cash flow information:
Cash paid for interest	2,538	1,819
Cash paid for interest - related party	227	281
Supplemental disclosure of non-cash financing and investing activities:
Settlement of restricted stock units into common stock	2	2
Unpaid debt offering costs	211	5
Unpaid partner company's offering cost	242
Unpaid partner company's at-the-market offering cost	55
Common shares issuable for license acquired	164
Issuance of partner company warrants in conjunction with Horizon Notes	888
Fixed assets acquired but not paid	$ 183	$ 818

XML

Organization and Description of Business

6 Months Ended

Jun. 30, 2019

Organization and Description of Business

Organization and Description of Business

1. Organization and Description of Business

Fortress Biotech, Inc. (“Fortress” or the “Company”) is a biopharmaceutical company dedicated to acquiring, developing and commercializing pharmaceutical and biotechnology products and product candidates, which the Company does at the Fortress level, at its majority-owned and majority-controlled subsidiaries and joint ventures, and at entities the Company founded and in which it maintains significant minority ownership positions. Fortress has a talented and experienced business development team, comprising of scientists, doctors and finance professionals, who identify and evaluate promising products and product candidates for potential acquisition by new or existing partner companies. Fortress, through its partner companies, has 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, St. Jude Children’s Research Hospital, Dana-Farber Cancer Institute, Nationwide Children’s Hospital, and the University of Pennsylvania.

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 the partners achieve their goals. Partner 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, and public and private financings; to date, three partner companies are publicly-traded, and two have consummated strategic partnerships with industry leaders Alexion Pharmaceuticals, Inc. and InvaGen Pharmaceuticals, Inc. (a subsidiary of Cipla Limited).

As of June 30, 2019, several of the Fortress partner companies maintain licenses to product candidate intellectual property, including Aevitas Therapeutics, Inc. (“Aevitas”), Avenue Therapeutics, Inc. (“Avenue”), Caelum Biosciences, Inc. (“Caelum”), Cellvation, Inc. (“Cellvation”), Checkpoint Therapeutics, Inc. (“Checkpoint”), Cyprium Therapeutics, Inc. (“Cyprium”), Helocyte, Inc. (“Helocyte”), Journey Medical Corporation (“Journey” or “JMC”), Mustang Bio, Inc. (“Mustang”), and Tamid Bio, Inc. (“Tamid”).

Liquidity and Capital Resources

Since inception, the Company’s operations have been financed primarily through the sale of equity and debt securities and proceeds from the exercise of warrants and stock options. The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur substantial losses for the next several years as it continues to fully develop and prepare regulatory filings and obtain regulatory approvals for its existing and new product candidates. The Company’s current cash and cash equivalents are sufficient to fund operations for at least the next 12 months. However, the Company will need to raise additional funding through strategic relationships, public or private equity or debt financings, sale of a partner company, grants or other arrangements to fully develop and prepare regulatory filings and obtain regulatory approvals for the existing and new product candidates, fund operating losses, and, if deemed appropriate, establish or secure through third parties manufacturing for the potential products, sales and marketing capabilities. If such funding is not available or not available on terms acceptable to the Company, the Company’s current development plan and plans for expansion of its general and administrative infrastructure will be curtailed.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

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 10 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 the companies: Avenue, Checkpoint and Mustang. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Form 10‑K, which was filed with the United States Securities and Exchange Commission (“SEC”) on March 18, 2019, from which the Company derived the balance sheet data at December 31, 2018, as well as Checkpoint’s Form 10‑K filed with the SEC on March 18, 2019, Mustang’s Form 10‑K, filed with the SEC on March 18, 2019, and Avenue’s Form 10‑K, filed with the SEC on March 12, 2019.

The Company’s unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries: Avenue, Aevitas, CB Securities Corporation, Cellvation, Coronado SO Co., Checkpoint, Cyprium, Escala Therapeutics, Inc., GeneXion Oncology, Inc., Helocyte, Immune Limited, JMC, Mustang, Tamid, Fortress Biotech China, Inc., FBIO Acquisition Corp. IV, FBIO Acquisition Corps. VI - XIV, and JG Pharma, Inc., a subsidiary of JMC. All intercompany balances and transactions have been eliminated.

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.

Use of Estimates

The Company’s unaudited condensed consolidated financial statements include certain amounts that are based on management’s best estimates and judgments. The Company’s significant estimates include, but are not limited to, useful lives assigned to long-lived and intangible assets, fair value measurements, stock-based compensation, common stock issued to acquire licenses, investments, accrued expenses, derivative warrant liabilities, revenue with customers, provisions for income taxes and contingencies. Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.

Discontinued Operations

At December 31, 2018, the Company determined that its National segment met the discontinued operations criteria set forth in Accounting Standards Codification (ASC) Subtopic 205‑20‑45, Presentation of Financial Statements. As such, the National segment results have been classified as discontinued operations in the accompanying Condensed Consolidated financial statements. See Note 3 for more information relating to the Company’s discontinued operations.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2018 Annual Report other than the adoption of the Financial Accounting Standards Board (FASB) Accounting Standard Updates (ASU) ASU 2016‑02, Leases, and 2018‑07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.

Leases

Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the condensed consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components. The Company continues to account for leases in the prior period financial statements under previous lease guidance ASC Topic 840,  Leases.

Stock-Based Compensation

The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates.

For stock-based compensation awards to non-employees, prior to the adoption of ASU 2018‑07 on January 1, 2019, the Company remeasured the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes in the estimated fair value of these non-employee awards were recognized as compensation expense in the period of change. Subsequent to the adoption of ASU 2018‑07, the Company recognizes non-employees compensation costs over the requisite service period based on a measurement of fair value for each stock award.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model or 409A valuations, as applicable. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Recently Adopted Accounting Pronouncements

In August 2018, the SEC adopted the final rule under SEC Release No. 33‑10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule became effective on November 5, 2018. The Company included the required presentation of changes in stockholders’ equity in this Form 10‑Q.

In June 2018, the FASB issued ASU 2018‑07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted ASU No. 2018‑07 as of January 1, 2019. As a result of the adoption of ASU 2018‑07, the grant date fair value of non-employee awards will be fixed as of December 31, 2018, rather than the prior methodology that recognized a variable cost based on the fair value of such shares as of their vesting dates. The Company recorded non-employees’ awards as of January 1, 2019 prospectively. The Company’s implementation of this standard as of January 1, 2019 did not have a material impact on its condensed consolidated financial statements.

In July 2017, the FASB issued ASU 2017‑11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The adoption of this ASU on January 1, 2019 did not have a material impact on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. For public companies, ASU 2016‑02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP.  In July 2018, the FASB issued ASU 2018‑11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. The Company adopted Topic 842 on January 1, 2019, using the optional transition method by recording a right of use asset of $23.0 million, a lease liability of $26.8 million and eliminated deferred rent of approximately $3.8 million; there was no effect on opening retained earnings, and the Company continues to account for leases in the prior period financial statements under ASC Topic 840. In adopting the new standard, the Company elected to apply the practical expedients regarding the identification of leases, lease classification, indirect costs, and the combination of lease and non-lease components.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016‑13 requires that expected credit losses relating to financial assets are measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016‑13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The new standard will be effective on January 1, 2020 and may be adopted earlier. The Company is currently evaluating the impact, if any, that ASU 2016‑13 will have on its condensed consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

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Discontinued Operations

6 Months Ended

Jun. 30, 2019

Discontinued Operations

Discontinued Operations

3. Discontinued Operations

The following is a summary of revenue and expenses of National for the three and six months ended June 30, 2018. The Company had no activity related to National in 2019.

	Three Months Ended June 30,		Six Months Ended June 30,
($in thousands)	2018		2018
Revenue	$	57,019	$	106,541
Operating expenses
Commissions, compensation and fees		49,345		92,906
Clearing fees		578		1,321
Communications		813		1,573
Occupancy		1,141		2,096
Licenses and registration		530		1,167
Professional fees		578		1,971
Interest		2		4
Underwriting costs		42		187
Depreciation and amortization		857		1,716
Other administrative expenses		2,332		4,113
Total operating expenses		56,218		107,054
Loss from operations		801		(513)
Other income (expenses)
Interest income		—		6
Interest expense and financing fees		446		766
Change in fair value of derivative liabilities		(6,945)		(8,033)
Other income		215		215
Total other expenses		(6,284)		(7,046)
Loss from discontinued operations before income taxes		(5,483)		(7,559)
Income tax expense		1,438		1,438
Loss from discontinued operations		(6,921)		(8,997)
Gain from disposal of National		—		—
Total loss from discontinued operations, net of tax	$	(6,921)	$	(8,997)

During the six months ended June 30, 2019, the Company received $13.1 million or $3.25 per share, for its remaining ownership of National, as such as of June 30, 2019, the Company had no asset available for sale on its condensed consolidated balance sheets. In connection with this sale, the Company classified the assets and liabilities related to National, included on its condensed consolidated balance sheet as of December 31, 2018, as held for sale as presented in the table below:

	December 31,
($in thousands)	2018
ASSETS
Current assets
Current assets held for sale	$	13,089
Total current assets held for sale		13,089
Total assets held for sale	$	13,089

The table below depicts the cash flows from the transaction for the six months ended June 30, 2019 and 2018, respectively:

	Six Months Ended June 30,
($ in thousands)	2019		2018
Operating activities
Effect of elimination entry with discontinued operations presentation	$	—	$	(751)
Net loss on discontinued operations		—		(8,997)
Total cash used in discontinued operating activities	$	—	$	(9,748)
Investing activities
Proceeds from sale of National	$	13,089	$	—
Total cash provided by discontinued investing activities	$	13,089	$	—

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Collaboration and Stock Purchase Agreements

6 Months Ended

Jun. 30, 2019

Collaboration And Stock Purchase Agreements

Collaboration and Stock Purchase Agreements

4. Collaboration and Stock Purchase Agreements

Caelum

Agreement with Alexion

In January 2019, the Company's partner company, Caelum,  signed an agreement with Alexion Pharmaceuticals, Inc. (“Alexion”) to advance the development of CAEL‑101. Under the terms of the agreement, Alexion purchased a 19.9% minority equity interest in Caelum for $30 million. Additionally, Alexion has agreed to make potential payments to Caelum upon the achievement of certain developmental milestones, in exchange for which Alexion obtained a contingent exclusive option to acquire the remaining equity in the company for pre-negotiated economics.

In connection with the Alexion agreement, the Company deconsolidated its holdings in Caelum immediately prior to the execution of the agreement. The following table provides a summary of the assets and liabilities of Caelum impacted by the deconsolidation:

	January
($ in thousands)	2019
ASSETS
Current assets
Cash and cash equivalents	$	1,201
Prepaid expenses and other current assets		6
Total current assets	$	1,207
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	$	2,246
Interest payable		198
Interest payable - related party		106
Note payable - related party		929
Note payable		9,914
Warrant liability		991
Total current liabilities		14,384
Net liability impacted by deconsolidation	$	13,177

In connection with this transaction the Company recorded a gain resulting from the deconsolidation of Caelum on its condensed consolidated financial statements for the six months ended June 30, 2019:

	Gain on
	deconsolidation of
($ in thousands)	Caelum
Fair value of Caelum	$	11,193
Net liabilities deconsolidated		13,177
Non-controlling interest share		(4,849)
Write off of MSA fees due Fortress		(1,000)
Gain on deconsolidation of Caelum	$	18,521

Avenue

Agreement with InvaGen

On November 12, 2018, the Company’s partner company Avenue entered into a Stock Purchase and Merger Agreement (“SPMA”) with InvaGen Pharmaceuticals Inc. (“InvaGen”) and Madison Pharmaceuticals Inc., a newly-formed, wholly-owned subsidiary of InvaGen. Pursuant to the SPMA, and following approval by Avenue’s stockholders on February 8, 2019, InvaGen purchased a number of shares of Avenue common stock representing 33.3% of Avenue’s fully-diluted capital stock for net proceeds to Avenue of $31.5 million (after deducting fees and other offering-related costs).

Upon the achievement of certain closing conditions (including most notably U.S. Food and Drug Administration approval for IV Tramadol, Avenue’s product candidate), InvaGen will be obligated to acquire Avenue via reverse triangular merger (the “Merger Transaction”). Under the Merger Transaction, InvaGen will pay $180 million (subject to certain potential reductions) to the holders of Avenue’s capital stock (other than InvaGen itself).

Subject to the terms and conditions described in the SPMA, InvaGen may also provide interim financing to Avenue in an amount of up to $7.0 million during the time period between February 8, 2019 and the Merger Transaction. Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable to Company stockholders by virtue of the Merger Transaction.

Prior to the closing of the Merger Transaction, Avenue will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with a trust company as rights, pursuant to which holders of common shares of Avenue, other than InvaGen (each, a “Holder”), will be entitled to receive on Contingent Value Right (“CVR”) for each share held immediately prior to the Merger Transaction.

Each CVR represents the right of its holder to receive a contingent cash payment pursuant to the CVR Agreement upon the achievement of certain milestones. If, during the period commencing on the day following the closing of the Merger Transaction until December 31, 2028, IV Tramadol generates at least $325 million or more in Net Sales (as defined in the CVR Agreement) in a calendar year, each Holder shall be entitled to receive their pro rata share of (i) if the product generated less than $400 million in Net Sales during such calendar year, 10% of Gross Profit (as defined in the CVR Agreement), (ii) if the product generated between $400 million and $500 million in Net Sales during such calendar year, 12.5% of Gross Profit, or (iii) if the product generated more than $500 million in Net Sales during such calendar year, 15% of Gross Profit. Additionally, at any time beginning on January 1, 2029 that IV Tramadol has generated at least $1.5 billion in aggregate Net Sales, then with respect to each calendar year in which IV Tramadol generates $100 million or more in Net Sales, each Holder shall be entitled to receive their pro rata share of an amount equal to 20% of the Gross Profit generated by IV Tramadol. These additional payments will terminate on the earlier of December 31, 2036 and the date (which may be extended by up to 6 months) that any person has received approval from the FDA for an Abbreviated New Drug Application or an FDA AP-rated 505(b)(2) NDA using IV Tramadol.

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Property and Equipment

6 Months Ended

Jun. 30, 2019

Property and Equipment

Property and Equipment

5. Property and Equipment

Fortress’ property and equipment consisted of the following:

	Useful Life		June 30,		December 31,
($ in thousands)	(Years)		2019		2018
	(Unaudited)
Computer equipment		3	$	648	$	648
Furniture and fixtures		5		1,153		1,128
Machinery & equipment		5		3,666		3,143
Leasehold improvements		5‑15		9,359		9,271
Construction in progress (1)		N/A		699		393
Total property and equipment				15,525		14,583
Less: Accumulated depreciation				(3,502)		(2,564)
Property and equipment, net			$	12,023	$	12,019

Note 1: Relates to the Mustang cell processing facility.

Fortress' depreciation expense for the three months ended June 30, 2019 and 2018, was approximately $0.5 million and $0.3 million, respectively, and was recorded in both research and development expense and general and administrative expense in the Condensed Consolidated Statements of Operations.

Fortress' depreciation expense for the six months ended June 30, 2019 and 2018, was approximately $0.9 million and $0.5 million, respectively, and was recorded in both research and development expense and general and administrative expense in the Condensed Consolidated Statements of Operations.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Fair Value Measurements

Fair Value Measurements

6. Fair Value Measurements

Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to their liquid or short-term nature, such as accounts payable, accrued expenses and other current liabilities.

Fair Value of Caelum

The Company valued its investment in Caelum in accordance with ASC Topic 820, Fair Value Measurements and Disclosures, and estimated the fair value to be $11.2 million based on a per share value of $1.549. The following inputs were utilized to derive the value: risk free rate of return of 2.24%, volatility of 70% and a discount for lack of marketability of 27.9%.

In connection with the Development Option and Share Purchase Agreement ("DOSPA") between Caelum and Alexion Therapeutics, Inc., Caelum’s convertible notes automatically converted into common shares of Caelum and the warrant liability payable to the placement agent in connection with the placement of the convertible notes was also issued.

Caelum Warrant Liability

The Caelum warrant liability and convertible notes did not exist as of June 30, 2019. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s warrant liability that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 is as follows:

	December 31, 2018
Risk-free interest rate	2.905% – 2.909	%
Expected dividend yield	—	%
Expected term in years	3.84 – 3.96
Expected volatility	70	%

	Fair Value of
	Derivative
	Warrant
($ in thousands)	Liability
Beginning balance at January 1, 2019	$	991
Issuance of warrant due to conversion of note		(991)
Ending balance at June 30, 2019	$	—

Caelum Convertible Notes

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s convertible notes that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 is as follows:

	December
	31, 2018
Risk-free interest rate	2.302	%
Expected dividend yield	—	%
Expected term in years	0.32
Expected volatility	67	%

	Caelum
	Convertible
	Notes, at fair
($ in thousands)	value
Beginning balance at January 1, 2019	$	9,914
Conversion of the convertible notes		(9,914)
Ending balance at June 30, 2019	$	—

The following tables classify into the fair value hierarchy of Fortress’ financial instruments, measured at fair value as of June 30, 2019 and December 31, 2018:

	Fair Value Measurement as of  June 30, 2019
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets
Fair value of investment in Caelum	$	—	$	—	$	11,193	$	11,193
Total	$	—	$	—	$	11,193	$	11,193

	Fair Value Measurement as of  December 31, 2018
($ in thousands)	Level 1		Level 2		Level 3		Total
Liabilities
Caelum warrant liability	$	—	$	—	$	991	$	991
Caelum convertible notes, at fair value		—		—		9,914		9,914
Total	$	—	$	—	$	10,905	$	10,905

The table below provides a roll-forward of the changes in fair value of Level 3 financial instruments as of June 30, 2019:

			Caelum
	Investment in		Convertible
($ in thousands)	Caelum		Note		Warrant liabilities		Total
Balance at December 31, 2018	$	—	$	9,914	$	991	$	10,905
Conversion of convertible notes		—		(9,914)		—		(9,914)
Issuance of warrant		—		—		(991)		(991)
Fair value of investment		11,193		—		—		11,193
Balance at June 30, 2019	$	11,193	$	—	$	—	$	11,193

As of June 30, 2019, no transfers occurred between Level 1, Level 2 and Level 3 instruments.

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Licenses Acquired

6 Months Ended

Jun. 30, 2019

Licenses Acquired

Licenses Acquired

7. Licenses Acquired

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 Fortress, Aevitas, Avenue, Cellvation, Checkpoint, Cyprium, Helocyte, Mustang and Tamid require substantial completion of research and development, and regulatory and marketing approval efforts in order to reach technological feasibility. As such, for the three and six months ended June 30, 2019 and 2018, the purchase price of licenses acquired was classified as research and development-licenses acquired in the Condensed Consolidated Statements of Operations as reflected in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Fortress Companies:
Helocyte	$	—	$	—	$	—	$	21
Mustang		200		—		650		75
Aevitas		—		1		—		1
Cellvation		—		—		—		1
Total	$	200	$	1	$	650	$	98

Mustang

In May 2017, the Company entered into an exclusive license agreement with the City of Hope National Medical Center (“COH”) for the use of CS1-specific chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) technology. Pursuant to this agreement, the Company paid an upfront fee of $0.6 million and pays an annual maintenance fee of $50,000. Additional payments are due for the achievement of ten development milestones totaling $14.9 million and royalty payments in the mid-single digits are due on net sales of licensed products.

In May 2019 the Company expensed a non-refundable milestone payment of $0.2 million upon the first patient dosed in a Phase 1 clinical study of CS1.

In February 2019, Mustang announced that it partnered and entered into an exclusive worldwide license agreement with Nationwide Children’s Hospital (“Nationwide”) to develop the C134 oncolytic virus (MB‑108) for the treatment of glioblastoma multiforme (“GBM”). Mustang intends to combine MB‑108 with MB‑101 (IL13R2‑specific CART) to potentially enhance efficacy in treating GBM. Mustang paid $0.2 million in consideration for the license for exclusive, worldwide rights to develop and commercialize products that incorporate data, know-how and/or C134 virus that were developed at Nationwide. Additional payments are due to Nationwide upon achievement of development and commercialization milestones totaling $152.8 million. Royalty payments in the low-single digits are due on net sales of licensed products.

For the three and six months ended June 30, 2019 and 2018, Mustang recorded the following expense in research and development for licenses acquired:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($in thousands)	2019		2018		2019		2018
City of Hope (COH) – CD123 (MB-102)	$	—	$	—	$	250	$	—
Nationwide Children’s Hospital – C134 (MB‑108)		—		—		200		—
CSI City of Hope Milestone (MB-104)		200				200
Manufacturing License		—		—		—		75
Total licenses acquired expense	$	200	$	—	$	650	$	75

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Sponsored Research and Clinical Trial Agreements

6 Months Ended

Jun. 30, 2019

Sponsored Research and Clinical Trial Agreements

Sponsored Research and Clinical Trial Agreements

8. Sponsored Research and Clinical Trial Agreements

Aevitas

In 2018, Aevitas entered into a Sponsored Research Agreement (“SRA”) with the University of Massachusetts (“UMass SRA”) for certain continued research and development activities related to the development of adeno-associated virus (“AAV”) gene therapies in complement-mediated diseases and with the Trustees of the University of Pennsylvania (“UPenn SRA”) for certain continued research and development activities related to the development of AAV gene therapies in complement-mediated diseases. For the three and six months ended June 30, 2019 and 2018, Aevitas recorded the following expense in research and development for sponsored research and clinical trial agreements:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
UMass – AAV	$	—	$	300	$	—	$	400
UPenn – AAV		250		—		500		—
Total	$	250	$	300	$	500	$	400

Cellvation

For the three and six months ended June 30, 2019 and 2018, respectively, Cellvation recorded expense of $0.1 million and $0.1 million and $0.1 million and $0.1 million, respectively in connection with its sponsored research arrangement with the University of Texas. The expense was recorded in research and development expense in the Condensed Consolidated Statements of Operations.

Mustang

For the three and six months ended June 30, 2019 and 2018, Mustang recorded the following expense in research and development for sponsored research and clinical trial agreements:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
COH CAR T	$	500	$	500	$	1,000	$	1,000
COH - CD123		456		114		759		264
COH - IL13Ra2		225		143		567		503
City of Hope - Manufacturing		115		115		229		229
BIDMC - CRISPR		—		—		69		—
Fred Hutch - CD20		374		418		641		684
Total	$	1,670	$	1,290	$	3,265	$	2,680

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Intangibles, net

6 Months Ended

Jun. 30, 2019

Intangibles, net

Intangibles, net

9. Intangibles, net

The table below provides a summary of the JMC intangible asset as of June 30, 2019 and December 31, 2018, respectively:

	Estmated Useful	June 30,		December 31,
($ in thousands)	Lives (Years)	2019		2018
		(Unaudited)
Ceracade®	3	$	300	$	300
Luxamend®	3		50		50
Targadox®	3		1,250		1,250
Exelderm®	3		1,200		1,200
Total			2,800		2,800
Accumulated amortization			(1,829)		(1,383)
Net intangible assets		$	971	$	1,417

The table below provides a summary for the six months ended June 30, 2019, of JMC recognized expense related to its product licenses, which was recorded in costs of goods sold on the Condensed Consolidated Statement of Operations:

	Intangible
($ in thousands)	Assets
Beginning balance at January 1, 2019	$	1,417
Amortization expense		(446)
Ending balance at June 30, 2019	$	971

The future amortization of these intangible assets is as follows:

					Total
($ in thousands)	Targadox®		Exelderm®		Amortization
For the six-months ending December 31, 2019	$	104	$	200	$	304
December 31, 2020		—		400		400
December 31, 2021		—		267		267
Total	$	104	$	867	$	971

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Debt and Interest

6 Months Ended

Jun. 30, 2019

Debt and Interest

Debt and Interest

10. Debt and Interest

Debt

Total debt consists of the following as of June 30, 2019 and December 31, 2018:

	June 30,		December
($ in thousands)	2019		31, 2018		Interest rate		Maturity
	(Unaudited)
IDB Note	$	14,929	$	14,929	2.25	%	Aug - 2020
2017 Subordinated Note Financing		3,254		3,254	8.00	%	March - 2020(3)
2017 Subordinated Note Financing		13,893		13,893	8.00	%	May - 2020(3)
2017 Subordinated Note Financing		1,820		1,820	8.00	%	June - 2020(3)
2017 Subordinated Note Financing		3,018		3,018	8.00	%	August - 2020(3)
2017 Subordinated Note Financing		6,371		6,371	8.00	%	September - 2020(3)
2018 Venture Notes		6,517		6,517	8.00	%	February - 2021(3)
2018 Venture Notes		15,190		15,190	8.00	%	March - 2021(3)
Opus Credit Facility(1)		9,500		9,500	12.00	%	September - 2019(3)
Mustang Horizon Notes(2)		15,750		—	9.00	%	October - 2022
Caelum Convertible Note, at fair value		—		1,000	8.00	%	January - 2019
Caelum Convertible Note, at fair value		—		6,800	8.00	%	February - 2019
Caelum Convertible Note, at fair value		—		2,114	8.00	%	March - 2019
Total notes payable		90,242		84,406
Less: Discount on notes payable		6,539		4,903
Total notes payable	$	83,703	$	79,503

Note 1: Classified as short-term on the Company’s Consolidated Balance Sheet as of December 31, 2018.

Note 2: Interest rate is 9.0% plus one-month LIBOR Rate in excess of 2.5%.

Note 3:  Maturity date extended (see Note 21)

Mustang Horizon Notes

On March 29, 2019 (“Closing Date”), Mustang entered into a $20.0 million venture debt financing agreement (the “Loan Agreement”) with Horizon Technology Finance Corporation (“Horizon”), the proceeds of which will provide Mustang with additional working capital to continue development of its gene and cell therapies. In accordance with the Loan Agreement, $15.0 million of the $20.0 million loan was funded on the Closing Date, with the remaining $5.0 million fundable upon Mustang achieving certain predetermined milestones.

Each advance under the Horizon Loan Agreement will mature 42 months from the first day of the month following the funding of the advance. The first three advances will mature on October 1, 2022 (the “Loan Maturity Date”). Each advance accrues interest at a per annum rate of interest equal to 9.00% plus the amount by which the one-month LIBOR Rate, as reported in the Wall Street Journal, exceeds 2.5%. The Loan Agreement provides for interest-only payments commencing May 1, 2019 through and including October 1, 2020. The interest-only period may be extended to April 1, 2021 if Mustang satisfies the Interest Only Extension Milestone (as defined in the Loan Agreement). Thereafter, commencing May 1, 2021, amortization payments will be payable monthly in eighteen installments of principal and interest. At its option, upon ten business days’ prior written notice to Horizon, Mustang may prepay all or any portion greater than or equal to $500,000 of each of the outstanding advances by paying the entire principal balance (or portion thereof) and all accrued and unpaid interest, subject to a prepayment charge of 4.0% of the then outstanding principal balance of each advance if such advance is prepaid on or before the Loan Amortization Date (as defined in the Loan Agreement), 3% if such advance is prepaid after the Loan Amortization Date applicable to such Loan, but on or prior to twelve months following the Loan Amortization Date, and 2% thereafter. In addition, a final payment equal to $0.3 million for each advance (i.e., $0.8 million in aggregate with respect to the initial $15.0 million) is due on the maturity date or other date of payment in full. Amounts outstanding during an event of default shall be payable on demand and shall accrue interest at an additional rate of 5.0% per annum of the past due amount outstanding.

Each advance of the loan is secured by a lien on substantially all of the assets of Mustang, other than Intellectual Property and Excluded Collateral (in each case as defined in the Loan Agreement), and contains customary covenants and representations, including a liquidity covenant, financial reporting covenant and limitations on dividends, indebtedness, collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts, and subsidiaries.

The events of default under the Loan Agreement include, among other things, without limitation, and subject to customary grace periods, (1) Mustang’s failure to make any payments of principal or interest under the Loan Agreement, promissory notes or other loan documents, (2) Mustang’s breach or default in the performance of any covenant under the Loan Agreement, (3) the occurrence of a material adverse change, (4) Mustang making a false or misleading representation or warranty in any material respect, (5) Mustang’s insolvency or bankruptcy, (6) certain attachments or judgments on the Mustang’s assets, (7) the occurrence of any material default under certain agreements or obligations of Mustang involving indebtedness in excess of $0.3 million or (8) failing to maintain minimum monthly cash balances which range from approximately $8.0 million to $13.0 million over the term of the loan. If an event of default occurs, Horizon is entitled to take enforcement action, including acceleration of amounts due under the Loan Agreement.

The Loan Agreement also contains warrant coverage of 5% of the total amount of the facility. Four warrants (the “Warrants”) were issued by Mustang to Horizon to purchase a combined 288,184 shares of Mustang’s common stock with an exercise price of $3.47 and a fair value of $0.9 million. The Warrant is exercisable for ten years from the date of issuance. Horizon may exercise the Warrant either by (a) cash or check or (b) through a net issuance conversion. The shares of Mustang’s common stock will, upon request by Horizon, be registered and freely tradeable following a period of six months after issuance.

Mustang paid Horizon an initial commitment fee of $0.2 million and reimbursed Horizon for $30,000 of legal fees in connection with the Loan Agreement. Mustang incurred approximately $1.2 million of legal and other direct costs incurred in connection with the Loan Agreement.

All fees, warrants, and costs paid to Horizon and all direct costs incurred by Mustang are recognized as a debt discount to the funded loans and are amortized to interest expense using the effective interest method over the term of the Loan Agreement.

Interest Expense

The following table shows the details of interest expense for all debt arrangements during the periods presented. Interest expense includes contractual interest and amortization of the debt discount and amortization of fees represents fees associated with loan transaction costs, amortized over the life of the loan:

	Three Months Ended June 30,
	2019						2018
($ in thousands)	Interest		Fees(1)		Total		Interest		Fees (1)		Total
IDB Note	$	85	$	—	$	85	$	85	$	—	$	85
2017 Subordinated Note Financing		1,048		392		1,440		1,049		357		1,406
Opus Credit Facility		284		119		403		284		101		385
2018 Venture Notes		432		156		588		429		128		557
LOC Fees		16		—		16		9		—		9
Helocyte Convertible Note		—		—		—		19		—		19
Caelum Convertible Note		—		—		—		195		—		195
Mustang Horizon Notes		342		232		574		—		—		—
Other		—		—		—		(66)		—		(66)
Total Interest Expense and Financing Fee	$	2,207	$	899	$	3,106	$	2,004	$	586	$	2,590

Note 1: Amortization of fees

	Six Months Ended June 30,
	2019						2018
($ in thousands)	Interest		Fees(1)		Total		Interest		Fees(1)		Total
IDB Note	$	168	$	—	$	168	$	169	$	—	$	169
2017 Subordinated Note Financing		2,076		755		2,831		2,097		682		2,779
Opus Credit Facility		565		232		797		565		420		985
2018 Venture Notes		861		302		1,163		485		145		630
LOC Fees		31		—		31		16		—		16
Helocyte Convertible Note		—		—		—		87		—		87
Caelum Convertible Note		—		—		—		391		—		391
Mustang Horizon Notes		353		232		585		—		—		—
Other		—		—		—		(64)		—		(64)
Total Interest Expense and Financing Fee	$	4,054	$	1,521	$	5,575	$	3,746	$	1,247	$	4,993

Note 1: Amortization of fees

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Leases

6 Months Ended

Jun. 30, 2019

Leases

Leases

11. Leases

On October 3, 2014, the Company entered into a 15‑year lease for office space at 2 Gansevoort Street, New York, NY 10014, at an average annual rent of $2.7 million. The Company took possession of this space, which serves as its principal executive offices, in December 2015, and took occupancy in April 2016. Total rent expense, over the full term of the lease for this space will approximate $40.7 million. In conjunction with the lease, the Company entered into Desk Space Agreements with two related parties: OPPM and TGTX, to occupy 10% and 45%, respectively, of the office space that requires them to pay their share of the average annual rent of $0.3 million and $1.1 million, respectively. The total net rent expense will approximate $16.0 million over the lease term. These initial rent allocations will be adjusted periodically for each party based upon actual percentage of the office space occupied. Additionally, the Company has reserved the right to execute desk space agreements with other third parties and those arrangements will also affect the cost of the lease actually borne by us.

In October 2015, the Company entered into a 5‑year lease for approximately 6,100 square feet of office space in Waltham, MA at an average annual rent of approximately $0.2 million. The Company took occupancy of this space in January 2016.

Journey

In June 2017, Journey extended its lease for 2,295 square feet of office space in Scottsdale, AZ by one year, at an average annual rent of approximately $55,000. Journey originally took occupancy of this space in November 2014. In August 2018, Journey amended their lease and entered into a new two-year extension for 3,681 square feet of office space in the same location in Scottsdale, AZ at an annual rate of approximately $94,000. The term of this amended lease commenced on December 1, 2018 and will expire on November 30, 2020.

Mustang

On October 27, 2017, Mustang entered into a lease agreement with WCS - 377 Plantation Street, Inc., a Massachusetts nonprofit corporation (“Landlord”). Pursuant to the terms of the lease agreement, Mustang agreed to lease 27,043 square feet from the Landlord, located at 377 Plantation Street in Worcester, MA (the “Facility”), through November 2026, subject to additional extensions at Mustang’s option. Base rent, net of abatements of $0.6 million over the lease term, totals approximately $3.6 million, on a triple-net basis.

The Facility initiated cell processing operations for both personalized CAR T and gene therapies in late 2018.

The Company leases copiers under agreements classified as operating leases that expire on various dates through 2021.

Most of the Company’s lease liabilities result from the lease of its New York City, NY office, which expires in 2031 and Mustang’s Worcester, MA cell processing facility lease, which expires in 2026. Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options. The Company does not act as a lessor or have any leases classified as financing leases. At June 30, 2019, the Company had operating lease liabilities of $26.1 million and right of use assets of $22.3 million, which were included in the condensed balance sheet.

During the three and six months ended June 30, 2019, the Company recorded $0.8 million and $1.6 million, respectively, as lease expense to current period operations.

	Three Months Ended		Six Months Ended
($ in thousands)	June 30, 2019		June 30, 2019
Lease cost
Operating lease cost	$	803	$	1,599
Shared lease costs		(452)		(929)
Variable lease cost		337		415
Total lease cost	$	688	$	1,085

The following tables summarize quantitative information about the Company’s operating leases, under the adoption of Topic 842:

	Six Months Ended
($ in thousands)	June 30, 2019
Operating cash flows from operating leases	$	(1,540)
Weighted-average remaining lease term – operating leases		6.5
Weighted-average discount rate – operating leases		6.2	%

	Future Lease
($ in thousands)	Liability
Six months ended December 31, 2019	$	1,098
Year Ended December 31, 2020		3,351
Year Ended December 31, 2021		3,114
Year Ended December 31, 2022		3,084
Year Ended December 31, 2023		3,137
Other		23,463
Total		37,247
Less: present value discount		(11,111)
Operating lease liabilities	$	26,136

At December 31, 2018, the total future minimum lease payments under all leases were:

($ in thousands)
2019	$	3,070
2020		3,289
2021		3,084
2022		3,084
2023		3,137
Beyond		23,466
Total minimum lease payments	$	39,130

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Accrued Liabilities and other Long-Term Liabilities

6 Months Ended

Jun. 30, 2019

Accrued Liabilities and other Long-Term Liabilities

Accrued Liabilities and other Long-Term Liabilities

12. Accrued Liabilities and other Long-Term Liabilities

Accrued expenses and other long-term liabilities consisted of the following:

	June 30,		December
($ in thousands)	2019		31, 2018
	(Unaudited)
Accrued expenses:
Professional fees	$	1,051	$	1,434
Salaries, bonuses and related benefits		4,479		5,843
Research and development		3,527		3,805
Research and development - manufacturing		946		826
Research and development - clinical supplies		160		160
Research and development - license maintenance fees		409		519
Research and development - milestones		200		200
Dr. Falk Pharma milestone		—		300
Accrued royalties payable		1,641		1,108
Accrued coupon expense		981		838
Other		1,401		1,327
Total accrued expenses	$	14,795	$	16,360
Other long-term liabilities:
Deferred rent and long-term lease abandonment charge(1)		2,229		5,211
Total other long-term liabilities	$	2,229	$	5,211

Note 1: As of June 30, 2019, balance consists of deferred charges related to build-out of the New York facility, and as of December 31, 2018, balance consists of deferred rent and deferred build out charges.

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Non-Controlling Interests

6 Months Ended

Jun. 30, 2019

Non-Controlling Interests

Non-Controlling Interests

13. Non-Controlling Interests

Non-controlling interests in consolidated entities are as follows:

	As of June 30, 2019
			Net loss attributable to		Non-controlling interests		Non-controlling
($ in thousands)	NCI equity share		non-controlling interests		in consolidated entities		ownership
Aevitas	$	(1,169)	$	(301)	$	(1,470)	36.1	%
Avenue (2)		23,900		(13,172)		10,728	77.2	%
Cellvation		(697)		(90)		(787)	21.1	%
Checkpoint (1)		12,042		(7,069)		4,973	69.0	%
Coronado SO		(290)		—		(290)	13.0	%
Cyprium		(292)		(73)		(365)	10.6	%
Helocyte		(4,136)		(79)		(4,215)	19.3	%
JMC		(223)		83		(140)	6.9	%
Mustang (2)		61,361		(11,263)		50,098	70.1	%
Tamid		(521)		(65)		(586)	23.4	%
Total	$	89,975	$	(32,029)	$	57,946

	As of December 31, 2018
			Net loss attributable to		Non-controlling interests		Non-controlling
($ in thousands)	NCI equity share		non-controlling interests		in consolidated entities		ownership
Aevitas	$	(474)	$	(606)	$	(1,080)	36.1	%
Avenue (2)		13,326		(13,735)		(409)	64.8	%
Caelum(3)		(2,436)		(2,413)		(4,849)	36.8	%
Cellvation		(457)		(185)		(642)	21.1	%
Checkpoint (1)		31,648		(23,470)		8,178	69.3	%
Coronado SO		(290)		—		(290)	13.0	%
Cyprium		(210)		(62)		(272)	10.8	%
Helocyte		(3,372)		(684)		(4,056)	19.8	%
JMC		(475)		245		(230)	6.9	%
Mustang (2)		38,631		(16,628)		22,003	60.5	%
Tamid		(211)		(251)		(462)	23.4	%
Total	$	75,680	$	(57,789)	$	17,891

Note 1: Checkpoint is consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Checkpoint’s Class A Common Shares which provide super-majority voting rights.

Note 2: Avenue and Mustang are consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Preferred Class A Shares which provide super-majority voting rights.

Note 3: Effective January 30, 2019, Caelum ceased to be a controlled Fortress entity and as such is no longer consolidated.

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Net Loss per Common Share

6 Months Ended

Jun. 30, 2019

Net Loss per Common Share

Net Loss per Common Share

14. Net Loss per Common Share

Basic net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common stock and common stock equivalents outstanding for the period.

The Company’s common stock equivalents, including unvested restricted stock, options, and warrants have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average common stock outstanding used to calculate both basic and diluted net loss per share is the same.

The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding, as the effect of including such securities would be anti-dilutive at the end of the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019	2018
Warrants to purchase Common Stock	874,189	894,189
Opus warrants to purchase Common Stock	1,880,000	1,880,000
Options to purchase Common Stock	1,148,347	1,085,502
Convertible preferred stock	1,000,000	1,000,000
Unvested Restricted Stock	12,623,290	11,023,682
Unvested Restricted Stock Units	840,845	1,864,980
Total	18,366,671	17,748,353

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Stockholders' Equity

Stockholders' Equity

15. Stockholders’ Equity

Stock-based Compensation

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 three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Employee awards	$	920	$	1,121	$	1,855	$	2,063
Executive awards of Fortress Companies’ stock		355		444		707		962
Non-employee awards		71		23		69		46
Fortress Companies:
Avenue		535		322		1,286		671
Checkpoint		813		72		1,611		1,209
Mustang		622		972		1,054		2,966
Other		57		198		100		30
Total stock-based compensation expense	$	3,373	$	3,152	$	6,682	$	7,947

For the three months ended June 30, 2019 and 2018, approximately $0.8 million and $0.8 million, respectively, of stock-based compensation expense was included in research and development expenses in connection with equity grants made to employees and consultants and approximately $2.6 million and $2.4 million, respectively, was included in general and administrative expenses in connection with grants made to employees, members of the board of directors and consultants.

For the six months ended June 30, 2019 and 2018, approximately $1.4 million and $3.1 million, respectively, of stock-based compensation expense was included in research and development expenses in connection with equity grants made to employees and consultants and approximately $5.3 million and $4.8 million, respectively, was included in general and administrative expenses in connection with grants made to employees, members of the board of directors and consultants.

Stock Options

The following table summarizes Fortress stock option activities excluding activity related to Fortress 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, 2018	1,285,501	$	3.75	$	—	2.93
Granted	125,000	$	1.18		40,000	—
Options vested and expected to vest at June 30, 2019	1,410,501	$	4.30	$	89,249	2.83
Options vested and exercisable	1,285,501	$	4.60	$	49,249	2.67

As of June 30, 2019, Fortress had no unrecognized stock-based compensation expense related to options.

Restricted Stock and Restricted Stock Units

The following table summarizes Fortress restricted stock awards and restricted stock units activities, excluding activities related to Fortress Companies:

		Weighted average
	Number of shares	grant price
Unvested balance at December 31, 2018	12,645,982	$	2.72
Restricted stock granted	1,516,408		0.86
Restricted stock forfeited	—		—
Restricted stock vested	(220,000)		3.16
Restricted stock units granted	40,000		1.63
Restricted stock units forfeited	(185,106)		4.45
Restricted stock units vested	(148,334)		3.41
Unvested balance at June 30, 2019	13,648,950	$	2.47

As of June 30, 2019, the Company had unrecognized stock-based compensation expense related to restricted stock and restricted stock unit awards of approximately $13.6 million and $2.1 million, respectively, which is expected to be recognized over the remaining weighted-average vesting period of 5.2 years and 2.2 years, respectively.

Warrants

The following table summarizes Fortress warrant activities, excluding activities related to Fortress Companies:

						Weighted average
						remaining
	Number of	Weighted average		Total intrinsic		contractual life
	shares	exercise price		value		(years)
Outstanding as of December 31, 2018	2,754,189	$	3.28	$	7,800	3.49
No activity	—		—		—	—
Outstanding as of June 30, 2019	2,754,189	$	3.28	$	7,800	3.00
Exercisable as of June 30, 2019	849,189	$	3.92	$	7,800	2.64

Employee Stock Purchase Plan

Eligible employees can purchase the Company’s Common Stock at the end of a predetermined offering period at 85% of the lower of the fair market value at the beginning or end of the offering period. The ESPP is compensatory and results in stock-based compensation expense.

As of June 30, 2019, 410,728 shares have been purchased and 589,272 shares are available for future sale under the Company’s ESPP. Share-based compensation expense recorded was approximately $19,000 and $43,000, respectively for the three months ended June 30, 2019 and 2018, and was approximately $39,000 and $81,000, respectively, for the six months ended June 30, 2019 and 2018.

Capital Raises

At-the-Market Offering

Pursuant to the terms of the Company’s Amended and Restated At Market Issuance Sales Agreement, or Sales Agreement, with B. Riley FBR, Inc. (“B. Riley,” f/k/a MLV & Co. LLC, and FBR Capital Markets & Co.) (the “ATM”), for the three and six month periods ended June 30, 2019, the Company issued approximately  4.5 million and 7.4 million shares of common stock at an average price of $1.72 and $1.88 per share for gross proceeds of $7.7 million and $14.0 million, respectively. In connection with these sales, the Company paid aggregate fees of approximately $0.3 million. The Sales Agreement terminates on August 17, 2019.

These shares were sold pursuant to the current shelf registration statement on Form S‑3; approximately $6.8 million of the shelf remains available for sale at June 30, 2019.

2019 At-the-Market Offering

On June 28, 2019, the Company entered into an At Market Issuance Sales Agreement (“2019 ATM”), with Cantor Fitzgerald & Co., Oppenheimer & Co., Inc., H.C. Wainwright & Co. Inc., Jones Trading Institutional Services LLC and B. Riley FBR, Inc., (each an "Agent" and collectively, the "Agents"). Also June 28, 2019, the Company filed the Second Amendment to Registration Statement No. 333-226089 on Form S-3 (the “Registration Statement”) which, upon effectiveness, will permit the Company to issue and sell shares of its common stock having an aggregate offering price of up to $50.0 million from time to time through the Agents under the 2019 ATM. Under the 2019 ATM, the Company pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

The 2019 ATM terminates on the earlier of three years from the date of effectiveness of the Form S-3 or the sale of all shares of common stock registered on the Registration Statement. The Company was notified by the SEC that the S-3 was declared effective on July 23, 2019.

Checkpoint Therapeutics, Inc.

Checkpoint At-the-Market Offering

In November 2017, Checkpoint filed a shelf registration statement on Form S‑3 (the "Checkpoint S‑3"), which was declared effective in December 2017. Under the Checkpoint S‑3, Checkpoint may sell up to a total of $100 million of its securities. In connection with the Checkpoint S‑3, Checkpoint entered into an At-the-Market Issuance Sales Agreement (the "Checkpoint ATM") with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co. Inc. and H.C. Wainwright & Co., LLC (each an "Agent" and collectively, the "Agents"), relating to the sale of shares of common stock. Under the Checkpoint ATM, Checkpoint pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

During the three and six months ended June 30, 2019, Checkpoint sold a total of 997,957 and 1,088,226 of its common stock, respectively, under the Checkpoint ATM for aggregate total gross proceeds of approximately $4.1 million and $4.5 million at an average selling price of $4.12 per share. Pursuant to the Founders Agreement, Checkpoint issued 24,941 and 27,195 shares of common stock to Fortress during the three and six months ended June 30, 2019, respectively, for the ATM offering noted above. No sales were made during the three and six months ended June 30, 2018 under the Checkpoint ATM.

In July 2019, Checkpoint was added to the Russell 2000® Index.

Approximately $61.5 million of the shelf remains available for sale under the Checkpoint S‑3, following the offerings noted above. Checkpoint may offer the securities under the Checkpoint S‑3 from time to time in response to market conditions or other circumstances if it believes such a plan of financing is in the best interests of its stockholders.

Mustang Bio, Inc.

Mustang At-the-Market Offering

On July 13, 2018, Mustang filed a shelf registration statement No. 333-226175 on Form S-3, as amended on July 20, 2018 (the "Mustang S-3"), which was declared effective in August 2018. Under the Mustang S-3, Mustang may sell up to a total of $75.0 million of its securities. In connection with the Mustang S-3, Mustang entered into an At-the-Market Issuance Sales Agreement (the "Mustang ATM") with B. Riley FBR, Inc., Cantor Fitzgerald & Co., National Securities Corporation, and Oppenheimer & Co. Inc. (each an "Agent" and collectively, the "Agents"), relating to the sale of shares of common stock. Under the Mustang ATM, Mustang pays the Agents a commission rate of up to 3.0% of the gross proceeds from the sale of any shares of common stock.

During the three months and six months ended June 30, 2019, Mustang issued approximately 3.5 million shares of common stock at an average price of $6.42 per share for gross proceeds of $22.5 million. In connection with these sales, Mustang paid aggregate fees of approximately $0.5 million, for net proceeds of approximately $22.0 million. No sales where made under the Mustang ATM in 2018.

Mustang Public Offering of Common Stock

In  May 2019, Mustang announced the pricing of an underwritten public offering, whereby it sold 6,875,000 shares of its common stock, (plus a 30-day option to purchase up to an additional 1,031,250 shares of common stock, which was exercised in May 2019) at a price of $4.00 per share for gross proceeds of approximately $31.6 million, before deducting underwriting discounts and commissions and offering expenses. The shares were sold under the Mustang S-3. Mustang paid aggregate fees of approximately $2.1 million and received approximately $29.5 million of net proceeds.

As of June 30, 2019, approximately $20.9 million of the Mustang S-3 remains available for sales of securities.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies

Commitments and Contingencies

16. Commitments and Contingencies

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 in such capacity. There have been no claims to date, and the Company has director and officer insurance to address such claims. Pursuant to agreements with clinical trial sites, the Company provides indemnification to such sites in certain conditions.

Legal Proceedings

In the ordinary course of business, the Company and its subsidiaries 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.

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Related Party Transactions

6 Months Ended

Jun. 30, 2019

Related Party Transactions

Related Party Transactions

17. Related Party Transactions

Other Related Parties

The Company’s Chairman, President and Chief Executive Officer, individually and through certain trusts over which he has voting and dispositive control, beneficially owned approximately 12.1% of the Company’s issued and outstanding Common Stock as of June 30, 2019. The Company’s Executive Vice Chairman, Strategic Development owns approximately 13.8% of the Company’s issued and outstanding Common Stock at June 30, 2019.

Shared Services Agreement with TGTX

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 Executive Chairman and Interim Chief Executive Officer of TGTX. Under the terms of the Agreement, TGTX will reimburse the Company for the salary and benefit costs associated with these employees based upon actual hours worked on TGTX related projects. For the three months ended June 30, 2019 and 2018, the Company invoiced TGTX $0.1 million and $0.7 million, respectively. For the six months ended June 30, 2019 and 2018, the Company invoiced TGTX $0.2 million and $1.0 million, respectively. At June 30, 2019, the amount receivable from TGTX related to this arrangement approximated $0.1 million

Desk Space Agreements with TGTX and OPPM

In connection with the Company’s Desk Space Agreements with TGTX and Opus Point Partners Management, LLC (“OPPM”), for the three months ended June 30, 2019, the Company had paid $0.7 million in rent under the Desk Space Agreements, and invoiced TGTX and OPPM approximately $0.3 million and $0.1 million respectively, for their prorated share of the rent base. At June 30, 2019, the amount due related to this arrangement from TGTX approximated $0.1 million and the amount due from OPPM approximated $0.3 million.

Opus Credit Facility

On March 12, 2018, the Company and OPHIF amended and restated the Opus Credit Facility (the “A&R Opus Credit Facility”) extending the maturity date of the notes issued under the Opus Credit Facility from September 14, 2018 by one year to September 14, 2019. On August 7, 2019, the maturity date of the notes was extended to September 14, 2020 (see Note 21). The A&R Opus Credit Facility also permits the Company to make portions of interest and principal repayments in the form of shares of the Company’s common stock and/or in common stock of the Company’s publicly-traded subsidiaries, subject to certain conditions. Fortress retains the ability to prepay the Notes at any time without penalty. The notes payable under the A&R Opus Credit Facility continue to bear interest at 12% per annum. For the six months ended June 30, 2019 and 2018, the Company paid $0.2 million and $0.3 million, respectively. Subsequent to June 30, 2019, the Company prepaid $500,000 of outstanding debt under the Opus credit Facility in the form of common shares of the Company (see Note21).

Founders Agreements

The Company has entered into Founders Agreements and, in some cases, Exchange Agreements with certain of its subsidiaries as described in the Company’s Form 10‑K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. The following table summarizes, by subsidiary, the effective date of the Founders Agreements and PIK dividend or equity fee payable to the Company in accordance with the terms of the Founders Agreements, Exchange Agreements and the subsidiaries’ certificates of incorporation.

		PIK Dividend as
		a % of fully
		diluted
		outstanding		Class of Stock
Fortress Partner Company	Effective Date (1)	capitalization		Issued
Helocyte	March 20, 2015	2.5	%	Common Stock
Avenue	February 17, 2015	0.0	%(2)	Common Stock
Mustang	March 13, 2015	2.5	%	Common Stock
Checkpoint	March 17, 2015	0.0	%(3)	Common Stock
Cellvation	October 31, 2016	2.5	%	Common Stock
Caelum	January 1, 2017	0.0	%(4)	Common Stock
Cyprium	March 13, 2017	2.5	%	Common Stock
Aevitas	July 28, 2017	2.5	%	Common Stock
Tamid	November 30, 2017(5)	2.5	%	Common Stock

Note 1: Represents the effective date of each subsidiary’s Founders Agreement. 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: Concurrently with the execution and delivery of the Stock Purchase and Merger Agreement (“SPMA”) entered into between Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement to the termination of InvaGen’s rights under the SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time.

Note 3: Instead of a PIK dividend, Checkpoint pays the Company an annual equity fee in shares of Checkpoint’s common stock equal to 2.5% of Checkpoint’s fully diluted outstanding capitalization.

Note 4: Effective January 31, 2019 the Caelum Founders Agreement and MSA with Fortress were terminated in conjunction with the execution of the DOSPA between Caelum and Alexion Therapeutics, Inc. (See Note 4).

Note 5: Represents the Trigger Date, the date that the Fortress partner company first acquires, whether by license or otherwise, ownership rights in a product.

Management Services Agreements

The Company has entered in Management Services Agreements (the “MSAs”) with certain of its subsidiaries as described in the Company’s Form 10‑K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. The following table summarizes, by subsidiary, the effective date of the MSA and the annual consulting fee payable by the subsidiary to the Company in quarterly installments:

		Annual MSA Fee
Fortress partner company	Effective Date	(Income)/Expense
Helocyte	March 20, 2015	$	500
Avenue (1)	February 17, 2015		—
Mustang	March 13, 2015		500
Checkpoint	March 17, 2015		500
Cellvation	October 31, 2016		500
Caelum(2)	January 1, 2017		—
Cyprium	March 13, 2017		500
Aevitas	July 28, 2017		500
Tamid	November 30, 2017		500
Fortress			(3,500)
Consolidated (Income)/Expense		$	—

Note 1: Concurrently with the execution and delivery of the SPMA entered into between, Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement to the termination of InvaGen’s rights under the SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time. (See Note 4).

Note 2: Effective January 31, 2019 the Caelum Founders Agreement and MSA with Fortress were terminated in conjunction with the execution of a DOSPA between Caelum and Alexion Therapeutics, Inc. and $1.0 million of fees accrued under the MSA were written off (See Note 4).

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Segment Information

6 Months Ended

Jun. 30, 2019

Segment Information

Segment Information

18. Segment Information

The Company operates in two reportable segments, Dermatology Product Sales and Pharmaceutical and Biotechnology Product Development. The accounting policies of the Company’s segments are the same as those described in Note 2. Prior to the sale of National the Company operated in three segments, one of which included National, see Note 3. The following tables summarize, for the periods indicated, operating results, from continued operations by reportable segment:

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Three Months Ended June 30, 2019	Sales		Development		Consolidated
Net Revenue	$	8,199	$	1,051	$	9,250
Direct cost of goods		(2,386)		—		(2,386)
Sales and marketing costs		(4,202)		—		(4,202)
Research and development(1)		—		(18,711)		(18,711)
General and administrative		(747)		(8,494)		(9,241)
Segment income (loss) from operations	$	864	$	(26,154)	$	(25,290)
Segment assets	$	9,313	$	217,951	$	227,264

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Three Months Ended June 30, 2018	Sales		Development		Consolidated
Net Revenue	$	6,689		126	$	6,815
Direct cost of goods		(1,668)		—		(1,668)
Sales and marketing costs		(2,910)		—		(2,910)
Research and development(1)		—		(17,489)		(17,489)
General and administrative		(383)		(9,763)		(10,146)
Segment income (loss) from operations		1,728		(27,126)		(25,398)
Segment assets	$	11,307	$	159,763	$	171,070
Assets held for sale						65,796
Total consolidated						236,866

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Six Months Ended June 30, 2019	Sales		Development		Consolidated
Net Revenue	$	14,324	$	1,403	$	15,727
Direct cost of goods		(4,270)		—		(4,270)
Sales and marketing costs		(7,695)		—		(7,695)
Research and development(1)		—		(42,434)		(42,434)
General and administrative		(1,139)		(18,087)		(19,226)
Segment income (loss) from operations	$	1,220	$	(59,118)	$	(57,898)
Segment assets	$	9,313	$	217,951	$	227,264

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Six Months Ended June 30, 2018	Sales		Development		Consolidated
Net Revenue	$	12,198	$	520	$	12,718
Direct cost of goods		(3,140)		—		(3,140)
Sales and marketing costs		(5,670)		—		(5,670)
Research and development(1)		—		(42,544)		(42,544)
General and administrative		(783)		(20,151)		(20,934)
Segment loss from operations	$	2,605		(62,175)	$	(59,570)
Segment assets	$	11,307		159,763	$	171,070
Assets held for sale						65,796
Total consolidated						236,866

Note 1: Research and development includes the cost of licenses acquired.

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Revenues from Contracts and Significant Customers

6 Months Ended

Jun. 30, 2019

Revenues from Contracts and Significant Customers

Revenues from Contracts and Significant Customers

19. Revenues from Contracts and Significant Customers

Disaggregation of Total Revenues

The Company has seven marketed products, with the majority of sales from Targadox®, Luxamend®, Ceracade® and Exelderm®. Substantially all of the Company’s product revenues are recorded in the U.S. Substantially all of the Company’s collaboration revenues are from its collaboration with TGTX. Revenues by product and collaborator are summarized as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Targadox®	$	7,230	$	6,363	$	12,930	$	11,861
Other branded revenue		969		326		1,394		337
Total product revenues		8,199		6,689		14,324		12,198
TGTX		1,051		126		1,403		520
Total Revenue	$	9,250	$	6,815	$	15,727	$	12,718

Significant Customers

Commencing in the second quarter of 2018, the majority of our dermatology products are sold under a third party logistics (“3PL”) Title Model, and as such, one customer consistently accounts for over 80% of gross product revenue and AR.  Under a 3PL Title Model, the company sells product to a 3PL, who in turn, manages distribution and collections. 

For the three and six months ended June 30, 2019, gross product revenue under the 3PL Title Model accounted for approximately 84.0% and 86.0%, respectively.

For the three months ended June 30, 2018, two of the Company’s Dermatology Products customers each accounted for approximately 53.0% and 11.0% of total gross product revenue.

For the six months ended June 30, 2018, three of the Company’s Dermatology Products customers each accounted for approximately 27%,  16% and 12% of  total gross product revenue.

At June 30, 2019, one of the Company’s Dermatology Products customers accounted for approximately 77.0% of total gross accounts receivable.  At December 31, 2018, one of the Company’s Dermatology Products customers accounted for approximately 80% of total gross accounts receivable.

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Incomes taxes

6 Months Ended

Jun. 30, 2019

Incomes taxes

Incomes taxes

20. Incomes 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 for which the Company has an 80% or greater ownership interest. Subsidiaries for which the Company does not have an 80% or more ownership are not included in the Company’s consolidated income tax group and file their own separate income tax return. As a result, certain corporate entities included in these financial statements are not able to combine or offset their taxable income or losses with other entities’ tax attributes.

Income tax expense for the six months ended June 30, 2019 and 2018 is based on the estimated annual effective tax rate.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events

Subsequent Events

21. Subsequent Events

On July 18, 2019, Dr. Rosenwald acquired 396,825 common shares of the Company at $1.26 per share. The shares were acquired as a result of the prepayment by the Company of $500,000 of debt owed to Dr. Rosenwald that was held in the name of Opus Point Healthcare Innovations Fund, LP (“Opus”), an investment fund co-owned by Dr. Rosenwald, in the form of the Company’s common stock (measured at the closing price on July 18, 2019), under that certain Amended & Restated Credit Facility Agreement , dated as of March 12, 2018, by and between the Company and Opus (the “Opus Credit Agreement”).

On August 7, 2019, the Company provided notice to NAM Biotech Fund II, LLC (“NAMBF”) and NAM Special Situations Fund I QP, LLC (“NAMSS”) of extension by one year of the maturity dates under the 2017 Subordinated Note Financing totaling $28.4 million, of which $12.3 million in the aggregate pertains to NAMBF and $16.1 million in the aggregate pertains to NAMSS.

On August 7, 2019, the Company provided notice to NSC Biotech Opportunities Fund, LLC (“NSCBOF”) and NSC Biotech Opportunities QP Fund, LLC (“NSCBOQPF”) of extension by six months of the maturity dates of the 2018 Venture Notes totaling $21.7 million of which $5.1 million in the aggregate pertains to NSCBOF and $16.6 million in the aggregate pertains to NSCBOQPF.

On August 7, 2019, the Company and Opus executed an amendment to the Opus Credit Agreement, extending the maturity date of $5.2 million owing thereunder by one year.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

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 10 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 the companies: Avenue, Checkpoint and Mustang. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Form 10‑K, which was filed with the United States Securities and Exchange Commission (“SEC”) on March 18, 2019, from which the Company derived the balance sheet data at December 31, 2018, as well as Checkpoint’s Form 10‑K filed with the SEC on March 18, 2019, Mustang’s Form 10‑K, filed with the SEC on March 18, 2019, and Avenue’s Form 10‑K, filed with the SEC on March 12, 2019.

The Company’s unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries: Avenue, Aevitas, CB Securities Corporation, Cellvation, Coronado SO Co., Checkpoint, Cyprium, Escala Therapeutics, Inc., GeneXion Oncology, Inc., Helocyte, Immune Limited, JMC, Mustang, Tamid, Fortress Biotech China, Inc., FBIO Acquisition Corp. IV, FBIO Acquisition Corps. VI - XIV, and JG Pharma, Inc., a subsidiary of JMC. All intercompany balances and transactions have been eliminated.

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.

Use of Estimates

Use of Estimates

The Company’s unaudited condensed consolidated financial statements include certain amounts that are based on management’s best estimates and judgments. The Company’s significant estimates include, but are not limited to, useful lives assigned to long-lived and intangible assets, fair value measurements, stock-based compensation, common stock issued to acquire licenses, investments, accrued expenses, derivative warrant liabilities, revenue with customers, provisions for income taxes and contingencies. Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.

Discontinued Operations

Discontinued Operations

At December 31, 2018, the Company determined that its National segment met the discontinued operations criteria set forth in Accounting Standards Codification (ASC) Subtopic 205‑20‑45, Presentation of Financial Statements. As such, the National segment results have been classified as discontinued operations in the accompanying Condensed Consolidated financial statements. See Note 3 for more information relating to the Company’s discontinued operations.

Significant Accounting Policies

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2018 Annual Report other than the adoption of the Financial Accounting Standards Board (FASB) Accounting Standard Updates (ASU) ASU 2016‑02, Leases, and 2018‑07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.

Leases

Leases

Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the condensed consolidated balance sheet as both a right-of-use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right-of-use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components. The Company continues to account for leases in the prior period financial statements under previous lease guidance ASC Topic 840,  Leases.

Stock-Based Compensation

Stock-Based Compensation

The Company expenses stock-based compensation to employees over the requisite service period based on the estimated grant-date fair value of the awards and forfeiture rates.

For stock-based compensation awards to non-employees, prior to the adoption of ASU 2018‑07 on January 1, 2019, the Company remeasured the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes in the estimated fair value of these non-employee awards were recognized as compensation expense in the period of change. Subsequent to the adoption of ASU 2018‑07, the Company recognizes non-employees compensation costs over the requisite service period based on a measurement of fair value for each stock award.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model or 409A valuations, as applicable. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In August 2018, the SEC adopted the final rule under SEC Release No. 33‑10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule became effective on November 5, 2018. The Company included the required presentation of changes in stockholders’ equity in this Form 10‑Q.

In June 2018, the FASB issued ASU 2018‑07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted ASU No. 2018‑07 as of January 1, 2019. As a result of the adoption of ASU 2018‑07, the grant date fair value of non-employee awards will be fixed as of December 31, 2018, rather than the prior methodology that recognized a variable cost based on the fair value of such shares as of their vesting dates. The Company recorded non-employees’ awards as of January 1, 2019 prospectively. The Company’s implementation of this standard as of January 1, 2019 did not have a material impact on its condensed consolidated financial statements.

In July 2017, the FASB issued ASU 2017‑11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The adoption of this ASU on January 1, 2019 did not have a material impact on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842) in order to increase transparency and comparability among organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous GAAP. For public companies, ASU 2016‑02 is effective for fiscal years beginning after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption is permitted. In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively allows entities to carryforward accounting conclusions under previous U.S. GAAP.  In July 2018, the FASB issued ASU 2018‑11, Leases (Topic 842): Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842 as of the adoption date, rather than as of the earliest period presented. The Company adopted Topic 842 on January 1, 2019, using the optional transition method by recording a right of use asset of $23.0 million, a lease liability of $26.8 million and eliminated deferred rent of approximately $3.8 million; there was no effect on opening retained earnings, and the Company continues to account for leases in the prior period financial statements under ASC Topic 840. In adopting the new standard, the Company elected to apply the practical expedients regarding the identification of leases, lease classification, indirect costs, and the combination of lease and non-lease components.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016‑13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016‑13 requires that expected credit losses relating to financial assets are measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016‑13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The new standard will be effective on January 1, 2020 and may be adopted earlier. The Company is currently evaluating the impact, if any, that ASU 2016‑13 will have on its condensed consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820), - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement , which makes a number of changes meant to add, modify or remove certain disclosure requirements associated with the movement amongst or hierarchy associated with Level 1, Level 2 and Level 3 fair value measurements. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the update. The Company does not expect the adoption of this guidance to have a material impact on its condensed consolidated financial statements.

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Discontinued Operations (Tables)

6 Months Ended

Jun. 30, 2019

Discontinued Operations

Schedule of revenue and expenses

The following is a summary of revenue and expenses of National for the three and six months ended June 30, 2018. The Company had no activity related to National in 2019.

	Three Months Ended June 30,		Six Months Ended June 30,
($in thousands)	2018		2018
Revenue	$	57,019	$	106,541
Operating expenses
Commissions, compensation and fees		49,345		92,906
Clearing fees		578		1,321
Communications		813		1,573
Occupancy		1,141		2,096
Licenses and registration		530		1,167
Professional fees		578		1,971
Interest		2		4
Underwriting costs		42		187
Depreciation and amortization		857		1,716
Other administrative expenses		2,332		4,113
Total operating expenses		56,218		107,054
Loss from operations		801		(513)
Other income (expenses)
Interest income		—		6
Interest expense and financing fees		446		766
Change in fair value of derivative liabilities		(6,945)		(8,033)
Other income		215		215
Total other expenses		(6,284)		(7,046)
Loss from discontinued operations before income taxes		(5,483)		(7,559)
Income tax expense		1,438		1,438
Loss from discontinued operations		(6,921)		(8,997)
Gain from disposal of National		—		—
Total loss from discontinued operations, net of tax	$	(6,921)	$	(8,997)

Schedule of condensed consolidated balance sheets

In connection with this sale, the Company classified the assets and liabilities related to National, included on its condensed consolidated balance sheet as of December 31, 2018, as held for sale as presented in the table below:

	December 31,
($in thousands)	2018
ASSETS
Current assets
Current assets held for sale	$	13,089
Total current assets held for sale		13,089
Total assets held for sale	$	13,089

Schedule of cash flows statement

The table below depicts the cash flows from the transaction for the six months ended June 30, 2019 and 2018, respectively:

	Six Months Ended June 30,
($ in thousands)	2019		2018
Operating activities
Effect of elimination entry with discontinued operations presentation	$	—	$	(751)
Net loss on discontinued operations		—		(8,997)
Total cash used in discontinued operating activities	$	—	$	(9,748)
Investing activities
Proceeds from sale of National	$	13,089	$	—
Total cash provided by discontinued investing activities	$	13,089	$	—

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Collaboration and Stock Purchase Agreements (Tables)

6 Months Ended

Jun. 30, 2019

Collaboration And Stock Purchase Agreements

Schedule of assets and liabilities of Caelum

The following table provides a summary of the assets and liabilities of Caelum impacted by the deconsolidation:

	January
($ in thousands)	2019
ASSETS
Current assets
Cash and cash equivalents	$	1,201
Prepaid expenses and other current assets		6
Total current assets	$	1,207
LIABILITIES
Current liabilities
Accounts payable and accrued expenses	$	2,246
Interest payable		198
Interest payable - related party		106
Note payable - related party		929
Note payable		9,914
Warrant liability		991
Total current liabilities		14,384
Net liability impacted by deconsolidation	$	13,177

Schedule of gain from deconsolidation of Caelum

In connection with this transaction the Company recorded a gain resulting from the deconsolidation of Caelum on its condensed consolidated financial statements for the six months ended June 30, 2019:

	Gain on
	deconsolidation of
($ in thousands)	Caelum
Fair value of Caelum	$	11,193
Net liabilities deconsolidated		13,177
Non-controlling interest share		(4,849)
Write off of MSA fees due Fortress		(1,000)
Gain on deconsolidation of Caelum	$	18,521

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2019

Property and Equipment

Schedule of property and equipment

Fortress’ property and equipment consisted of the following:

	Useful Life		June 30,		December 31,
($ in thousands)	(Years)		2019		2018
	(Unaudited)
Computer equipment		3	$	648	$	648
Furniture and fixtures		5		1,153		1,128
Machinery & equipment		5		3,666		3,143
Leasehold improvements		5‑15		9,359		9,271
Construction in progress (1)		N/A		699		393
Total property and equipment				15,525		14,583
Less: Accumulated depreciation				(3,502)		(2,564)
Property and equipment, net			$	12,023	$	12,019

Note 1: Relates to the Mustang cell processing facility.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of financial instruments, measured at fair value

The following tables classify into the fair value hierarchy of Fortress’ financial instruments, measured at fair value as of June 30, 2019 and December 31, 2018:

	Fair Value Measurement as of  June 30, 2019
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets
Fair value of investment in Caelum	$	—	$	—	$	11,193	$	11,193
Total	$	—	$	—	$	11,193	$	11,193

	Fair Value Measurement as of  December 31, 2018
($ in thousands)	Level 1		Level 2		Level 3		Total
Liabilities
Caelum warrant liability	$	—	$	—	$	991	$	991
Caelum convertible notes, at fair value		—		—		9,914		9,914
Total	$	—	$	—	$	10,905	$	10,905

Schedule of changes in fair value of financial instruments

The table below provides a roll-forward of the changes in fair value of Level 3 financial instruments as of June 30, 2019:

			Caelum
	Investment in		Convertible
($ in thousands)	Caelum		Note		Warrant liabilities		Total
Balance at December 31, 2018	$	—	$	9,914	$	991	$	10,905
Conversion of convertible notes		—		(9,914)		—		(9,914)
Issuance of warrant		—		—		(991)		(991)
Fair value of investment		11,193		—		—		11,193
Balance at June 30, 2019	$	11,193	$	—	$	—	$	11,193

Caelum [Member] | Convertible Debt [Member]

Schedule of weighted average (in aggregate) significant unobservable inputs

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s convertible notes that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 is as follows:

	December
	31, 2018
Risk-free interest rate	2.302	%
Expected dividend yield	—	%
Expected term in years	0.32
Expected volatility	67	%

Schedule of fair value of derivative warrant liability

	Caelum
	Convertible
	Notes, at fair
($ in thousands)	value
Beginning balance at January 1, 2019	$	9,914
Conversion of the convertible notes		(9,914)
Ending balance at June 30, 2019	$	—

Warrants to Purchase Common Stock [Member] | Caelum [Member]

Schedule of weighted average (in aggregate) significant unobservable inputs

The Caelum warrant liability and convertible notes did not exist as of June 30, 2019. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring Caelum’s warrant liability that are categorized within Level 3 of the fair value hierarchy as of December 31, 2018 is as follows:

	December 31, 2018
Risk-free interest rate	2.905% – 2.909	%
Expected dividend yield	—	%
Expected term in years	3.84 – 3.96
Expected volatility	70	%

Schedule of fair value of derivative warrant liability

	Fair Value of
	Derivative
	Warrant
($ in thousands)	Liability
Beginning balance at January 1, 2019	$	991
Issuance of warrant due to conversion of note		(991)
Ending balance at June 30, 2019	$	—

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Licenses Acquired (Tables)

6 Months Ended

Jun. 30, 2019

Licenses Acquired

Schedule of research and development-licenses

As such, for the three and six months ended June 30, 2019 and 2018, the purchase price of licenses acquired was classified as research and development-licenses acquired in the Condensed Consolidated Statements of Operations as reflected in the table below:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Fortress Companies:
Helocyte	$	—	$	—	$	—	$	21
Mustang		200		—		650		75
Aevitas		—		1		—		1
Cellvation		—		—		—		1
Total	$	200	$	1	$	650	$	98

Schedule of research and development for licenses acquired

For the three and six months ended June 30, 2019 and 2018, Mustang recorded the following expense in research and development for licenses acquired:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($in thousands)	2019		2018		2019		2018
City of Hope (COH) – CD123 (MB-102)	$	—	$	—	$	250	$	—
Nationwide Children’s Hospital – C134 (MB‑108)		—		—		200		—
CSI City of Hope Milestone (MB-104)		200				200
Manufacturing License		—		—		—		75
Total licenses acquired expense	$	200	$	—	$	650	$	75

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Sponsored Research and Clinical Trial Agreements (Tables)

6 Months Ended

Jun. 30, 2019

Aevitas Therapeutics Inc [Member]

Schedule of research and development for sponsored research and clinical trial agreements

For the three and six months ended June 30, 2019 and 2018, Aevitas recorded the following expense in research and development for sponsored research and clinical trial agreements:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
UMass – AAV	$	—	$	300	$	—	$	400
UPenn – AAV		250		—		500		—
Total	$	250	$	300	$	500	$	400

Mustang Therapeutics, Inc [Member]

Schedule of research and development for sponsored research and clinical trial agreements

For the three and six months ended June 30, 2019 and 2018, Mustang recorded the following expense in research and development for sponsored research and clinical trial agreements:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
COH CAR T	$	500	$	500	$	1,000	$	1,000
COH - CD123		456		114		759		264
COH - IL13Ra2		225		143		567		503
City of Hope - Manufacturing		115		115		229		229
BIDMC - CRISPR		—		—		69		—
Fred Hutch - CD20		374		418		641		684
Total	$	1,670	$	1,290	$	3,265	$	2,680

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Intangibles, net (Tables)

6 Months Ended

Jun. 30, 2019

Intangibles, net

Schedule of JMC intangible asset

The table below provides a summary of the JMC intangible asset as of June 30, 2019 and December 31, 2018, respectively:

	Estmated Useful	June 30,		December 31,
($ in thousands)	Lives (Years)	2019		2018
		(Unaudited)
Ceracade®	3	$	300	$	300
Luxamend®	3		50		50
Targadox®	3		1,250		1,250
Exelderm®	3		1,200		1,200
Total			2,800		2,800
Accumulated amortization			(1,829)		(1,383)
Net intangible assets		$	971	$	1,417

Schedule of JMC recognized expense related to its product licenses

The table below provides a summary for the six months ended June 30, 2019, of JMC recognized expense related to its product licenses, which was recorded in costs of goods sold on the Condensed Consolidated Statement of Operations:

	Intangible
($ in thousands)	Assets
Beginning balance at January 1, 2019	$	1,417
Amortization expense		(446)
Ending balance at June 30, 2019	$	971

Schedule of future amortization of intangible assets

The future amortization of these intangible assets is as follows:

					Total
($ in thousands)	Targadox®		Exelderm®		Amortization
For the six-months ending December 31, 2019	$	104	$	200	$	304
December 31, 2020		—		400		400
December 31, 2021		—		267		267
Total	$	104	$	867	$	971

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Debt and Interest (Tables)

6 Months Ended

Jun. 30, 2019

Debt and Interest

Schedule of debt

	June 30,		December
($ in thousands)	2019		31, 2018		Interest rate		Maturity
	(Unaudited)
IDB Note	$	14,929	$	14,929	2.25	%	Aug - 2020
2017 Subordinated Note Financing		3,254		3,254	8.00	%	March - 2020(3)
2017 Subordinated Note Financing		13,893		13,893	8.00	%	May - 2020(3)
2017 Subordinated Note Financing		1,820		1,820	8.00	%	June - 2020(3)
2017 Subordinated Note Financing		3,018		3,018	8.00	%	August - 2020(3)
2017 Subordinated Note Financing		6,371		6,371	8.00	%	September - 2020(3)
2018 Venture Notes		6,517		6,517	8.00	%	February - 2021(3)
2018 Venture Notes		15,190		15,190	8.00	%	March - 2021(3)
Opus Credit Facility(1)		9,500		9,500	12.00	%	September - 2019(3)
Mustang Horizon Notes(2)		15,750		—	9.00	%	October - 2022
Caelum Convertible Note, at fair value		—		1,000	8.00	%	January - 2019
Caelum Convertible Note, at fair value		—		6,800	8.00	%	February - 2019
Caelum Convertible Note, at fair value		—		2,114	8.00	%	March - 2019
Total notes payable		90,242		84,406
Less: Discount on notes payable		6,539		4,903
Total notes payable	$	83,703	$	79,503

Note 1: Classified as short-term on the Company’s Consolidated Balance Sheet as of December 31, 2018.

Note 2: Interest rate is 9.0% plus one-month LIBOR Rate in excess of 2.5%.

Note 3:  Maturity date extended (see Note 21)

Schedule of interest expense for all debt arrangements

	Three Months Ended June 30,
	2019						2018
($ in thousands)	Interest		Fees(1)		Total		Interest		Fees (1)		Total
IDB Note	$	85	$	—	$	85	$	85	$	—	$	85
2017 Subordinated Note Financing		1,048		392		1,440		1,049		357		1,406
Opus Credit Facility		284		119		403		284		101		385
2018 Venture Notes		432		156		588		429		128		557
LOC Fees		16		—		16		9		—		9
Helocyte Convertible Note		—		—		—		19		—		19
Caelum Convertible Note		—		—		—		195		—		195
Mustang Horizon Notes		342		232		574		—		—		—
Other		—		—		—		(66)		—		(66)
Total Interest Expense and Financing Fee	$	2,207	$	899	$	3,106	$	2,004	$	586	$	2,590

Note 1: Amortization of fees

	Six Months Ended June 30,
	2019						2018
($ in thousands)	Interest		Fees(1)		Total		Interest		Fees(1)		Total
IDB Note	$	168	$	—	$	168	$	169	$	—	$	169
2017 Subordinated Note Financing		2,076		755		2,831		2,097		682		2,779
Opus Credit Facility		565		232		797		565		420		985
2018 Venture Notes		861		302		1,163		485		145		630
LOC Fees		31		—		31		16		—		16
Helocyte Convertible Note		—		—		—		87		—		87
Caelum Convertible Note		—		—		—		391		—		391
Mustang Horizon Notes		353		232		585		—		—		—
Other		—		—		—		(64)		—		(64)
Total Interest Expense and Financing Fee	$	4,054	$	1,521	$	5,575	$	3,746	$	1,247	$	4,993

Note 1: Amortization of fees

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Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases

Schedule of lease expense

During the three and six months ended June 30, 2019, the Company recorded $0.8 million and $1.6 million, respectively, as lease expense to current period operations.

	Three Months Ended		Six Months Ended
($ in thousands)	June 30, 2019		June 30, 2019
Lease cost
Operating lease cost	$	803	$	1,599
Shared lease costs		(452)		(929)
Variable lease cost		337		415
Total lease cost	$	688	$	1,085

The following tables summarize quantitative information about the Company’s operating leases, under the adoption of Topic 842:

	Six Months Ended
($ in thousands)	June 30, 2019
Operating cash flows from operating leases	$	(1,540)
Weighted-average remaining lease term – operating leases		6.5
Weighted-average discount rate – operating leases		6.2	%

	Future Lease
($ in thousands)	Liability
Six months ended December 31, 2019	$	1,098
Year Ended December 31, 2020		3,351
Year Ended December 31, 2021		3,114
Year Ended December 31, 2022		3,084
Year Ended December 31, 2023		3,137
Other		23,463
Total		37,247
Less: present value discount		(11,111)
Operating lease liabilities	$	26,136

Schedule of total future minimum lease payments

At December 31, 2018, the total future minimum lease payments under all leases were:

($ in thousands)
2019	$	3,070
2020		3,289
2021		3,084
2022		3,084
2023		3,137
Beyond		23,466
Total minimum lease payments	$	39,130

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Accrued Liabilities and other Long-Term Liabilities (Tables)

6 Months Ended

Jun. 30, 2019

Accrued Liabilities and other Long-Term Liabilities

Schedule of accrued expenses and other long-term liabilities

Accrued expenses and other long-term liabilities consisted of the following:

	June 30,		December
($ in thousands)	2019		31, 2018
	(Unaudited)
Accrued expenses:
Professional fees	$	1,051	$	1,434
Salaries, bonuses and related benefits		4,479		5,843
Research and development		3,527		3,805
Research and development - manufacturing		946		826
Research and development - clinical supplies		160		160
Research and development - license maintenance fees		409		519
Research and development - milestones		200		200
Dr. Falk Pharma milestone		—		300
Accrued royalties payable		1,641		1,108
Accrued coupon expense		981		838
Other		1,401		1,327
Total accrued expenses	$	14,795	$	16,360
Other long-term liabilities:
Deferred rent and long-term lease abandonment charge(1)		2,229		5,211
Total other long-term liabilities	$	2,229	$	5,211

Note 1: As of June 30, 2019, balance consists of deferred charges related to build-out of the New York facility, and as of December 31, 2018, balance consists of deferred rent and deferred build out charges.

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Non-Controlling Interests (Tables)

6 Months Ended

Jun. 30, 2019

Non-Controlling Interests

Schedule of non-controlling interests in consolidated entities

Non-controlling interests in consolidated entities are as follows:

	As of June 30, 2019
			Net loss attributable to		Non-controlling interests		Non-controlling
($ in thousands)	NCI equity share		non-controlling interests		in consolidated entities		ownership
Aevitas	$	(1,169)	$	(301)	$	(1,470)	36.1	%
Avenue (2)		23,900		(13,172)		10,728	77.2	%
Cellvation		(697)		(90)		(787)	21.1	%
Checkpoint (1)		12,042		(7,069)		4,973	69.0	%
Coronado SO		(290)		—		(290)	13.0	%
Cyprium		(292)		(73)		(365)	10.6	%
Helocyte		(4,136)		(79)		(4,215)	19.3	%
JMC		(223)		83		(140)	6.9	%
Mustang (2)		61,361		(11,263)		50,098	70.1	%
Tamid		(521)		(65)		(586)	23.4	%
Total	$	89,975	$	(32,029)	$	57,946

	As of December 31, 2018
			Net loss attributable to		Non-controlling interests		Non-controlling
($ in thousands)	NCI equity share		non-controlling interests		in consolidated entities		ownership
Aevitas	$	(474)	$	(606)	$	(1,080)	36.1	%
Avenue (2)		13,326		(13,735)		(409)	64.8	%
Caelum(3)		(2,436)		(2,413)		(4,849)	36.8	%
Cellvation		(457)		(185)		(642)	21.1	%
Checkpoint (1)		31,648		(23,470)		8,178	69.3	%
Coronado SO		(290)		—		(290)	13.0	%
Cyprium		(210)		(62)		(272)	10.8	%
Helocyte		(3,372)		(684)		(4,056)	19.8	%
JMC		(475)		245		(230)	6.9	%
Mustang (2)		38,631		(16,628)		22,003	60.5	%
Tamid		(211)		(251)		(462)	23.4	%
Total	$	75,680	$	(57,789)	$	17,891

Note 1: Checkpoint is consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Checkpoint’s Class A Common Shares which provide super-majority voting rights.

Note 2: Avenue and Mustang are consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Preferred Class A Shares which provide super-majority voting rights.

Note 3: Effective January 30, 2019, Caelum ceased to be a controlled Fortress entity and as such is no longer consolidated.

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Net Loss per Common Share (Tables)

6 Months Ended

Jun. 30, 2019

Net Loss per Common Share

Schedule of shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding

The following shares of potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding, as the effect of including such securities would be anti-dilutive at the end of the six months ended June 30, 2019 and 2018:

	Six Months Ended June 30,
	2019	2018
Warrants to purchase Common Stock	874,189	894,189
Opus warrants to purchase Common Stock	1,880,000	1,880,000
Options to purchase Common Stock	1,148,347	1,085,502
Convertible preferred stock	1,000,000	1,000,000
Unvested Restricted Stock	12,623,290	11,023,682
Unvested Restricted Stock Units	840,845	1,864,980
Total	18,366,671	17,748,353

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2019

Stockholders' Equity

Schedule of stock-based compensation expense

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 three and six months ended June 30, 2019 and 2018:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Employee awards	$	920	$	1,121	$	1,855	$	2,063
Executive awards of Fortress Companies’ stock		355		444		707		962
Non-employee awards		71		23		69		46
Fortress Companies:
Avenue		535		322		1,286		671
Checkpoint		813		72		1,611		1,209
Mustang		622		972		1,054		2,966
Other		57		198		100		30
Total stock-based compensation expense	$	3,373	$	3,152	$	6,682	$	7,947

Summary of Fortress stock option activities excluding activity related to Fortress partner companies

The following table summarizes Fortress stock option activities excluding activity related to Fortress 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, 2018	1,285,501	$	3.75	$	—	2.93
Granted	125,000	$	1.18		40,000	—
Options vested and expected to vest at June 30, 2019	1,410,501	$	4.30	$	89,249	2.83
Options vested and exercisable	1,285,501	$	4.60	$	49,249	2.67

Summary of Fortress restricted stock awards and restricted stock units activities, excluding activities related to Fortress Companies

The following table summarizes Fortress restricted stock awards and restricted stock units activities, excluding activities related to Fortress Companies:

		Weighted average
	Number of shares	grant price
Unvested balance at December 31, 2018	12,645,982	$	2.72
Restricted stock granted	1,516,408		0.86
Restricted stock forfeited	—		—
Restricted stock vested	(220,000)		3.16
Restricted stock units granted	40,000		1.63
Restricted stock units forfeited	(185,106)		4.45
Restricted stock units vested	(148,334)		3.41
Unvested balance at June 30, 2019	13,648,950	$	2.47

Summary of Fortress warrant activities, excluding activities related to Fortress Companies

The following table summarizes Fortress warrant activities, excluding activities related to Fortress Companies:

						Weighted average
						remaining
	Number of	Weighted average		Total intrinsic		contractual life
	shares	exercise price		value		(years)
Outstanding as of December 31, 2018	2,754,189	$	3.28	$	7,800	3.49
No activity	—		—		—	—
Outstanding as of June 30, 2019	2,754,189	$	3.28	$	7,800	3.00
Exercisable as of June 30, 2019	849,189	$	3.92	$	7,800	2.64

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2019

Related Party Transactions

Schedule of effective date and PIK dividend or equity fee payable

The Company has entered into Founders Agreements and, in some cases, Exchange Agreements with certain of its subsidiaries as described in the Company’s Form 10‑K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. The following table summarizes, by subsidiary, the effective date of the Founders Agreements and PIK dividend or equity fee payable to the Company in accordance with the terms of the Founders Agreements, Exchange Agreements and the subsidiaries’ certificates of incorporation.

		PIK Dividend as
		a % of fully
		diluted
		outstanding		Class of Stock
Fortress Partner Company	Effective Date (1)	capitalization		Issued
Helocyte	March 20, 2015	2.5	%	Common Stock
Avenue	February 17, 2015	0.0	%(2)	Common Stock
Mustang	March 13, 2015	2.5	%	Common Stock
Checkpoint	March 17, 2015	0.0	%(3)	Common Stock
Cellvation	October 31, 2016	2.5	%	Common Stock
Caelum	January 1, 2017	0.0	%(4)	Common Stock
Cyprium	March 13, 2017	2.5	%	Common Stock
Aevitas	July 28, 2017	2.5	%	Common Stock
Tamid	November 30, 2017(5)	2.5	%	Common Stock

Note 1: Represents the effective date of each subsidiary’s Founders Agreement. 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: Concurrently with the execution and delivery of the Stock Purchase and Merger Agreement (“SPMA”) entered into between Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement to the termination of InvaGen’s rights under the SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time.

Note 3: Instead of a PIK dividend, Checkpoint pays the Company an annual equity fee in shares of Checkpoint’s common stock equal to 2.5% of Checkpoint’s fully diluted outstanding capitalization.

Note 4: Effective January 31, 2019 the Caelum Founders Agreement and MSA with Fortress were terminated in conjunction with the execution of the DOSPA between Caelum and Alexion Therapeutics, Inc. (See Note 4).

Note 5: Represents the Trigger Date, the date that the Fortress partner company first acquires, whether by license or otherwise, ownership rights in a product.

Schedule of effective date and annual consulting fee payable by the subsidiary to the Company

The Company has entered in Management Services Agreements (the “MSAs”) with certain of its subsidiaries as described in the Company’s Form 10‑K for the year ended December 31, 2018, filed with the SEC on March 18, 2019. The following table summarizes, by subsidiary, the effective date of the MSA and the annual consulting fee payable by the subsidiary to the Company in quarterly installments:

		Annual MSA Fee
Fortress partner company	Effective Date	(Income)/Expense
Helocyte	March 20, 2015	$	500
Avenue (1)	February 17, 2015		—
Mustang	March 13, 2015		500
Checkpoint	March 17, 2015		500
Cellvation	October 31, 2016		500
Caelum(2)	January 1, 2017		—
Cyprium	March 13, 2017		500
Aevitas	July 28, 2017		500
Tamid	November 30, 2017		500
Fortress			(3,500)
Consolidated (Income)/Expense		$	—

Note 1: Concurrently with the execution and delivery of the SPMA entered into between, Avenue, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”) (together, the “SPMA Parties”), the SPMA Parties entered into a waiver agreement (the “Waiver Agreement”), pursuant to which the Company irrevocably waived its right to receive the annual dividend of Avenue’s common shares under the terms of the Class A preferred stock and any fees, payments, reimbursements or other distributions under the management services agreement between the Company and Avenue and the Founders Agreement, for the period from the effective date of the Waiver Agreement to the termination of InvaGen’s rights under the SPMA. Pursuant to the Waiver Agreement, immediately prior to the closing of the Merger Transaction contemplated under the SPMA, the Company will convert all of its preferred shares into common shares pursuant to the terms of the certificate of incorporation of Avenue, as amended from time to time. (See Note 4).

Note 2: Effective January 31, 2019 the Caelum Founders Agreement and MSA with Fortress were terminated in conjunction with the execution of a DOSPA between Caelum and Alexion Therapeutics, Inc. and $1.0 million of fees accrued under the MSA were written off (See Note 4).

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Information

Schedule of continued operations by reportable segment

The following tables summarize, for the periods indicated, operating results, from continued operations by reportable segment:

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Three Months Ended June 30, 2019	Sales		Development		Consolidated
Net Revenue	$	8,199	$	1,051	$	9,250
Direct cost of goods		(2,386)		—		(2,386)
Sales and marketing costs		(4,202)		—		(4,202)
Research and development(1)		—		(18,711)		(18,711)
General and administrative		(747)		(8,494)		(9,241)
Segment income (loss) from operations	$	864	$	(26,154)	$	(25,290)
Segment assets	$	9,313	$	217,951	$	227,264

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Three Months Ended June 30, 2018	Sales		Development		Consolidated
Net Revenue	$	6,689		126	$	6,815
Direct cost of goods		(1,668)		—		(1,668)
Sales and marketing costs		(2,910)		—		(2,910)
Research and development(1)		—		(17,489)		(17,489)
General and administrative		(383)		(9,763)		(10,146)
Segment income (loss) from operations		1,728		(27,126)		(25,398)
Segment assets	$	11,307	$	159,763	$	171,070
Assets held for sale						65,796
Total consolidated						236,866

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Six Months Ended June 30, 2019	Sales		Development		Consolidated
Net Revenue	$	14,324	$	1,403	$	15,727
Direct cost of goods		(4,270)		—		(4,270)
Sales and marketing costs		(7,695)		—		(7,695)
Research and development(1)		—		(42,434)		(42,434)
General and administrative		(1,139)		(18,087)		(19,226)
Segment income (loss) from operations	$	1,220	$	(59,118)	$	(57,898)
Segment assets	$	9,313	$	217,951	$	227,264

			Pharmaceutical
			and
	Dermatology		Biotechnology
($ in thousands)	Products		Product
Six Months Ended June 30, 2018	Sales		Development		Consolidated
Net Revenue	$	12,198	$	520	$	12,718
Direct cost of goods		(3,140)		—		(3,140)
Sales and marketing costs		(5,670)		—		(5,670)
Research and development(1)		—		(42,544)		(42,544)
General and administrative		(783)		(20,151)		(20,934)
Segment loss from operations	$	2,605		(62,175)	$	(59,570)
Segment assets	$	11,307		159,763	$	171,070
Assets held for sale						65,796
Total consolidated						236,866

Note 1: Research and development includes the cost of licenses acquired.

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Revenues from Contracts and Significant Customers (Tables)

6 Months Ended

Jun. 30, 2019

Revenues from Contracts and Significant Customers

Schedule of disaggregation of Total Revenues

Revenues by product and collaborator are summarized as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2019		2018		2019		2018
Targadox®	$	7,230	$	6,363	$	12,930	$	11,861
Other branded revenue		969		326		1,394		337
Total product revenues		8,199		6,689		14,324		12,198
TGTX		1,051		126		1,403		520
Total Revenue	$	9,250	$	6,815	$	15,727	$	12,718

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Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 01, 2019
Accounting Policies [Line Items]
Operating Lease, Liability	$ 26,136
Operating Lease, Right-of-Use Asset	$ 22,255
Accounting Standards Update 2016-02 [Member]
Accounting Policies [Line Items]
Operating Lease, Liability		$ 26,800
Operating Lease, Right-of-Use Asset		23,000
Deferred Rent Credit		$ 3,800

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Discontinued Operations- Summary of revenue and expenses (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Discontinued Operations
Revenue	$ 57,019	$ 106,541
Operating expenses
Commissions, compensation and fees	49,345	92,906
Clearing fees	578	1,321
Communications	813	1,573
Occupancy	1,141	2,096
Licenses and registration	530	1,167
Professional fees	578	1,971
Underwriting costs	42	187
Interest	2	4
Depreciation and amortization	857	1,716
Other administrative expenses	2,332	4,113
Total operating expenses	56,218	107,054
Loss from operations	801	(513)
Other income (expenses)
Interest income		6
Interest expense and financing fees	446	766
Change in fair value of derivative liabilities	(6,945)	(8,033)
Other income	215	215
Total other expenses	(6,284)	(7,046)
Loss from discontinued operations before income taxes	(5,483)	(7,559)
Income tax expense	1,438	1,438
Loss from discontinued operations	(6,921)	(8,997)
Total loss from discontinued operations	$ (6,921)	$ (8,997)

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Discontinued Operations- Classified assets and liabilities (Details) - USD ($) $ in Thousands	Jan. 31, 2019	Dec. 31, 2018
Current assets
Current assets held for sale		$ 13,089
Total current assets	$ 1,207	13,089
Total assets held for sale		$ 13,089

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Discontinued Operations- Cash flows from the transaction (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Operating activities
Effect of elimination entry with discontinued operations presentation			$ (751)
Net loss on discontinued operations	$ (6,921)		(8,997)
Total cash used in discontinued operating activities			$ (9,748)
Investing activities
Proceeds from sale of National		$ 13,089
Total cash provided by discontinued investing activities		$ 13,089

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Discontinued Operations- Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Disposal Group, Including Discontinued Operation, Assets		$ 13,089
National Holdings Corporation [Member]
Disposal Group, Including Discontinued Operation, Assets	$ 13,100
Share Price	$ 3.25

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Collaboration and Stock Purchase Agreements - Summary of the assets and liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Jan. 31, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents		$ 1,201
Prepaid expenses and other current assets		6
Total current assets		1,207	$ 13,089
Current liabilities
Accounts payable and accrued expenses		2,246
Interest payable		198
Interest payable - related party		106
Note payable - related party		929
Note payable		9,914
Warrant liability		991
Total current liabilities		14,384
Net liability impacted by deconsolidation	$ 13,177	$ 13,177

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Collaboration and Stock Purchase Agreements - Condensed consolidated financial statements (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jan. 31, 2019
Gain on deconsolidation of Caelum
Fair value of Caelum	$ 11,193
Net liabilities deconsolidated	13,177	$ 13,177
Non-controlling interest share	(4,849)
Write off of MSA fees due Fortress	(1,000)
Gain on deconsolidation of Caelum	$ 18,521

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Collaboration and Stock Purchase Agreements - Additional Information (Details) - USD ($) $ in Thousands	1 Months Ended		3 Months Ended		6 Months Ended
	Feb. 08, 2019	Jan. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Nov. 12, 2018
Revenues			$ 9,250	$ 6,815	$ 15,727	$ 12,718
Business Acquisition, Percentage of Voting Interests Acquired							33.30%
Business Combination, Contingent Consideration, Liability							$ 180,000
Caelum [Member]
Sale of Stock, Consideration Received on Transaction		$ 30,000
Sale of Stock Percentage of Shares Transferred on Transaction		19.90%
Sales [Member] | Avenue [Member]
Revenues					325,000
Sales After January One, Twenty Thousand Twenty Nine [Member] | Avenue [Member]
Revenues					$ 1,500,000
Gross Profit Percentage To Net Sales					20.00%
Slab One [Member] | Avenue [Member]
Gross Profit Percentage To Net Sales					10.00%
Slab One [Member] | Sales [Member] | Avenue [Member]
Revenues					$ 400,000
Slab One [Member] | Sales After January One, Twenty Thousand Twenty Nine [Member] | Avenue [Member]
Revenues					$ 100,000
Slab Two [Member] | Avenue [Member]
Gross Profit Percentage To Net Sales					12.50%
Slab Two [Member] | Sales [Member] | Avenue [Member] | Maximum [Member]
Revenues					$ 500,000
Slab Two [Member] | Sales [Member] | Avenue [Member] | Minimum [Member]
Revenues					$ 400,000
Slab Three [Member] | Avenue [Member]
Gross Profit Percentage To Net Sales					15.00%
Slab Three [Member] | Sales [Member] | Avenue [Member]
Revenues					$ 500,000
SPMA [Member]
Business Combination, Consideration Transferred	$ 7,000
First Stage Member [Member] | SPMA [Member]
Business Combination, Consideration Transferred	$ 31,500

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Property and Equipment - Components of Property and Equipment (Details) - USD ($) $ in Thousands		6 Months Ended
		Jun. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Line Items]
Total property and equipment		$ 15,525	$ 14,583
Less: Accumulated depreciation		(3,502)	(2,564)
Property and equipment, net		12,023	12,019
Computer Equipment [Member] | Fortress Biotech Inc [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment		$ 648	648
Useful Life (Years)		3 years
Furniture and Fixtures [Member] | Fortress Biotech Inc [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment		$ 1,153	1,128
Useful Life (Years)		5 years
Leasehold Improvements [Member] | Fortress Biotech Inc [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment		$ 9,359	9,271
Leasehold Improvements [Member] | Fortress Biotech Inc [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Useful Life (Years)		15 years
Leasehold Improvements [Member] | Fortress Biotech Inc [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Useful Life (Years)		5 years
Construction in progress [Member] | Fortress Biotech Inc [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment	[1]	$ 699	393
Machinery and Equipment [Member] | Fortress Biotech Inc [Member]
Property, Plant and Equipment [Line Items]
Total property and equipment		$ 3,666	$ 3,143
Useful Life (Years)		5 years

[1] Relates to the Mustang cell processing facility.

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Property and Equipment - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Property and Equipment
Depreciation	$ 500	$ 300	$ 938	$ 503

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Fair Value Measurements - Contingently Issuable Warrants with option pricing model (Details) - Caelum Warrant Liabilities [Member]	12 Months Ended
	Dec. 31, 2018
Measurement Input, Risk Free Interest Rate [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Risk-free interest rate	2.905%
Measurement Input, Risk Free Interest Rate [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Risk-free interest rate	2.909%
Measurement Input, Expected Dividend Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected dividend yield	0.00%
Measurement Input, Expected Term [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected term in years	3 years 10 months 2 days
Measurement Input, Expected Term [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected term in years	3 years 11 months 16 days
Measurement Input, Price Volatility [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected volatility	70.00%

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Fair Value Measurements - Derivative Contingently Issuable Warrant liabilities (Details) - Caelum Warrant Liabilities [Member] $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Beginning balance	$ 991
Issuance of warrant due to conversion of note	$ (991)

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Fair Value Measurements - Warrant Liabilities And Convertible Notes At Fair Value (Details) - Caelum Convertible Notes [Member]	12 Months Ended
	Dec. 31, 2018
Measurement Input, Risk Free Interest Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Risk-free interest rate	2.302%
Measurement Input, Expected Dividend Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected dividend yield	0.00%
Measurement Input, Expected Term [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected term in years	3 months 26 days
Measurement Input, Price Volatility [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Expected volatility	67.00%

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Fair Value Measurements - Exclusive of National Financial Instruments Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets
Fair value of investment	$ 11,193
Total	11,193
Liabilities
Liabilities		$ 10,905
Warrants to Purchase Common Stock [Member]
Liabilities
Liabilities		991
Caelum Convertible Notes [Member]
Liabilities
Liabilities		9,914
Fair Value, Inputs, Level 3 [Member]
Assets
Fair value of investment	11,193
Total	$ 11,193
Liabilities
Liabilities		10,905
Fair Value, Inputs, Level 3 [Member] | Warrants to Purchase Common Stock [Member]
Liabilities
Liabilities		991
Fair Value, Inputs, Level 3 [Member] | Caelum Convertible Notes [Member]
Liabilities
Liabilities		$ 9,914

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Fair Value Measurements - Changes in Fair Value of Financial Instruments (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance	$ 11,193
Caelum [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance	10,905
Balance	11,193
Caelum Convertible Notes [Member] | Caelum [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Balance	9,914
Conversion of the convertible notes	(9,914)
Balance	$ 0

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Fair Value Measurements - Changes in fair value (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Fair value of investment	$ 11,193
Balance	11,193
Caelum [Member]
Balance	10,905
Conversion of convertible notes	(9,914)
Issuance of warrant	(991)
Fair value of investment	11,193
Balance	11,193
Warrants to Purchase Common Stock [Member] | Caelum [Member]
Balance	991
Issuance of warrant	(991)
Caelum Convertible Notes [Member] | Caelum [Member]
Balance	9,914
Conversion of convertible notes	(9,914)
Balance	$ 0

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Fair Value Measurements - Additional Information (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, Fair Value Disclosure	$ 11,193
Caelum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, Fair Value Disclosure	$ 11,193
Measurement Input, Risk Free Interest Rate [Member] | Caelum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Values Assumptions Risk Free Return	2.24%
Measurement Input Investments [Member] | Caelum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments, Fair Value Disclosure	$ 11,200
Measurement Input, Share Price [Member] | Caelum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Values Assumptions Share Price | $ / shares	$ 1.549
Measurement Input, Price Volatility [Member] | Caelum [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Values Assumptions Expected Volatility Rate	70.00%
Fair Values Assumptions Expected Discount For Lack Of Marketability	27.90%

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Licenses Acquired - License as recorded in the Condensed Consolidated Statements of Operations (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense	$ 200	$ 1	$ 650	$ 98
Helocyte [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense				21
Mustang [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense	$ 200		$ 650	75
Aevitas [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense		$ 1		1
Cellvation [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense				$ 1

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Licenses Acquired - Research and development expenses (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense	$ 200	$ 1	$ 650	$ 98
Mustang Therapeutics, Inc [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense	200		650	75
Mustang Therapeutics, Inc [Member] | City of Hope COH CD123 (MB-102) [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense			250
Mustang Therapeutics, Inc [Member] | CS-1 City of Hope Milestone (MB-104) [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense	$ 200		200
Mustang Therapeutics, Inc [Member] | Nationwide Children's Hospital - C134 (MB-108) [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense			$ 200
Mustang Therapeutics, Inc [Member] | Manufacturing License [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Total licenses acquired expense				$ 75

XML

Licenses Acquired - Additional Information (Details)		1 Months Ended
	Feb. 01, 2019 USD ($)	May 31, 2019 USD ($)	May 31, 2017 USD ($) Milestone
CS-1 City of Hope Milestone (MB-104) [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Payment For Research And Development Licenses			$ 600,000
Research And Development Licenses Payments Due			14,900,000
Research And Development Licenses, Annual Maintenance Fee			$ 50,000
Research And Development Licenses, Number of Development Milestones in Which Payments is Due | Milestone			10
Research and Development in Process		$ 200,000
Nationwide Children's Hospital - C134 (MB-108) [Member]
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Payment For Research And Development Licenses	$ 200,000
Research And Development Licenses Payments Due	$ 152,800,000

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Sponsored Research and Clinical Trial Agreements - Summary of Aevitas expense related to its sponsored research agreements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total licenses acquired expense	$ 200	$ 1	$ 650	$ 98
Research and clinical trial agreements [Member] | Aevitas Therapeutics Inc [Member]
Total licenses acquired expense	250	300	500	400
Research and clinical trial agreements [Member] | Aevitas Therapeutics Inc [Member] | UMass - AAV [Member]
Total licenses acquired expense		$ 300		$ 400
Research and clinical trial agreements [Member] | Aevitas Therapeutics Inc [Member] | UPenn - AAV [Member]
Total licenses acquired expense	$ 250		$ 500

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Sponsored Research and Clinical Trial Agreements - Summary of Mustang expense related to its sponsored research agreements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total licenses acquired expense	$ 200	$ 1	$ 650	$ 98
BIDMC - CRISPR [Member]
Total licenses acquired expense		0	69
Mustang Therapeutics, Inc [Member]
Total licenses acquired expense	200		650	75
Research and clinical trial agreements [Member] | Mustang Therapeutics, Inc [Member]
Total licenses acquired expense	1,670	1,290	3,265	2,680
Research and clinical trial agreements [Member] | Mustang Therapeutics, Inc [Member] | COH CAR T [Member]
Total licenses acquired expense	500	500	1,000	1,000
Research and clinical trial agreements [Member] | Mustang Therapeutics, Inc [Member] | COH - CD123 (MB-102) [Member]
Total licenses acquired expense	456	114	759	264
Research and clinical trial agreements [Member] | Mustang Therapeutics, Inc [Member] | COH - IL13Ra2 (MB-101) [Member]
Total licenses acquired expense	225	143	567	503
Research and clinical trial agreements [Member] | Mustang Therapeutics, Inc [Member] | City Of Hope Manufacturing [Member]
Total licenses acquired expense	115	115	229	229
Research and clinical trial agreements [Member] | Mustang Therapeutics, Inc [Member] | Fred Hutch-CD20 (MB-106) [Member]
Total licenses acquired expense	$ 374	$ 418	$ 641	$ 684

XML

Sponsored Research and Clinical Trial Agreements - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Research and Development Expense (Excluding Acquired in Process Cost)	$ 18,511	$ 17,488	$ 41,784	$ 42,446
University of Texas [Member] | Cellvation [Member]
Research and Development Expense (Excluding Acquired in Process Cost)	$ 100	$ 100	$ 100	$ 100

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Intangibles, net - Summary Of The JMC Intangible Asset (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Net intangible assets	$ 971	$ 1,417
Journey Medical Corporation [Member]
Finite-Lived Intangible Assets, Gross	2,800	2,800
Accumulated amortization	(1,829)	(1,383)
Net intangible assets	$ 971	1,417
Ceracade [Member] | Journey Medical Corporation [Member]
Finite-Lived Intangible Asset, Useful Life	3 years
Finite-Lived Intangible Assets, Gross	$ 300	300
Luxamend [Member] | Journey Medical Corporation [Member]
Finite-Lived Intangible Asset, Useful Life	3 years
Finite-Lived Intangible Assets, Gross	$ 50	50
Targadox [Member] | Journey Medical Corporation [Member]
Finite-Lived Intangible Asset, Useful Life	3 years
Finite-Lived Intangible Assets, Gross	$ 1,250	1,250
Exelderm [Member] | Journey Medical Corporation [Member]
Finite-Lived Intangible Asset, Useful Life	3 years
Finite-Lived Intangible Assets, Gross	$ 1,200	$ 1,200

XML

Intangibles, net - Cost Of Goods Sold (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Beginning balance at January 1, 2019	$ 1,417
Ending balance at March 31, 2019	971
Journey Medical Corporation [Member]
Beginning balance at January 1, 2019	1,417
Amortization expense	(446)
Ending balance at March 31, 2019	$ 971

XML

Intangibles, net - Amortization Of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Total	$ 971	$ 1,417
Journey Medical Corporation [Member]
For the six-months ending December 31, 2019	304
December 31, 2020	400
December 31, 2021	267
Total	971	$ 1,417
Targadox [Member] | Journey Medical Corporation [Member]
For the six-months ending December 31, 2019	104
December 31, 2020	0
December 31, 2021	0
Total	104
Exelderm [Member] | Journey Medical Corporation [Member]
For the six-months ending December 31, 2019	200
December 31, 2020	400
December 31, 2021	267
Total	$ 867

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Debt and Interest - Long-term debt (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt [Line Items]
Total notes payable, long-term	$ 90,242	$ 84,406
Less: Discount of notes payable	6,539	4,903
Total notes payable	$ 83,703	79,503
Interest Rate	2.50%
IDB Note [Member]
Debt [Line Items]
Total notes payable, long-term	$ 14,929	14,929
Interest Rate	2.25%
2017 Subordinated Note Financing One [Member]
Debt [Line Items]
Total notes payable, long-term	$ 3,254	3,254
Interest Rate	8.00%
2017 Subordinated Note Financing Two [Member]
Debt [Line Items]
Total notes payable, long-term	$ 13,893	13,893
Interest Rate	8.00%
2017 Subordinated Note Financing Three [Member]
Debt [Line Items]
Total notes payable, long-term	$ 1,820	1,820
Interest Rate	8.00%
2017 Subordinated Note Financing Four [Member]
Debt [Line Items]
Total notes payable, long-term	$ 3,018	3,018
Interest Rate	8.00%
2017 Subordinated Note Financing Five [Member]
Debt [Line Items]
Total notes payable, long-term	$ 6,371	6,371
Interest Rate	8.00%
Opus Credit Facility [Member]
Debt [Line Items]
Total notes payable, long-term	$ 9,500	9,500
Interest Rate	12.00%
Caelum Convertible Note One [Member]
Debt [Line Items]
Total notes payable, long-term		1,000
Interest Rate	8.00%
Caelum Convertible Note Two [Member]
Debt [Line Items]
Total notes payable, long-term		6,800
Interest Rate	8.00%
Caelum Convertible Note Three [Member]
Debt [Line Items]
Total notes payable, long-term		2,114
Interest Rate	8.00%
Venture Notes One [Member]
Debt [Line Items]
Total notes payable, long-term	$ 6,517	6,517
Interest Rate	8.00%
Venture Notes Two [Member]
Debt [Line Items]
Total notes payable, long-term	$ 15,190	$ 15,190
Interest Rate	8.00%
Mustang 2019 Venture Debt [Member]
Debt [Line Items]
Total notes payable, long-term	$ 15,750
Interest Rate	9.00%
LIBOR Rate [Member]
Debt [Line Items]
Interest Rate	9.00%

XML

Debt and Interest - Schedule of Interest Expenses for Debt Arrangements (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Debt [Line Items]
Interest	$ 2,207	$ 2,004	$ 4,054	$ 3,746
Amortization of fees	899	586	1,521	1,247
Interest and Debt Expense	3,106	2,590	5,575	4,993
LOC Fees [Member]
Debt [Line Items]
Interest	16	9	31	16
Interest and Debt Expense	16	9	31	16
IDB Note [Member]
Debt [Line Items]
Interest	85	85	168	169
Interest and Debt Expense	85	85	168	169
2017 Subordinated Note Financing One [Member]
Debt [Line Items]
Interest	1,048	1,049	2,076	2,097
Amortization of fees	392	357	755	682
Interest and Debt Expense	1,440	1,406	2,831	2,779
Opus Credit Facility [Member]
Debt [Line Items]
Interest	284	284	565	565
Amortization of fees	119	101	232	420
Interest and Debt Expense	403	385	797	985
Helocyte Convertible Note [Member]
Debt [Line Items]
Interest		19		87
Interest and Debt Expense		19		87
Caelum Convertible Note [Member]
Debt [Line Items]
Interest		195		391
Interest and Debt Expense		195		391
Other [Member]
Debt [Line Items]
Interest		(66)		(64)
Interest and Debt Expense		(66)		(64)
2018 Venture Notes [Member]
Debt [Line Items]
Interest	432	429	861	485
Amortization of fees	156	128	302	145
Interest and Debt Expense	588	$ 557	1,163	$ 630
Mustang 2019 Venture Notes [Member]
Debt [Line Items]
Interest	342		353
Amortization of fees	232		232
Interest and Debt Expense	$ 574		$ 585

XML

Debt and Interest- Additional Information (Details)	1 Months Ended
	Mar. 29, 2019 USD ($) D installment $ / shares shares	Jun. 30, 2019
Debt [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		2.50%
Amortization Payments, Installments | installment	18
Number of Business Days Prior Written Notice | D	10
Debt Instrument, Periodic Payment, Principal	$ 500,000
Percent of Outstanding Loan Principal Amount for Calculation of Repayment Change	4.00%
Percentage Of Amortization Loan Date	3.00%
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	2.00%
Line of Credit Facility, Periodic Payment	$ 300,000
Line of Credit Facility, Periodic Payment, Principal	800,000
Proceeds from Lines of Credit	$ 15,000,000
Accrued Interest Percentage	5.00%
Percentage of Warrants Included in Debt	5.00%
Class of Warrant or Right, Number of Securities Called by Each Warrant or Right | shares	288,184
Class of Warrant or Right, Exercise Price of Warrants or Rights | $ / shares	$ 3.47
Warrants Not Settleable in Cash, Fair Value Disclosure	$ 900,000
Minimum [Member]
Debt [Line Items]
Cash	8,000,000
Maximum [Member]
Debt [Line Items]
Cash	13,000,000
Horizon Technology Finance Corporation [Member]
Debt [Line Items]
Legal Fees	1,200,000
Line of Credit Facility, Commitment Fee Amount	200,000
Reimbursement of Legal Fees	30,000
Mustang Two Thousand Nineteen Venture Debt [Member]
Debt [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	15,000,000
Line of Credit Facility, Current Borrowing Capacity	20,000,000
Line of Credit Facility, Remaining Borrowing Capacity	$ 5,000,000
LIBOR Rate [Member]
Debt [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		9.00%
Debt Instrument, Basis Spread on Variable Rate	9.00%

XML

Leases - Summarizes quantitative information about the Company's operating leases (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Leases
Operating cash flows from operating leases	$ (1,540)
Weighted-average remaining lease term - operating leases	6 years 6 months
Weighted-average discount rate - operating leases	6.20%
Six months ended December 31, 2019	$ 1,098
Year Ended December 31, 2020	3,351
Year Ended December 31, 2021	3,114
Year Ended December 31, 2022	3,084
Year Ended December 31, 2023	3,137
Other	23,463
Total	37,247
Less: present value discount	(11,111)
Operating lease liabilities	$ 26,136

XML

Leases - Lease expense (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Leases
Operating lease cost	$ 803	$ 1,599
Shared lease costs	(452)	(929)
Variable lease cost	337	415
Total lease cost	$ 688	$ 1,085

XML

Leases - Future minimum lease payments (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Leases
2019	$ 3,070
2020	3,289
2021	3,084
2022	3,084
2023	3,137
Beyond	23,466
Total minimum lease payments	$ 39,130

XML

Leases - Additional Information (Details)		1 Months Ended				3 Months Ended	6 Months Ended
	Oct. 03, 2014 USD ($)	Aug. 31, 2018 USD ($) ft²	Oct. 27, 2017 USD ($) ft²	Jun. 30, 2017 USD ($) ft²	Oct. 31, 2015 USD ($) ft²	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)
Lessee, Operating Lease, Term of Contract	15 years				5 years
Lessee Operating Lease Annual Average Rental Expense	$ 2,700,000				$ 200,000
Operating Leases, Rent Expense, Net	40,700,000						$ 16,000,000
Land Subject to Ground Leases | ft²					6,100
Operating Lease, Liability						$ 26,136,000	26,136,000
Operating Lease, Right-of-Use Asset						22,255,000	22,255,000
Operating Lease, Expense						$ 800,000	$ 1,600,000
MASSACHUSETTS
Operating Leases, Rent Expense, Net			$ 3,600,000
Land Subject to Ground Leases | ft²			27,043
Lessee Operating Lease Base Rent Net of Abatements			$ 600,000
AZERBAIJAN
Lessee Operating Lease Annual Average Rental Expense		$ 94,000		$ 55,000
Lessee, Operating Lease, Option to Extend				P2Y
Land Subject to Ground Leases | ft²		3,681		2,295
OPPM [Member]
Lessee Operating Lease Annual Average Rental Expense	$ 300,000
Lessee Operating Lease Percentage Of Desk Space To Occupy	10.00%
TGTX [Member]
Lessee Operating Lease Annual Average Rental Expense	$ 1,100,000
Lessee Operating Lease Percentage Of Desk Space To Occupy	45.00%

XML

Accrued Liabilities and other Long-Term Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accrued expenses:
Professional fees	$ 1,051	$ 1,434
Salaries, bonuses and related benefits	4,479	5,843
Research and development	3,527	3,805
Research and development - manufacturing	946	826
Research and development - clinical supplies	160	160
Research and development - license maintenance fees	409	519
Research and development - milestones	200	200
Dr. Falk Pharma milestone		300
Accrued royalties payable	1,641	1,108
Accrued coupon expense	981	838
Other	1,401	1,327
Total accrued expenses	14,795	16,360
Other long-term liabilities:
Deferred rent and long-term lease abandonment charge	2,229	5,211
Total other long-term liabilities	$ 2,229	$ 5,211

XML

Non-Controlling Interests (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended		12 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Noncontrolling Interest [Line Items]
NCI equity share				$ 89,975		$ 75,680
Net loss attributable to non-controlling interest		$ (14,382)	$ (14,105)	(32,029)	$ (31,305)	(57,789)
Non-controlling interests in consolidated entities		57,946		57,946		17,891
Aevitas [Member]
Noncontrolling Interest [Line Items]
NCI equity share				(1,169)		(474)
Net loss attributable to non-controlling interest				(301)		(606)
Non-controlling interests in consolidated entities		$ (1,470)		$ (1,470)		$ (1,080)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		36.10%		36.10%		36.10%
Avenue [Member]
Noncontrolling Interest [Line Items]
NCI equity share	[1]			$ 23,900		$ 13,326
Net loss attributable to non-controlling interest	[1]			(13,172)		(13,735)
Non-controlling interests in consolidated entities	[1]	$ 10,728		$ 10,728		$ (409)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	[1]	77.20%		77.20%		64.80%
Caelum [Member]
Noncontrolling Interest [Line Items]
NCI equity share						$ (2,436)
Net loss attributable to non-controlling interest						(2,413)
Non-controlling interests in consolidated entities						$ (4,849)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners						36.80%
Cellvation [Member]
Noncontrolling Interest [Line Items]
NCI equity share				$ (697)		$ (457)
Net loss attributable to non-controlling interest				(90)		(185)
Non-controlling interests in consolidated entities		$ (787)		$ (787)		$ (642)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		21.10%		21.10%		21.10%
Checkpoint Therapeutics, Inc [Member]
Noncontrolling Interest [Line Items]
NCI equity share	[2]			$ 12,042		$ 31,648
Net loss attributable to non-controlling interest	[2]			(7,069)		(23,470)
Non-controlling interests in consolidated entities	[2]	$ 4,973		$ 4,973		$ 8,178
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	[2]	69.00%		69.00%		69.30%
Coronado SO [Member]
Noncontrolling Interest [Line Items]
NCI equity share				$ (290)		$ (290)
Net loss attributable to non-controlling interest						0
Non-controlling interests in consolidated entities		$ (290)		$ (290)		$ (290)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		13.00%		13.00%		13.00%
Cyprium [Member]
Noncontrolling Interest [Line Items]
NCI equity share				$ (292)		$ (210)
Net loss attributable to non-controlling interest				(73)		(62)
Non-controlling interests in consolidated entities		$ (365)		$ (365)		$ (272)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		10.60%		10.60%		10.80%
Helocyte [Member]
Noncontrolling Interest [Line Items]
NCI equity share				$ (4,136)		$ (3,372)
Net loss attributable to non-controlling interest				(79)		(684)
Non-controlling interests in consolidated entities		$ (4,215)		$ (4,215)		$ (4,056)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		19.30%		19.30%		19.80%
JMC [Member]
Noncontrolling Interest [Line Items]
NCI equity share				$ (223)		$ (475)
Net loss attributable to non-controlling interest				83		245
Non-controlling interests in consolidated entities		$ (140)		$ (140)		$ (230)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		6.90%		6.90%		6.90%
Mustang Therapeutics, Inc [Member]
Noncontrolling Interest [Line Items]
NCI equity share	[1]			$ 61,361		$ 38,631
Net loss attributable to non-controlling interest	[1]			(11,263)		(16,628)
Non-controlling interests in consolidated entities	[1]	$ 50,098		$ 50,098		$ 22,003
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	[1]	70.10%		70.10%		60.50%
Tamid [Member]
Noncontrolling Interest [Line Items]
NCI equity share				$ (521)		$ (211)
Net loss attributable to non-controlling interest				(65)		(251)
Non-controlling interests in consolidated entities		$ (586)		$ (586)		$ (462)
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners		23.40%		23.40%		23.40%

[1] Avenue and Mustang are consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Preferred Class A Shares which provide super-majority voting rights.

[2] Checkpoint is consolidated with Fortress’ operations because Fortress maintains voting control through its ownership of Checkpoint’s Class A Common Shares which provide super-majority voting rights.

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Net Loss per Common Share (Details) - shares	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total of weighted average shares outstanding	18,366,671	17,748,353
Warrants to Purchase Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total of weighted average shares outstanding	874,189	894,189
Opus warrants to purchase Common Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total of weighted average shares outstanding	1,880,000	1,880,000
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total of weighted average shares outstanding	1,148,347	1,085,502
Convertible preferred stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total of weighted average shares outstanding	1,000,000	1,000,000
Unvested Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total of weighted average shares outstanding	12,623,290	11,023,682
Unvested Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total of weighted average shares outstanding	840,845	1,864,980

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Stockholders' Equity - Employee Stock Purchase Programs (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 3,373	$ 3,152	$ 6,682	$ 7,947
Avenue [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	535	322	1,286	671
Checkpoint [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	813	72	1,611	1,209
Mustang [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	622	972	1,054	2,966
Other [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	57	198	100	30
Employee Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	920	1,121	1,855	2,063
Executive Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	355	444	707	962
Non-Employee Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 71	$ 23	$ 69	$ 46

XML

Stockholders' Equity - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Stockholders' Equity
Number of shares, Options vested and expected to vest	1,285,501
Number of shares, Options exercised	125,000
Number of shares, Options vested and expected to vest	1,410,501	1,285,501
Number of shares, Options Exercisable	1,285,501
Weighted average exercise price, Options vested and expected to vest	$ 3.75
Weighted Average Exercise Price, Options exercised	1.18
Weighted average exercise price, Options vested and expected to vest	4.30
Weighted average exercise price, Options vested and exercisable	$ 4.60
Total weighted average intrinsic value, Options vested and expected to vest	$ 89,249
Total weighted average intrinsic value, Options exercised	40,000
Total weighted average intrinsic value, Exercisable	$ 49,249
Weighted average remaining contractual life (years), Options vested and expected to vest	2 years 9 months 29 days	2 years 11 months 5 days
Weighted average remaining contractual life (years), Options vested and exercisable	2 years 8 months 1 day

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Stockholders' Equity - Restricted Stock Activity (Details) - Restricted Stock [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares, Unvested balance | shares	12,645,982
Number of shares, Restricted stock granted | shares	1,516,408
Number of shares, Restricted stock vested | shares	(220,000)
Number of shares Restricted stock units granted | shares	40,000
Number of shares Restricted stock units forfeited | shares	(185,106)
Number of shares Restricted stock units vested | shares	(148,334)
Number of shares, Unvested balance | shares	13,648,950
Weighted average grant price, Unvested balance | $ / shares	$ 2.72
Weighted average grant price, Restricted stock granted | $ / shares	0.86
Weighted average grant price, Restricted stock vested | $ / shares	3.16
Weighted average grant price, Restricted stock units granted | $ / shares	1.63
Weighted average grant price, Restricted stock units forfeited | $ / shares	4.45
Weighted average grant price, Restricted stock units vested | $ / shares	3.41
Weighted average grant price, Unvested balance | $ / shares	$ 2.47

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Stockholders' Equity - Summarizes Fortress warrant activities (Details) - Warrants to Purchase Common Stock [Member] - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Subsidiary or Equity Method Investee [Line Items]
Number of shares, Outstanding	2,754,189
Number of shares, Outstanding	2,754,189	2,754,189
Number of shares, Exercisable	849,189
Weighted average exercise price, Outstanding	$ 3.28
Weighted average exercise price, Outstanding	3.28	$ 3.28
Weighted average exercise price, Exercisable	$ 3.92
Total intrinsic value, Outstanding	$ 7,800	$ 7,800
Total intrinsic value, Exercisable	$ 7,800
Weighted average remaining contractual life (years), Outstanding	3 years	3 years 5 months 27 days
Weighted average remaining contractual life, Exercisable (years)	2 years 7 months 21 days

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Stockholders' Equity - Additional Information (Details) - USD ($)				1 Months Ended		3 Months Ended		6 Months Ended
	Jun. 28, 2019	Apr. 30, 2019	Jul. 13, 2018	Apr. 30, 2019	Nov. 30, 2017	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Mar. 29, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights										$ 3.47
Common Stock, Shares, Issued						68,138,203		68,138,203			68,138,203
Common Stock, Par or Stated Value Per Share						$ 0.001		$ 0.001			$ 0.001
Adjustments To Additional Paid In Capital At Market Offering Costs							$ (135,000)		$ (141,000)
Market Offering [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from issuance of Common stock								$ 22,500,000
Proceeds From Issuance Of Common Stock Net of Issuance Costs						$ 22,000,000		$ 22,000,000
Common Stock, Shares, Issued						3,500,000		3,500,000
Common Stock, Par or Stated Value Per Share						$ 6.42		$ 6.42
Adjustments To Additional Paid In Capital At Market Offering Costs						$ 500,000		$ 500,000
Aggregate Offering Price of Debt	$ 50,000,000
Percentage of Placement of Agent Fee	3.00%
Available-for-sale Securities						$ 6,800,000		$ 6,800,000
Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common Stock issued in connection with the first ESPP offering						54,221	43,707	54,221	43,707
Issuance of Common Stock for At the Market Offering in shares						4,463,399	1,066,038	7,390,826	1,130,835
Common Stock [Member] | Market Offering [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average Price Per Share						$ 1.72		$ 1.88
Proceeds from issuance of Common stock						$ 7,700,000		$ 14,000,000
Issuance of Common Stock for At the Market Offering in shares						4,500,000		7,400,000
Adjustments To Additional Paid In Capital At Market Offering Costs								$ 300,000
Mustang Bio, Inc [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common Stock Shares Available For Future Issuance Value						$ 20,900,000		$ 20,900,000
Marketable Securities			$ 75,000,000
Percentage of Placement of Agent Fee			3.00%
Mustang Bio, Inc [Member] | Over-Allotment Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from issuance of Common stock		$ 31,600,000
Payments of Stock Issuance Costs				$ 2,100,000
Proceeds From Issuance Of Common Stock Net of Issuance Costs				$ 29,500,000
Stock Issued During Period, Shares, New Issues		6,875,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights		1,031,250		1,031,250
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 4.00		$ 4.00
Checkpoint Therapeutics, Inc [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares Issued, Price Per Share						$ 4.12		$ 4.12
Proceeds from issuance of Common stock						$ 4,000,000		$ 4,500,000
Stock Issued During Period, Shares, New Issues						997,957		1,088,226
Percentage of Placement of Agent Fee					3.00%
Maximum Authorized Amount Of Shares To Be Sold					$ 100,000,000
Available-for-sale Securities						$ 61,500,000		$ 61,500,000
Checkpoint Therapeutics, Inc [Member] | Market Offering [Member] | Founder Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Issued During Period, Shares, New Issues						24,941		27,195
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense						$ 800,000	$ 800,000	$ 1,400,000	$ 3,100,000
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated Share-based Compensation Expense						2,600,000	2,400,000	$ 5,300,000	4,800,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition								5 years 2 months 12 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options						13,600,000		$ 13,600,000
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition								2 years 2 months 12 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options						$ 2,100,000		$ 2,100,000
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Stock Purchase Plan to eligible employees, Reckoning fair value percentage during offering period						85.00%		85.00%
Common Stock issued in connection with the first ESPP offering								410,728
Allocated Share-based Compensation Expense						$ 19,000	$ 43,000	$ 39,000	$ 81,000
Common Stock, Capital Shares Reserved for Future Issuance						589,272		589,272

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Related Party Transactions - Schedule of Effective Date and Equity Fee Payable (Details)	6 Months Ended
	Jun. 30, 2019
Helocyte Inc [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	2.50%
Dividends Payable, Date Declared	Mar. 20, 2015
Avenue Therapeutics, Inc. [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	0.00%
Dividends Payable, Date Declared	Feb. 17, 2015
Mustang Bio, Inc [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	2.50%
Dividends Payable, Date Declared	Mar. 13, 2015
Checkpoint Therapeutics, Inc [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	0.00%
Dividends Payable, Date Declared	Mar. 17, 2015
Cellvation Inc [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	2.50%
Dividends Payable, Date Declared	Oct. 31, 2016
Caelum Bio sciences Inc [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	0.00%
Dividends Payable, Date Declared	Jan. 01, 2017
Cyprium Bio sciences Inc [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	2.50%
Dividends Payable, Date Declared	Mar. 13, 2017
Aevitas Inc [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	2.50%
Dividends Payable, Date Declared	Jul. 28, 2017
Tamid [Member]
Related Party Transaction [Line Items]
Dividends Paid in kind percentage	2.50%
Dividends Payable, Date Declared	Nov. 30, 2017

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Related Party Transactions - Schedule of The Effective Date and Annual Management Services agreement Fee (Income) Expense (Details)	6 Months Ended
	Jun. 30, 2019 USD ($)
Helocyte Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ 500
Annual Consulting Fee Payable Effective Date	Mar. 20, 2015
Avenue Therapeutics, Inc. [Member]
Related Party Transaction [Line Items]
Annual Consulting Fee Payable Effective Date	Feb. 17, 2015
Mustang Bio, Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ 500
Annual Consulting Fee Payable Effective Date	Mar. 13, 2015
Checkpoint Therapeutics, Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ 500
Annual Consulting Fee Payable Effective Date	Mar. 17, 2015
Cellvation Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ 500
Annual Consulting Fee Payable Effective Date	Oct. 31, 2016
Caelum Bio sciences Inc [Member]
Related Party Transaction [Line Items]
Annual Consulting Fee Payable Effective Date	Jan. 01, 2017
Cyprium Bio sciences Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ 500
Annual Consulting Fee Payable Effective Date	Mar. 13, 2017
Aevitas Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ 500
Annual Consulting Fee Payable Effective Date	Jul. 28, 2017
Tamid Bio sciences Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ 500
Annual Consulting Fee Payable Effective Date	Nov. 30, 2017
Fortress Biotech Inc [Member]
Related Party Transaction [Line Items]
Annual Management Services Agreement Fee Income expense	$ (3,500)

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Related Party Transactions - Additional Information (Details) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	Jan. 31, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Aug. 07, 2019	Jul. 18, 2019	Jul. 01, 2019	Dec. 31, 2018
Related Party Transaction [Line Items]
Long-term Debt		$ 90,242,000		$ 90,242,000					$ 84,406,000
Debt Instrument, Interest Rate, Stated Percentage		2.50%		2.50%
Annual Management Services Agreement Fee Income Expense Written Off	$ 1,000,000
Opus Credit Facility [Member]
Related Party Transaction [Line Items]
Payments of Loan Costs				$ 200,000	$ 300,000
Long-term Debt		$ 9,500,000		$ 9,500,000					$ 9,500,000
Debt Instrument, Interest Rate, Stated Percentage		12.00%		12.00%
Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Interest own in percent by principal stockholder or director		12.10%		12.10%
Subsequent Events [Member]
Related Party Transaction [Line Items]
Long-term Debt							$ 500,000
Subsequent Events [Member] | Opus Credit Facility [Member]
Related Party Transaction [Line Items]
Long-term Debt						$ 5,200,000		$ 500,000
TG Therapeutics, Inc [Member]
Related Party Transaction [Line Items]
Payments for Rent		$ 300,000
OPPM [Member]
Related Party Transaction [Line Items]
Due from Related Parties, Current		$ 100,000		$ 100,000
Executives Vice Chairman [Member]
Related Party Transaction [Line Items]
Interest own in percent by principal stockholder or director		13.80%		13.80%
Desk Share Agreements [Member]
Related Party Transaction [Line Items]
Payments for Rent		$ 700,000
Desk Share Agreements [Member] | TG Therapeutics, Inc [Member]
Related Party Transaction [Line Items]
Due from Related Parties, Current		100,000		$ 100,000
Desk Share Agreements [Member] | OPPM [Member]
Related Party Transaction [Line Items]
Due from Related Parties, Current		300,000		300,000
Shared Services Agreement [Member] | TG Therapeutics, Inc [Member]
Related Party Transaction [Line Items]
Proceeds from Related Party Agreement		100,000	$ 700,000	200,000	$ 1,000,000
Due from Related Parties, Current		$ 100,000		$ 100,000

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Segment Information (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) segment	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Segment Reporting Information [Line Items]
Number of Reportable Segments | segment			2
Number of Operating Segments | segment			3
Net Revenue	$ 9,250	$ 6,815	$ 15,727	$ 12,718
Direct cost of goods	(2,386)	(1,668)	(4,270)	(3,140)
Research and development	(18,511)	(17,488)	(41,784)	(42,446)
General and administrative	(13,443)	(13,056)	(26,921)	(26,604)
Segment gain (loss) from operations	(25,290)	(25,398)	(57,898)	(59,570)
Segment assets	227,264		227,264		$ 140,993
Assets held for sale					$ 13,089
Dermatology Products Sales [Member]
Segment Reporting Information [Line Items]
Net Revenue	8,199	6,689	14,324	12,198
Direct cost of goods	(2,386)	(1,668)	(4,270)	(3,140)
Sales and marketing costs	(4,202)	(2,910)	(7,695)	(5,670)
General and administrative	(747)	(383)	(1,139)	(783)
Segment gain (loss) from operations	864	1,728	1,220	2,605
Segment assets	9,313	11,307	9,313	11,307
Pharmaceutical and Biotechnology Product Development [Member]
Segment Reporting Information [Line Items]
Net Revenue	1,051	126	1,403	520
Research and development	(18,711)	(17,489)	(42,434)	(42,544)
General and administrative	(8,494)	(9,763)	(18,087)	(20,151)
Segment gain (loss) from operations	(26,154)	(27,126)	(59,118)	(62,175)
Segment assets	217,951	159,763	217,951	159,763
Consolidated [Member]
Segment Reporting Information [Line Items]
Net Revenue	9,250	6,815	15,727	12,718
Direct cost of goods	(2,386)	(1,668)	(4,270)	(3,140)
Sales and marketing costs	(4,202)	(2,910)	(7,695)	(5,670)
Research and development	(18,711)	(17,489)	(42,434)	(42,544)
General and administrative	(9,241)	(10,146)	(19,226)	(20,934)
Segment gain (loss) from operations	(25,290)	(25,398)	(57,898)	(59,570)
Segment assets	$ 227,264	171,070	$ 227,264	171,070
Assets held for sale		65,796		65,796
Total consolidated		$ 236,866		$ 236,866

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Revenues from Contracts and Significant Customers - Company's product revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Sales Revenue, Goods, Net	$ 8,199	$ 6,689	$ 14,324	$ 12,198
Total Revenue	9,250	6,815	15,727	12,718
Targadox [Member]
Sales Revenue, Goods, Net	7,230	6,363	12,930	11,861
Other Branded Revenue [Member]
Sales Revenue, Goods, Net	969	326	1,394	337
TGTX [Member]
Sales Revenue, Goods, Net	$ 1,051	$ 126	$ 1,403	$ 520

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Revenues from Contracts and Significant Customers - Additional Information (Details) - product	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Number of Products			7
Customer One [Member] | Revenue | Customer Concentration Risk [Member]
Concentration risk, percentage		53.00%		27.00%
Customer Two [Member] | Revenue | Customer Concentration Risk [Member]
Concentration risk, percentage		11.00%		16.00%
Customer Three [Member] | Revenue | Customer Concentration Risk [Member]
Concentration risk, percentage				12.00%
3PL Title Model | Revenue | Customer Concentration Risk [Member]
Concentration risk, percentage	84.00%	80.00%	86.00%
Company's Dermatology Products Customer | Revenue | Customer Concentration Risk [Member]
Concentration risk, percentage			77.00%		80.00%

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Subsequent Events (Details) - USD ($)	Aug. 07, 2019	Jul. 18, 2019	Jul. 01, 2019	Jun. 30, 2019	Dec. 31, 2018
Subsequent Event [Line Items]
Common Stock, Shares, Issued				68,138,203	68,138,203
Common Stock, Par or Stated Value Per Share				$ 0.001	$ 0.001
Long-term Debt				$ 90,242,000	$ 84,406,000
Opus Credit Facility [Member]
Subsequent Event [Line Items]
Long-term Debt				$ 9,500,000	$ 9,500,000
Subsequent Events [Member]
Subsequent Event [Line Items]
Common Stock, Shares, Issued		396,825
Common Stock, Par or Stated Value Per Share		$ 1.26
Long-term Debt		$ 500,000
Subsequent Events [Member] | 2017 Subordinated Note [Member]
Subsequent Event [Line Items]
Long-term Debt	$ 28,400,000
Subsequent Events [Member] | 2018 Venture Notes [Member]
Subsequent Event [Line Items]
Long-term Debt	21,700,000
Subsequent Events [Member] | Opus Credit Facility [Member]
Subsequent Event [Line Items]
Long-term Debt	5,200,000		$ 500,000
Subsequent Events [Member] | NAM Biotech Fund II, LLC [Member] | 2017 Subordinated Note [Member]
Subsequent Event [Line Items]
Long-term Debt	12,300,000
Subsequent Events [Member] | NAM Special Situations Fund I QP [Member] | 2017 Subordinated Note [Member]
Subsequent Event [Line Items]
Long-term Debt	16,100,000
Subsequent Events [Member] | NSC Biotech Opportunities Fund, LLC [Member] | 2018 Venture Notes [Member]
Subsequent Event [Line Items]
Long-term Debt	5,100,000
Subsequent Events [Member] | NSC Biotech Opportunities QP Fund, LLC [Member] | 2018 Venture Notes [Member]
Subsequent Event [Line Items]
Long-term Debt	$ 16,600,000