TG Therapeutics, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020; filed May 11, 2020. TG Therapeutics is a clinical-stage biopharmaceutical company developing treatments for B-cell-mediated diseases. It had no approved products and no product sales during the period.
Financial performance and position
| Metric | Q1 2020 | Q1 2019 or prior date |
|---|---|---|
| License revenue | $38,000 | $38,000 |
| Research and development expense | $36.0 million | $32.4 million |
| General and administrative expense | $14.3 million | $2.3 million |
| Operating loss | $50.2 million | $34.7 million |
| Net loss | $51.1 million | $35.2 million |
| Basic and diluted loss per share | $0.48 | $0.43 |
| Net cash used in operating activities | $62.1 million | $33.4 million |
- Revenue was entirely from amortizing an upfront license payment; the filing reports no product revenue. Conventional gross or operating margins are not meaningful given the negligible revenue and operating losses.
- G&A rose substantially, principally because noncash compensation increased to $9.1 million from $0.4 million. Total stock-based compensation was $11.1 million, versus $1.9 million a year earlier. R&D growth primarily reflected late-stage trials and manufacturing for ublituximab.
- At March 31, cash and cash equivalents were $52.1 million and short-term investments were $26.3 million, or $78.3 million combined. Cash, cash equivalents and restricted cash fell $60.6 million during the quarter. Total assets were $101.8 million; total liabilities were $103.2 million, leaving a $1.4 million stockholders’ deficit.
- Long-term debt had a $30.0 million principal balance and a $29.2 million carrying value, net of financing costs. The Hercules loan matures March 2022, bears interest at no less than 10.25%, and is interest-only through April 2021. The company reported compliance with its loan covenants.
- Other current liabilities included $28.3 million due to a contract manufacturer. Operating lease liabilities totaled $11.8 million. Disclosed contractual obligations for debt, the manufacturer and leases were $78.2 million, including $30.5 million due in less than one year.
Material changes and subsequent events
- After quarter-end, the company sold 4,535,608 shares through its at-the-market program for approximately $77.4 million gross and $76.0 million net. Management said the March 31 cash and investments, together with this financing, were expected to fund operations for more than 12 months from the filing date. The financing increased liquidity but diluted existing shareholders.
- On April 24, 2020, the FDA approved the company’s request for a refund of the $2.9 million umbralisib NDA user fee; the company expected receipt within 45 days of the FDA’s notice.
- On May 5, 2020, after quarter-end, the company announced that UNITY-CLL met its primary progression-free-survival endpoint at a prespecified interim analysis and would stop early for superior efficacy. Safety and secondary endpoints were still being assessed; this was not a Q1 result.
Outlook, commentary and key risks
- Management expected to complete the rolling umbralisib NDA submission for marginal zone and follicular lymphoma in the first half of 2020, and targeted a UNITY-CLL regulatory submission and full data presentation by year-end 2020. These are forward-looking targets, not guarantees.
- The lead programs were ublituximab and umbralisib, including their U2 combination; the company also had three early-stage candidates. Several pivotal or registration-directed trials were fully enrolled. Management anticipated minimal COVID-19 impact on timelines for certain completed-enrollment trials, while continuing to monitor the pandemic.
- The company reported no material adverse COVID-19 impact to date, but warned that restrictions could disrupt trials, regulatory review, commercialization preparations and supply. It depended on single-source manufacturers, including facilities in India, South Korea and China; manufacturers were operating at varying capacity. The company said clinical supply was sufficient for current programs through 2020.
- TG Therapeutics expected ongoing operating losses and substantial financing needs; it had an accumulated deficit of $752.3 million and no approved drug. Approval, clinical safety and efficacy, manufacturing scale-up, market acceptance, reimbursement, competition and access to future capital remain material uncertainties. Equity financing may cause further dilution.
- An unusual accounting item is the legacy 5% convertible notes: the filing reports approximately $19.5 million of cumulative principal and accrued interest, but a $171,000 fair-value liability on the balance sheet. The notes are past maturity, and the company describes its obligation as limited to specified product cash flows and the conversion feature.
Investor verification checklist
- Confirm subsequent ATM proceeds, share issuance and resulting dilution, and assess whether liquidity remains consistent with management’s more-than-12-month estimate.
- Review the full UNITY-CLL results, including safety and secondary endpoints, and subsequent regulatory filings and FDA decisions.
- Track the umbralisib NDA timetable, FDA review outcome and status of the user-fee refund.
- Monitor COVID-19 effects on trial follow-up, regulatory timelines and sole-source manufacturing capacity, especially commercial supply readiness.
- Reconcile cash burn and near-term commitments, including the $28.3 million manufacturer liability, debt service and lease obligations.
- Assess the magnitude and timing of stock-based compensation and understand the accounting and settlement terms of the legacy convertible notes.