TG Therapeutics, Inc. — Q1 2015 Form 10-Q
Reporting period: Three months ended March 31, 2015. The unaudited results are for a clinical-stage biopharmaceutical company developing treatments for B-cell malignancies and autoimmune diseases. Its lead programs were ublituximab (TG-1101) and TGR-1202; it had no approved drug candidates and no product sales.
Financial results and liquidity
| Metric | Q1 2015 | Q1 2014 / comparison |
|---|---|---|
| License revenue | $38,095 | $38,095 |
| Research and development expense | $9.62 million | $4.41 million |
| General and administrative expense | $5.02 million | $3.23 million |
| Total costs and expenses | $14.64 million | $7.64 million |
| Operating loss | $14.60 million | $7.61 million |
| Net loss | $14.58 million | $7.55 million |
| Basic and diluted loss per share | $0.35 | $0.25 |
| Cash used in operating activities | $8.88 million | $8.33 million |
- Revenue was solely license-fee amortization from the Ildong sublicense; the company reported no product revenue. Profitability and operating margins are not meaningful given the development-stage business and operating losses.
- At March 31, cash and cash equivalents were $86.00 million and short-term investments were $19.13 million; with interest receivable, disclosed liquid resources totaled $105.23 million. Current assets were $115.74 million and current liabilities $9.55 million.
- Total liabilities were $11.04 million. The balance sheet carried $272,206 of notes payable at fair value; the filing reports approximately $19.78 million of principal and accrued interest on the legacy 5% notes, whose payment obligation is tied to specified product cash flows and whose holders have a conversion feature.
- Cash increased by $30.29 million during the quarter, mainly reflecting $35.33 million of financing cash flow. The company raised approximately $34.2 million net through its ATM offering and received $408,286 from warrant exercises.
Material changes and business developments
- R&D expense rose $5.21 million year over year. Management attributed the increase principally to expanded clinical trials, additional patients, and manufacturing and trial preparation for planned Phase 3 programs: approximately $4.1 million for TG-1101 and $1.1 million for TGR-1202. It also paid $500,000 upfront for the anti-PD-L1/anti-GITR collaboration.
- G&A expense rose $1.79 million, primarily because milestone-based restricted-stock awards vested. Total noncash stock compensation was $5.36 million, versus $4.23 million a year earlier.
- In March, TG entered a global collaboration with Checkpoint Therapeutics for anti-PD-L1 and anti-GITR programs in hematologic malignancies. Terms include the $500,000 upfront payment, up to $164 million in development and sales milestones, and tiered single-digit royalties.
- The company reported that the TG-1101/ibrutinib Phase 2 study had completed enrollment. Its planned GENUINE Phase 3 study was designed for approximately 330 high-risk, previously treated CLL patients under an FDA Special Protocol Assessment; the filing notes that an SPA does not assure approval.
- Shares outstanding increased during the quarter through the ATM and other issuances. From April 1 through May 8, 2015, the company sold another 518,076 shares for approximately $8.0 million net proceeds.
Outlook, risks, and notable items
- Management expected cash and investments at March 31, together with the subsequent ATM proceeds, to fund anticipated operating cash needs for more than 24 months from March 31. The estimate depends on clinical-trial timing, design, and conduct; management also stated that significant future financing would be needed to execute its plans, including commercialization.
- Management expected other R&D costs to increase modestly during the rest of 2015, mainly with additional trial enrollment, and other G&A costs to remain at a comparable level. It expected continued operating losses and significant noncash compensation expense.
- Key risks include clinical efficacy and safety uncertainty, regulatory approval and trial delays, reliance on third-party manufacturers and clinical contractors, competition, intellectual-property disputes, and the need for additional capital. The company had no commercial sales infrastructure and relied on partners for manufacturing and development activities.
- Related-party matters warrant attention: the CEO/interim CEO and president had roles and equity interests involving Fortress and Checkpoint, which participated in the collaboration; the company also reported transactions and service arrangements with LFB and Opus Point Partners. The filing disclosed approximately $3.13 million payable to LFB and $6.09 million of prepaid R&D with LFB at quarter-end.
- The company estimated an average annual rent obligation of approximately $1.1 million under a 15-year desk-space agreement with Fortress, with occupancy expected in late 2015 or early 2016. It had pledged approximately $0.6 million of restricted cash in connection with the arrangement.
- No material pending legal proceedings were reported. Management concluded disclosure controls were effective as of March 31, 2015.
Important facts for investors to verify
- Whether clinical-trial progress, enrollment, safety, and results support the stated development plans, particularly the GENUINE Phase 3 program and combination studies.
- Whether the disclosed greater-than-24-month cash runway remains achievable as trial and manufacturing costs change, and when further financing may be required.
- The economic and dilution effects of ATM and other equity issuances, including subsequent-period sales and remaining shelf capacity.
- The terms, related-party governance, and potential future costs of the Checkpoint collaboration and Fortress desk-space agreement.
- The accounting and settlement implications of the legacy 5% notes, including the difference between their reported fair value and stated principal plus accrued interest.