TG Therapeutics, Inc. — FY2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018; filed March 1, 2019. The filing also reports fourth-quarter 2018 results. Unless noted otherwise, amounts are U.S. dollars.
Business context
TG Therapeutics is a clinical-stage biopharmaceutical company developing medicines for B-cell-mediated diseases, including chronic lymphocytic leukemia (CLL), non-Hodgkin lymphoma (NHL), and multiple sclerosis (MS). Its lead candidates are ublituximab and umbralisib, also studied together as U2. Three additional candidates—TG-1501, TG-1701, and TG-1801—were in early clinical development. No candidate had been approved for sale, and the company had generated no product-sales revenue.
Financial results and liquidity
| Metric | FY2018 | FY2017 |
|---|---|---|
| License revenue | $0.152 million | $0.152 million |
| Research and development expense | $159.391 million | $102.533 million |
| General and administrative expense | $15.161 million | $16.331 million |
| Operating loss | $174.400 million | $118.712 million |
| Net loss | $173.482 million | $118.476 million |
| Basic and diluted loss per share | $2.30 | $1.91 |
| Cash used in operating activities | $128.925 million | $93.760 million |
Revenue was license-fee amortization from the Ildong sublicense, not drug sales. Operating and profit margins are not meaningful for this pre-commercial company. R&D growth primarily reflected late-stage clinical programs and manufacturing for ublituximab and umbralisib; FY2018 also included $4.0 million of noncash stock expense for in-licensing.
At year-end, cash and cash equivalents were $41.958 million, short-term investments $26.848 million, and interest receivable $0.095 million—$68.901 million combined. Total assets were $83.616 million, total liabilities $59.580 million, and stockholders’ equity $24.036 million. Accumulated deficit was $528.345 million. The company reported $18.350 million in long-term liabilities for deferred contract-manufacturer costs; the balance sheet also showed $67,000 of current notes payable. There was no material interest-rate or credit-risk exposure identified for its short-duration investment portfolio.
Management stated that year-end liquidity, first-quarter 2019 financing, and vendor payment arrangements were expected to fund planned operations into mid-2020. Subsequent to year-end, the company drew $30 million under a Hercules facility of up to $60 million and announced a public offering expected to generate $25.2 million gross. These financings are not included in December 31, 2018 cash. The loan carries interest of at least 10.25%, is secured by substantially all assets other than intellectual property, and matures in 2022.
Material changes and operating developments
- Net loss increased by $55.006 million year over year, while operating cash use rose by $35.165 million.
- R&D expense increased by $56.858 million, chiefly from late-stage trial and manufacturing activity. Management expected other R&D costs to decrease modestly in 2019 and other G&A costs to remain relatively consistent.
- Cash and investments declined from $84.825 million at year-end 2017 to $68.901 million at year-end 2018. The company raised $113.639 million net through its at-the-market stock program in 2018; shares outstanding increased from 73.1 million to 83.9 million.
- At year-end, UNITY-CLL and the ULTIMATE I/II MS trials were ongoing. In September 2018, the DSMB said the planned interim CLL response-rate analysis was not mature; the company stopped planning to seek accelerated approval for U2 in CLL based on ORR and awaited the PFS endpoint.
- After year-end, the company reported that the UNITY-NHL MZL cohort met its ORR endpoint in all 69 treated patients, with results within the company’s 40–50% target range. The filing noted follow-up and safety analyses remained ongoing. FDA Breakthrough Therapy Designation had been granted in January 2019; a possible accelerated-approval filing remained subject to FDA discussions and further data.
- The company was not pursuing accelerated approval based on GENUINE ublituximab-plus-ibrutinib results at that time, citing regulatory hurdles after venetoclax received full approval for the relevant CLL setting.
Outlook, risks, contingencies, and unusual items
- Management estimated a UNITY-CLL PFS readout by year-end 2019 or the first half of 2020, while emphasizing event-driven timing uncertainty. Topline ULTIMATE I/II MS data were targeted for mid-2020; FL/SLL cohort data were targeted for the second half of 2019.
- Estimated remaining phase costs disclosed included approximately $5 million for UNITY-CLL, $5 million for the relevant UNITY-NHL phase, and $35 million for the ULTIMATE MS program. These are estimates, not commitments, and depend on trial progress and funding.
- The company expected continued losses and stated that additional financing would be needed. Equity financing may dilute shareholders; debt adds repayment obligations and restrictive covenants. The company had no approved products or established sales infrastructure.
- Key execution risks include clinical-trial failure or delay, adverse effects, regulatory discretion even under Special Protocol Assessments, manufacturing scale-up and product comparability, reliance on single-source suppliers and contractors, reimbursement and pricing pressure, competition, and patent or licensing disputes.
- Contractual obligations at year-end totaled approximately $35.346 million: $16.996 million in operating lease commitments and $18.350 million due to a contract manufacturer, principally within one to three years. The manufacturer arrangement included a 6% annual administrative fee from invoice issuance.
- A securities class action alleged misleading disclosures concerning UNITY-CLL; on March 1, 2019, plaintiffs sought voluntary dismissal without prejudice. A related shareholder derivative action remained disclosed. The company recorded no legal reserve.
- The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also reported disclosure controls and internal controls effective as of year-end.
Important facts for investors to verify
- Whether the MZL response-rate result holds with required follow-up, full safety review, and FDA feedback—and whether it supports an application or approval.
- Timing and outcome of UNITY-CLL’s event-driven PFS analysis, and the ULTIMATE I/II and FL/SLL readouts.
- Current cash runway and spending needs against the mid-2020 estimate, including use and availability of remaining Hercules loan tranches and completion of the announced equity offering.
- Manufacturing scale-up, supply continuity, product comparability, and the timing and cash impact of deferred manufacturer obligations.
- Potential dilution, Hercules interest and covenant compliance, and developments in the derivative litigation and other legal matters.