TG Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2019. Financial amounts are in U.S. dollars; figures below are rounded. The company is a clinical-stage biopharmaceutical developer focused on B-cell-mediated diseases. It had no approved drug products or product-sale revenue.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| License revenue | $38,000 | $38,000 | $114,000 | $114,000 |
| Research and development expense | $58.0 million | $33.4 million | $123.2 million | $107.1 million |
| General and administrative expense | $2.9 million | $1.0 million | $8.0 million | $13.2 million |
| Operating loss | $60.9 million | $34.3 million | $131.1 million | $120.3 million |
| Net loss | $61.9 million | $34.0 million | $133.3 million | $119.6 million |
| Loss per share | $0.69 | $0.43 | $1.55 | $1.61 |
- Q3 R&D increased $23.7 million year over year, principally due to late-stage clinical programs and ublituximab manufacturing. Management expected other R&D costs to decrease modestly during the remainder of 2019. G&A excluding noncash compensation was expected to remain comparable.
- For the first nine months, operating cash use was $102.4 million, versus $95.2 million in 2018. Investing activities used $0.7 million; financing provided $105.9 million, including stock-sale proceeds and $29.7 million of debt-financing proceeds. Cash, cash equivalents and restricted cash ended at $45.9 million, compared with $72.0 million a year earlier.
- At September 30, cash and cash equivalents were $44.7 million and short-term investments were $27.8 million, totaling approximately $72.5 million in cash and investments. Current assets were $80.4 million and current liabilities were $80.2 million. Total liabilities were $119.1 million, against total assets of $93.3 million; stockholders’ equity was a deficit of $25.8 million.
- Long-term debt had a $30.0 million principal balance and a $28.7 million net carrying value after issuance costs. The Hercules facility bears interest at the greater of prime plus 4.75% or 10.25%, matures March 2022, and is secured by substantially all assets other than intellectual property. The company reported covenant compliance at quarter-end.
- A contract manufacturer had deferred approximately $43.0 million of costs, included in current liabilities; payment was not yet made, and scheduled amounts were due in 2020. A 6% annual administrative fee applies. Total stated contractual obligations for debt, this manufacturer and leases were $92.4 million.
Material changes and financing
- Net loss widened in Q3, primarily reflecting higher R&D and interest expense. Nine-month net loss also increased, despite lower G&A noncash compensation and lower noncash in-licensing expense than in 2018.
- In February 2019, the company drew an initial $30 million under a term loan facility of up to $60 million. Additional advances are conditional, and the debt carries interest-only payments through October 2020, potentially extendable subject to specified conditions.
- Equity issuance increased shares outstanding: 96.6 million at September 30, compared with 83.9 million at December 31, 2018. The company raised approximately $76.7 million net from stock sales in the first nine months. After quarter-end, it sold 3.64 million additional shares through November 12 for approximately $22.1 million net.
- Management said quarter-end cash and investments, together with the additional fourth-quarter capital raised, were expected to fund liquidity needs for more than twelve months from the filing date. The company also stated it remained dependent on significant future financing and anticipated continuing operating losses.
Pipeline, outlook and principal risks
- Lead programs ublituximab and umbralisib were in pivotal or registration-directed trials for CLL and NHL; ublituximab was also in Phase 3 trials for relapsing multiple sclerosis. TG-1501, TG-1701 and TG-1801 were in Phase 1 development.
- The UNITY-CLL monitoring board’s March 2019 futility review found the trial was not futile and recommended continuation without modification; it reported no safety concerns. This was not a positive efficacy determination. The study was event-driven, and the filing cautioned that completion timing was uncertain.
- The MZL cohort of UNITY-NHL met its primary overall response rate endpoint, with interim data reported at a 52% response rate in the evaluable population. Following FDA discussions, management anticipated beginning an NDA submission for previously treated MZL around year-end 2019. FDA approval and the adequacy of final data were not assured.
- After quarter-end, the company announced that the follicular lymphoma patients in the UNITY-NHL cohort met the primary response-rate endpoint; the filing said it planned to present data later and discuss them with FDA.
- Key risks include clinical-trial failure or delay, uncertain safety and efficacy in larger or longer studies, regulatory review and approval risk, manufacturing scale-up and single-source supplier dependence, substantial continuing cash needs, debt and deferred manufacturer obligations, potential equity dilution, competition, and intellectual-property challenges. Management emphasized that forward-looking statements are uncertain and actual results may differ materially.
- The company recognized new lease right-of-use assets and liabilities after adopting the lease accounting standard in 2019; the adoption did not materially affect reported operating results. It reported no material pending legal proceedings and said disclosure controls were effective.
Important facts for investors to verify
- Whether clinical and regulatory milestones—including the anticipated MZL NDA timing and later-stage trial outcomes—were achieved, and whether final data support approval.
- Cash runway and financing needs, including the effect of subsequent equity sales, potential further dilution, and any remaining availability under the shelf registration.
- Timing and payment terms for the approximately $43 million contract-manufacturer liability, along with any additional manufacturing commitments or fees.
- Debt interest, repayment and covenant terms, availability of conditional loan advances, and the company’s ability to meet obligations at maturity.
- Whether umbralisib and ublituximab maintain acceptable safety, efficacy and manufacturing comparability as trials and production scale-up progress.