TG Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. The company is a clinical-stage biopharmaceutical developer focused on B-cell-mediated diseases. Its lead candidates are ublituximab and umbralisib, also studied together as U2. It had no approved drug products and no product-sale revenue.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| License revenue | $0.04 million | $0.04 million | $0.11 million | $0.11 million |
| Research and development expense | $50.5 million | $58.0 million | $122.9 million | $123.2 million |
| General and administrative expense | $35.3 million | $2.9 million | $64.0 million | $8.0 million |
| Operating loss | $85.7 million | $60.9 million | $186.8 million | $131.1 million |
| Net loss | $87.2 million | $61.9 million | $191.2 million | $133.3 million |
| Basic and diluted loss per share | $0.73 | $0.69 | $1.70 | $1.55 |
Margins: Not meaningful because revenue consisted only of license-fee amortization, with no product sales.
- At September 30, 2020, cash and cash equivalents were $254.2 million, versus $112.6 million at December 31, 2019; restricted cash was another $1.3 million. Current assets were $260.3 million and current liabilities $77.7 million.
- Operating cash use for the first nine months was $162.5 million, compared with $102.4 million in 2019. Investing activities provided $27.6 million; financing activities provided $276.4 million, primarily from equity sales. Cash, cash equivalents and restricted cash increased by $141.5 million.
- Gross term-loan principal was $30.0 million; its net carrying amount was $29.7 million, including the end-of-term fee and unamortized issuance costs. The loan matures March 2022, is secured by substantially all assets other than intellectual property, and its interest-only period was extended through April 1, 2021. The company reported covenant compliance.
- Operating lease liabilities totaled $11.4 million. A further $19.4 million was due to a contract manufacturer and included in current liabilities. Total disclosed contractual obligations for debt, leases and the manufacturer were $68.0 million.
Changes versus prior period and unusual items
- Net loss widened year over year, principally reflecting a sharp increase in noncash stock compensation and higher G&A spending. Q3 stock compensation was $28.3 million, compared with $2.1 million in Q3 2019; the nine-month totals were $46.8 million and $5.7 million, respectively. The filing attributes much of the increase to restricted stock and options awarded to executive personnel.
- Q3 other R&D expense declined $10.7 million year over year, mainly from lower manufacturing costs for ublituximab and umbralisib, partly offset by milestone payments. Nine-month other R&D expense was broadly similar to 2019.
- Other G&A expense rose to $11.6 million in Q3 from $2.3 million, and to $25.4 million for nine months from $6.6 million, as the company expanded personnel and prepared for a potential launch.
- The company raised $276.3 million net from common-stock sales during the first nine months, including a May public offering. After quarter-end, it sold additional ATM shares from October 1 through November 5, raising approximately $72.9 million net. These financings increased liquidity but diluted shareholders.
- Umbralisib and TG-1701 milestone payments of $12.0 million and $2.0 million, respectively, were disclosed for Q3. The company also accrued $2.6 million in contract-manufacturer administrative fees in interest expense during the first nine months.
Outlook, developments and principal risks
- Management stated that September 30 cash, together with fourth-quarter 2020 capital raised, was expected to fund operations for more than 12 months from the filing date. The company nevertheless expects continuing losses and says substantial future financing may be needed; profitability is uncertain.
- The FDA accepted the umbralisib NDA in August 2020. MZL received Priority Review with a February 15, 2021 PDUFA goal date; FL received standard review with a June 15, 2021 goal date. These are review targets, not assurances of approval.
- The company reported that the Phase 3 UNITY-CLL trial met its primary endpoint at a prespecified interim analysis and would stop early for superior efficacy. Final data included in an abstract released November 4, 2020 reported median PFS of 31.9 months for U2 versus 17.9 months for obinutuzumab plus chlorambucil. The ULTIMATE I and II MS trials and key NHL cohorts were fully enrolled; follow-up and data collection continued.
- COVID-19 had not materially harmed operations or supply to date, according to the company, but could disrupt trials, regulatory reviews, manufacturing, launch preparations and access to capital. Management said clinical supply of umbralisib, ublituximab and TG-1701 was expected to cover current program needs through Q1 2021. Several products rely on single-source or overseas manufacturers.
- Key risks include clinical and regulatory failure or delay, adverse effects, manufacturing scale-up and supply constraints, competition, reimbursement and pricing pressure, reliance on third parties, patent and licensing disputes, financing needs and potential dilution. Umbralisib safety monitoring is especially relevant: the filing reports serious adverse events in trials and notes that longer exposure could reveal additional risks.
- No material pending legal proceedings were reported. Disclosure controls were deemed effective, and no material change in internal control over financial reporting was reported for the quarter.
Important facts for investors to verify
- FDA review decisions and any label, safety, manufacturing or post-marketing requirements for umbralisib by the stated PDUFA dates.
- Final, audited clinical data and regulatory implications from UNITY-CLL, UNITY-NHL and the ublituximab MS trials, including safety and follow-up.
- Actual cash burn, launch and clinical-development spending, and whether management’s stated liquidity runway remains adequate.
- Terms and potential shareholder dilution from subsequent ATM equity sales, alongside debt service and the manufacturer payable.
- Commercial manufacturing readiness, supply continuity and the potential impact of COVID-19 on overseas suppliers and clinical programs.