TG Therapeutics, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Unless noted, financial amounts are in U.S. dollars; figures below are rounded to millions.
Business context
TG Therapeutics is a commercial-stage biopharmaceutical company focused on B-cell malignancies and autoimmune diseases. The FDA granted UKONIQ (umbralisib) accelerated approval on February 5, 2021, for certain adults with relapsed or refractory marginal zone lymphoma (MZL) and follicular lymphoma (FL); U.S. commercial sales began in February. The company also has programs in Phase 3 development for chronic lymphocytic leukemia (CLL) and relapsing multiple sclerosis (RMS), plus earlier-stage candidates.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Product revenue, net | $0.755 million | None |
| License revenue | $0.038 million | $0.038 million |
| Total revenue | $0.793 million | $0.038 million |
| Research and development expense | $63.1 million | $36.0 million |
| Selling, general and administrative expense | $26.8 million | $14.3 million |
| Operating loss | $89.2 million | $50.2 million |
| Net loss | $90.6 million | $51.1 million |
| Net loss per share, basic and diluted | $0.69 | $0.48 |
| Cash used in operating activities | $81.4 million | $62.1 million |
- At March 31, cash and cash equivalents were $471.5 million and short-term investments were $52.3 million, totaling $523.8 million; restricted cash was an additional $1.3 million. Cash, cash equivalents and restricted cash decreased by $81.9 million during Q1.
- Current assets were $535.0 million and current liabilities $92.5 million. Total assets were $548.7 million, total liabilities $103.4 million, and accumulated deficit $1.071 billion.
- Debt included $30.0 million principal under the Hercules term loan; its reported carrying amount was $30.1 million, including the end-of-term fee and net of unamortized issuance costs. The loan matures March 1, 2022. Lease liabilities totaled $11.9 million.
- Reported product cost was $0.139 million, but much of the manufacturing cost for Q1 UKONIQ sales had been expensed before FDA approval. The reported product margin therefore is not representative of ongoing economics.
Material changes and management commentary
- Revenue began with UKONIQ’s launch, but product sales remained limited at $0.755 million. Gross product revenue of $0.906 million was reduced by $0.151 million in estimated rebates, discounts, fees and other sales adjustments.
- R&D expense rose $27.1 million year over year, mainly due to milestone achievements and ublituximab manufacturing costs. SG&A expense rose $12.5 million, primarily reflecting personnel and commercial-launch costs. Stock-based compensation was $16.6 million, compared with $11.1 million a year earlier.
- Management expects SG&A costs to increase during 2021 as UKONIQ commercialization continues. It expects to use remaining pre-commercial UKONIQ inventory for sales through Q2 2022, after which product costs are expected to rise relative to revenue.
- Management stated that cash and investments at March 31 were expected to fund operations for more than 12 months from the filing date. It also said significant future financing is needed to execute ongoing and future operations; financing needs will depend on commercial uptake, manufacturing, and clinical and regulatory spending.
Outlook, risks and unusual items
- UKONIQ’s MZL and FL approvals are accelerated approvals. Continued approval depends on verification and description of clinical benefit in a confirmatory trial; the filing also describes additional post-marketing studies and requirements.
- The company completed a rolling BLA submission in March 2021 seeking approval of ublituximab plus UKONIQ (U2) for CLL. Separately, April 2021 results reported after quarter-end showed that both ULTIMATE RMS Phase 3 trials met their primary endpoint; these were not Q1-period results. The ULTRA-V Phase 2 trial completed enrollment in April 2021.
- Key risks include limited commercial-launch experience, competition and payer access, reliance on third-party and single-source manufacturers, clinical and regulatory uncertainty, and COVID-19 effects on commercialization, trials, supply and regulatory activity. UKONIQ is manufactured in India; the filing noted pandemic-related operating and supply risks.
- The Hercules loan is secured by substantially all company assets other than intellectual property, carries a minimum annual interest rate of 10.25%, and includes restrictive covenants. The company reported covenant compliance through the filing date. It also disclosed approximately $11.4 million in short-term CMO liabilities and expected further manufacturing obligations.
- The company paid Rhizen a $12.0 million UKONIQ approval milestone during Q1. There were no material pending legal proceedings. Management reported effective disclosure controls; implementation of UKONIQ revenue, cost and receivable processes materially changed internal controls during the quarter.
Important facts for investors to verify
- UKONIQ launch trajectory, net pricing, payer coverage, gross-to-net adjustments and patient access.
- Progress and results of the required UKONIQ confirmatory trial and post-marketing commitments, including implications for continued approval.
- FDA review of the completed U2 CLL BLA submission and the full, final clinical and safety data from the RMS trials reported in April.
- Cash burn, financing plans and dilution risk, particularly given the company’s stated need for significant future financing and loan maturity in March 2022.
- Commercial manufacturing capacity, CMO payment obligations, supply continuity and the timing of the shift from pre-approval UKONIQ inventory to capitalized manufacturing costs.