TG Therapeutics, Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. The company is a clinical-stage biopharmaceutical developer focused on B-cell malignancies and autoimmune diseases. Its lead programs are ublituximab (TG-1101) and umbralisib (TGR-1202); it had no approved drug products and no product-sale revenue.
Financial performance
| Metric | Q2 2017 | Q2 2016 | Six months 2017 | Six months 2016 |
|---|---|---|---|---|
| License revenue | $38,000 | $38,000 | $76,000 | $76,000 |
| Research and development expense | $26.7 million | $13.5 million | $49.4 million | $25.2 million |
| General and administrative expense | $1.8 million | $2.5 million | $6.8 million | $4.9 million |
| Operating loss | $28.4 million | $16.0 million | $56.1 million | $30.0 million |
| Net loss | $28.4 million | $15.9 million | $56.1 million | $29.7 million |
| Net loss per share | $0.45 | $0.33 | $0.96 | $0.61 |
Revenue consisted of amortization of an earlier Ildong license payment; the filing reports no product-sales revenue or gross margin. R&D growth chiefly reflected expanded clinical development and manufacturing for TG-1101 and TGR-1202. Six-month stock-based compensation rose to $7.5 million from $3.3 million.
Cash, liquidity, debt, and financing
- At June 30, cash and cash equivalents were $77.6 million; short-term investments were $8.8 million and interest receivable was $43,000. The company reported approximately $86.5 million across cash, equivalents, investments, and interest receivable.
- Current assets were $97.0 million and current liabilities $20.8 million, implying working capital of approximately $76.3 million. Total liabilities were $23.2 million; stockholders’ equity was $78.0 million.
- Six-month operating cash outflow was $49.1 million, versus $29.5 million in 2016. Investing activities provided $11.0 million, primarily from investment maturities; financing provided $90.7 million, principally from stock issuance and warrant exercises.
- The company raised approximately $54 million net in a March public offering and approximately $31 million net through the 2015 ATM during the first half. It reported an additional approximately $4.0 million net from the 2017 ATM in Q2. After quarter-end, it sold shares for approximately $10.9 million net through August 7.
- Management said available funds at quarter-end, together with subsequent proceeds, were expected to fund planned operations through 2018. It also stated that substantial future financing would be needed to execute its plans. Common shares outstanding were 68.1 million at June 30, up from 56.8 million at year-end; 68.8 million were reported outstanding August 1.
- The 5% notes had a reported fair-value carrying amount of $153,000, but cumulative principal and accrued interest were approximately $17.1 million. The notes matured in 2015; the company described its obligations as limited to specified product cash flows, if any, and the conversion feature. No payments had been made.
Material developments, outlook, and risks
- The company reported that the Phase 3 GENUINE trial of TG-1101 plus ibrutinib met its primary overall-response-rate endpoint in high-risk CLL: 78% versus 45% in the treated population (p<0.001). The filing cautions that presented data were interim and could differ from final data; FDA acceptance and approval were uncertain. The GENUINE protocol’s prior SPA had been rescinded after a 2016 design change.
- In May 2017, a DSMB recommended ending enrollment in the single-agent arms of the UNITY-CLL Phase 3 trial after concluding the combination’s agent contribution was established; it identified no safety concern and recommended continuing the study.
- After quarter-end, the company announced an FDA Special Protocol Assessment for two Phase 3 TG-1101 trials in relapsing multiple sclerosis. Each was planned to enroll approximately 440 subjects. This post-quarter development is not a Q2-period result.
- Management expected other R&D costs to increase modestly during the remainder of 2017 as Phase 3 enrollment expanded and the company prepared for potential commercialization; it expected other G&A costs to remain broadly comparable. These expectations are forward-looking and depend on trial progress and financing.
- The company had accumulated losses of $292.5 million and expected continuing losses; profitability was uncertain. Key risks include clinical-trial outcomes and delays, regulatory discretion, manufacturing and third-party dependence, competition, intellectual-property disputes, future financing and dilution, and commercialization/reimbursement challenges.
- A securities class action alleging misleading statements about GENUINE was voluntarily dismissed without prejudice in April 2017; the company denied the allegations. The filing reported no material pending legal proceedings. Certain licensing, office, and shared-services arrangements involved related parties, including entities associated with the CEO.
Important facts for investors to verify
- Whether final, cleaned GENUINE data support a regulatory filing and whether the FDA accepts the proposed pathway.
- Actual cash burn, trial spending, and financing needs relative to management’s stated runway through 2018.
- Progress, enrollment, safety, and results for UNITY-CLL, UNITY-NHL, and the planned multiple-sclerosis Phase 3 program.
- Potential dilution from further ATM or shelf offerings, and the terms and economic implications of the legacy 5% notes.
- Any developments in the dismissed litigation, related-party arrangements, or reliance on external manufacturers and clinical vendors.