TG Therapeutics, Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019; financial statements are unaudited. TG Therapeutics is a clinical-stage biopharmaceutical company developing treatments for B-cell-mediated diseases. It reported no product sales; revenue was limited to license-fee amortization.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| License revenue | $38,000 | $38,000 |
| Research and development expense | $32.4 million | $35.0 million |
| General and administrative expense | $2.3 million | $6.6 million |
| Operating loss | $34.7 million | $41.6 million |
| Net loss | $35.2 million | $41.5 million |
| Basic and diluted loss per share | $0.43 | $0.59 |
| Cash used in operating activities | $33.4 million | $28.0 million |
- At March 31, cash and cash equivalents were $64.3 million and short-term investments were $28.1 million, or $92.5 million combined. Restricted cash was a further $1.2 million.
- Cash, cash equivalents and restricted cash increased $22.4 million during the quarter. Financing provided $56.9 million: $27.7 million net proceeds from a March share offering and $29.2 million net proceeds from debt financing.
- Total assets were $117.5 million, total liabilities $98.3 million, and stockholders’ equity $19.3 million. Accumulated deficit was $563.5 million.
- The Hercules facility funded an initial $30.0 million advance; the balance-sheet carrying amount of long-term debt was $28.3 million after fees and costs. The facility allows up to $60.0 million subject to conditions. Interest is at least 10.25% annually; interest-only payments run through October 2020, potentially extendable to April 2021 if specified conditions are met. Maturity is March 2022.
- A contract manufacturer had approximately $18.6 million of deferred costs and fees, with $18.35 million included in contractual obligations and due in Q1 2020. The company also reported $16.7 million of undiscounted operating-lease payments.
- Management said cash and investments at quarter-end, together with capital raised in Q2, were expected to fund planned operations through mid-2020. Through May 10, the company sold 3.03 million shares through its ATM for approximately $24.6 million gross and $24.2 million net.
Material changes and operating developments
- Net loss narrowed year over year, primarily as noncash stock compensation fell, especially in G&A; other R&D expense also decreased as major trials completed enrollment during 2018. However, operating cash use increased, which the company attributed primarily to ongoing clinical-development spending.
- Other expense was $0.5 million versus $48,000 of other income in Q1 2018, mainly reflecting interest expense and amortization associated with the new Hercules financing.
- The March public offering issued 4.715 million shares, including the underwriter option, for approximately $27.7 million net. Shares outstanding increased during the quarter.
- Adoption of the new lease standard added material right-of-use assets and lease liabilities; the company reported a $7.9 million right-of-use asset and $9.4 million lease liability at March 31. The reported effect on operations was not material.
Outlook, risks and contingencies
- Ublituximab and umbralisib were in pivotal or registration-directed trials; TG-1501, TG-1701 and TG-1801 were in Phase 1 development. None of the candidates had marketing approval, and the company warned that it expected continuing losses and would require significant future financing.
- Management expected other R&D costs to decrease modestly for the remainder of 2019 and other G&A costs to remain comparable. These expectations are subject to clinical, manufacturing and financing needs.
- The UNITY-CLL monitoring committee concluded at a planned futility review that the trial was not futile and recommended continuation without modification; it also identified no safety concern in its review. The filing cautions that the event-driven trial’s completion timing is uncertain.
- For the UNITY-NHL MZL cohort, the company reported that the primary response-rate endpoint was met. Interim analysis of 42 patients showed a 52% independent-review response rate, including 19% complete responses; the safety population included 69 treated patients. The company planned further data presentation and discussions with the FDA about possible accelerated approval. Breakthrough Therapy Designation had been granted in January 2019 and orphan designation in April 2019. These designations do not ensure approval, and final results may differ.
- Key risks include clinical-trial failure or delay, uncertain safety and efficacy, regulatory discretion, manufacturing scale-up and single-source supply dependence, competition, and the need for additional capital. Debt is secured by substantially all company assets other than intellectual property and includes restrictive covenants and default provisions.
- A securities class action was dismissed without prejudice on March 1, 2019. A related shareholder derivative action was dismissed without prejudice on April 18, 2019, after quarter-end. The filing did not report a clear quantified liability for these matters.
- Management concluded disclosure controls and procedures were effective as of March 31, 2019 and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the stated runway through mid-2020 remains achievable after operating burn, clinical and manufacturing commitments, and subsequent share issuance.
- Current cash, investment balances, ATM issuance, remaining shelf capacity, and dilution from equity financing and warrants.
- Debt facility draw conditions, interest and repayment terms, covenant compliance, and the timing and funding of the deferred contract-manufacturer balance.
- Final UNITY-NHL MZL efficacy and safety results and the FDA’s view of any accelerated-approval application; progress and timing for UNITY-CLL and ULTIMATE I and II.
- Potential manufacturing, clinical-trial, regulatory, intellectual-property and litigation developments that could affect costs, approval prospects or financing needs.