Mustang Bio, Inc. — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021; filed March 23, 2022. Mustang is a clinical-stage cell and gene therapy company developing treatments for cancers and rare genetic diseases. It has no approved products and has generated no product sales.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Product revenue | None | None |
| Research and development expense | $49.9 million | $37.2 million |
| R&D license acquisition expense | $5.8 million | $10.1 million |
| General and administrative expense | $11.0 million | $9.5 million |
| Total operating expenses / operating loss | $66.7 million | $56.8 million |
| Net loss | $66.4 million | $60.0 million |
| Net loss per share, basic and diluted | $0.76 | $1.14 |
| Net cash used in operating activities | $53.7 million | $37.3 million |
- Cash and cash equivalents were $109.6 million at year-end, plus $1.0 million of restricted cash. Current liabilities were $10.8 million. The company reported a $251.8 million accumulated deficit.
- Financing activities provided $70.8 million in 2021, principally from $71.9 million gross proceeds under its at-the-market (ATM) equity program. The company issued about 19.4 million ATM shares at an average $3.70 per share; net proceeds were about $70.6 million.
- Investing activities used $5.4 million, including $4.0 million for fixed assets. Year-end total liabilities were $12.8 million, including $2.0 million of operating lease liabilities. The prior Horizon debt had been repaid in 2020; no term-loan debt was reported at year-end 2021.
- Margins are not meaningful because the company had no product revenue. Management stated year-end cash and cash equivalents were expected to fund anticipated operating needs for at least one year from the filing date.
Material changes and business developments
- Net loss increased 11% year over year, while operating expenses rose 17%. R&D expense increased $12.6 million, reflecting higher personnel, laboratory, consulting, clinical and manufacturing costs. License acquisition expense declined $4.2 million, primarily due to lower Fortress annual stock-dividend expense.
- Operating cash use increased $16.3 million. ATM equity proceeds remained the principal funding source, and shares outstanding increased substantially during the year, creating dilution.
- MB-106 interim Phase 1/2 results reported at ASH in December 2021 included a 94% overall response rate and 62% complete response rate among 16 patients. The filing describes these as interim clinical results, not proof of approval or commercial success.
- Mustang licensed a RAG1-SCID gene therapy program from Leiden University Medical Centre and a potential in-vivo/off-the-shelf CAR T platform from Mayo Clinic during 2021. It also received an approximately $2 million National Cancer Institute grant to partially fund the MB-106 trial.
- MB-107 received FDA authorization to proceed with a pivotal Phase 2 trial; the filing projected first-patient enrollment in the second half of 2022. In January 2022, FDA placed the MB-207 pivotal-trial IND on hold pending CMC clearance.
Outlook, risks and unusual items
- Management expects continued significant operating losses and rising R&D and administrative expenses. Additional financing will be needed to advance candidates, pursue regulatory filings and support commercialization; there is no assurance financing will be available on acceptable terms.
- Subsequent to year-end, Mustang announced a $75 million Runway debt facility on March 8, 2022: $30 million funded at closing and up to $45 million subject to milestones. The facility includes warrants for up to 748,036 shares and debt covenants, with substantially all assets other than specified exclusions pledged as collateral.
- The MB-108 oncolytic-virus trial had been on clinical hold since October 2020 following toxicity at the highest dose. The filing described a planned lower-dose restart and projected delay of the MB-109 combination-trial IND; timelines are subject to regulatory clearance.
- Key risks include clinical and regulatory failure or delay, manufacturing and CMC constraints, reliance on research and manufacturing partners, competition, uncertain reimbursement, intellectual-property and licensing disputes, and dependence on additional capital. COVID-19 and geopolitical disruption could affect trials, suppliers and financing access.
- Fortress Biotech controls voting power and receives annual stock dividends equal to 2.5% of fully diluted capitalization, plus shares equal to 2.5% of gross equity or debt financings under the Founders Agreement. These arrangements may dilute other holders and create related-party conflicts.
- Mustang reported no material litigation. Management concluded disclosure controls and internal control over financial reporting were effective; the company’s auditor was not engaged to attest to internal-control effectiveness.
Important facts for investors to verify
- Confirm the cash runway and forecast assumptions against the cash balance, operating burn, post-year-end ATM sales and the Runway facility’s funded and milestone-dependent tranches.
- Review the MB-207 FDA hold, required CMC work and clearance status, and the latest MB-107 pivotal-trial enrollment timeline.
- Validate the durability, patient numbers, follow-up and safety details behind MB-106’s interim response results, and distinguish investigator-reported data from later-stage evidence.
- Assess future dilution from equity issuance, Fortress’s contractual share grants and dividends, outstanding warrants, and the new Runway warrants.
- Review the financial-statement notes for license and research commitments, lease obligations, related-party payments, and the substantial valuation allowance against deferred tax assets.