TG Therapeutics, Inc. — Q2 2019 Form 10-Q
Business context and reporting period. This quarterly report covers the three and six months ended June 30, 2019. TG Therapeutics is a clinical-stage biopharmaceutical company developing treatments for B-cell-mediated diseases, including CLL, NHL and multiple sclerosis. Its lead candidates are ublituximab and umbralisib, also studied together as U2; TG-1501, TG-1701 and TG-1801 were in Phase 1 development. The company had no approved drug products and no product sales.
Key financial metrics
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue (license revenue only) | $0.038 million | $0.038 million | $0.076 million | $0.076 million |
| Research and development expense | $32.9 million | $38.7 million | $65.3 million | $73.7 million |
| General and administrative expense | $2.7 million | $5.7 million | $5.1 million | $12.3 million |
| Operating loss | $35.5 million | $44.3 million | $70.2 million | $85.9 million |
| Net loss | $36.2 million | $44.1 million | $71.4 million | $85.7 million |
| Loss per share, basic and diluted | $0.42 | $0.59 | $0.85 | $1.18 |
Revenue was immaterial relative to expenses, so conventional operating or profit margins are not informative; the filing does not present a meaningful gross margin. Q2 operating expenses fell year over year, primarily because of lower noncash in-licensing and executive stock-compensation costs and lower other R&D spending.
- Cash and liquidity: At June 30, cash and cash equivalents were $57.2 million and short-term investments were $27.7 million, or approximately $85.0 million combined. Current assets were $94.4 million and current liabilities were $56.0 million.
- Cash flow: Operating activities used $69.2 million in the first half of 2019, versus $62.2 million in the comparable 2018 period. Financing activities provided $85.2 million, including stock-sale proceeds and debt financing.
- Debt and obligations: The company drew $30.0 million under a Hercules term loan in February; the balance-sheet carrying amount at quarter-end was $28.5 million after fees and costs. The loan matures March 2022, carries interest at the greater of prime plus 4.75% or 10.25%, and is secured by substantially all assets other than intellectual property. A further $30.0 million was potentially available subject to conditions. The company reported compliance with loan covenants.
- Other commitments: A contract manufacturer was owed approximately $20.7 million, with amounts due in the first and second quarters of 2020. Total disclosed contractual obligations for debt, the manufacturer and operating leases were approximately $67.1 million. The company also reported $9.3 million in lease liabilities.
Material changes and business developments
- Six-month net loss narrowed by $14.3 million year over year, mainly reflecting lower R&D and G&A expenses, including substantially lower noncash stock compensation and in-licensing expense. This was partly offset by higher interest expense following the Hercules financing.
- Common shares issued increased from 83.9 million at December 31, 2018 to 93.4 million at June 30, 2019. The company raised net proceeds of approximately $27.5 million in a March public offering and $28.4 million through its ATM program in the first half. It sold a further 1.47 million shares through August 6 for net proceeds of approximately $11.6 million.
- The FDA had granted umbralisib Breakthrough Therapy Designation for previously treated MZL. The company said it anticipated initiating an NDA submission for that indication by year-end 2019, following FDA discussions; this was an expectation, not an approval or filing.
- The MZL cohort of UNITY-NHL met its primary overall response rate endpoint. Interim data for 42 patients showed a 52% response rate by independent review, including a 19% complete response rate. The company cautioned that follow-up and final results could differ.
- The UNITY-CLL monitoring board concluded the planned futility analysis showed the study was not futile and identified no safety concerns requiring modification; the trial was to continue. It was event-driven, and the filing warned completion timing was uncertain.
Outlook, risks and unusual items
Management expected cash, cash equivalents and investments at June 30, together with capital raised in the third quarter, to fund planned operations into the fourth quarter of 2020. The estimate depends on trial timing and other spending, and management stated that significant future financing would be needed. Management expected other R&D costs to decrease modestly for the remainder of 2019 and other G&A costs to remain at a comparable level.
Key risks include clinical-trial outcomes and timing, regulatory review, drug safety, manufacturing scale-up and product comparability, reliance on third-party and single-source suppliers, and the company’s need for additional capital. Equity financing may dilute shareholders; debt adds interest, collateral and covenant risks. Potential milestone payments under license and collaboration agreements are excluded from the contractual-obligations table because their amount or timing was uncertain. No material pending legal proceedings were reported.
The company adopted the new lease standard in January 2019, adding right-of-use assets and lease liabilities to the balance sheet; the reported income-statement impact was not material. The filing also describes a $20.7 million deferred contract-manufacturer obligation and a 6% annual administrative fee; the text does not provide a clear accrued-fee amount.
Important facts for investors to verify
- Whether the anticipated MZL NDA submission occurred, and what final efficacy, duration-of-response and safety data support it.
- Progress and completion timing for UNITY-CLL and the ULTIMATE I and II trials, including any final results or regulatory developments.
- Cash burn, subsequent financing, dilution from ATM or other share sales, and whether the stated runway remains achievable.
- Repayment timing and terms for the contract-manufacturer balance, continued supply and manufacturing scale-up, and access to any remaining Hercules loan tranches.
- Whether longer follow-up or larger patient exposure changes the safety profile of umbralisib or other pipeline candidates.