TG Therapeutics, Inc. — FY2013 Form 10-K
Reporting period: Fiscal year ended December 31, 2013; filed March 7, 2014. This is an annual report, not a standalone fourth-quarter results filing. TG Therapeutics was a development-stage biopharmaceutical company with no approved products and no product-sale revenue.
Business context and pipeline
The company was developing treatments for hematologic malignancies: TG-1101 (ublituximab), an anti-CD20 antibody, and TGR-1202, an oral PI3K-delta inhibitor. It also held rights to AST-726, a nasal vitamin B12 candidate, but discontinued its development because of expiring intellectual property. TG-1101 received FDA orphan-drug designations for nodal and extranodal marginal zone lymphoma in 2013.
Financial results and liquidity
| Metric | FY2013 | FY2012 |
|---|---|---|
| License revenue | $152,381 | $19,048 |
| Research and development expense | $13.663 million | $21.028 million |
| General and administrative expense | $6.658 million | $4.781 million |
| Operating loss | $22.966 million | $26.895 million |
| Net loss | $20.478 million | $26.183 million |
| Net loss per share | $0.81 | $1.38 |
| Cash used in operating activities | $10.824 million | $5.188 million |
License revenue was amortization of Ildong’s $2 million upfront sublicense payment, recognized over the agreement term; there were no product sales. Gross margin is not meaningful for this development-stage business. The improvement in operating and net losses versus 2012 was materially affected by the absence of a $16.578 million noncash stock expense recorded in 2012 for the TG-1101 license. FY2013 also included $5.203 million of noncash stock compensation and a $2.798 million noncash impairment charge for in-process research and development.
At year-end, cash and cash equivalents were $40.485 million, long-term government securities were $4.919 million, and interest receivable was $27,169, for reported cash, investments and interest receivable of approximately $45.432 million. Current assets were $42.303 million and current liabilities $6.317 million. Management estimated these resources would fund anticipated operating cash requirements for approximately 24 months from year-end, subject to trial timing and other factors.
Financing activities provided $39.779 million in 2013, chiefly net proceeds of $37.648 million from a public offering and $2.281 million from warrant exercises. The offering issued 6.555 million shares including the overallotment. Investing activities used $4.926 million, primarily to purchase held-to-maturity securities.
Reported notes payable totaled $742,307 at year-end: $677,778 current and $64,529 noncurrent. The ICON note was in default after a missed January 2012 balloon payment; in January 2014, the company paid $772,369 to settle principal and interest in full. Separately, the 5% notes had stated principal and accrued interest of approximately $18.614 million, but were carried at a fair value of $64,529 because the company’s payment obligations were tied to cash flows from legacy products and a conversion feature. The reduction in their estimated fair value contributed a substantial noncash gain to 2013 results.
Changes, outlook and key risks
- R&D excluding noncash compensation increased to $12.621 million from $3.994 million in 2012. TG-1101 project spending was $8.281 million, down from $19.141 million; TGR-1202 spending rose to $4.340 million from $1.259 million. The 2013 TGR-1202 spending included a $2 million milestone payment to Rhizen.
- Management estimated approximately $6 million to complete the current TG-1101 development phase by year-end 2014 and approximately $1.5 million to complete the TGR-1202 Phase I phase by mid-2014. These estimates were uncertain and depended on available financing.
- During 2013 the company initiated combination trials of TG-1101 with TGR-1202 and with ibrutinib. Preliminary, early-stage findings included responses in a small TG-1101 NHL monotherapy group and nodal reductions among some CLL patients receiving TGR-1202; these were not confirmatory efficacy results. TGR-1202 dose escalation was ongoing, with one reported dose-limiting Grade 3 rash at 800 mg that resolved and no other dose-limiting toxicities reported through 1,200 mg in the described dataset.
- The company expected R&D spending to increase in 2014 as clinical enrollment continued, and expected ongoing operating losses. It said further financing would be needed beyond its estimated 24-month runway. Additional equity financing could dilute shareholders; failure to raise capital could delay or curtail trials.
- Key risks include clinical and regulatory failure or delay, limited early-stage patient data, reliance on licensors and single-source contract manufacturers, competition from established and developing therapies, patent and intellectual-property challenges, and the absence of sales, marketing and manufacturing infrastructure. The company reported no material pending legal proceedings against it; a separate Hedrin joint-venture arbitration remained ongoing, with the company reporting that it had been removed as a party in 2011.
Most important facts for investors to verify
- Whether the stated cash runway and phase-completion estimates remain achievable given trial spending, enrollment and subsequent financing.
- Updated, adequately sized clinical safety and efficacy data for TG-1101 and TGR-1202, including results from combination studies.
- The status and terms of the ICON settlement, and the contingent 5% notes’ obligations, conversion provisions and fair-value assumptions.
- Potential dilution from future share issuance, warrants and equity awards; common shares outstanding were 34.336 million at year-end and 34.374 million as of March 1, 2014.
- Progress on patent protection, manufacturing scale-up and regulatory requirements, and the effect of competing treatments on each candidate’s commercial prospects.