The case is made in a ROTH Capital Partners report for investing in this U.S.-based pharma having multiple shots on goal.
In a June 30 research note, analyst Scott Henry reported that ROTH Capital Partners initiated coverage on Fortress Biotech Inc. (FBIO:NASDAQ) with a Buy rating and a $4 per share price target (today's share price is about $1.50).
"The current assets have significantly greater value than the current enterprise value. We further believe that multiple catalysts could both increase the company valuation and provide nondilutive capital to fund development costs," Henry cited as the reasons for ROTH's Buy rating on Fortress.
Based in New York, Fortress is a biopharmaceutical company that in-licenses high potential, clinical-stage assets to use through its entity or through majority owned subsidiaries.
Henry presented the bases of ROTH's investment thesis. One, Fortress has great diversification, among assets, including clinical programs; among private subsidiaries and among ownership in other public companies. "No single asset/company contributes greater than 25% to our estimated total valuation," the analyst pointed out.
Two, catalysts expected in the next 12–18 months could move up the stock price, highlighted Henry. They include:
- The filing of intravenous tramadol (Fortress owns 32%).
- The launch of the pivotal trial for MB-107 in X-linked severe combined immunodeficiency (Fortress owns about 30%).
- The start of the Phase 2 CAEL-101 trial in AL amyloidosis (Fortress owns about 43%).
- The advancement of its checkpoint therapeutics oncology programs (Fortress owns about 32%).
- A data readout from the Phase 3 CUTX-101 trial in Menkes disease (Fortress owns about 89%).
Three, Fortress has several potential chances to generate nondilutive cash that could benefit shareholders, Henry pointed out. They include a:
- Buyout of Fortress' stake in Avenue Therapeutics, about $55 million (late 2020).
- Pediatric voucher for Cyprium, $50–100 million (2021).
- Buyout of Fortress' Caelum Biosciences stake, at least $150 million (2022).
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Disclosures from ROTH Capital Partners, Fortress Biotech Inc., Company Note, June 30, 2019
Regulation Analyst Certification ("Reg AC"): The research analyst primarily responsible for the content of this report certifies the following under Reg AC: I hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
ROTH makes a market in shares of Fortress Biotech, Inc. and as such, buys and sells from customers on a principal basis.
A Research Analyst and/or a member of the Analyst's household own(s) debt or equity securities of Fortress Biotech, Inc. stock.
Shares of Fortress Biotech, Inc. may be subject to the Securities and Exchange Commission's Penny Stock Rules, which may set forth sales practice requirements for certain low-priced securities.
ROTH Capital Partners, LLC expects to receive or intends to seek compensation for investment banking or other business relationships with the covered companies mentioned in this report in the next three months.