Mustang Bio, Inc. — FY 2017 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2017. Mustang is a clinical-stage biopharmaceutical company developing CAR T cancer immunotherapies, primarily through licenses and research partnerships. It had no approved products or product-sale revenue and reported an accumulated deficit of $48.4 million.
Its portfolio included clinical-stage IL13Rα2 CAR T for glioblastoma (MB-101), CD123 CAR T for AML/BPDCN (MB-102), and CD20 CAR T for B-cell lymphoma (MB-106); other programs were preclinical. For MB-101, City of Hope reported 33 patients treated by year-end, no dose-limiting toxicities to date, and one complete response sustained for 7.5 months before recurrence. Fred Hutch’s CD20 study had no patients treated as of December 31, 2017.
Financial results and liquidity
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development | $7.943 million | $2.468 million |
| R&D—licenses acquired | $12.433 million | $6.079 million |
| General and administrative | $11.409 million | $2.816 million |
| Total operating expenses / operating loss | $31.785 million | $11.363 million |
| Net loss | $31.288 million | $12.654 million |
| Net loss per share, basic and diluted | $1.24 | $1.15 |
| Net cash used in operating activities | $12.948 million | $4.129 million |
Margins are not meaningful because the company had no revenue. At year-end, cash and cash equivalents were $34.975 million, short-term certificates of deposit were $26.002 million, and restricted cash was $0.5 million. Current assets were $61.361 million; current liabilities were $3.611 million. The balance sheet reported no outstanding debt. Management estimated cash and short-term investments would fund anticipated operating requirements for at least 15 months.
Material changes and notable items
- Net loss rose 147% year over year as operating expenses increased 180%, reflecting expanded research, clinical support, licensing, staffing, public-company costs and other activity.
- FY 2017 R&D—licenses acquired included a $9.6 million noncash charge for Fortress’s annual stock dividend. This accounting item materially affected reported expenses and should be distinguished from cash operating burn.
- G&A included approximately $2.2 million related to settlement of litigation: a $0.2 million cash payment and a $2.0 million share-related expense. Fortress transferred the shares; Mustang did not issue new settlement shares.
- Mustang raised approximately $56.0 million gross in 2017 private placements and reported $50.3 million net cash proceeds from common-stock and warrant issuance. Placement agent fees paid to a Fortress-affiliated entity were approximately $5.6 million.
- Cash used in investing activities was $29.052 million, primarily reflecting purchases of certificates of deposit, license payments and facility-related spending.
Outlook, risks and commitments
Management expects R&D and G&A costs to increase as programs advance, the Worcester cell-processing facility is built out, and public-company and compliance costs continue. The facility was expected to become operational in 2018; Mustang anticipated preparing its first IND filing for late 2018. The filing provides no revenue or earnings guidance and states that sustained profitability may never be achieved.
- Development, clinical, regulatory and manufacturing outcomes remain uncertain; all product candidates were investigational, and none had marketing approval.
- The company relied substantially on City of Hope and Fred Hutch for research, clinical studies and manufacturing, with limited in-house cell-processing experience at the time of filing.
- Cash needs may exceed available resources; additional financing could be dilutive or require less favorable partnerships or licensing terms. Management’s 15-month runway estimate is not a guarantee.
- Reported contractual obligations totaled $17.438 million, including $13.804 million for annual license fees and sponsored research and $3.634 million for the Worcester lease. The lease runs through November 2026; planned facility improvements were approximately $3.5 million.
- Fortress controlled voting power through its Class A preferred stock and had rights to annual stock dividends and financing-related share grants. These arrangements, along with related-party services and financing fees, create dilution and governance considerations.
- The Tang litigation was settled in November 2017. The filing reported no other litigation believed to have a material adverse effect. The company said disclosure controls and internal control over financial reporting were effective as of year-end.
Key facts for investors to verify
- Reconcile the $31.288 million annual net loss with the $12.948 million operating cash outflow, particularly noncash license and Fortress-related stock charges.
- Assess actual cash burn, certificate-of-deposit availability and runway against the company’s 15-month estimate, including facility and trial spending.
- Track clinical progress and safety data for MB-101, MB-102 and MB-106; distinguish investigator-reported preliminary results from company-generated or controlled evidence.
- Review financing, share issuance and warrant overhang, including Fortress’s voting, annual dividend and financing-related equity rights and related-party fees.
- Monitor license milestones, royalties, sponsored research commitments, the Worcester facility’s timing and cost, and the timing of Mustang’s planned IND filing.