Fortress Biotech, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Asset Purchase Agreements

Asset Purchase Agreements	6 Months Ended
Jun. 30, 2024
Asset Purchase Agreements
Asset Purchase Agreements	3. Asset Purchase Agreements Mustang Agreements with uBriGene On May 18, 2023, Mustang entered into an Asset Purchase Agreement (the “Original Asset Purchase Agreement”) with uBriGene, pursuant to which Mustang agreed to sell its leasehold interest in its cell processing facility located in Worcester, Massachusetts (the “Facility”), and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility to uBriGene (the “Transaction”). Mustang and uBriGene subsequently entered into Amendment No. 1 to the Original Asset Purchase Agreement, dated as of June 29, 2023 (“Amendment No. 1”), and Amendment No. 2 to the Original Asset Purchase Agreement, dated as of July 28, 2023 (“Amendment No. 2,” and together with the Original Asset Purchase Agreement and Amendment No. 1, the “Prior Asset Purchase Agreement”). On July 28, 2023, pursuant to the Prior Asset Purchase Agreement, Mustang completed the sale of all of its assets that primarily relate to the manufacturing and production of cell and gene therapies at the Facility (such operations, the “Transferred Operations” and such assets, the “Transferred Assets”) to uBriGene for upfront consideration of $6 million cash (the “Base Amount”). The Transferred Assets included all of Mustang’s assets, except for Mustang’s lease and related leasehold improvements of the Facility and contracts that are primarily used in the Transferred Operations. Mustang recorded a gain of $1.4 million in connection with the sale of the Transferred Assets and recorded approximately $0.3 million of the base consideration as deferred income, that was to be recognized upon the transfer of the lease. In connection with the Prior Asset Purchase Agreement, Mustang and uBriGene submitted a voluntary joint notice to the U.S. Committee on Foreign Investment in the United States (“CFIUS”). Following CFIUS’s review and subsequent investigation of the transactions related to the Prior Asset Purchase Agreement, on May 13, 2024, Mustang, together with uBriGene and CFIUS, executed a National Security Agreement (the “NSA”), pursuant to which Mustang and uBriGene agreed to abandon the transactions related to the Prior Asset Purchase Agreement and the agreements entered into in connection therewith. The NSA obligated uBriGene and Mustang to terminate agreements between the two parties, including the Manufacturing Services Agreement, Quality Services Agreement, and Subcontracting CDMO Agreement. In addition, uBriGene must sell, or otherwise dispose of, the equipment assets purchased within 180 days after the execution of the NSA. June 2024 Repurchase of Assets On June 27, 2024 (the “Effective Date”), Mustang entered into an Asset Purchase Agreement (the “Repurchase Agreement”) with uBriGene, pursuant to which Mustang agreed, subject to the terms and conditions set forth therein, to repurchase the Transferred Assets, primarily lab equipment and supplies (collectively, the “Repurchased Assets”). Pursuant to the terms of the Repurchase Agreement, Mustang and uBriGene also terminated existing manufacturing and services agreements. As consideration for the Repurchase Agreement, Mustang has agreed to pay to uBriGene a total purchase price (the “Purchase Price”) of $1.4 million, consisting of (i) an upfront payment of $0.1 million due within five (5) business days of the Effective Date and a (ii) subsequent amount of $1.3 million due on the date that is twelve (12) months after the closing date (the “Deferred Amount”). In the event that as of the original (or any extended) date on which the Deferred Amount is payable, Mustang has, as of the date of the public reporting of its then-most recent quarterly audited or unaudited financial statements, net assets below $20 million, then Mustang may, upon written notice to uBriGene, elect to delay its payment obligation of the Deferred Amount by an additional six (6) months, with no limit on the number of such extensions available to Mustang. Notwithstanding the foregoing, if Mustang has not paid the Deferred Amount in full as of the date that is twelve (12) months after closing of the Repurchase Agreement, any amounts that remain outstanding will accrue interest at a rate of 5% per annum beginning on the date that is twelve (12) months after closing and until the Deferred Amount is paid in full. Additionally, in connection with the termination of the agreements described above under the Repurchase Agreement, Mustang agreed to forgive a net receivable from uBriGene of approximately $3.3 million, comprised of outstanding receivables of $6.9 million and payables of $3.6 million, resulting in total purchase consideration in the Repurchase Transactions of approximately $4.7 million. As of June 30, 2024, the $1.4 million Purchase Price was recorded in Accrued Expenses - Other (see Note 10). Mustang allocated the total purchase consideration of $4.7 million to the Repurchased Assets on a relative fair value basis. Mustang used a third-party to perform a valuation of the repurchased equipment, which resulted in a fair value less costs to sell of approximately $2.2 million. The remaining purchase consideration of $2.5 million was allocated to the supplies repurchased. The supplies repurchased with no alternative future use were recognized as research and development expense in an amount of $2.2 million. Repurchased supplies with an alternative future use of $0.3 million were also recognized in research and development expense, as Mustang does not have plans to resume operations in the facility, and it intends to dispose of the supplies in a single transaction with the equipment. Mustang concluded that the disposal group, which includes the repurchased equipment assets and associated supplies with an aggregate value of approximately $2.2 million, met the criteria to be classified as held for sale at the date of acquisition. Avenue InvaGen Pharmaceuticals Inc. (“InvaGen”) Share Repurchase Under the Share Repurchase Agreement between Avenue and InvaGen Pharmaceuticals, Inc. (“InvaGen”) under which Avenue repurchased all of InvaGen’s shares in Avenue, Avenue agreed to pay InvaGen an additional amount as a contingent fee, payable in the form of seven and a half percent (7.5%) of the net proceeds of future financings, until $4.0 million in the aggregate is paid to InvaGen. In connection with equity financings in the first half of 2024, Avenue made payments totaling $0.6 million to InvaGen.

Asset Purchase Agreements

6 Months Ended

Jun. 30, 2024

Asset Purchase Agreements

Asset Purchase Agreements

3. Asset Purchase Agreements

Mustang

Agreements with uBriGene

On May 18, 2023, Mustang entered into an Asset Purchase Agreement (the “Original Asset Purchase Agreement”) with uBriGene, pursuant to which Mustang agreed to sell its leasehold interest in its cell processing facility located in Worcester, Massachusetts (the “Facility”), and associated assets relating to the manufacturing and production of cell and gene therapies at the Facility to uBriGene (the “Transaction”). Mustang and uBriGene subsequently entered into Amendment No. 1 to the Original Asset Purchase Agreement, dated as of June 29, 2023 (“Amendment No. 1”), and Amendment No. 2 to the Original Asset Purchase Agreement, dated as of July 28, 2023 (“Amendment No. 2,” and together with the Original Asset Purchase Agreement and Amendment No. 1, the “Prior Asset Purchase Agreement”).

On July 28, 2023, pursuant to the Prior Asset Purchase Agreement, Mustang completed the sale of all of its assets that primarily relate to the manufacturing and production of cell and gene therapies at the Facility (such operations, the “Transferred Operations” and such assets, the “Transferred Assets”) to uBriGene for upfront consideration of $6 million cash (the “Base Amount”). The Transferred Assets included all of Mustang’s assets, except for Mustang’s lease and related leasehold improvements of the Facility and contracts that are primarily used in the Transferred Operations. Mustang recorded a gain of $1.4 million in connection with the sale of the Transferred Assets and recorded approximately $0.3 million of the base consideration as deferred income, that was to be recognized upon the transfer of the lease.

In connection with the Prior Asset Purchase Agreement, Mustang and uBriGene submitted a voluntary joint notice to the U.S. Committee on Foreign Investment in the United States (“CFIUS”). Following CFIUS’s review and subsequent investigation of the transactions related to the Prior Asset Purchase Agreement, on May 13, 2024, Mustang, together with uBriGene and CFIUS, executed a National Security Agreement (the “NSA”), pursuant to which Mustang and uBriGene agreed to abandon the transactions related to the Prior Asset Purchase Agreement and the agreements entered into in connection therewith. The NSA obligated uBriGene and Mustang to terminate agreements between the two parties, including the Manufacturing Services Agreement, Quality Services Agreement, and Subcontracting CDMO Agreement. In addition, uBriGene must sell, or otherwise dispose of, the equipment assets purchased within 180 days after the execution of the NSA.

June 2024 Repurchase of Assets

On June 27, 2024 (the “Effective Date”), Mustang entered into an Asset Purchase Agreement (the “Repurchase Agreement”) with uBriGene, pursuant to which Mustang agreed, subject to the terms and conditions set forth therein, to repurchase the Transferred Assets, primarily lab equipment and supplies (collectively, the “Repurchased Assets”). Pursuant to the terms of the Repurchase Agreement, Mustang and uBriGene also terminated existing manufacturing and services agreements.

As consideration for the Repurchase Agreement, Mustang has agreed to pay to uBriGene a total purchase price (the “Purchase Price”) of $1.4 million, consisting of (i) an upfront payment of $0.1 million due within five (5) business days of the Effective Date and a (ii) subsequent amount of $1.3 million due on the date that is twelve (12) months after the closing date (the “Deferred Amount”). In the event that as of the original (or any extended) date on which the Deferred Amount is payable, Mustang has, as of the date of the public reporting of its then-most recent quarterly audited or unaudited financial statements, net assets below $20 million, then Mustang may, upon written notice to uBriGene, elect to delay its payment obligation of the Deferred Amount by an additional six (6) months, with no limit on the number of such extensions available to Mustang. Notwithstanding the foregoing, if Mustang has not paid the Deferred Amount in full as of the date that is twelve (12) months after closing of the Repurchase Agreement, any amounts that remain outstanding will accrue interest at a rate of 5% per annum beginning on the date that is twelve (12) months after closing and until the Deferred Amount is paid in full. Additionally, in connection with the termination of the agreements described above under the Repurchase Agreement, Mustang agreed to forgive a net receivable from uBriGene of approximately $3.3 million, comprised of outstanding receivables of $6.9 million and payables of $3.6 million, resulting in total purchase consideration in the Repurchase Transactions of approximately $4.7 million. As of June 30, 2024, the $1.4 million Purchase Price was recorded in Accrued Expenses - Other (see Note 10).

Mustang allocated the total purchase consideration of $4.7 million to the Repurchased Assets on a relative fair value basis. Mustang used a third-party to perform a valuation of the repurchased equipment, which resulted in a fair value less costs to sell of approximately $2.2 million. The remaining purchase consideration of $2.5 million was allocated to the supplies repurchased. The supplies repurchased with no alternative future use were recognized as research and development expense in an amount of $2.2 million. Repurchased supplies with an alternative future use of $0.3 million were also recognized in research and development expense, as Mustang does not have plans to resume operations in the facility, and it intends to dispose of the supplies in a single transaction with the equipment. Mustang concluded that the disposal group, which includes the repurchased equipment assets and associated supplies with an aggregate value of approximately $2.2 million, met the criteria to be classified as held for sale at the date of acquisition.

Avenue

InvaGen Pharmaceuticals Inc. (“InvaGen”) Share Repurchase

Under the Share Repurchase Agreement between Avenue and InvaGen Pharmaceuticals, Inc. (“InvaGen”) under which Avenue repurchased all of InvaGen’s shares in Avenue, Avenue agreed to pay InvaGen an additional amount as a contingent fee, payable in the form of seven and a half percent (7.5%) of the net proceeds of future financings, until $4.0 million in the aggregate is paid to InvaGen. In connection with equity financings in the first half of 2024, Avenue made payments totaling $0.6 million to InvaGen.