TG Therapeutics, Inc. — Q2 2018 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and six months ended June 30, 2018, with comparisons to 2017. TG Therapeutics is a clinical-stage biopharmaceutical company developing treatments for B-cell malignancies and autoimmune diseases. Its principal programs include ublituximab (TG-1101), umbralisib (TGR-1202) and their combination, U2. The company had no approved drug products and no product sales; reported revenue was license revenue.
Key financial metrics
Amounts below are in millions of dollars except per-share data and where noted.
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| License revenue | 0.038 | 0.038 | 0.076 | 0.076 |
| Research and development expense | 38.700 | 26.706 | 73.718 | 49.388 |
| General and administrative expense | 5.683 | 1.757 | 12.280 | 6.780 |
| Operating loss | (44.345) | (28.425) | (85.922) | (56.092) |
| Net loss | (44.142) | (28.353) | (85.671) | (56.081) |
| Basic and diluted loss per share | (0.59) | (0.45) | (1.18) | (0.96) |
Gross margin is not meaningful given minimal license revenue and the absence of product sales. The company reported an accumulated deficit of $440.5 million at June 30, 2018.
- Cash and liquidity: Cash and cash equivalents were $105.7 million, short-term investments $20.6 million, and interest receivable $0.1 million, or approximately $126.3 million combined. Current assets were $136.0 million versus current liabilities of $36.9 million; total liabilities were $39.3 million.
- Cash flow, six months: Operating cash use was $62.2 million, compared with $49.1 million in 2017. Investing activities provided $7.4 million and financing activities provided $104.5 million. Cash, cash equivalents and restricted cash ended at $106.9 million.
- Debt and commitments: Notes payable were carried at fair value of $0.210 million. The filing also reports approximately $17.9 million of cumulative principal and accrued interest on the legacy 5% notes; no payments had been made. The company states its obligations are limited to specified product cash flows and a conversion feature. License agreements include substantial conditional milestone and royalty obligations.
- Equity financing: The company sold 7.7 million shares through its ATM program in the first half for approximately $104.5 million net. It reported 82.8 million common shares outstanding as of August 3, 2018. From July 1 through August 7, it sold another 358,000 shares for approximately $4.6 million net.
Material changes versus the prior comparable period
- Q2 net loss widened to $44.1 million from $28.4 million; the six-month net loss widened to $85.7 million from $56.1 million.
- R&D expense rose by $12.0 million in Q2 and $24.3 million for the first half, primarily reflecting clinical development and manufacturing for TG-1101 and TGR-1202. Other R&D expense alone increased $9.4 million in Q2 and $20.2 million for the first half.
- G&A expense increased by $3.9 million in Q2 and $5.5 million for the first half. The increase included greater noncash compensation related to executive restricted stock, as well as personnel and office costs.
- The first-half results included $4.0 million of noncash stock expense for in-licensing transactions, including the Novimmune and Jiangsu Hengrui agreements. First-half stock compensation expense was $11.6 million, versus $7.5 million in 2017.
- Operating cash use increased by $13.1 million year over year, while ATM equity proceeds supported the increase in cash and investments.
Outlook, management commentary and risks
- Management said cash, investments, interest receivable and capital raised after quarter-end were expected to fund planned operations into Q4 2019. The company nevertheless expects continued operating losses and says significant future financing will be needed; projections depend on financing and trial costs.
- Management expected other R&D costs to remain relatively consistent for the rest of 2018 as registration-directed trial enrollment was completed and the company prepared for potential commercialization. Other G&A costs were also expected to remain at a comparable level.
- The company was preparing a potential BLA filing in 2018 for ublituximab plus ibrutinib in high-risk CLL, subject to regulatory and other considerations. It expected 2018 top-line ORR data from UNITY-CLL. In August 2018, after quarter-end, it announced target enrollment had been reached in the ULTIMATE I and II multiple sclerosis trials.
- In January 2018, TG Therapeutics licensed BTK inhibitor candidates TG-1701 and TG-1702; TG-1701 was expected to enter clinical development in the second half of 2018. In June, it entered a joint development and license-option agreement for TG-1801, an anti-CD47/anti-CD19 antibody.
- Key risks include clinical-trial failure or delay, uncertain FDA review and approval (including that an SPA does not guarantee approval), safety and manufacturing comparability, reliance on licensors and contract manufacturers, competition, intellectual-property disputes, and inability to raise capital on acceptable terms. Further equity financing could dilute shareholders.
- The filing reports no material pending legal proceedings. Management concluded disclosure controls were effective as of June 30, 2018 and reported no material quarterly change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the stated cash runway into Q4 2019 remains achievable given clinical-trial spending, milestones, and subsequent financing needs.
- Current clinical-trial status, data timing, and the regulatory basis for any proposed ublituximab filing; trial progress or enrollment targets do not ensure approval.
- The full economic terms and potential obligations under the BTK and TG-1801 agreements, including contingent milestones, royalties, and development costs.
- The dilution and remaining availability under the ATM and shelf registrations, including equity issued after June 30, 2018.
- The distinction between the $0.210 million fair-value carrying amount and the approximately $17.9 million cumulative liability disclosed for the legacy 5% notes, and the conditions governing any payment or conversion.