Mustang Bio, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 29, 2023. This is an annual report, not a standalone fourth-quarter earnings report. Mustang is a clinical-stage cell- and gene-therapy company and reported no product sales.
Financial performance and position
| Metric | FY2022 / year-end | FY2021 / comparison |
|---|---|---|
| Revenue | No product revenue reported | No product revenue reported |
| Research and development | $62.5 million | $49.9 million |
| R&D licenses acquired | $1.5 million | $5.8 million |
| General and administrative | $12.2 million | $11.0 million |
| Total operating expenses / operating loss | $76.2 million / $(76.2) million | $66.7 million / $(66.7) million |
| Net loss | $(77.5) million; $(0.75) per share | $(66.4) million; $(0.76) per share |
| Operating cash flow | $(65.1) million | $(53.7) million |
| Cash and cash equivalents | $75.7 million | $109.6 million |
| Restricted cash | $1.0 million | $1.0 million |
| Term loan, net carrying value | $27.4 million | None reported |
Operating expenses increased 14% and net loss increased 17% year over year. R&D growth reflected higher employee compensation, laboratory supplies, vector manufacturing and clinical-trial costs. Lower license-acquisition expense partly offset the increase. Interest expense rose to $3.4 million, largely reflecting the new variable-rate Runway loan. No meaningful operating margin comparison is available because the company has no product revenue.
Cash, cash equivalents and restricted cash totaled $76.7 million at year-end. Financing activities provided $34.1 million, including $30.0 million of Runway loan proceeds and $6.6 million gross ATM proceeds; operating and investing activities used $65.1 million and $3.0 million, respectively. Accumulated deficit was $329.4 million, and stockholders’ equity was $46.3 million.
Business, developments and outlook
- The pipeline spans CAR T programs for hematologic cancers and solid tumors and gene therapies for rare genetic diseases. Programs are being developed with academic and research partners; none is approved for sale.
- MB-102: the safety review team recommended escalation to the next dose level; Mustang anticipated opening that cohort in 2023.
- MB-106: interim investigator-sponsored trial results reported 96% overall response and 75% complete response among 28 patients as of September 2022. Mustang’s multicenter trial had begun treating patients; these are interim clinical data, not approval evidence.
- MB-107: reported infant-trial results were encouraging, but the pivotal-trial timeline was extended by manufacturing-material issues; the company targeted first enrollment in 2023.
- MB-207: the FDA placed Mustang’s IND on clinical hold pending additional manufacturing and controls data. A separate NIH study was suspended under stopping rules after clonal expansion in the myeloid lineage was observed in 10% of treated patients; the filing reported no observed insertional mutagenesis or malignancies at that time.
- MB-108: the UAB Phase 1 study had been on clinical hold since September 2022 due to toxicity. Resumption at a lower dose was expected to require FDA clearance. The company planned to seek an IND in 2023 for the MB-101/MB-108 combination, MB-109.
- MB-110, for RAG1-SCID, had entered an ongoing European Phase 1/2 study under LUMC; Mustang reported the first patient had received therapy.
Management expects substantial continuing R&D and other expenses and anticipates continued losses. The company stated that additional financing will be needed, but availability and terms are uncertain. It is reducing or monitoring costs and may delay or terminate programs while seeking additional capital. The filing does not provide a firm revenue, profitability or cash-runway forecast.
Liquidity, debt and material risks
- Going concern: Management and the auditor identified substantial doubt about Mustang’s ability to continue as a going concern for at least 12 months after issuance of the financial statements. The audit opinion was unqualified but included a going-concern emphasis. The statements contain no adjustments for a possible inability to continue operations.
- Debt: The Runway facility provides for up to $75 million, of which $30 million was funded; the remaining $45 million is conditional on milestones. The loan matures in April 2027, has a variable rate reported at 13.40% at year-end, and is secured by substantially all assets subject to exclusions. Interest-only payments were scheduled through April 2024, with possible extension to 2025 if specified milestones are met.
- Covenants and liquidity: The loan includes a minimum-liquidity covenant tied to trailing operating cash flow and other restrictions. The company said it was compliant at December 31, 2022, but warned it could be difficult to remain compliant without cost reductions or additional capital.
- Funding and dilution: Mustang raised $6.6 million gross through its ATM in 2022, versus $71.9 million in 2021. It disclosed limits under the SEC “baby shelf” rules while public float remained below $75 million. Further equity financing could dilute shareholders; debt or partnerships could constrain operations or require relinquishing rights.
- Listing: Nasdaq had notified Mustang of minimum-bid-price noncompliance, with an extended compliance deadline of May 24, 2023. A 15-for-1 reverse split was approved and was planned after the filing, but completion and regaining compliance were not assured.
- Control and related parties: Fortress controls a voting majority and receives an annual stock dividend equal to 2.5% of fully diluted capitalization, plus shares tied to certain financings. The filing notes potential conflicts and that affiliated agreements may not reflect terms available from unaffiliated parties.
- Other significant risks include clinical and regulatory failure or delay, manufacturing and supply dependence, patent and licensing disputes, competition, reimbursement uncertainty, and potential dilution. No material legal proceedings were reported. Management said disclosure controls and internal control over financial reporting were effective at year-end.
Most important facts for investors to verify
- Cash consumption, financing capacity and covenant compliance, including whether additional Runway tranches can be accessed and on what conditions.
- Current liquidity and the assumptions behind management’s going-concern assessment; the filing expressly identifies substantial doubt.
- Updated MB-107 manufacturing progress and MB-207 clinical-hold status, including follow-up on the NIH study’s clonal-expansion finding.
- Regulatory status and safety updates for MB-108, and whether planned MB-102, MB-106 and MB-109 milestones were achieved.
- Actual completion and Nasdaq effect of the planned 15-for-1 reverse split, and current listing compliance.
- Share-count dilution from ATM issuance, equity awards, Fortress provisions and any further capital raises.