Mustang Bio, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Mustang is a clinical-stage cell and gene therapy company with no approved products and no product-sales revenue. All financial amounts below are in U.S. dollars; financial-statement amounts are unaudited.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Research and development expense | $10.8 million | $15.2 million | $24.8 million | $31.5 million |
| General and administrative expense | $3.1 million | $3.1 million | $5.4 million | $6.4 million |
| Operating loss | $13.9 million | $18.2 million | $30.2 million | $37.9 million |
| Net loss | $16.2 million | $19.1 million | $32.9 million | $38.9 million |
| Net loss per share, basic and diluted | $2.00 | $2.50 | $4.06 | $5.20 |
| Cash used in operating activities | Not separately presented for the quarter | $30.2 million | $33.9 million |
Revenue and profit margins are not meaningful because the company reported no product-sales revenue and incurred operating losses. At June 30, cash and cash equivalents were $15.4 million, down from $75.7 million at December 31, 2022; restricted cash was $0.75 million. Total assets were $29.1 million and total liabilities were $15.4 million. Stockholders’ equity was $13.7 million.
Mustang repaid and terminated its Runway Growth Finance term loan on April 11, paying $30.7 million. The balance sheet therefore showed no note payable at June 30; operating lease liabilities were $2.6 million. Six-month financing cash outflow was $30.3 million, primarily reflecting the loan payoff. Cash, cash equivalents and restricted cash declined by $60.5 million in the first half, ending at $16.1 million.
Material changes versus the prior comparable period
- Q2 operating expenses fell 24% year over year, mainly from lower R&D spending; first-half operating expenses fell 20%. Management attributed the R&D reduction principally to lower clinical-trial costs, lab supplies, plasmid manufacturing, stock compensation and consulting.
- Net loss improved year over year, but interest expense increased substantially. First-half interest expense included a $2.8 million loss on extinguishment of debt; the payoff removed the term-loan balance.
- In May, Mustang discontinued MB-102, MB-103, MB-104 and MB-105 and terminated associated licenses and agreements. It also reported an approximately 14% workforce reduction; the facility transaction and further workforce reductions brought the stated cumulative reduction to approximately 82%.
- A 15-for-1 reverse stock split became effective April 3, 2023. Share and per-share amounts in the filing are retroactively adjusted.
Outlook, commentary and principal risks
- Going concern: Management concluded substantial doubt exists about Mustang’s ability to continue as a going concern for at least 12 months after the financial statements’ issuance. The company expects continued losses and negative operating cash flow and requires additional financing. The filing says Form S-3 fundraising is constrained by the “baby shelf” rules.
- Management’s cash outlook: Following the July 28 facility sale, Mustang stated it expected to fund operations and clinical trials through year-end even if it did not receive the contingent payment. If it raises at least $10 million in equity and obtains landlord consent, it could qualify for up to $5 million of contingent consideration, less specified costs; management said receipt by the end of Q1 2024 could extend funding into Q2 or Q3 2024, depending on trial expenses. These are conditional estimates, not assured funding.
- Facility sale and manufacturing: Mustang sold manufacturing-related assets to uBriGene for $6 million cash on July 28, after quarter-end. The lease transfer remained subject to landlord consent, with CFIUS review also pending. If the lease is not transferred within 120 days of closing, uBriGene may seek good-faith negotiations for Mustang to repurchase the assets. The company committed to spend at least $8 million on uBriGene manufacturing services over two years and paid 25% at signing. Lease-transfer, regulatory, repurchase and manufacturing-continuity risks could affect costs, liquidity and clinical supply.
- Pipeline: MB-106 is the stated lead program; management anticipated dose escalation and response data in the third and fourth quarters of 2023. The company also expected to file an IND for MB-109 in 2023. Enrollment in investigator-sponsored XSCID trials was paused while institutions test a modified vector; Mustang delayed its own sponsored trials. These timelines and expectations are forward-looking.
- Other key risks: No candidate is approved, development and regulatory outcomes are uncertain, and the company depends on academic partners and third-party manufacturers. Fortress controls a voting majority and may receive equity grants that dilute other holders. Management reported disclosure controls were effective at June 30, 2023; no material change in internal control over financial reporting was reported for the quarter.
Most important facts for investors to verify
- Current cash runway, spending reductions and whether additional financing is available on acceptable terms.
- Status of the required equity raise and landlord consent conditions for the contingent facility-sale consideration, and any CFIUS requirements or repurchase notice.
- Implementation, cost and continuity of the uBriGene manufacturing arrangements, including the $8 million minimum commitment and its impact on liquidity.
- MB-106 clinical progress and the status of the stated 2023 milestones; any updates to the XSCID trial pause and modified-vector work.
- Potential dilution from future financing, equity awards and Fortress-related arrangements, considering the reverse split.