Mustang Bio, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Financial statements are unaudited. Mustang is a clinical-stage cell and gene therapy company with no approved products or product-sales revenue; it reported no revenue for the periods presented.
Financial results and liquidity
| Metric | Q3 2020 / September 30, 2020 | Comparable 2019 / December 31, 2019 |
|---|---|---|
| Operating expenses, three months | $10.4 million | $10.0 million |
| Net loss, three months | $13.0 million | $10.2 million |
| Operating expenses, nine months | $36.1 million | $30.0 million |
| Net loss, nine months | $39.4 million | $30.2 million |
| Cash and cash equivalents | $75.3 million | $61.4 million |
| Cash, cash equivalents and restricted cash | $76.3 million | $62.4 million |
| Total liabilities | $9.7 million | $21.8 million |
| Notes payable | None | $13.4 million net of discount |
| Stockholders’ equity | $76.4 million | $51.7 million |
Amounts are rounded. Current assets were $75.6 million and current liabilities $7.6 million, for working capital of approximately $68.0 million. Restricted cash was $1.0 million. No meaningful operating margin is reported because the company had no revenue.
For the nine months, operating cash use was $27.8 million, investing cash use was $2.9 million, and financing provided $44.6 million. Cash and restricted cash increased $13.8 million. Cash use from operations increased from $24.1 million in the prior-year period.
Changes versus comparable periods
- Q3 operating expenses rose 4% year over year, to $10.4 million; net loss widened 27%, to $13.0 million. The quarter’s interest expense increased substantially, principally due to costs associated with repaying the Horizon notes.
- Nine-month operating expenses increased 20%, to $36.1 million, and net loss widened 31%, to $39.4 million. Research and development expense rose 29%, largely reflecting personnel, vector manufacturing, contract research, consulting and sponsored-trial costs.
- On September 30, 2020, Mustang repaid the Horizon notes in full. The repayment included $15.0 million principal, accrued interest, a $750,000 final payment fee and $550,000 in prepayment penalties. The balance sheet reported no notes payable at quarter-end.
- Funding included approximately $25.6 million gross proceeds from the at-the-market offering and approximately $37.2 million gross proceeds from the June public offering. Common shares issued and outstanding increased to 60.2 million at September 30, from 39.4 million at year-end 2019.
Outlook, pipeline and risks
- Management expected cash and cash equivalents at September 30 to fund anticipated operating cash requirements for at least one year from the filing date. It also stated that substantial additional financing would be needed to complete development and potential commercialization. Mustang expects continued significant losses and may never become profitable.
- Management expected research and development and general and administrative expenses to rise as programs advance, clinical activity expands and regulatory and public-company costs continue.
- MB-107’s planned registrational Phase 2 trial in newly diagnosed XSCID infants was on hold pending FDA chemistry, manufacturing and controls clearance, which management expected in Q1 2021; topline data were targeted for Q4 2022. A registrational Phase 2 trial of MB-207 in previously transplanted XSCID patients was expected to be filed in Q1 2021, with topline data targeted for Q4 2022. These were forward-looking targets, not assured outcomes.
- In October 2020, after quarter-end, the company announced the first patient dosed in its sponsored MB-102 Phase 1/2 trial. The filing also reported FDA Rare Pediatric Disease and Orphan Drug designations for MB-107 and MB-207, and disclosed early MB-105 patient results and interim MB-106 data; these are preliminary clinical observations, not evidence of established efficacy.
- COVID-19 had not materially affected the business to date, and management did not expect a material impact on long-term timelines or liquidity based on its assessment. Risks include disruption to enrollment, trial sites, regulatory review, employees and third-party manufacturing or supply chains.
- Other material risks include clinical or regulatory setbacks, adverse events, manufacturing and supply constraints, competition, dependence on research and licensing partners, and the need for additional capital. Equity financing can dilute shareholders. Fortress controls Mustang and receives shares equal to 2.5% of gross equity or debt financing under the Founders Agreement.
- The filing reported no legal proceedings and no off-balance-sheet arrangements. Management concluded disclosure controls were effective for the quarter.
Investor verification priorities
- Check subsequent cash burn, financing activity and whether the stated minimum one-year runway remains supportable.
- Verify progress on FDA CMC clearance and the timing, enrollment and data milestones for MB-107 and MB-207.
- Review subsequent trial data for MB-102, MB-105 and MB-106, including durability, patient numbers and safety; distinguish early reports from controlled evidence.
- Monitor clinical manufacturing capacity, third-party supply dependencies and any COVID-related trial or regulatory delays.
- Assess further dilution, remaining shelf capacity and the financial and governance effects of Fortress’s control and financing-linked share grants.