TG Therapeutics, Inc. — Q2 2013 Form 10-Q
Reporting period: Three and six months ended June 30, 2013. TG Therapeutics is a development-stage biopharmaceutical company developing treatments for hematologic malignancies; it had no approved products or product sales.
Financial results and position
| Metric | Q2 2013 | Six months 2013 |
|---|---|---|
| License revenue | $38,095 | $76,190 |
| Research and development expense | $5.03 million | $6.60 million |
| General and administrative expense | $1.64 million | $3.82 million |
| Net loss attributable to TG Therapeutics | $6.58 million | $10.26 million |
| Basic and diluted loss per share | $0.29 | $0.46 |
| Cash used in operating activities | Not provided for the quarter | $4.76 million |
- At June 30, cash and cash equivalents were $13.42 million, down from $16.46 million at December 31, 2012. Total assets were $17.86 million; total liabilities were $7.58 million; equity was $10.28 million.
- Current assets were $14.17 million versus current liabilities of $3.47 million. Liabilities included a $677,778 current ICON convertible note, which was in default, and $2.36 million of noncurrent 5% notes carried at fair value.
- The company reported an accumulated development-stage deficit of $29.18 million. No meaningful commercial-product margin was reported; revenue was limited to amortization of the Ildong license payment.
Changes versus comparable periods
- Q2 revenue rose from zero in 2012 to $38,095; six-month revenue rose from zero to $76,190. This reflects straight-line recognition of Ildong’s $2.0 million upfront payment, not product sales.
- Q2 R&D expense increased to $5.03 million from $1.65 million, primarily due to approximately $3.02 million in TG-1101 manufacturing costs. Six-month R&D fell to $6.60 million from $18.39 million because the 2012 period included $16.58 million of noncash stock expense for the LFB license; excluding that item, other R&D increased as clinical programs began.
- Q2 net loss attributable to the company increased to $6.58 million from $1.89 million. Six-month loss attributable to the company decreased to $10.26 million from $12.15 million, principally reflecting the prior-year LFB noncash charge. Comparative 2012 consolidated losses also included losses attributable to a noncontrolling interest.
- Operating cash use increased to $4.76 million for the first half of 2013 from $1.36 million in the first half of 2012, primarily due to clinical development spending. Warrant exercises provided $1.72 million of financing cash in the 2013 period.
Outlook, developments and risks
- After quarter-end, the company completed a July 2013 public offering, including the underwriters’ exercised overallotment, for approximately $37.4 million in net proceeds. Management estimated that June 30 cash plus offering proceeds would fund anticipated operating cash needs for approximately 30–36 months from June 30, subject to clinical-trial timing, design and conduct. The filing also states that significant future financing will be needed to execute operations, including commercialization.
- Management expected other R&D costs to increase modestly in the rest of 2013, largely due to additional clinical-trial enrollment; other G&A costs were expected to remain at a comparable level. The company expects continued operating losses and may never become profitable.
- TG-1101 trials continued. Preliminary single-agent data presented in June covered 12 patients: no dose-limiting toxicities were reported, and 5 of 10 evaluable patients had an objective response. These early, small-sample findings are not proof of efficacy. In the combination study with lenalidomide, six patients had enrolled and no dose-limiting toxicities had been observed as of the presentation.
- TGR-1202 was in a first-in-human Phase I dose-escalation trial. As of July, no dose-limiting toxicities had been observed and a maximum tolerated dose had not been reached. Preliminary pharmacokinetic data were planned for Q3 2013; management cautioned that inadequate or inconclusive data could delay or end the program.
- Management was reviewing whether to continue, sell/license, or change the development plan for AST-726; no decision had been made, and a decision was expected within roughly three months, subject to change.
- The ICON note was past due: the company had not made the January 2012 balloon payment or subsequent payments and was seeking a settlement or alternative arrangement. The 5% notes’ fair value depends on Level 3 assumptions and discounted projected AST-726/AST-915 cash flows.
- Key risks include clinical and regulatory failure, reliance on licensors and third-party manufacturers, single-source supply, competition, intellectual-property challenges, future financing and dilution, and limited commercial infrastructure. The filing reported no material pending legal proceedings. Management said disclosure controls were effective; a corporate controller was hired during the quarter to address a previously reported segregation-of-duties weakness.
Important facts for investors to verify
- Whether the July offering proceeds and stated 30–36-month runway remain adequate as clinical-trial spending and enrollment evolve.
- Subsequent TG-1101 and TGR-1202 trial data, including patient numbers, durability of responses, safety, pharmacokinetics and any dose-limiting toxicities.
- Resolution and terms of the defaulted ICON note, and the assumptions underlying the fair value of the 5% notes.
- The AST-726 development decision and any resulting effect on the notes’ cash-flow valuation.
- Potential dilution from future financing and equity awards; the filing reported 33,276,940 common shares outstanding as of July 29, 2013.