TG Therapeutics, Inc. — Q1 2017 Form 10-Q
Business context and period. The filing covers the three months ended March 31, 2017. TG Therapeutics is a clinical-stage biopharmaceutical company developing treatments for B-cell malignancies and autoimmune diseases. Its lead programs are ublituximab (TG-1101) and TGR-1202; none of its drug candidates had been approved or generated product sales.
Financial and operating performance
| Metric | Q1 2017 | Q1 2016 / comparison |
|---|---|---|
| License revenue | $38,095 | $38,095 |
| Research and development expense | $22.68 million | $11.62 million |
| General and administrative expense | $5.02 million | $2.41 million |
| Total costs and expenses | $27.70 million | $14.03 million |
| Operating loss | $27.67 million | $13.99 million |
| Net loss | $27.73 million | $13.85 million |
| Basic and diluted loss per share | $0.52 | $0.28 |
| Cash used in operating activities | $22.30 million | $16.67 million |
- Revenue was entirely license revenue from amortization of an earlier Ildong upfront payment. Product-sales margins are not meaningful because there were no product sales.
- R&D expense rose mainly with clinical development and manufacturing for TG-1101 and TGR-1202. G&A growth reflected higher noncash stock compensation, new-office costs and personnel expenses.
- Cash, cash equivalents and short-term investments totaled approximately $109.46 million at March 31, 2017, including $95.64 million of cash and cash equivalents and $13.82 million of short-term investments. Management said available funds were expected to support planned operations through 2018.
- Current assets were $118.96 million and current liabilities were $19.73 million. Total liabilities were $22.21 million; stockholders’ equity was $101.04 million.
- Net financing cash inflow was $86.91 million, primarily from a March public offering and sales under the ATM program, plus warrant exercises. Net investing cash inflow was $6.00 million, primarily from investment maturities.
- The company reported $174,657 fair value for its 5% notes payable. The notes’ cumulative liability, including accrued interest, was approximately $16.9 million; the filing says the company’s obligations are limited to specified product cash flows, if any, and the conversion feature.
Material changes and notable developments
- Net loss approximately doubled year over year, as total expenses increased about $13.67 million. Operating cash use also increased, reflecting expanded clinical programs.
- Noncash stock compensation increased to approximately $6.00 million from $1.70 million. The filing attributes the increase to restricted-stock grants and changes in the fair value of certain consultant awards.
- The company raised approximately $54 million net in a March underwritten offering and approximately $31 million net through its ATM program. Common shares issued increased from 56.82 million at year-end to 66.82 million at quarter-end.
- Q1 2017 GENUINE Phase 3 topline results showed an 80% overall response rate for ublituximab plus ibrutinib versus 47% for ibrutinib alone in the treated population (p<0.001). Some responses still required confirmation at the analysis date.
Outlook, risks and contingencies
- Management expected other R&D costs to increase modestly through the rest of 2017 as Phase 3 enrollment expanded and launch preparation continued; other G&A expenses were expected to remain comparable.
- The company expected continuing operating losses and stated it would need significant future financing to execute its plans. It may seek additional equity, debt or collaboration funding, which could dilute shareholders or constrain operations.
- GENUINE’s design had been amended to reduce enrollment and use overall response rate as its sole primary endpoint; the amendment ended the trial’s Special Protocol Assessment. Management planned to seek an FDA discussion about a potential accelerated-approval filing, but approval and FDA acceptance of the data were uncertain.
- Key risks include clinical efficacy and safety, regulatory review, trial enrollment and execution, reliance on licensors and contract manufacturers, competition, intellectual-property challenges, reimbursement, and the ability to obtain capital. Management cautioned that clinical results and timing may differ from expectations.
- A securities class action relating to GENUINE-trial statements was voluntarily dismissed without prejudice on April 5, 2017, after the quarter ended; the company said it denied the allegations and gave no consideration for dismissal.
- Management reported effective disclosure controls as of March 31, 2017 and no material quarter-over-quarter change in internal control over financial reporting.
Important facts for investors to verify
- Whether GENUINE response rates were confirmed and whether the FDA accepts the data and proposed accelerated-approval pathway.
- Current cash runway versus actual trial, manufacturing and potential launch-related spending, and the timing and terms of any further financing.
- Progress, enrollment, safety and costs in the UNITY-CLL and UNITY-DLBCL programs and other clinical trials.
- The distinction between the notes’ reported fair value and their approximately $16.9 million cumulative accrued liability, including the terms governing payment and conversion.
- Potential dilution from outstanding equity awards, future ATM or shelf offerings, and other financing needs.
- Developments in the dismissed securities litigation and any subsequent legal proceedings.