TG Therapeutics(TGTX) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company presents its unaudited condensed consolidated financial statements for the period ending June 30, 2019 Condensed Consolidated Balance Sheets The balance sheet shows increased total assets driven by cash and new debt, alongside a growing accumulated deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $57,228 | $41,958 | | Total current assets | $94,441 | $79,031 | | Total assets | $106,585 | $83,616 | | Liabilities & Equity | | | | Total current liabilities | $55,967 | $38,854 | | Long-term debt | $28,513 | $— | | Total liabilities | $93,380 | $59,580 | | Accumulated deficit | ($599,713) | ($528,345) | | Total stockholders' equity | $13,205 | $24,036 | - The company's total assets increased to $106.6 million from $83.6 million, primarily driven by an increase in cash and the addition of long-term debt, while the accumulated deficit grew to $599.7 million[18] Condensed Consolidated Statements of Operations The statement of operations indicates a reduced net loss compared to the prior year, driven by lower operating expenses Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2019 | Q2 2018 | 6 Months 2019 | 6 Months 2018 | | :--- | :--- | :--- | :--- | :--- | | License revenue | $38 | $38 | $76 | $76 | | Total research and development | $32,866 | $38,700 | $65,251 | $73,718 | | Total general and administrative | $2,716 | $5,683 | $5,057 | $12,280 | | Operating loss | ($35,544) | ($44,345) | ($70,232) | ($85,922) | | Net loss | ($36,213) | ($44,142) | ($71,368) | ($85,671) | | Basic and diluted net loss per share | ($0.42) | ($0.59) | ($0.85) | ($1.18) | - Net loss for the second quarter of 2019 was $36.2 million, a decrease from $44.1 million in the same period of 2018, primarily due to lower research and development expenses and decreased noncash compensation[20] Condensed Consolidated Statements of Cash Flows Cash flow statements show significant cash used in operations, offset by cash provided by financing activities Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($69,211) | ($62,226) | | Net cash (used in) provided by investing activities | ($678) | $7,377 | | Net cash provided by financing activities | $85,164 | $104,453 | | Net increase in cash | $15,275 | $49,604 | - For the first six months of 2019, the company used $69.2 million in cash for operations, while financing activities provided $85.2 million from stock sales and debt proceeds[27] Notes to Condensed Consolidated Financial Statements The notes detail the company's focus on B-cell mediated diseases, its financial condition, and key contractual agreements - The company is a biopharmaceutical firm focused on B-cell mediated diseases, with lead candidates ublituximab and umbralisib in pivotal trials for CLL, NHL, and MS[30] - As of June 30, 2019, the company had an accumulated deficit of approximately $599.7 million and believes its cash will fund operations into the fourth quarter of 2020[34][36] - In February 2019, the company entered into a term loan facility of up to $60.0 million with Hercules Capital, Inc, drawing an initial $30.0 million[98] - The company has an agreement with a contract manufacturer to defer payment of approximately $20.7 million in costs, included in current liabilities[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial results, clinical development progress, liquidity, and contractual obligations Overview and Products Under Development The company is developing medicines for B-cell mediated diseases, with several candidates in late-stage clinical trials - TG Therapeutics is a biopharmaceutical company focused on developing medicines for B-cell mediated diseases like Chronic Lymphocytic Leukemia (CLL), non-Hodgkin Lymphoma (NHL), and Multiple Sclerosis (MS)[124] Advanced Drug Candidate Pipeline | Clinical Drug Candidate | Initial Target Disease | Stage of Development | | :--- | :--- | :--- | | Ublituximab (TG-1101) | Chronic Lymphocytic Leukemia | Phase 3 (UNITY-CLL) | | | Relapsing Multiple Sclerosis | Phase 3 (ULTIMATE I & II) | | Umbralisib (TGR-1202) | Chronic Lymphocytic Leukemia | Phase 3 (UNITY-CLL) | | | Marginal Zone Lymphoma | Phase 2b (UNITY-NHL) | | | Follicular Lymphoma | Phase 2b (UNITY-NHL) | | TG-1501 (anti-PDL1) | B-cell Cancers | Phase 1 | | TG-1701 (BTK inhibitor) | B-cell Cancers | Phase 1 | | TG-1801 (anti-CD47/CD19) | B-cell Cancers | Phase 1 | - The UNITY-NHL trial's Marginal Zone Lymphoma (MZL) cohort met its primary endpoint, with an anticipated New Drug Application (NDA) submission by year-end 2019[127] Results of Operations Operating results show a decrease in R&D expenses due to clinical program enrollment completion and an increase in interest expense from new debt Comparison of Operating Results (in millions) | Expense Category | Q2 2019 | Q2 2018 | Change | | :--- | :--- | :--- | :--- | | Other R&D Expenses | $31.4 | $34.8 | ($3.4) | | Noncash Compensation (G&A) | $0.4 | $3.4 | ($3.0) | | Interest Expense | $1.1 | $0.2 | $0.9 | - The decrease in R&D expenses for Q2 2019 was mainly due to the completion of enrollment in primary clinical programs during 2018[140] - The increase in interest expense was primarily due to the Hercules financing agreement executed in February 2019[143][152] Liquidity and Capital Resources The company's liquidity is supported by cash reserves and recent financing, deemed sufficient to fund operations into late 2020 - As of June 30, 2019, the company had approximately $85.0 million in cash, cash equivalents, and investment securities[155] - Management believes that current cash, combined with capital raised in Q3 2019, is sufficient to fund planned operations into the fourth quarter of 2020[155] - Cash used in operating activities increased to $69.2 million for the first six months of 2019 from $62.2 million in the prior year period[156] - Net cash provided by financing activities in the first six months of 2019 was $85.2 million, from debt financing and proceeds from common stock issuance[158] Contractual Obligations and Commitments The company's primary contractual obligations consist of long-term debt, deferred manufacturing costs, and operating leases Contractual Obligations as of June 30, 2019 (in thousands) | Obligation | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt | $30,000 | $— | $30,000 | $— | $— | | Contract manufacturer | $20,738 | $20,738 | $— | $— | $— | | Operating leases | $16,410 | $1,363 | $2,707 | $2,682 | $9,658 | | Total | $67,148 | $22,101 | $32,707 | $2,682 | $9,658 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure from interest rate fluctuations on its short-term investments is considered immaterial - The company's investment portfolio consists of cash equivalents and short-term government and investment-grade corporate debt[176] - Due to the short-term basis of its investments, the company believes there is no material exposure to interest rate risk or credit risk[176] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls - An evaluation of disclosure controls and procedures, supervised by the CEO and CFO, concluded that they were effective as of June 30, 2019[177][178] - No changes occurred in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[179] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company and its subsidiaries are not currently party to any material pending legal proceedings - As of the filing date, the company is not a party to, and its property is not the subject of, any material pending legal proceedings[181] Item 1A. Risk Factors The company faces significant risks related to its financial position, debt, drug development, commercialization, and third-party dependencies Risks Related to Our Financial Position and Need for Additional Capital The company's history of significant losses and lack of revenue necessitate substantial future funding to sustain operations - The company has a limited operating history, has never generated revenue from drug sales, and has an accumulated deficit of $599.7 million as of June 30, 2019[183][186] - Substantial additional funding will be required to continue operations, and failure to raise capital may force the company to delay or eliminate programs[190] Risks Related to our Indebtedness Debt obligations under a loan agreement are secured by company assets and carry risks of default and collateral seizure - The company has up to $60.0 million in debt obligations under a Loan Agreement with Hercules Capital, secured by substantially all company assets[197][198] - Failure to satisfy debt obligations or breaching covenants could result in an event of default, allowing the lender to accelerate all amounts due[199] Risks Related to Drug Development and Regulatory Approval Business success is highly dependent on completing pivotal trials and navigating the lengthy and uncertain regulatory approval process - The success of the business heavily depends on the successful completion of pivotal trials and obtaining regulatory approval, which is a lengthy and uncertain process[200][211] - Early positive clinical trial results are not predictive of future success in larger, later-stage trials[203][207] - A Breakthrough Therapy Designation for umbralisib in MZL does not guarantee a faster review or ultimate approval by the FDA[234] Risks Related to Commercialization The company faces substantial competition, market acceptance hurdles, and the need to build a commercial infrastructure - The company faces substantial competition from established therapies and large pharmaceutical companies with greater resources[245][247] - Successful commercialization depends on gaining market acceptance and securing favorable pricing and reimbursement, which is uncertain[252][258][259] - The company currently lacks a sales and marketing infrastructure and must invest significantly to build a commercial organization[279][280] Risks Related to Our Dependence on Third Parties Reliance on third-party CROs and single-source manufacturers for clinical trials and drug supply creates significant operational risks - The company relies on third-party Contract Research Organizations (CROs) to conduct clinical trials, and their poor performance could cause delays[294] - The company depends on third-party contract manufacturers for its drug supply, where any disruption could impair development efforts[298][299] - Active pharmaceutical ingredients (API) and drug products are sourced from single-source suppliers, creating a significant risk of supply interruption[307][308] Risks Relating to Our Intellectual Property Protecting intellectual property through patents and trade secrets is critical but faces uncertainty and potential infringement claims - Commercial success depends on obtaining and maintaining robust patent protection, which is not guaranteed[321][324] - The company may be sued for infringing on the intellectual property rights of third parties, which could be costly and halt commercialization[338][341] - The company relies on trade secrets and confidentiality agreements that may be breached or provide inadequate protection[352] Item 6. Exhibits This section lists key agreements and required CEO and CFO certifications filed as exhibits with the report - Key exhibits include a collaboration agreement with Checkpoint Therapeutics, Inc, and a services agreement with Samsung Biologics Co, Ltd[389] - Certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002 are included as exhibits[389]