TG Therapeutics, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; financial amounts below are in millions of dollars unless noted. The company is a clinical-stage biopharmaceutical developer focused on B-cell malignancies and autoimmune diseases. It had no approved drug candidates and generated no product sales.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| License revenue | $0.038 | $0.038 |
| Research and development expense | $35.0 | $22.7 |
| General and administrative expense | $6.6 | $5.0 |
| Operating loss | $(41.6) | $(27.7) |
| Net loss | $(41.5) | $(27.7) |
| Basic and diluted loss per share | $(0.59) | $(0.52) |
| Operating cash used | $(28.0) | $(22.3) |
Revenue was entirely license-fee amortization from the Ildong agreement; there were no product revenues. Gross margin is not meaningful given the company’s development-stage operations. R&D expense growth primarily reflected ongoing TG-1101 and TGR-1202 clinical development and manufacturing. Net loss included $7.3 million of noncash stock compensation, compared with $6.0 million a year earlier.
At March 31, cash and cash equivalents were $82.9 million, short-term investments $26.2 million, and interest receivable $0.1 million, totaling approximately $109.2 million. Total current assets were $117.0 million and current liabilities $33.3 million. Total liabilities were $35.8 million; reported notes payable were $0.2 million. The company also disclosed a $17.7 million cumulative liability, including accrued interest, on legacy 5% notes, carried at fair value; it reported no payments and described its obligations as limited to specified product cash flows and a conversion feature.
Q1 financing provided $52.4 million net from common-stock sales under the at-the-market (ATM) program. The company sold 3.99 million shares at an average $13.38, raising approximately $53.4 million gross. Cash, cash equivalents and restricted cash increased by $26.2 million to $83.5 million. Shares outstanding were 77.1 million at March 31 and 78.0 million as of May 1, 2018.
Material changes and developments
- Net loss widened by $13.8 million year over year. R&D expense increased $12.3 million, while G&A increased $1.6 million. Operating cash use rose $5.7 million.
- In January 2018, the company licensed rights to two BTK inhibitors from Jiangsu Hengrui, with an April $1.0 million upfront payment in common stock, potential milestones of approximately $350 million, and low-double-digit royalties.
- After quarter-end, from April 1 through May 4, the company sold another 1.01 million ATM shares for approximately $14.1 million net. It said approximately $198.9 million of common stock remained available under its shelf registration.
Outlook, commentary and risks
- Management said cash and investments at March 31, together with capital raised in Q2, were expected to fund planned operations through mid-2019. The company remains dependent on significant future financing; additional equity financing could dilute shareholders.
- Management expected other R&D costs to increase modestly during the remainder of 2018 as Phase 3 enrollment expanded and commercialization preparations continued; it expected other G&A costs to remain at a comparable level.
- The company expected Unity-CLL top-line overall response rate data in 2018 and was preparing for a possible 2018 BLA filing for TG-1101 with ibrutinib in high-risk CLL. Filing, acceptance and approval were uncertain and subject to FDA discretion. The GENUINE trial was not powered for progression-free survival.
- TG-1101 and TGR-1202 were in late-stage clinical development, including Phase 3 programs; the anti-PD-L1 antibody was in Phase 1, while other programs remained preclinical. Clinical success, regulatory approval, manufacturing, market acceptance and profitability were not assured.
- Key risks include clinical-trial delays or failure, safety and drug-combination risks, reliance on licensors and third-party manufacturers, intellectual-property disputes, competition, reimbursement and commercialization challenges, and the need for additional capital. The filing reported no material pending legal proceedings. Management said disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether clinical data and FDA interactions support the anticipated 2018 Unity-CLL readout and any GENUINE BLA filing.
- Whether the stated mid-2019 cash runway remains achievable as trial, manufacturing and commercialization-preparation costs evolve.
- The pace and terms of further ATM or other financing, including resulting share dilution.
- The status, safety and enrollment of Phase 3 programs, and whether manufacturing supply and product comparability meet regulatory requirements.
- The terms and potential financial impact of the Jiangsu BTK license, including milestone and royalty obligations.