Mustang Bio, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Mustang is a clinical-stage cell and gene therapy company with no approved products or product sales; it reported no revenue for the periods. Financial statement amounts below are in U.S. dollars unless stated otherwise.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development | $14.1 million | $8.0 million | $36.6 million | $27.1 million |
| R&D—licenses acquired | $0.6 million | $0.3 million | $1.6 million | $1.8 million |
| General and administrative | $2.4 million | $2.2 million | $8.4 million | $7.1 million |
| Total operating expenses | $17.1 million | $10.4 million | $46.6 million | $36.1 million |
| Net loss | $17.0 million | $13.0 million | $46.3 million | $39.4 million |
| Basic and diluted loss per share | $0.19 | $0.23 | $0.54 | $0.82 |
For Q3, operating expenses increased 64% and net loss increased 31% year over year. For the first nine months, operating expenses rose 29% and net loss rose 18%. Higher R&D spending reflected increased clinical-trial and laboratory activity, personnel, consulting and other development costs. Lower interest expense, following repayment of Horizon venture debt in 2020, partly offset the operating-loss increase. The company reported no meaningful operating margin because it had no revenue.
At September 30, cash and cash equivalents were $120.9 million, with $1.0 million of restricted cash; total cash, cash equivalents and restricted cash were $121.9 million. Current assets were $121.9 million and current liabilities $10.5 million. Total liabilities were $12.5 million, principally accounts payable, accrued expenses and lease liabilities; no debt balance was reported. Accumulated deficit was $231.8 million.
For the nine months, operating cash use was $39.0 million, investing cash use was $3.9 million, and financing provided $65.9 million. Financing was principally $66.9 million of gross ATM proceeds, less $1.3 million of offering costs. Management expected September 30 cash and cash equivalents to cover anticipated operating cash requirements for at least one year from the filing date, but stated that additional financing would be needed to fully develop and potentially commercialize its candidates.
Material changes and capital structure
- ATM sales raised $66.9 million gross during the first nine months of 2021, versus $25.6 million in the comparable 2020 period. The 2021 sales involved approximately 17.3 million shares at an average $3.87 per share.
- Common shares outstanding increased from 70.9 million at December 31, 2020 to 91.2 million at September 30, 2021. The filing reports 92.6 million common shares outstanding as of November 10, 2021.
- Under the Founders Agreement, Fortress received 517,304 shares tied to 2.5% of ATM gross proceeds; Fortress also holds all outstanding Class A preferred shares and voting control. These arrangements create continuing dilution and related-party considerations.
- The company invested $2.6 million in fixed assets and $1.3 million in R&D licenses during the first nine months. Property and equipment investment included its Worcester facility.
Outlook, programs and risks
Management expects R&D and G&A spending to increase as development expands. Forward-looking program targets disclosed include a first patient in the MB-107 registrational Phase 2 trial in Q1 2022, with topline data targeted for the second half of 2023; an MB-207 registrational-trial IND expected in Q4 2021, with topline data targeted for the first half of 2024; and initial enrollment in Mustang’s MB-106 multicenter trial expected in Q1 2022. These are plans and targets, not assured outcomes.
- COVID-19 had caused some clinical-trial accrual delays and delays in availability and delivery of laboratory and manufacturing supplies; management described the impact on long-term timelines and liquidity as minimal to date.
- After quarter-end, the company announced a Leiden University Medical Centre license for RAG1-SCID gene therapy. The filing describes a $0.4 million upfront expense and potential development milestones of up to $31 million, plus royalties.
- After quarter-end, Mustang reported interim MB-106 data for 16 patients in a conference abstract: 94% overall response and 62% complete response, with no dose-limiting toxicities reported to date. These are early clinical results, not evidence of regulatory approval or commercial efficacy; adverse events included cytokine release syndrome, neurotoxicity, neuropathic pain, and grade 3–4 neutropenia.
- After quarter-end, the company announced an approximately $2 million National Cancer Institute grant to partially fund the MB-106 trial.
- Principal risks include continued losses and uncertain future financing, clinical and regulatory failure or delay, dependence on licensors and third parties for research, trials and manufacturing, supply-chain disruption, intellectual-property disputes, and Fortress control and dilution. The company cautions it may never achieve profitability.
The filing stated that disclosure controls and procedures were effective and that no material change in internal control over financial reporting occurred during the quarter. No legal proceedings were reported.
Key investor verification points
- Reconcile the filing’s liquidity figures: the balance sheet and cash-flow reconciliation show $121.9 million of cash, cash equivalents and restricted cash, while a risk-factor passage states $130.9 million of cash and restricted cash.
- Assess cash runway against the reported $39.0 million of nine-month operating cash use, planned pipeline spending, and management’s stated need for additional financing.
- Track actual trial enrollment, regulatory interactions, data maturity and safety for MB-107, MB-207, MB-106 and other programs against the stated timelines.
- Evaluate dilution from ATM use, Fortress’s financing-based share grants and annual stock dividend, and the company’s remaining registered financing capacity.
- Review the complete risk-factor disclosures and the terms, milestones and royalty obligations under licenses and related-party agreements.