MUSTANG BIO, INC. current report, 28 July 2023

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Business Context and Reporting Period

Company: Mustang Bio, Inc. (MBIO)
Filing Type: Form 8-K (Current Report)
Date of Report: July 28, 2023
Event: Completion of the sale of the Company's cell processing facility and associated manufacturing assets in Worcester, Massachusetts, to uBriGene (Boston) Biosciences, Inc. ("uBriGene"). This transaction was executed via a Second Amendment to the Asset Purchase Agreement, which removed the requirement for landlord consent as a closing condition.

Key Financial Metrics and Transaction Terms

Transaction Consideration:

  • Base Amount: $6,000,000 paid by uBriGene on the Closing Date (July 28, 2023).
  • Contingent Amount: Up to $5,000,000, subject to specific conditions.
Conditions for Contingent Payment:
  • Mustang Bio must complete an equity issuance of at least $10,000,000 after closing.
  • Mustang Bio must obtain landlord consent to transfer the facility lease to uBriGene.
  • The contingent amount is reduced by severance payments to transferred employees and payments under transferred contracts.
  • If conditions are not met within two years, the obligation to pay the contingent amount expires.
Future Commitments:
  • Manufacturing Services: Mustang Bio committed to spend at least $8,000,000 over two years purchasing manufacturing services from uBriGene for its lead product candidates (including MB-106).
  • Sub-Contracting: uBriGene sub-contracted the manufacturing of Mustang Bio's products back to Mustang Bio under a Sub-Contracting CDMO Agreement until the lease transfer is finalized.
Assets Transferred: Equipment, inventory, intellectual property, data, and business records related to cell and gene therapy manufacturing. The facility lease and employees were not transferred on the closing date.

Material Changes and Operational Impact

Change in Asset Ownership: Mustang Bio has divested its primary manufacturing facility and related assets. While the assets were transferred, the lease of the facility and the employment of staff supporting these operations remain with Mustang Bio pending landlord consent.

Operational Continuity:

  • Mustang Bio will continue to manufacture its products at the facility under a sub-contracting arrangement with uBriGene until the lease is formally assigned.
  • A joint steering committee has been established to oversee operations.
  • uBriGene may locate up to three personnel at the facility for oversight.
Repurchase Option: If the landlord does not consent to the lease transfer within 120 days of closing, uBriGene may issue a "Repurchase Notice," triggering negotiations for Mustang Bio to repurchase the assets for the price originally paid ($6,000,000 plus any adjustments).

Outlook, Risks, and Contingencies

Regulatory and Landlord Risks:

  • CFIUS Review: The parties expect to file a joint voluntary notice with the Committee on Foreign Investment in the United States (CFIUS) by August 31, 2023. The landlord has stated it will not consider the lease transfer until a final CFIUS determination is received.
  • Landlord Consent: The landlord has 30 business days to decide on the lease transfer after receiving the CFIUS determination and a summary of the parties' reaction.
Financial Contingencies:
  • The receipt of the $5,000,000 contingent payment is not guaranteed and depends on a future capital raise and lease transfer.
  • If the lease transfer fails, the Manufacturing Services Agreement and Sub-Contracting CDMO Agreement may terminate, potentially disrupting the supply chain for Mustang Bio's product candidates.
Forward-Looking Statements: The filing warns that actual results may differ due to risks in drug development, regulatory approvals, and the ability to secure the necessary capital raise.

Investor Verification Checklist

  • Capital Raise Status: Verify if Mustang Bio has initiated or completed an equity issuance of at least $10,000,000 to trigger the contingent payment.
  • CFIUS Timeline: Monitor the filing date of the CFIUS notice and the expected duration of the review process.
  • Landlord Decision: Track the landlord's decision on the lease assignment, which is critical for the transfer of employees and the full realization of the transaction benefits.
  • Repurchase Risk: Assess the likelihood of the 120-day deadline for lease assignment being missed, which could force a repurchase of the assets.
  • Manufacturing Continuity: Confirm the operational status of the Sub-Contracting CDMO Agreement and the production schedule for lead product candidate MB-106.