TG Therapeutics, Inc. — 2014 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2014; filed March 16, 2015. The company is a development-stage biopharmaceutical company focused on treatments for B-cell malignancies and autoimmune diseases. It had no approved products and no product sales.
Financial performance and position
| Metric | 2014 | 2013 |
|---|---|---|
| License revenue | $152,381 | $152,381 |
| Research and development expense | $40.1 million | $13.7 million |
| General and administrative expense | $15.8 million | $6.7 million |
| Operating loss | $55.7 million | $23.0 million |
| Net loss | $55.8 million | $20.5 million |
| Basic and diluted loss per share | $1.64 | $0.81 |
| Cash used in operating activities | $35.1 million | $10.7 million |
- At year-end, cash and cash equivalents were $55.7 million, short-term investments $23.1 million, and interest receivable $85,516. Management reported combined cash, investments, and interest receivable of $78.9 million.
- Total current assets were $85.2 million and current liabilities $5.1 million. Total liabilities were $6.6 million, including $275,190 of notes payable at fair value; no material conventional debt balance was reported.
- Cash from financing was $68.6 million, principally from equity issuance and warrant exercises. Investing cash outflow was $18.4 million, largely reflecting purchases of held-to-maturity securities.
- No operating margin is meaningful given minimal license revenue and no product sales. Accumulated deficit was $95.2 million.
Material changes and developments
- Net loss increased to $55.8 million from $20.5 million. Total R&D expense rose to $40.1 million, including $8.7 million of R&D stock compensation and $5.4 million of noncash in-licensing stock expense. Other R&D expense increased as clinical programs advanced and included a $4.0 million cash payment to Rhizen.
- G&A expense increased to $15.8 million, including $12.4 million of noncash compensation. Noncash stock compensation across functions totaled $21.1 million, versus $5.2 million in 2013.
- In September 2014, TG exercised its option for global TGR-1202 rights, paying Rhizen $4.0 million and issuing 371,530 shares. Potential future milestones are approximately $175 million, plus royalties.
- The company raised approximately $48.8 million net through its 2013 ATM during 2014, and approximately $16.8 million net in a March 2014 public offering. Shares outstanding increased from 34.3 million at year-end 2013 to 44.9 million at year-end 2014.
- After year-end, the company sold 1,369,777 shares through its 2015 ATM for approximately $19.3 million net. Management said year-end funds, including subsequent proceeds, were expected to fund operations for more than 24 months from December 31, 2014.
Pipeline, outlook, and principal risks
- Ublituximab (TG-1101): Clinical-stage anti-CD20 antibody. The Phase 3 GENUINE trial, under an FDA Special Protocol Assessment, began enrolling in January 2015; it compares ublituximab plus ibrutinib with ibrutinib alone in previously treated high-risk CLL. The planned enrollment is approximately 330. Management estimated about $15 million to complete the Phase 3 phase, with completion projected in 2018.
- TGR-1202: Clinical-stage oral PI3K-delta inhibitor. Preliminary, early-stage trial results showed activity in some patients, but these findings are not confirmatory evidence of efficacy. Management estimated about $1.5 million to complete the Phase I phase, projected by the end of 2015.
- Other programs: IRAK4 inhibitors and anti-PD-L1/anti-GITR antibody programs were preclinical. In March 2015, TG entered a Checkpoint collaboration involving the antibody programs, with a $500,000 upfront payment, potential milestones up to $164 million, and tiered single-digit royalties.
- Management expected R&D spending to increase in 2015 as later-stage trials commenced; it also expected noncash compensation to remain at a comparable level and other G&A to increase modestly. These are expectations, not guaranteed outcomes. The company’s stated development timelines and cost estimates assume further financing.
- Key risks include clinical failure or delay, regulatory uncertainty even with an SPA, continued financing needs and potential dilution, competition, dependence on licensors and third-party manufacturers, and the absence of internal sales and manufacturing capabilities. TG relied on contract manufacturers, generally with limited backup supply.
- Material obligations include potential milestone and royalty payments under licenses. A related-party office arrangement with Coronado was expected to carry average annual rent obligations of approximately $1.1 million; $0.6 million was pledged as restricted cash. Opus Point Partners, managed in part by CEO Michael Weiss, was entitled to a 1% royalty on certain potential IRAK4 product sales. The filing reported no material pending legal proceedings.
- Auditors issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded disclosure controls and internal controls were effective as of year-end.
Most important facts for investors to verify
- Latest cash runway and actual burn rate against management’s greater-than-24-month estimate, including post-year-end ATM proceeds and subsequent spending.
- Progress, enrollment, safety, efficacy, and timelines for the GENUINE Phase 3 trial and other clinical programs; early results may not predict later outcomes.
- Future financing requirements, equity dilution, and whether projected clinical costs and timelines remain achievable.
- Manufacturing capacity, supply continuity, and the impact of any process changes or secondary-manufacturer qualification.
- License economics and related-party arrangements, including milestone, royalty, rent, and conflict-of-interest disclosures.