Mustang Bio, Inc. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited financial statements; amounts below are in U.S. dollars unless stated otherwise. Mustang is a clinical-stage cell and gene therapy company and reported no product revenue.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $15.2 million | $10.9 million | $31.5 million | $22.5 million |
| General and administrative expense | $3.1 million | $2.5 million | $6.4 million | $6.0 million |
| Total operating expenses | $18.2 million | $14.4 million | $37.9 million | $29.5 million |
| Net loss | $19.1 million | $14.4 million | $38.9 million | $29.3 million |
| Net loss per share, basic and diluted | $0.19 | $0.16 | $0.39 | $0.35 |
| Net cash used in operating activities | Not stated for quarter | Not stated for quarter | $33.9 million | $27.7 million |
- At June 30, 2022, cash and cash equivalents were $107.4 million and restricted cash was $1.0 million. Total cash, cash equivalents and restricted cash were $108.4 million, down $2.2 million from year-end 2021.
- Total assets were $121.9 million; total liabilities were $39.9 million; stockholders’ equity was $82.0 million. The accumulated deficit was $290.7 million.
- In March 2022, Mustang drew $30.0 million under a Runway Growth Finance facility of up to $75.0 million; the remaining $45.0 million is conditional on milestones. The loan’s stated rate was 10.21% at June 30, 2022, and its maturity is April 2027. Net carrying amount was $27.2 million after discount and fees. The facility is secured by substantially all assets, subject to exclusions, and includes financial and other covenants; the company reported covenant compliance.
- Six-month financing cash flow was $33.3 million, including the $30.0 million loan proceeds and $5.9 million gross ATM equity proceeds. ATM sales totaled about 6.8 million shares at an average $0.87 per share. Weighted-average shares outstanding rose to 100.4 million for the first half from 84.0 million a year earlier.
- Margins are not meaningful because the company had no product revenue. Interest expense was $0.9 million in Q2 and $1.2 million for the first half, primarily reflecting the new term loan and debt discount amortization.
Changes versus comparable periods
- Q2 net loss increased $4.7 million, or 33%, year over year; first-half net loss increased $9.6 million, or 33%.
- First-half R&D expense rose 40%, mainly due to personnel, clinical-trial costs, laboratory supplies and plasmid manufacturing. General and administrative expense increased 7% for the first half.
- Operating cash use increased by $6.2 million year over year for the first half. Financing cash proceeds were substantially lower than in 2021, when ATM sales generated $63.8 million gross, versus $5.9 million in the first half of 2022.
- Debt and related interest costs were new in 2022. Cash and cash equivalents declined modestly from $109.6 million at December 31, 2021, while liabilities increased from $12.8 million to $39.9 million.
Business, outlook and material developments
- Pipeline priorities include ex vivo gene therapies for XSCID and RAG1-SCID and CAR T programs for hematologic malignancies and solid tumors. The company reported no approved products and expects continuing operating losses and significant development spending.
- Management stated that June 30 cash and cash equivalents were expected to fund anticipated operating cash requirements for at least one year from the filing date. The company nevertheless expects to need additional financing to fully develop, obtain approval for and commercialize its candidates; future funding may dilute shareholders or impose restrictive terms.
- MB-107: manufacturing-material quality issues extended the timeline. Mustang said it was working toward enrolling the first patient in a pivotal multicenter Phase 2 trial in 2023.
- MB-207: FDA placed the IND on hold in January 2022 pending CMC clearance. The company identified process-validation manufacturing runs and qualification of product-release assays as key activities and targeted a first patient in a pivotal Phase 2 trial in 2023.
- MB-106: partner-reported interim Phase 1/2 results in 26 patients showed a 96% overall response rate and 73% complete response rate, with no grade 3 or 4 cytokine release syndrome or ICANS reported. Mustang expected to dose the first patient in its sponsored trial within about 60 days and enroll 3–6 patients by year-end 2022. These are interim partner-study results, not evidence of regulatory approval.
- RAG1-SCID: after quarter-end, on July 27, 2022, Mustang announced treatment of the first patient. The filing said the infant tolerated therapy and was developing immune function.
- MB-109, combining MB-101 CAR T and MB-108 oncolytic virus for malignant brain tumors, remained in IND-enabling work; Mustang expected to file an IND for a sponsored Phase 1 trial in 2023.
- COVID-19 and global supply-chain disruption had moderately affected development timelines and liquidity, including delays in trial activity and availability of laboratory and manufacturing materials.
- Fortress Biotech controls a voting majority and receives shares under financing-related and annual stock grant arrangements, creating control and dilution risks. A May 2022 Nasdaq notice cited noncompliance with the $1.00 minimum bid-price rule; the initial compliance deadline was November 21, 2022. The company said it might undertake a reverse stock split if needed.
- Management reported disclosure controls and procedures were effective as of June 30, 2022, and no material change in internal control over financial reporting occurred during the quarter. No legal proceedings were reported.
Key investor verification points
- Check subsequent cash burn, financing activity and management’s cash-runway assumptions against the stated minimum one-year runway.
- Track whether the conditional $45.0 million loan tranche milestones are met, the loan’s interest and covenant terms, and any effect on liquidity or asset flexibility.
- Verify progress on MB-107 manufacturing and its anticipated 2023 trial start, and whether the MB-207 FDA hold is lifted after CMC requirements are addressed.
- Follow Mustang-sponsored MB-106 trial enrollment and outcomes separately from the partner’s interim data, including safety, durability and patient numbers.
- Assess ATM issuance and Fortress-related share grants for continuing dilution, and monitor authorized-share capacity and outstanding share counts.
- Confirm Nasdaq bid-price compliance and any reverse-split action, while considering potential effects on trading liquidity.