TGTX

TG Therapeutics, Inc. (TGTX) - Form 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended June 30, 2012. TG Therapeutics, Inc. is a development-stage biopharmaceutical company focused on the acquisition, development, and commercialization of innovative pharmaceutical products, primarily for cancer and underserved therapeutic needs. The company's lead product candidate is TGTX-1101 (ublituximab), a monoclonal antibody targeting the CD20 antigen for the treatment of B-cell proliferative disorders. The company also holds rights to AST-726 (Vitamin B12 deficiency) and AST-915 (essential tremor). As of June 30, 2012, the company had not generated any product revenue.

Key Financial Metrics

Note: The significant non-cash expense of $16,578,000 in the six-month period relates to stock issued for the in-licensing of TGTX-1101.

Material Changes vs. Prior Period

• Revenue: No revenue was generated in the current or prior periods.
• Expenses: Total costs and expenses increased significantly to $20.5 million for the six months ended June 30, 2012, compared to $297,000 for the same period in 2011. This increase is primarily driven by a one-time non-cash stock expense of $16.6 million associated with the exercise of a license option for TGTX-1101.
• Liquidity: Cash and cash equivalents increased from $9.7 million at December 31, 2011, to $20.4 million at June 30, 2012, due to proceeds from the sale of preferred stock (converted to common) in the 2011 Equity PIPE.
• Debt: The company repaid a $200,000 short-term note in February 2012. However, the company has a convertible note payable to ICON Clinical Research Limited in the amount of $677,778 which is currently in default as the balloon payment due January 31, 2012, was not made.

Guidance, Outlook, and Risks

• Outlook: Management anticipates that cash on hand ($20.4 million) is sufficient to fund operations for approximately 20-24 months from June 30, 2012. The company expects to continue incurring operating losses for the foreseeable future.
• Development Milestones: The company received FDA acceptance of its Investigational New Drug (IND) application for TGTX-1101 in April 2012 and intends to initiate a Phase I/II study in the third quarter of 2012.
• Controls and Procedures: Management concluded that disclosure controls and procedures were not effective as of June 30, 2012, due to a lack of segregation of duties (all financial duties performed by the CFO). The company plans to hire additional personnel to address this.
• Risks:
  • Capital Requirements: The company will need to raise additional capital to continue operations beyond the next 24 months.
  • Default Risk: The ICON Convertible Note is in default; the company is negotiating a settlement.
  • Regulatory Risk: No products have been approved; clinical trials are lengthy, expensive, and uncertain.
  • Intellectual Property: Success depends on third-party licensors (LFB Group) maintaining patent protection.

Key Facts for Investor Verification

• Cash Runway: Verify the sufficiency of the $20.4 million cash balance against the projected 20-24 month runway, considering the high burn rate of clinical development.
• Debt Default: Confirm the status of negotiations regarding the $677,778 ICON Convertible Note, which is currently in default.
• Non-Cash Expenses: Understand that the reported net loss is heavily influenced by a $16.6 million non-cash stock expense for the TGTX-1101 license, which does not impact immediate cash flow but reflects a significant equity dilution event.
• Internal Controls: Monitor the company's progress in hiring additional accounting staff to remediate the material weakness in internal controls regarding segregation of duties.
• Stock Structure: Note the recent reverse stock split (56.25 for 1) and the conversion of preferred stock to common stock, which impacts share count and per-share metrics.