MUSTANG BIO, INC.
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
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| PART I | 6 | |
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| Item 1. | Business | 6 |
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| Item 1A. | Risk Factors | 25 |
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| Item 1B. | Unresolved Staff Comments | 60 |
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| Item 1C. | Cybersecurity | 60 |
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| Item 2. | Properties | 60 |
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| Item 3. | Legal Proceedings | 61 |
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| Item 4. | Mine Safety Disclosures | 61 |
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| PART II | 61 | |
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| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 61 |
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| Item 6. | Reserved | 62 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 62 |
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| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 74 |
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| Item 8. | Financial Statements and Supplementary Data | 74 |
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| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 75 |
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| Item 9A. | Controls and Procedures | 75 |
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| Item 9B. | Other Information | 76 |
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| Item 9C. | Disclosure Regarding Foreign Jurisdiction that Prevents Inspections | 76 |
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| PART III | 76 | |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 76 |
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| Item 11. | Executive Compensation | 81 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 84 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 86 |
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| Item 14. | Principal Accountant Fees and Services | 88 |
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| PART IV | 89 | |
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| Item 15. | Exhibits and Financial Statement Schedules | 89 |
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SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Annual Report on Form 10-K (this “Form 10-K”) may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words“aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “potential,” “predict,” “seek,” “should,” “target,” “will,” “would”and similar expressions are generally intended to identify forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under the caption “Risk Factors,” set forth in Part I, Item 1A of this Form 10-K. Such forward-looking statements include, but are not limited to, statements about our:
| ● | expectations for increases or decreases in expenses; |
| ● | expectations for the clinical and pre-clinical development, manufacturing, regulatory approval, and commercialization of our pharmaceutical product candidates or any other products we may acquire or in-license; |
| ● | use of clinical research centers and other contractors; |
| ● | expectations for incurring capital expenditures to expand our research and development and manufacturing capabilities; |
| ● | expectations for generating revenue or becoming profitable on a sustained basis; |
| ● | expectations or ability to enter into marketing and other partnership agreements; |
| ● | expectations or ability to enter into product acquisition and in-licensing transactions; |
| ● | expectations or ability to build our own commercial infrastructure to manufacture, market and sell our product candidates, if approved; |
| ● | expectations for the acceptance of our product candidates, if approved, by doctors, patients or payors; |
| ● | ability to compete against other companies and research institutions; |
| ● | ability to secure adequate protection for our intellectual property; |
| ● | ability to attract and retain key personnel; |
| ● | ability to obtain reimbursement for our products, if approved; |
| ● | estimates of the sufficiency of our existing cash and cash equivalents and investments to finance our operating requirements, including expectations regarding the value and liquidity of our investments; |
| ● | stock price and the volatility of the equity markets; |
| ● | expectations for future capital requirements. |
We have based these forward-looking statements largely on our current expectations, estimates, forecasts, and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Except as required by law, we assume no responsibility for updating any forward-looking statements.
We qualify all of our forward-looking statements by these cautionary statements whether as a result of new information, future events or otherwise.
SUMMARY OF RISK FACTORS
Our business is subject to risks of which you should be aware before making an investment decision. The risks described below are a summary of the principal risks associated with an investment in us and are not the only risks we face. You should carefully consider these risk factors, the risk factors described in Part I, Item 1A of this Form 10-K, and the other reports and documents that we have filed with the Securities and Exchange Commission (“SEC”).
Risks Related to our Finances and Capital Requirements
| ● | We have incurred significant losses since our inception and anticipate that we will incur continued losses for the foreseeable future. |
| ● | There is substantial doubt regarding our ability to continue as a going concern. We will need to raise additional financing in upcoming periods, which may not be available on acceptable terms to us, or at all. Failure to obtain necessary capital when needed may force us to delay, limit or terminate our commercial readiness efforts, activities to support a potential commercial launch following any approval of our product candidates, or other operations. |
| ● | We have not generated any revenue from our development stage products, and we do not know when, or if, we will generate any revenue. |
| ● | Our short operating history makes it difficult to evaluate our business and prospects. |
| ● | Our success is contingent on raising additional capital, and our efforts to do so may fail. Even if successful, our future capital raising activities may dilute our current stockholders, restrict our operations, or cause us to relinquish proprietary rights. |
Risks Pertaining to our Business Strategy, Structure and Organization
| ● | Our future growth and success depend on our ability to successfully develop and, if approved, commercialize our product candidates, which we have yet to do. |
| ● | Our future success is highly dependent on the successful development of our chimeric antigen receptor (“CAR”) engineered T cell (“CAR T”) technology and gene therapy product candidates. |
Risks Inherent in Drug Development and Commercialization
| ● | Preclinical development is highly speculative and carries a high failure risk. |
| ● | We may not receive the required regulatory approvals for any of our product candidates on our projected timelines, if at all, which may result in increased costs and delay our ability to generate revenue. |
| ● | We may not obtain the desired labeling claims or intended uses for product promotion, or favorable scheduling classifications, to successfully promote our product candidates, if approved. |
| ● | If a product candidate demonstrates adverse side effects, we may need to abandon or limit the development of such product candidate. |
| ● | Even if a product candidate is approved, it may be subject to various post-marketing requirements, including studies or clinical trials, and increased regulatory scrutiny. |
| ● | Our competitors may develop treatments for our products’ target indications, which could limit our product candidates’ commercial opportunity and profitability. |
| ● | If our product candidates, if approved, are not broadly accepted by the healthcare community, the revenues from any such product will likely be limited. |
| ● | Any successful products’ liability claims related to any of our current or future product candidates may cause us to incur substantial liability and limit the commercialization of any such products. |
| ● | Our gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval, if at all. |
Risks Related to Reliance on Third Parties
| ● | We rely, and expect to continue to rely, on third parties to conduct our preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials or complying with applicable regulatory requirements. |
| ● | We contract with third parties for the manufacture of our product candidates for preclinical and clinical testing and may also do so for commercialization, if and when our product candidates are approved. |
| ● | We rely on clinical data and results obtained by third parties, which may prove inaccurate or unreliable. |
| ● | We may need to license certain intellectual property from third parties, and such licenses may not be available or may not be available on commercially reasonable terms. |
Risks Relating to Legislation and Regulation Affecting the Biopharmaceutical and Other Industries
| ● | We operate in a heavily regulated industry, and we cannot predict the impact that any future legislation or administrative or executive action may have on our operations. |
| ● | We may be subject to anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings. |
| ● | We are subject to numerous environmental, health and safety laws and regulations and could become subject to fines or penalties or incur costs that could harm our business. |
Risks Pertaining to Intellectual Property and Potential Disputes with Licensors Thereof
| ● | If we are unable to obtain and maintain sufficient patent protection for our technology and products, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our technology and products could therefore be impaired. |
| ● | We depend on our licensors to maintain and enforce the intellectual property rights covering certain of our product candidates. |
| ● | We or our licensors may be subject to costly and time-consuming litigation for infringement of third-party intellectual property rights or to enforce our or our licensors’ intellectual property rights against third-party infringers. |
| ● | Any dispute with our licensors may affect our ability to develop or commercialize our product candidates. |
Risks Relating to Our Control by Fortress Biotech, Inc. (“Fortress”)
| ● | Fortress controls a voting majority of our common stock and has the right to receive significant share grants annually, which will result in dilution of our other stockholders and could reduce the value of our common stock. |
| ● | We have entered into certain agreements with Fortress and may have received better terms from unaffiliated third parties. |
| ● | We share certain directors with Fortress, which could create conflicts of interest between us and Fortress. |
Risks Relating to the Sale of Our Manufacturing Facility
| ● | We may be unable to complete the sale of our manufacturing facility as contemplated if the Committee on Foreign Investment in the United States (“CFIUS”) determines to implement mitigation measures, including the potential divestment of some or all of the transferred assets by the buyer, which may limit our ability to realize the anticipated cost savings of the sale of the facility and may have a material adverse effect on our financial condition. |
| ● | Our receipt of the contingent portion of the consideration for the sale of the manufacturing facility is subject to receipt of the consent of the landlord of the facility to the transfer of such lease to the buyer and our ability to raise additional capital. |
| ● | Because the manufacturing facility was not transferred to the buyer within 120 days after Closing (as defined in the transaction documents), the buyer may provide us with notice of its intentions to enter into negotiations for our repurchase of the facility, following which we will be obligated to negotiate the repurchase of the facility from the buyer; there can be no guarantee that this repurchase happens on terms favorable to us, or at all. |
| ● | The landlord may object to certain aspects of the transaction, which could result in expensive and time-consuming litigation and could prevent us from realizing the intended benefits of the transaction. |
| ● | If the sale of the facility is fully consummated, we will rely on the buyer for the manufacture of our lead product candidates, which may subject us to additional manufacturing risks. |
| ● | We may incur substantial expenses related to the transaction and the consummation of the sale of the facility. |
| ● | Certain key personnel may depart the Company upon the completion of the sale of the facility, which may adversely affect our ability to realize the anticipated benefits of the transaction; unfortunately, key personnel may also depart our Company in the event that we are unable to complete the transaction. |
| ● | Our strategic pivot to our lead product candidate, MB-106, and our disposal of non-core assets, including our facility, may not result in the cost savings we anticipate and could result in total costs and expenses that are greater than expected. |
