Mustang Bio, Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. Mustang is a clinical-stage biopharmaceutical company developing cell and gene therapies; it reported no product revenue and remains majority-controlled by Fortress Biotech.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $15.4 million | $14.1 million | $46.9 million | $36.6 million |
| General and administrative | $3.4 million | $2.4 million | $9.8 million | $8.4 million |
| Net loss | $19.0 million | $17.0 million | $57.9 million | $46.3 million |
| Operating cash used | Not provided for quarter | Not provided for quarter | $49.8 million | $39.0 million |
- At September 30, cash and cash equivalents were $91.4 million, with a further $1.0 million of restricted cash. Current assets were $94.4 million and current liabilities $13.6 million.
- Cash, cash equivalents and restricted cash declined $18.3 million in the first nine months. Investing activities used $2.5 million; financing activities provided $34.1 million.
- Accumulated deficit was $309.7 million. The company anticipates its September 30 cash and cash equivalents will fund operating cash requirements for at least one year from the filing date, but says further financing will be required to fully develop and commercialize its candidates.
- The Runway term loan provided $30 million of a $75 million facility; the additional $45 million is conditional on milestones. Long-term debt, net of discount, was $27.3 million at quarter-end. The variable rate was 11.69%; interest-only payments run through April 2024, with maturity in April 2027. Mustang reported compliance with loan covenants.
- Gross margin is not applicable to the reported results because the company had no product sales. The filing reports no profitability or product-sales guidance.
Changes and notable items
- Nine-month operating expenses rose 22% to $56.7 million, mainly as R&D increased 28% to $46.9 million, reflecting personnel, clinical-trial, laboratory-supply and manufacturing costs. Net loss increased 25% year over year.
- ATM equity proceeds fell to $6.6 million in the first nine months of 2022 from $66.9 million in 2021. The 2022 sales were approximately 7.9 million shares at an average $0.84 per share. Total common shares outstanding were 106,427,767 at September 30 and 106,458,821 on November 11.
- Fortress receives shares equal to 2.5% of gross equity or debt financing under the Founders Agreement, in addition to an annual stock dividend. This creates ongoing dilution risk.
- Q3 included $669,000 of NIH grant income, partially offset by increased interest expense from the Runway loan. Nine-month interest expense was $2.2 million.
Programs, outlook and risks
- MB-107: Manufacturing-material quality issues extended the development timeline. Following FDA feedback received August 26, Mustang was working toward enrolling the first patient in a pivotal multicenter Phase 2 trial in 2023.
- MB-207: The FDA placed the IND on clinical hold in January 2022 pending chemistry, manufacturing and controls clearance. Mustang cited process-validation runs and assay qualification as key steps and targeted a first patient in a multicenter Phase 2 trial in 2023.
- MB-106: Interim investigator-sponsored data reported for 28 patients showed a 96% overall response rate and 75% complete response rate as of September 9, 2022. These are interim clinical results, not evidence of regulatory approval. The first patient entered Mustang’s multicenter Phase 1/2 trial in October; the company expected to enroll 3–6 patients by year-end 2022.
- RAG1-SCID: The company announced the first patient had been treated in July 2022 and reported the patient was tolerating therapy and developing immune function.
- MB-109: The company expected to file an IND in 2023 for a proposed combination of CAR T and oncolytic-virus therapies, subject to completing manufacturing and preclinical work.
- Management expects R&D and G&A spending to rise as programs advance. COVID-19 and supply-chain constraints had caused some clinical-trial and materials delays. Higher interest rates could increase loan costs.
- Nasdaq notified Mustang of minimum-bid-price noncompliance; the initial compliance period ran through November 21, 2022. The company said it might conduct a reverse stock split if needed. Fortress voting control, financing needs, clinical and manufacturing setbacks, third-party dependence and potential dilution are material risks.
- Management concluded disclosure controls were effective as of September 30, 2022. The filing reported no legal proceedings and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company’s stated cash runway remains adequate relative to its operating burn and planned clinical milestones, and when additional financing may be needed.
- Progress toward resolving MB-107 manufacturing issues and lifting the MB-207 clinical hold, including whether the stated 2023 trial timelines were achieved.
- Subsequent MB-106 clinical results, enrollment, safety and durability, distinguishing interim findings from later-stage or regulatory evidence.
- Terms and milestone availability of the remaining $45 million Runway facility, the variable interest burden and compliance with covenants.
- Subsequent Nasdaq bid-price compliance and the effects of ATM issuance and Fortress-related share grants on dilution and voting control.