TG Therapeutics, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013. The company is a development-stage biopharmaceutical business and had no approved products or product-sale revenue.
Business context and development
The company was developing ublituximab (TG-1101), an anti-CD20 antibody, and TGR-1202, an oral PI3K-delta inhibitor, for hematologic malignancies. It also held rights to AST-726, a nasal vitamin B12 product. Ublituximab was in two Phase I/II studies; TGR-1202 began a Phase I study in January 2013, with first-cohort enrollment completed. These are early-stage programs, and the filing cautions that results may not predict later outcomes.
Financial results and liquidity
| Metric | Q1 2013 | Q1 2012 |
|---|---|---|
| License revenue | $38,095 | $0 |
| Research and development expense | $1.570 million | $16.741 million |
| General and administrative expense | $2.182 million | $644,001 |
| Operating loss | $3.714 million | $17.385 million |
| Net loss attributable to TG Therapeutics | $3.674 million | $10.256 million |
| Basic and diluted loss per share | $0.17 | $2.03 |
| Cash used in operating activities | $2.205 million | $861,634 |
The 2012 comparison includes a one-time $16.578 million noncash stock expense associated with the LFB in-licensing agreement. Q1 2013 R&D spending increased by about $1.052 million, primarily as clinical programs commenced; management expected it to rise further with trial enrollment. G&A increased, in part because of noncash compensation and legal costs. Q1 2013 noncash stock compensation was $1.885 million. Gross margin is not meaningful for this pre-commercial company.
Cash and cash equivalents were $15.188 million at March 31, down from $16.456 million at December 31, 2012. Warrant exercises provided $936,920 in financing cash during the quarter. Management estimated that March 31 cash would fund anticipated operating requirements for approximately 15–18 months, while also stating that significant future financing is needed to execute plans and that development projections assume additional financing.
Total assets were $21.387 million, total liabilities $6.688 million, and equity $14.699 million. Current assets were $17.789 million versus current liabilities of $2.473 million. Notes payable had a $3.102 million carrying value: $677,778 current and $2.424 million noncurrent. The ICON note is in default; its $677,778 principal and $139,421 interest payable were outstanding, and the company was seeking a settlement or alternative arrangement. The 5% notes had approximately $17.943 million of face liability including accrued interest, but a $2.424 million fair-value carrying amount; no payments had been made. Their fair value depends on Level 3 estimates of future AST-726/AST-915 cash flows.
Material changes, outlook, and risks
- The $38,095 of license revenue was amortized from Ildong’s $2.0 million upfront sublicense payment, recognized over the expected responsibility period through December 2025. Deferred revenue associated with the payment was approximately $1.943 million. The company could receive up to $5.0 million more upon milestones, plus royalties if the product is commercialized.
- Management was reviewing AST-726’s future, including stopping development and seeking a sale or license, continuing the existing plan, or pursuing an alternative; a decision was expected in 6–12 months.
- Management warned of continuing losses, substantial development costs, dependence on future financing, and the possibility that trials or other plans would be curtailed if financing is unavailable. Clinical, regulatory, manufacturing, commercialization, reimbursement, competition, and intellectual-property risks are substantial. The filing specifically notes third-party manufacturing and licensing dependence and potential patent obstacles affecting ublituximab.
- Disclosure controls were judged effective at March 31, 2013. Management said it used additional personnel and external advisers to address a material weakness in financial-reporting controls related primarily to inadequate segregation of duties, and planned to hire accounting staff in Q2.
- The company reported no material pending legal proceedings. It had six full- and part-time employees, traded on the OTC Bulletin Board, and disclosed limited market liquidity and stock-price volatility risks.
Important facts for investors to verify
- Whether cash burn, trial enrollment, and financing needs remain consistent with the stated 15–18-month cash runway, and what additional capital may be required.
- Clinical progress and safety, efficacy, and pharmacokinetic data for ublituximab and TGR-1202; the filing provides no assurance of successful later-stage development.
- Status of the defaulted ICON note and any settlement, and the assumptions underlying the fair value of the 5% notes.
- Progress toward Ildong milestones and commercialization, and any decision on AST-726 development.
- Remediation of the financial-reporting material weakness and the adequacy of accounting staffing and controls.