Mustang Bio, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Financial statements are unaudited. Mustang is a clinical-stage biopharmaceutical company and a majority-controlled subsidiary of Fortress Biotech. It reported no product revenue; profit margins are therefore not meaningful.
Key financial metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Research and development expense | $9.5 million | $15.4 million | $34.3 million | $46.9 million |
| General and administrative expense | $2.1 million | $3.4 million | $7.5 million | $9.8 million |
| Operating loss | $10.3 million | $18.8 million | $40.5 million | $56.7 million |
| Net loss | $10.1 million | $19.0 million | $43.0 million | $57.9 million |
| Net loss per share, basic and diluted | $1.23 | $2.42 | $5.29 | $7.61 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $42.2 million | $49.8 million |
At September 30, cash and cash equivalents were $9.6 million, restricted cash was $0.75 million, and total liabilities were $16.6 million. Stockholders’ equity was $4.0 million. The $30.7 million Runway term loan payoff was completed in April; no note payable remained at quarter-end. Lease liabilities totaled $2.6 million.
Changes versus comparable periods
- Q3 net loss narrowed by $8.9 million year over year; nine-month net loss narrowed by $14.9 million. Lower R&D and G&A spending drove the improvement, partly offset in the nine-month period by $2.8 million of debt-extinguishment loss and higher total interest expense.
- R&D expense fell 39% in Q3 and 27% for the nine-month period, reflecting portfolio reprioritization, lower personnel, supplies and program costs, and reimbursements under the uBriGene subcontracting arrangement. G&A declined 37% in Q3 and 24% year to date.
- Operating cash use improved to $42.2 million from $49.8 million year to date. Investing activities provided $5.9 million, largely from the facility asset sale; financing activities used $30.0 million, primarily to repay the term loan. Cash, cash equivalents and restricted cash decreased $66.3 million during the period.
Business developments, outlook and risks
- In May, Mustang discontinued MB-102, MB-103, MB-104 and MB-105, reduced its workforce by approximately 14%, and shifted focus toward MB-106. The filing says the facility transaction and related workforce changes brought cumulative workforce reduction to approximately 82%.
- MB-106: In August, the company reported responses and favorable early safety observations in four patients in the indolent lymphoma cohort of its multicenter study. These preliminary results are limited to four patients. Management expected FDA feedback in an end-of-Phase 1 meeting in Q1 2024, first patient dosing in a Waldenstrom macroglobulinemia registrational study in mid-2024, and top-line data in 2026; a registrational study for certain DLBCL patients was expected to begin in 2025.
- MB-109: The FDA accepted the IND in October 2023; the company planned a Phase 1 multicenter trial in 2024. The filing also described expected 2024 trial starts for MB-117 and MB-217 and additional MB-110 trial enrollment. These are forward-looking plans, not reported outcomes.
- Going concern is a central risk. Management concluded substantial doubt exists about Mustang’s ability to continue as a going concern for at least 12 months from issuance of the statements. The company expects continued losses and needs additional capital; it may delay or terminate programs or further reduce spending.
- Management estimated that September-end cash plus approximately $3.9 million of net proceeds from an October financing would fund operations and clinical trials through Q1 2024. If the company secures the conditional facility-sale payment by the end of Q2 2024, management estimated funding could extend through Q3 2024, depending on trial spending. The October financing raised approximately $4.4 million gross, or $3.9 million net, and included shares and warrants with potential dilution.
- The July sale of manufacturing assets to uBriGene generated $6.0 million upfront and a $1.4 million accounting gain. Up to $5.0 million less specified costs is contingent on raising $10.0 million in equity within two years after closing and obtaining landlord consent to the lease transfer. CFIUS requested a withdrawal and refiling of its notice in November; the lease transfer remained unresolved. uBriGene could seek good-faith repurchase negotiations if the lease was not transferred within 120 days. Mustang also committed to at least $8.0 million of manufacturing purchases over two years, while continuing interim manufacturing under a subcontracting agreement.
- Principal risks include limited liquidity and access to capital, clinical and regulatory uncertainty, reliance on research and manufacturing partners, possible dilution, Fortress control and related-party arrangements, and CFIUS, landlord-consent and manufacturing-continuity risks associated with the facility sale.
Important facts for investors to verify
- Current cash runway, subsequent cash use, and whether additional financing is available on acceptable terms.
- Progress toward the $10.0 million contingent-capital-raise condition and landlord consent; the timing and amount of any contingent sale payment.
- CFIUS’s final determination, any mitigation requirements, and whether uBriGene exercises its repurchase-notice rights.
- MB-106 trial enrollment, follow-up, safety and efficacy data, and whether stated regulatory and trial timelines remain achievable.
- Manufacturing capacity, quality and continuity under the uBriGene arrangements, including the effects of the minimum-spend commitment and potential warrant and share dilution.