Mustang Bio, Inc. — Q1 2022 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three months ended March 31, 2022. Mustang is a clinical-stage cell and gene therapy company focused on hematologic cancers, solid tumors and rare genetic diseases. It reported no product revenue and remains dependent on financing to develop its pipeline. All financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $16.3 million | $11.6 million; up 40% |
| General and administrative expense | $3.3 million | $3.5 million; down 3% |
| Total operating expenses | $19.6 million | $15.1 million; up 30% |
| Net loss | $19.8 million | $15.0 million |
| Net loss per share, basic and diluted | $0.20 | $0.19 |
| Operating cash used | $16.3 million | $15.6 million |
| Investing cash used | $1.3 million | $0.5 million |
| Financing cash provided | $30.2 million | $47.6 million |
Research and development expense rose by $4.7 million, primarily from personnel, clinical-trial costs, laboratory supplies and plasmid manufacturing. The company reported no revenue, so a meaningful gross margin is not available. Net loss widened by $4.8 million; the filing attributes the increase mainly to higher R&D spending and interest on the new term loan.
At March 31, cash and cash equivalents were $122.2 million, restricted cash was $1.0 million, and current assets totaled $124.2 million. Current liabilities were $10.8 million. Accumulated deficit was $271.6 million. Management said cash and cash equivalents were expected to cover anticipated operating cash needs for at least one year from the filing date, while also stating that further financing will be needed to fully develop and commercialize candidates.
Debt, financing and material changes
- In March, Mustang entered a term-loan facility of up to $75 million with Runway Growth Finance. It received $30 million at closing; the remaining $45 million is conditional on predetermined milestones. The loan matures April 15, 2027, carries a minimum 9.25% annual rate, and has interest-only payments until April 2024, potentially extendable to April 2025 if milestones are met.
- The loan is secured by substantially all company assets, subject to exclusions, and includes financial and other covenants. Mustang said it was compliant at March 31. The balance sheet shows $27.0 million of long-term debt net of discount; $30 million was funded before fees and discounts.
- The company issued approximately 2.8 million shares through its at-the-market offering for $2.8 million gross proceeds at an average $1.00 per share, versus approximately 11.6 million shares and $48.4 million in Q1 2021. The lower ATM proceeds were offset by loan financing.
- Fortress Biotech receives shares equal to 2.5% of gross equity or debt financings under the Founders Agreement and holds voting control. Financing-related share issuances and the annual stock dividend dilute other shareholders.
Outlook, programs and risks
- Management expected R&D and G&A expenses to rise as programs advance. No product-sales guidance or profitability timeline was provided.
- Management expected the first patient in the pivotal MB-107 XSCID Phase 2 study in the second half of 2022. The FDA had placed the MB-207 pivotal-trial IND on hold pending CMC work; Mustang estimated first enrollment in Q1 2023.
- MB-106 interim Phase 1/2 results announced after quarter-end reported a 96% overall response rate and 72% complete response rate among 25 patients, with no grade 3 or 4 cytokine release syndrome or ICANS reported. These are interim trial results, not established evidence of approval or commercial outcomes.
- COVID-19 had caused some clinical-trial accrual delays and supply-chain constraints affecting laboratory and manufacturing materials. The company described the overall long-term impact to date as limited, but cautioned that effects could worsen.
- Key risks include sustained losses and need for additional capital; clinical, regulatory and manufacturing setbacks; reliance on research, trial and manufacturing partners; potential dilution and restrictive debt covenants; and Fortress control and related-party arrangements. No legal proceedings were reported. Management concluded disclosure controls were effective as of March 31, 2022.
Important facts for investors to verify
- Whether cash runway and spending assumptions remain consistent with management’s estimate, and how much additional capital may be required.
- Whether the conditional $45 million Runway tranche milestones can be achieved, and the loan’s interest, fees, covenants and collateral implications.
- Clinical-trial progress and updated safety and efficacy evidence for MB-107, MB-207, MB-106 and other lead candidates, including the status of the MB-207 FDA hold.
- Future share issuance under the ATM, the Founders Agreement and Fortress’s annual stock dividend, and the resulting dilution and control implications.
- Whether COVID-related enrollment and supply delays, or other manufacturing and partner constraints, affect development timelines or costs.