TG Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2017; filed November 9, 2017. The company is a clinical-stage biopharmaceutical developer focused on B-cell malignancies and autoimmune diseases. It had no approved products or product sales; reported revenue was license-fee amortization.
Financial performance and position
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| License revenue | $38,096 | $38,096 | $114,286 | $114,286 |
| Research and development expense | $27.1 million | $21.8 million | $76.5 million | $46.9 million |
| General and administrative expense | $4.5 million | $3.2 million | $11.3 million | $8.1 million |
| Operating loss | $31.6 million | $24.9 million | $87.7 million | $54.9 million |
| Net loss | $31.5 million | $24.8 million | $87.6 million | $54.6 million |
| Basic and diluted loss per share | $0.48 | $0.50 | $1.45 | $1.11 |
- Cash and liquidity: Cash and cash equivalents were $91.8 million at September 30, 2017, versus $25.0 million at December 31, 2016. Current assets were $97.7 million and current liabilities $19.8 million. Management said cash on hand was expected to fund planned operations through 2018, while noting significant future financing would be needed to execute its strategy.
- Cash flows, nine months: Operating cash use was $71.9 million, compared with $44.6 million in 2016; investing activities provided $19.8 million; financing activities provided $118.9 million. Net cash increased $66.8 million.
- Debt and obligations: Balance-sheet notes payable were $182,156, measured at fair value. The underlying 5% notes and accrued interest had a stated cumulative liability of approximately $17.3 million; no payments had been made, and the notes were past maturity. The company described its obligations as limited to specified product cash flows, if any, and the conversion feature.
- Equity financing and dilution: The company raised approximately $116.8 million net from stock sales during the nine months, plus $2.1 million from warrant exercises. Common shares issued increased from 56.8 million at year-end 2016 to 70.7 million at September 30, 2017. Approximately $267.3 million of common stock remained available under the 2017 shelf registration statement.
Revenue was immaterial relative to expenses, so conventional operating or net margins are not meaningful. The company reported no product-sales revenue.
Material changes versus prior periods
- Nine-month R&D expense rose $29.6 million year over year, principally due to clinical-development and manufacturing activity for TG-1101 and TGR-1202. Nine-month operating cash use also increased, primarily reflecting these programs.
- Nine-month G&A expense increased $3.1 million. Noncash stock compensation increased substantially: total restricted-stock compensation was $12.4 million for the nine months, versus $6.2 million in 2016.
- Net loss widened to $87.6 million from $54.6 million for the nine months, while loss per share increased to $1.45 from $1.11. The weighted-average share count increased to 60.6 million from 49.0 million.
- The increase in cash was principally funded by the March public offering and at-the-market stock sales. Short-term investment securities held at year-end 2016 had matured by September 2017.
Outlook, developments, and risks
- Pipeline and trial updates: TG-1101 (ublituximab) and TGR-1202 (umbralisib), including their U2 combination, were in late-stage clinical development for hematologic cancers; TG-1101 was also being developed for relapsing multiple sclerosis. The anti-PD-L1 antibody entered Phase 1 in October 2017; IRAK4, BET, and anti-GITR programs remained preclinical.
- Regulatory and clinical: The GENUINE Phase 3 trial met its primary overall response-rate endpoint in high-risk CLL; reported response rates were 78% for TG-1101 plus ibrutinib and 45% for ibrutinib alone in the treated population. The FDA said accelerated approval based on response rate would be a review issue, and indicated that future available therapies could affect its benefit-risk assessment. The company was preparing for a potential BLA as early as Q2 2018, subject to further FDA discussions and other factors.
- The FDA had agreed to Special Protocol Assessments for the UNITY-CLL study and two Phase 3 multiple-sclerosis trials. The company cautioned that an SPA does not guarantee approval. UNITY-CLL enrollment reached its target in September 2017, with enrollment extended briefly to include additional identified patients.
- Spending outlook: Management expected other R&D costs to remain relatively consistent for the rest of 2017 based on the quarter, but also stated nine-month R&D costs could increase modestly as Phase 3 enrollment expanded and commercialization preparations advanced. Other G&A costs were expected to remain at a comparable level. The company expected continuing operating losses and substantial development expenditures.
- Key risks: Clinical failure, enrollment or trial delays, adverse events, regulatory uncertainty, dependence on licensors and contract manufacturers, competition, intellectual-property disputes, reimbursement and commercialization challenges, and the need for additional financing. Further equity issuance could dilute shareholders. The company had no internal commercial sales organization.
- Contingencies and controls: A consolidated securities class action alleging misleading statements about GENUINE was voluntarily dismissed without prejudice in April 2017; the company denied the allegations. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the reported cash runway through 2018 remains adequate against trial enrollment, manufacturing, and commercialization-preparation costs, and when additional financing may be required.
- Subsequent GENUINE FDA discussions, the status and timing of any BLA, and whether newer competing therapies affect the accelerated-approval case.
- Clinical outcomes and timelines for UNITY-CLL, UNITY-NHL, and the ULTIMATE multiple-sclerosis trials, including safety and enrollment updates.
- The terms and remaining capacity of the 2017 shelf and ATM programs, and the resulting share-count and dilution effects.
- The distinction between the $182,156 fair-value balance-sheet amount for the 5% notes and the approximately $17.3 million stated cumulative liability, including the notes’ conversion and contingent-payment terms.
- Any material developments in the dismissed securities litigation, licensing relationships, manufacturing capacity, or intellectual-property matters.