TG Therapeutics, Inc. — Q2 2016 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2016. The company is a development-stage biopharmaceutical business focused on treatments for B-cell malignancies and autoimmune diseases. Its principal clinical-stage candidates are ublituximab (TG-1101) and TGR-1202. No candidate had been approved, and the company reported no product sales.
Financial performance and liquidity
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| License revenue | $38,095 | $38,095 | $76,190 | $76,190 |
| Research and development expense | $13.5 million | $11.3 million | $25.2 million | $20.9 million |
| General and administrative expense | $2.5 million | $5.9 million | $4.9 million | $10.9 million |
| Operating loss | $(16.0) million | $(17.1) million | $(30.0) million | $(31.7) million |
| Net loss | $(15.9) million | $(17.1) million | $(29.7) million | $(31.7) million |
| Net loss per share, basic and diluted | $(0.33) | $(0.38) | $(0.61) | $(0.73) |
Revenue was essentially amortization of an upfront Ildong license payment; the filing reports no product-sales revenue or meaningful product gross margin. For the first half, operating cash use was $29.5 million, versus $21.1 million a year earlier. Investing activities used $0.5 million and financing activities provided $3.6 million; cash and cash equivalents declined $26.5 million to $28.6 million.
At June 30, cash, cash equivalents, investment securities and interest receivable totaled approximately $75.8 million. Total assets were $94.8 million; current liabilities were $14.1 million and total liabilities $16.1 million. Stockholders’ equity was $78.7 million, down from $101.6 million at year-end 2015. Cash runway was estimated at approximately 18–24 months from June 30, subject to clinical-trial needs; management said significant future financing would be needed to execute its plans.
Changes and notable items
- First-half R&D expense rose $4.3 million year over year, chiefly from higher TGR-1202 manufacturing and clinical-trial costs and a $1.0 million BET-program license fee. Management expected R&D costs to rise further as trial enrollment expanded.
- First-half G&A expense fell $6.0 million, mainly because noncash stock compensation was substantially lower; other G&A increased with new-office and personnel costs.
- First-half stock-based compensation was $3.3 million, compared with $11.6 million in 2015. Net loss improved despite greater R&D spending, in large part because of lower noncash compensation.
- The company sold 396,811 shares through its ATM program for about $3.5 million net proceeds during the first half. Approximately $178 million remained available under its shelf registration statement.
- The company began a registration-directed Phase 2b UNITY-DLBCL study in June. Its Phase 3 GENUINE and UNITY-CLL programs were being conducted under FDA Special Protocol Assessments; the filing cautions that an SPA does not guarantee approval.
Outlook, risks and contingencies
Management anticipated continued operating losses and no sustained profitability in the foreseeable future. It described trial timing, enrollment, manufacturing, regulatory approval and commercialization as uncertain, and stated that development projections assumed further financing. Potential financing could dilute shareholders or require less favorable licensing or other arrangements.
Key risks include clinical-trial failure or delay, unknown longer-term safety and combination-treatment effects, regulatory and manufacturing hurdles, reliance on third-party licensors and contractors, competition, and the need to build commercial capabilities. The filing reported no material pending legal proceedings. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting during the quarter.
A notable obligation is the legacy 5% notes: their cumulative face liability, including accrued interest, was approximately $16.8 million, but their fair-value carrying amount was $90,564 at June 30. The company stated it had no obligation to pay except from specified product cash flows and the conversion feature; no payments had been made. This valuation relies on significant, uncertain assumptions.
The May 2016 BET sublicense involved a $1.0 million upfront fee, contingent development, regulatory and commercial milestone payments of up to approximately $177 million, and a single-digit royalty on net sales. The agreement was with Checkpoint, a Fortress subsidiary; the filing also disclosed other related-party ties and transactions involving Fortress and company leadership.
Investor facts to verify
- Whether actual cash burn and clinical spending remain consistent with the stated 18–24-month runway, and when additional capital may be required.
- Enrollment, safety and efficacy progress in GENUINE, UNITY-CLL and UNITY-DLBCL, including whether trial results support planned regulatory submissions.
- Manufacturing capacity, product comparability and third-party supply reliability as trials expand.
- The assumptions behind the $90,564 fair value of the 5% notes versus their approximately $16.8 million cumulative face liability.
- The terms, milestone exposure and related-party governance around the BET sublicense and office/shared-services arrangements.