TG Therapeutics, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; financial statements are unaudited. Comparisons are with the three months ended March 31, 2015 unless otherwise noted.
Business context
TG Therapeutics is a development-stage biopharmaceutical company focused on treatments for B-cell malignancies and autoimmune diseases. Its principal clinical programs are ublituximab (TG-1101) and the oral PI3K-delta inhibitor TGR-1202; IRAK4 inhibitors and anti-PD-L1 and anti-GITR antibodies are preclinical. No drug candidate had been approved for sale, and the company had generated no product sales.
Financial results and liquidity
| Metric | Q1 2016 | Q1 2015 / prior balance date |
|---|---|---|
| License revenue | $38,095 | $38,095 |
| Research and development expense | $11.62 million | $9.62 million |
| General and administrative expense | $2.41 million | $5.02 million |
| Total costs and expenses | $14.03 million | $14.64 million |
| Operating loss | $13.99 million | $14.60 million |
| Net loss | $13.85 million | $14.58 million |
| Basic and diluted loss per share | $0.28 | $0.35 |
| Cash used in operating activities | $16.67 million | $8.88 million |
| Cash and cash equivalents at period end | $36.48 million | $55.06 million at Dec. 31, 2015 |
| Short- and long-term investments | $48.68 million | $47.17 million at Dec. 31, 2015 |
| Total assets | $100.06 million | $113.47 million at Dec. 31, 2015 |
| Total liabilities | $10.62 million | $11.90 million at Dec. 31, 2015 |
| Stockholders’ equity | $89.45 million | $101.57 million at Dec. 31, 2015 |
Revenue was solely license-fee amortization; product-sales margins are not applicable. Cash, cash equivalents, investment securities and interest receivable totaled approximately $85.3 million at March 31, 2016. Management estimated this would fund anticipated operating cash requirements for more than 24 months from that date, while stating that significant future financing would be needed to execute its plans. Investing activities used $1.92 million; financing activities provided $14,163, primarily from warrant exercises.
The balance sheet reports $152,917 of notes payable at fair value. The related matured 5% notes had a cumulative liability, including accrued interest, of approximately $20.2 million; the filing says the company’s obligations are limited to specified product cash flows, if any, and the conversion feature, and that no payments had been made as of March 31, 2016.
Material changes versus the prior period
- R&D expense increased $2.00 million, mainly from higher TGR-1202 manufacturing and clinical-trial costs, partly offset by lower TG-1101 costs.
- G&A expense fell $2.61 million, mainly because noncash compensation declined. Total noncash compensation was $1.70 million versus $5.36 million.
- Net loss narrowed by approximately $0.73 million, but operating cash use rose by approximately $7.79 million, primarily reflecting increased clinical-development spending and working-capital movements.
- Cash and cash equivalents declined $18.58 million during the quarter. Investment securities increased modestly from year-end.
Outlook, commentary, risks and unusual items
- Management expected other R&D costs to increase during the remainder of 2016 as Phase 3 enrollment expands and launch preparation proceeds; other G&A costs were expected to remain at a comparable level.
- The company described two priority Phase 3 programs: GENUINE, ublituximab plus ibrutinib for previously treated high-risk CLL, and UNITY-CLL, ublituximab plus TGR-1202 for CLL. Both had FDA Special Protocol Assessments; the filing cautions that an SPA does not guarantee approval.
- Following quarter-end, the company sold 212,914 shares through its at-the-market program for approximately $2.2 million gross and $2.1 million net proceeds. The filing reports 54,339,123 common shares outstanding as of May 5, 2016.
- A related-party office arrangement with Fortress involved an estimated average annual rent obligation of approximately $1.1 million under a 15-year lease. The company began occupying the space in April 2016, with rental payments expected to begin in the third quarter; allocated build-out costs included approximately $1.2 million of prepaid rent.
- Key risks include clinical-trial failure or delay, safety and regulatory uncertainty, reliance on licensors and third-party manufacturers, competition, intellectual-property disputes, commercialization and reimbursement challenges, and the need for additional capital. Management expects continued operating losses and says development timelines assume further financing.
- Management concluded disclosure controls were effective as of March 31, 2016; no material change in internal control over financial reporting was reported. The company reported no material pending legal proceedings.
Important facts for investors to verify
- Whether the stated cash runway remains adequate as Phase 3 enrollment, manufacturing and launch-preparation spending increase.
- Progress, enrollment, endpoints and eventual results of GENUINE and UNITY-CLL, including any protocol changes and regulatory feedback.
- Clinical safety and efficacy evidence for ublituximab and TGR-1202, especially in larger studies, longer exposure and combination regimens.
- Manufacturing capacity, supply continuity and product comparability as the company adds or changes manufacturing sources.
- Potential dilution and financing needs, including subsequent ATM sales and the timing and terms of future capital raising.
- The nature and accounting treatment of the matured 5% notes, related-party arrangements, and the company’s long-term office commitments.