Mustang Bio, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; filed May 12, 2023. Mustang is a clinical-stage cell and gene therapy company with no products approved for sale and no product revenue. It is majority-controlled by Fortress Biotech.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 / prior date |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| Research and development expense | $14.0 million | $16.3 million |
| General and administrative expense | $2.3 million | $3.3 million |
| Total operating expenses / operating loss | $16.3 million | $19.6 million |
| Net loss | $16.7 million | $19.8 million |
| Net loss per share | $2.06 | $2.71 |
| Operating cash used | $17.8 million | $16.3 million |
| Cash and cash equivalents at period end | $58.1 million | $75.7 million at Dec. 31, 2022 |
| Cash, cash equivalents and restricted cash | $58.8 million | $76.7 million at Dec. 31, 2022 |
| Accumulated deficit | $346.1 million | $329.4 million at Dec. 31, 2022 |
| Long-term note payable, net | $27.6 million | $27.4 million at Dec. 31, 2022 |
| Total liabilities | $43.8 million | $46.1 million at Dec. 31, 2022 |
Gross margin is not applicable to the reported results because the company reported no product revenue. Interest expense increased to $1.2 million from $0.2 million; the loan’s stated rate was 13.77% at March 31, 2023. The company reported no investing or financing cash flows in Q1 2023.
Changes versus the prior comparable period
- Net loss narrowed by $3.1 million, or 16%, as operating expenses fell $3.3 million. R&D decreased 14%, primarily from lower clinical-trial, laboratory-supply, plasmid/vector and stock-compensation costs; G&A decreased 31%, including lower Fortress equity-fee expense.
- Despite the lower net loss, cash used in operations increased $1.5 million to $17.8 million, and cash plus restricted cash fell $17.8 million during the quarter.
- Interest expense rose $0.9 million, partly offset by higher interest income and $0.4 million of grant income.
Outlook, risks and notable events
- Going concern: Management concluded substantial doubt exists about the company’s ability to continue as a going concern for at least 12 months after issuance. It expects continuing losses and negative operating cash flow and says additional financing is needed. Financing plans are uncertain; management may reduce spending, delay programs or terminate them.
- Debt repayment after quarter-end: The Runway Growth Finance term loan was repaid and terminated on April 11, 2023, for $30.7 million. The filing does not provide a clear post-repayment cash balance. Before repayment, the balance sheet showed $27.6 million of net long-term debt.
- Funding constraints: No shares were sold under the ATM in Q1. The company said Form S-3 “baby shelf” rules limit primary offerings to one-third of public float in a 12-month period while its public float is below $75 million. About $8.0 million remained available under its 2020 shelf at March 31, 2023; the 2021 shelf had no sales as of that date.
- Pipeline: Mustang said it decided in Q1 to close out the MB-102 study and does not plan further enrollment in the foreseeable future. For MB-106, it anticipated dose escalation in a multicenter Phase 1 trial and response data at medical meetings in 2023. It expected to file an IND for the MB-109 combination program in 2023. Both XSCID Phase 1/2 trials were suspended: MB-107’s timeline was extended over manufacturing-material issues, and MB-207 remained on FDA clinical hold pending additional CMC data. MB-110 was being evaluated in a European Phase 1/2 trial, with further enrollment anticipated.
- Share structure and control: A 15-for-1 reverse split took effect April 3, 2023; reported historical share and per-share data were adjusted retroactively. Fortress holds voting control and has rights to annual stock dividends and shares tied to certain financings, creating potential dilution and related-party governance risks.
- Other material risks include clinical, regulatory and manufacturing uncertainty; reliance on academic and other third parties; intellectual-property and licensing risks; and the need to raise capital on acceptable terms. Management reported disclosure controls were effective as of March 31, 2023, with no material quarterly change in internal control over financial reporting. No legal proceedings were reported.
Most important facts for investors to verify
- Cash and liquidity after the $30.7 million April 11 loan payoff, and the timing and terms of any new financing.
- How the company will address the stated going-concern doubt and whether planned cost reductions will delay or discontinue programs.
- Current clinical and regulatory status, enrollment and data timing for MB-106, MB-109, MB-107, MB-207 and MB-110.
- Actual capacity to raise funds under the baby shelf rules and remaining registration statements.
- Potential dilution from future equity issuance and Fortress-related share rights, considering the reverse split.