Mustang Bio, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Mustang is a clinical-stage cell and gene therapy company and a majority-controlled subsidiary of Fortress Biotech. The interim financial statements are unaudited.
Business context and pipeline
Mustang reported no product revenue and has no products approved for commercial sale. Its programs target rare genetic disorders, hematologic malignancies and solid tumors. Development relies substantially on research institutions and other third parties.
- MB-107, an XSCID gene therapy, was in Phase 1/2 studies; the company targeted topline data from its registrational infant trial in the first half of 2023 and expected to file an MB-207 registrational-trial IND in Q3 2021.
- MB-106, a CD20 CAR T therapy, received FDA IND clearance for a multicenter Phase 1/2 trial in May 2021. Interim data reported by Fred Hutchinson showed a 93% response rate and 67% complete response rate in 15 patients treated with a modified manufacturing process; the small, interim dataset is not evidence of established efficacy.
- MB-101’s trial for leptomeningeal brain tumors dosed its first patient in May 2021. Other CAR T programs included MB-102, MB-104, MB-103 and MB-105.
Financial results and liquidity
| Metric | Three months ended June 30, 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development | $10.9 million | $22.5 million |
| License-related R&D expense | $1.0 million | $1.0 million |
| General and administrative | $2.5 million | $6.0 million |
| Total operating expenses | $14.4 million | $29.5 million |
| Net loss | $14.4 million | $29.3 million |
| Basic and diluted loss per share | $0.16 | $0.35 |
At June 30, 2021, cash and cash equivalents were $129.9 million, with another $1.0 million in restricted cash; accumulated deficit was $214.8 million. Total liabilities were $8.2 million, including operating lease liabilities; the filing reports only $4,000 of interest expense in Q2 and $8,000 for the six months. No revenue-based margins are meaningful because the company had no product revenue.
For the first half, operating cash use was $27.7 million, investing cash use was $2.9 million, and financing provided $62.7 million. The financing included $63.8 million gross proceeds from the at-the-market (ATM) offering, less approximately $1.2 million in offering costs. Management said June 30 cash was expected to cover anticipated operating cash requirements for at least one year from the filing date, while also stating further financing would be needed to fully develop and potentially commercialize its candidates.
Changes versus the prior comparable period
- Q2 operating expenses rose 2% to $14.4 million from $14.1 million; net loss narrowed to $14.4 million from $14.6 million, helped by a swing in other income/expense after repayment of Horizon venture debt.
- For the first half, operating expenses increased 15% to $29.5 million from $25.6 million, and net loss increased 11% to $29.3 million from $26.5 million. R&D and G&A rose, while lower license expense partly offset the increase.
- First-half operating cash use increased to $27.7 million from $17.7 million. Cash and restricted cash increased by $32.1 million, primarily because of ATM financing.
- Common shares outstanding increased from 70.9 million at December 31, 2020 to 89.9 million at June 30, 2021. The company issued approximately 16.2 million shares through the ATM during the first half; Fortress also receives equity under the Founders Agreement.
Outlook, risks and other notable items
- Management expects R&D spending to increase as programs advance and anticipates higher G&A costs as operations expand. The filing does not provide financial guidance for revenue, earnings or cash burn.
- The company expects continued losses and may never become profitable. Further capital may be required; equity financing could dilute shareholders, while debt or collaborations could impose restrictions or require relinquishing rights.
- Key risks include clinical and regulatory failure or delay, manufacturing and supply-chain dependence, reliance on third-party trial sponsors, intellectual-property and licensing disputes, and the ability to raise capital. COVID-19 had no material impact on long-term development timing or liquidity based on management’s assessment at filing, but remained a potential source of disruption.
- Fortress controls a voting majority and is entitled to shares tied to financings and an annual stock dividend, creating potential dilution and conflicts of interest. The 2021 shelf registration permits up to $200 million in securities; no sales under it had occurred by June 30.
- Management reported disclosure controls and procedures were effective and no material change in internal control over financial reporting during the quarter. The filing reported no legal proceedings.
- After quarter-end, the company reported EMA PRIME designation for MB-107 in August 2021. This is a subsequent development, not a Q2-period event.
Important facts for investors to verify
- Whether subsequent clinical-trial enrollment, safety and efficacy data support the reported interim MB-106 results, including follow-up duration and the modified manufacturing process.
- Actual cash burn and runway against management’s estimate, and the timing and terms of any additional financing.
- Share dilution from ATM sales, Fortress-related equity provisions, outstanding warrants and equity awards.
- Progress against MB-107 and MB-207 regulatory and data milestones, and the status of other clinical programs.
- Potential obligations under license and research agreements, including milestone payments, royalties and the Mayo Clinic program commitments.