Rafael Holdings Reports Second Quarter Fiscal 2024 Financial Results
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Insights
The reported financial results by Rafael Holdings, Inc. for the second quarter of fiscal 2024 indicate a significant turnaround in performance, with net income from continuing operations of $5.9 million, compared to a net loss in the previous year. This shift is primarily attributed to an unrealized gain of $9.7 million from investments in Cyclo Therapeutics. The strategic decision to increase ownership in Day Three Labs to a majority interest aligns with the company's commitment to expand its portfolio and leverage its financial position.
However, it is noteworthy that the company recorded a loss of $1.6 million on its initial investment in Day Three Labs. This highlights the inherent risks associated with strategic investments, especially in industries such as cannabis, which are subject to regulatory and market volatility. The reduction in research and development expenses suggests a strategic pivot or streamlining of operations, possibly indicating a focus on fewer, more promising projects or a reallocation of resources towards the newly consolidated Day Three Labs.
The pharmaceutical and biotech sectors are highly competitive and subject to rapid change. Rafael Holdings' investment in Cyclo Therapeutics, particularly during its Phase 3 clinical trial for Niemann-Pick Disease Type C, suggests confidence in the potential market success of the therapy. The disease, being rare, may benefit from orphan drug status, potentially offering market exclusivity and pricing advantages. The company's increased stake in Day Three Labs, which focuses on enhancing cannabis products with pharmaceutical-grade technology, indicates an attempt to diversify and tap into the burgeoning cannabis market.
Investors should consider the long-term growth potential of these strategic moves, while also acknowledging the challenges of integrating new acquisitions and the time required for clinical trials to potentially translate into marketable products. The increased general and administrative expenses, primarily due to non-cash stock-based compensation and professional fees, reflect the costs associated with these strategic endeavors and the company's expansion.
The financial performance of Rafael Holdings is closely tied to the success of its strategic investments, particularly in the biotech sector. The unrealized gains from Cyclo Therapeutics underscore the volatility and potential for high returns in biotech investments. The pivot towards a majority ownership in Day Three Labs represents a diversification strategy, potentially spreading risk across different segments of the healthcare and biotechnology market.
While the reduction in R&D expenses might raise questions about the company's long-term innovation pipeline, it could also signal a strategic focus on bringing current assets to market. The consolidation of Day Three Labs' financial results may impact the company's balance sheet and income statement in the future, depending on the subsidiary's performance. As the cannabis market is still in a nascent and evolving regulatory environment, this investment might carry a higher risk profile, which stakeholders should monitor closely.
Company remains focused on generating shareholder value by advancing portfolio and identifying attractive opportunities for strategic investments
Increased ownership in Day Three Labs to a majority interest of
NEWARK, N.J., March 13, 2024 (GLOBE NEWSWIRE) -- Rafael Holdings, Inc. (NYSE: RFL), today reported its financial results for the second quarter of fiscal 2024 – and the six months ended January 31, 2024.
“During fiscal 2024, we will continue to focus on advancing our existing portfolio and intend to leverage our strong balance sheet with selective strategic investments in companies with the potential to generate value for our stockholders. We are extremely pleased to welcome Dr. John Goldberg to the Rafael team as our Chief Medical Officer. John is a highly respected senior executive with nearly two decades of experience in drug development. John will be an integral member of our team, as we advance our existing assets and evaluate additional opportunities for investment,” said Bill Conkling, CEO of Rafael Holdings. Bill added, “We are encouraged by the positive developments for Cyclo Therapeutics’ (Nasdaq: CYTH) Phase 3 registrational clinical trial for patients with Niemann-Pick Disease Type C and in the increasing momentum behind Day Three Labs, which reimagines existing cannabis offerings with pharmaceutical-grade technology to bring to market better, cleaner, more precise and predictable products.”
Rafael Holdings, Inc. Second Quarter Fiscal Year 2024 Financial Results
As of January 31, 2024, we had cash, cash equivalents and marketable securities of
For the three months ended January 31, 2024, we recorded net income from continuing operations of
For the three months ended January 31, 2024, research and development expenses were
For the three months ended January 31, 2024, general and administrative expenses from continuing operations were
Rafael Holdings, Inc. First Half Fiscal Year 2024 Financial Results
For the six months ended January 31, 2024, we recorded net income from continuing operations of
For the six months ended January 31, 2024, research and development expenses were
For the six months ended January 31, 2024, general and administrative expenses from continuing operations were
About Rafael Holdings, Inc.
Rafael Holdings is a holding company with interests in clinical and early-stage pharmaceutical companies, including a majority investment in Cornerstone Pharmaceuticals, Inc., formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company, a majority equity interest in LipoMedix Pharmaceuticals Ltd., a clinical stage pharmaceutical company, the Barer Institute Inc., a wholly-owned preclinical cancer metabolism research operation, an investment in Cyclo Therapeutics Inc. (Nasdaq: CYTH), a clinical-stage biotechnology company dedicated to developing life-changing medicines for patients and families living with challenging diseases through its lead therapeutic asset, Trappsol® Cyclo™, a majority investment in Day Three Labs, Inc., a company which reimagines existing cannabis offerings with pharmaceutical-grade technology and innovation like Unlokt™ to bring to market better, cleaner, more precise and predictable products in the cannabis industry, and a majority interest in Rafael Medical Devices, LLC, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries. The Company’s primary focus is to expand our investment portfolio through opportunistic and strategic investments including therapeutics which address high unmet medical needs.
Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release that do not relate to matters of historical fact should be considered forward-looking statements, including without limitation statements regarding our expectations surrounding the potential, safety, efficacy, and regulatory and clinical progress of our product candidates; plans regarding the further evaluation of clinical data; and the potential of our pipeline, including our internal cancer metabolism research programs. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, those disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended July 31, 2023, and our other filings with the SEC. These factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent management’s estimates as of the date of this press release. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.
Contact:
Barbara Ryan
Barbara.ryan@rafaelholdings.com
(203) 274-2825
| RAFAEL HOLDINGS, INC. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (in thousands, except share and per share data) | ||||||||||
| January 31, 2024 | July 31, 2023 | |||||||||
| ASSETS | (unaudited) | |||||||||
| CURRENT ASSETS | ||||||||||
| Cash and cash equivalents | $ | 7,136 | $ | 21,498 | ||||||
| Available-for-sale securities | 64,587 | 57,714 | ||||||||
| Interest receivable | 560 | 387 | ||||||||
| Convertible note receivable, related party | 1,924 | 1,921 | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of | 379 | 213 | ||||||||
| Prepaid expenses and other current assets | 487 | 914 | ||||||||
| Investment in equity securities | — | 294 | ||||||||
| Total current assets | 75,073 | 82,941 | ||||||||
| Property and equipment, net | 2,064 | 1,695 | ||||||||
| Investments – Other Pharmaceuticals | — | 65 | ||||||||
| Investments – Hedge Funds | 2,369 | 4,984 | ||||||||
| Investment – Day Three | — | 2,797 | ||||||||
| Investments – Cyclo Therapeutics Inc. | 19,567 | 4,763 | ||||||||
| Goodwill | 3,571 | — | ||||||||
| Intangible assets | 1,888 | — | ||||||||
| In-process research and development | 1,575 | 1,575 | ||||||||
| Other assets | 42 | 9 | ||||||||
| TOTAL ASSETS | $ | 106,149 | $ | 98,829 | ||||||
| LIABILITIES AND EQUITY | ||||||||||
| CURRENT LIABILITIES | ||||||||||
| Accounts payable | $ | 509 | $ | 333 | ||||||
| Accrued expenses | 845 | 763 | ||||||||
| Other current liabilities | 140 | 1,023 | ||||||||
| Due to related parties | 69 | 26 | ||||||||
| Installment note payable | 1,700 | — | ||||||||
| Total current liabilities | 3,263 | 2,145 | ||||||||
| Deferred income tax liabilities, net | 545 | — | ||||||||
| Other liabilities | 87 | 55 | ||||||||
| TOTAL LIABILITIES | $ | 3,895 | $ | 2,200 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||||
| EQUITY | ||||||||||
| Class A common stock, | 8 | 8 | ||||||||
| Class B common stock, | 238 | 236 | ||||||||
| Additional paid-in capital | 266,159 | 264,010 | ||||||||
| Accumulated deficit | (164,924 | ) | (167,333 | ) | ||||||
| Treasury stock, at cost; 101,487 and 0 Class B shares as of January 31, 2024 and July 31, 2023, respectively | (168 | ) | — | |||||||
| Accumulated other comprehensive loss related to unrealized loss on available-for-sale securities | (88 | ) | (353 | ) | ||||||
| Accumulated other comprehensive income related to foreign currency translation adjustment | 3,714 | 3,725 | ||||||||
| Total equity | 104,939 | 100,293 | ||||||||
| Noncontrolling interests | (2,685 | ) | (3,664 | ) | ||||||
| TOTAL EQUITY ATTRIBUTABLE TO RAFAEL HOLDINGS, INC. | 102,254 | 96,629 | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 106,149 | $ | 98,829 | ||||||
| RAFAEL HOLDINGS, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Three Months Ended January 31, | Six Months Ended January 31, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenues | $ | 68 | $ | 70 | $ | 136 | $ | 140 | ||||||||
| G&A Expenses | 2,561 | 2,085 | 4,601 | 5,194 | ||||||||||||
| R&D Expenses | 612 | 2,225 | 1,101 | 4,306 | ||||||||||||
| Depreciation and amortization | 38 | 19 | 55 | 41 | ||||||||||||
| Operating Loss | (3,143 | ) | (4,259 | ) | (5,621 | ) | (9,401 | ) | ||||||||
| Unrealized gain (loss) on investments - Hedge Funds | 51 | 378 | (115 | ) | 251 | |||||||||||
| Impairment of investments - Other Pharmaceuticals | - | (67 | ) | - | (223 | ) | ||||||||||
| Loss on initial investment in Day Three upon acquisition | (1,633 | ) | - | (1,633 | ) | - | ||||||||||
| Unrealized gain on investments - Cyclo Therapeutics Inc | 9,718 | - | 7,594 | |||||||||||||
| Other, net | 1,117 | 701 | 2,347 | 924 | ||||||||||||
| Income (loss) before incomes taxes from continuing operations | 6,110 | (3,247 | ) | 2,572 | (8,449 | ) | ||||||||||
| Benefit from (provision for) taxes | - | (5 | ) | (6 | ) | (10 | ) | |||||||||
| Equity in loss of Day Three | (206 | ) | - | (422 | ) | - | ||||||||||
| Consolidated net income (loss) from continuing operations | 5,904 | (3,252 | ) | 2,144 | (8,459 | ) | ||||||||||
| Discontinued Operations | ||||||||||||||||
| Loss from discontinued operations related to 520 Property | - | (157 | ) | - | (241 | ) | ||||||||||
| Gain on disposal of 520 Property | - | - | - | 6,784 | ||||||||||||
| (Loss) income from discontinued operations | - | (157 | ) | - | 6,543 | |||||||||||
| Consolidated net income (loss) | 5,904 | (3,409 | ) | 2,144 | (1,916 | ) | ||||||||||
| Net loss attributable to noncontrolling interests | (143 | ) | (159 | ) | (265 | ) | (258 | ) | ||||||||
| Net income (loss) attributable to Rafael Holdings, Inc. | $ | 6,047 | $ | (3,250 | ) | $ | 2,409 | $ | (1,658 | ) | ||||||
| Continuing operations earnings (loss) per share | ||||||||||||||||
| Net income (loss) from continuing operations | $ | 5,904 | $ | (3,252 | ) | $ | 2,144 | $ | (8,459 | ) | ||||||
| Net loss attributable to noncontrolling interests | (143 | ) | (159 | ) | (265 | ) | (258 | ) | ||||||||
| Numerator for income (loss) per share from continuing operations | $ | 6,047 | $ | (3,093 | ) | $ | 2,409 | $ | (8,201 | ) | ||||||
| Discontinued operations earnings (loss) per share | ||||||||||||||||
| Net income (loss) from discontinued operations | $ | - | $ | (157 | ) | $ | - | $ | 6,543 | |||||||
| Earnings (loss) per share - Basic | ||||||||||||||||
| Continuing operations | $ | 0.26 | $ | (0.13 | ) | $ | 0.10 | $ | (0.36 | ) | ||||||
| Discontinued operations | - | (0.01 | ) | - | 0.28 | |||||||||||
| Total basic earnings (loss) per common share | $ | 0.26 | $ | (0.14 | ) | $ | 0.10 | $ | (0.07 | ) | ||||||
| Earnings (loss) per share - Diluted | ||||||||||||||||
| Continuing operations | $ | 0.25 | $ | (0.13 | ) | $ | 0.10 | $ | (0.36 | ) | ||||||
| Discontinued operations | - | (0.01 | ) | - | 0.28 | |||||||||||
| Total diluted earnings (loss) per common share | $ | 0.25 | $ | (0.14 | ) | $ | 0.10 | $ | (0.07 | ) | ||||||
| Weighted average number of shares used in calculation of earnings (loss) per share - basic | 23,642,421 | 23,155,018 | 23,643,660 | 23,085,612 | ||||||||||||
| Weighted average number of shares used in calculation of earnings (loss) per share - diluted | 24,402,069 | 23,155,018 | 24,403,308 | 23,085,612 | ||||||||||||
FAQ
What are Rafael Holdings, Inc.'s financial results for the second quarter of fiscal 2024?
What is Rafael Holdings, Inc.'s ownership percentage in Day Three Labs?
Who is the new Chief Medical Officer at Rafael Holdings, Inc.?
What positive developments were mentioned for Cyclo Therapeutics in the press release?
What innovative approach is Day Three Labs taking in the cannabis market?
